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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 1-7901
BARNETT BANKS,INC.
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(Exact name of Registrant as specified in its charter)
FLORIDA 59-0560515
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
50 N. LAURA STREET, JACKSONVILLE, FL 32202-3638
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (904) 791-7720
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Securities registered pursuant to Section 12(b) of the Act:
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock The New York Stock Exchange
Par Value $2.00 per share
8 1/2% Subordinated Capital The New York Stock Exchange
Notes, due 1999
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at December 31, 1996 is approximately $7,800,134,417.
Common Stock outstanding at December 31, 1996:
189,668,922 Shares
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in this report: (1)
portions of Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1996, in Parts II and III and (2) Registrant's 1997
Annual Meeting Proxy Statement in Part III, which is incorporated by
reference pursuant to Instruction G of Form 10-K. The Company will file its
definitive Proxy Statement with the Commission prior to March 31, 1997.
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INDEX TO FORM 10-K
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
NOTE: Certain information required by Form 10-K is incorporated by reference
from the 1996 Annual Report as indicated below. Only that information
expressly incorporated by reference is deemed filed with the Commission.
PART I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders - None
PART II ANNUAL REPORT REFERENCE(1)
Item 5 Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . Inside front cover, 68
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . 1
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . .20 - 37, 40- 43
Item 8 Financial Statements and Supplementary Data . . .38, 39, 44 - 65
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . .None
PART III(2)
Item 10 Directors and Executive Officers of the Registrant:
Executive Officers. . . . . . . . . . . . . . . . . . . . . . .67
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . .67
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Item 13 Certain Relationships and Related Transactions
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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ITEMS OF PART IV - FORM 10-K
(a)1. The financial statements of Barnett are listed in response to
Item 8 of this report and are incorporated by reference.
(a)2. Financial Statement Schedules:
All schedules to the consolidated financial statements required by
Article 9 of Regulation S-X and all other schedules to the financial
statements of the Registrant have been omitted because the information
is either not required, not applicable, or is included in the
financial statements or notes thereto.
(b). Reports on Form 8-K: None.
(c). Exhibits:
3. Articles of Incorporation are incorporated by reference to exhibit
4(a) of the Corporation's Registration Statement No. 33-59246
4. Instruments defining the rights of security holders,
including indentures:
(a) Indenture dated as of May 15, 1972, relating to 7-3/4%
Sinking Fund Debentures due 1997.
(b) Indenture dated as of August 15, 1984 relating to the 8.5%
Subordinated Capital Notes due 1999.
(c) Indenture dated as of October 19, 1990, and supplemental
indentures dated April 21, 1991 and May 14, 1993 relating
to Debt Securities of the Company.
(d) Indenture dated as of October 19, 1990 and supplemental
indenture as of April 22, 1991 related to Debt Securities
of the Company.
(e) Indenture dated March 16, 1995 relating to Subordinated
Debt Securities of the Company
(f) Indenture dated March 16, 1995 relating to Senior Debt
Securities of the Company
(g) Registration Rights Agreement dated as of December 2, 1996
relating to the Capital Securities of Barnett Capital II
(including therein a schedule identifying substantially
identical registration rights agreements dated November 27,
1996 and January 28, 1997, relating to the Capital
Securities of Barnett Capital I and Barnett Capital III,
respectively).
(h) Guarantee Agreement dated as of December 2, 1996 for the
benefit of holders of the Capital Securities of Barnett
Capital II (including therein a schedule identifying
substantially identical guarantee agreements dated
November 27, 1996 and January 28, 1997, relating to the
Capital Securities of Barnett Capital I and Barnett
Capital III, respectively).
(i) Indenture dated as of December 2, 1996 relating to 7.95%
Junior Subordinated Debentures Due 2026 of the Company
(including therein a form of Junior Subordinated Debenture
and a schedule identifying substantially identical indentures
dated November 27, 1996 and January 28, 1997 relating to
additional issuances of junior subordinated debentures of
the Company).
(j) Amended and Restated Declaration of Trust of Barnett
Capital II dated as of December 2, 1996 relating to
$200,000,000 Capital Securities of the Trust (including
therein a form of Capital Security and a schedule identifying
substantially identical amended and restated declarations of
trusts dated November 27, 1996 and January 28, 1997, of
Barnett Capital I and Barnett Capital III, respectively).
10. Material contracts:
(a) Long Term Incentive Plan of Barnett Banks, Inc., as amended
(b) Employment agreements
(c) Trust under executive benefit plan
11. Statement re Computation of Per Share Earnings.
12. Ratios of Earnings to Combined Fixed Charges and Preferred Dividends.
13. Annual Report to Security Holders for the fiscal year ended
December 31, 1996.
21. Subsidiaries of the Registrant.
23. Consents of experts and counsel
(a) Consent of Arthur Andersen LLP
24. Powers of Attorney
27. Financial Data Schedule
(1)These items are incorporated from the 1996 Annual Report.
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(2)Except for the information relating to executive officers, the material
required by Items 10 through 13 is hereby incorporated by reference from the
Company's definitive proxy statement pursuant to Instruction G of Form 10-K.
The Company will file its definitive Proxy Statement with the Commission prior
to March 31, 1997.
BUSINESS
GENERAL
Barnett Banks, Inc. is a multi-bank holding company, headquartered in
Jacksonville, Florida, that was organized in 1930. Between 1930 and 1965,
Barnett controlled several small banks on the East Coast of Florida and was
affiliated with Barnett Bank of Jacksonville N.A. through common ownership.
In 1966, the company acquired the Jacksonville bank, chartered in 1877, and
began a program of expansion through the acquisition and organization of
banks in Florida's major population centers. In 1986, Barnett completed its
first acquisition in Georgia.
Now one of the top 25 financial institutions in the United States,
Barnett had assets of $41.2 billion and deposits of $33.8 billion on December
31, 1996. On that date, Barnett owned 4 commercial banks with a total of 622
offices in 45 Florida counties and 8 Georgia counties. At December 31, 1996,
Barnett and its subsidiaries had 19,717 full-time employees.
The majority of average deposits for 1996 were held by the principal
banking subsidiary, Barnett Bank, N.A., and were $32.9 billion, or 99% of the
combined total deposits of the banking subsidiaries. The remaining three
banking subsidiaries had less than $500 million in deposits. Barnett's
banking subsidiaries generally provide a full range of commercial banking and
related financial services to the retail, wholesale, manufacturing, real
estate and financial sectors of its markets. State banking laws have been a
major factor in the development of the company's corporate structure in
Florida. Prior to 1977, Florida was a unit banking state, prohibiting the
state's banks from operating branches. At the end of 1976, Barnett operated
60 separate banks in 24 counties. Since then, the Florida Banking Code has
been liberalized to permit cross-county mergers and, in 1988, to permit
cross-county branching. Since 1977, Barnett has consolidated more than 100
Florida banking organizations into 2 banks, one of which serves multi-county
markets.
In addition to its general banking business, Barnett and its
affiliates are engaged in consumer finance which specializes in originating,
securitizing and servicing fixed-rate consumer loans secured by first or
second mortgages, residential lending, indirect dealer auto lending and
leasing, merchant servicing and asset management which offers insurance
products, mutual funds, annuities, trust services and brokerage services.
CHANGES IN ORGANIZATIONAL STRUCTURE
In October 1996, the company entered into an agreement with Household
Credit Services, Inc. to form a strategic alliance to manage and build
Barnett's credit card business. The company sold $776 million of non-core
credit card outstandings, less related reserves of $31 million, to Household.
Household will service the company's core portfolio and will assist in
pursuing new credit card accounts. In May 1996, the company completed the
sale of its mortgage servicing operation and other assets to Homeside, Inc.,
a mortgage servicing venture in which the company has an approximate
one-third interest. The sale included $136 million in goodwill and $211
million in purchased mortgage servicing rights. The company invested $118
million into the venture. No significant gains or losses were incurred
related to these transactions. In 1996, the company completed the
consolidation of its 32 banking charters into 4 to enhance internal
operations, reduce reporting redundancies and focus more resources on serving
customer needs. Several non-bank subsidiaries were also consolidated into the
resulting subsidiary, Barnett Bank, N.A. Barnett's subsidiary banks in
Southeast Georgia, Southwest Georgia and the Community Bank of the Islands on
Sanibel Island retained their individual bank chartres.
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COMPETITION
Pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, substantially all state law barriers to the
acquisition of banks by out-of-state bank holding companies were eliminated
as of September 29, 1995. The law will also permit interstate branching by
banks effective June 1, 1997 subject to the ability of states to opt out of
interstate branching completely or to set an earlier effective date. The
company anticipates that the effect of the new law will be to increase
competition within the markets in which it now operates, although the company
cannot predict the extent nor the timing of any increased competition.
In addition to competition from other banks, Barnett continues to
face increased competition from other financial services organizations.
Savings and loan associations continue to compete for loans and deposits,
while finance companies and credit unions compete in the important areas of
consumer lending and deposit gathering. Non-traditional financial service
providers such as brokerages, mutual funds, insurance companies and finance
subsidiaries of industrial companies have intensified competition in recent
years. Additionally, Barnett's national mortgage banking and consumer finance
subsidiaries face significant competition from numerous bank and non-bank
companies.
SUPERVISION AND REGULATION
Barnett is a bank holding company subject to supervision and
regulation by the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended. As a bank holding company, Barnett's activities and those
of its banking and nonbanking subsidiaries are limited to the business of
banking and activities closely related or incidental to banking. Barnett may
not directly or indirectly acquire the ownership or control of more than five
percent of any class of voting shares or substantially all of the assets of
any company, including a bank, without the prior approval of the Federal
Reserve Board. In addition, the Georgia Department of Banking and Finance
regulates the Georgia operations of bank holding companies. Various federal
and state laws and regulations also govern the operations of the company's
banking subsidiaries.
Dividends and management fees from subsidiaries are the holding
company's major source of income. Dividend payments from the banking
subsidiaries may be limited by statutes. (See NOTE R of NOTES TO FINANCIAL
STATEMENTS in the 1996 Annual Report.)
Barnett's subsidiary banks are subject to regulation and supervision by
the Office of the Comptroller of the Currency (OCC) (in the case of
nationally chartered banks), the state banking authorities of the states in
which they are organized (in the case of state chartered banks), the Federal
Reserve Board (in the case of state chartered member banks) and the FDIC.
Barnett and its subsidiaries are also affected by various state and
federal laws, including those relating to consumer protection and similar
matters, as well as by the fiscal and monetary policies of the federal
government and its agencies, including the Federal Reserve Board. An
important purpose of these policies is to curb inflation and control
recessions through control of the supply of money and credit. The Federal
Reserve Board uses its powers to establish reserve requirements of insured
depository institutions and to conduct open market operations in the United
States government securities so as to influence the supply of money and
credit. These policies have a direct effect on the amount of bank loans and
deposits and on interest rates charged on loans and paid on deposits, with
the result that federal policies have a material effect on the earnings of
Barnett and its subsidiaries. Future policies of the Federal Reserve Board and
other government authorities and future changes in state and federal laws and
regulations cannot be predicted nor can their effect on the future earnings
of Barnett and its subsidiaries be predicted.
On August 10, 1993, the Federal Deposit Insurance Act was amended to
provide that in the event of the liquidation or other resolution of an
insured depository institution occurring on or after such date, the claims of
depositors of such institution (including claims by the FDIC as subrogee of
insured depositors) are entitled to priority in payment over the claims of
any other senior or general creditors of the institution, including
shareholders.
Effective December 31, 1992, the federal bank regulatory authorities
each adopted risk-based capital guidelines to which Barnett and its banking
subsidiaries are subject. These guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profile among banking organizations, takes off-balance
sheet exposures into explicit account in assessing capital adequacy and
minimizes disincentives to holding liquid, low-risk assets. Failure to meet
applicable capital guidelines could subject a bank to a variety of
enforcement remedies available to the federal regulatory authorities,
including limitation on the ability to pay dividends, the issuance of a
directive to increase capital, the termination of deposit insurance by the
FDIC, and appointment of a conservator or receiver. On December 31, 1996,
Barnett and each of its subsidiary banks' capital levels exceeded the capital
guidelines established by the federal banking authorities.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(FDICIA) provides for expanded regulation of depository institutions and
their subsidiaries and assigns to the federal banking agencies broad powers to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the
institutions in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," or "critically
undercapitalized." The FDICIA imposes progressively more restrictive
constraints on operations, management, and capital distributions based on the
category in which an institution is classified. A depository institution is
considered "well capitalized" if it has (i) a total risk-based capital ratio of
10% or greater, (ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii)
a leverage ratio of 5% or greater and (iv) is not subject to any order or
written directive to meet and maintain a specific capital level. On
December 31, 1996, Barnett and each of its subsidiary banks were considered by
federal regulatory authorities to be "well capitalized."
Barnett's non-banking activities are supervised by the Federal Reserve
Board with respect to companies directly owned by Barnett, and by the OCC
with respect to companies owned directly by Barnett Bank, N.A. In addition,
each of Barnett's direct and indirect nonbanking subsidiaries also is subject
to supervision and regulation by various state and federal agencies,
including but not limited to, the Commission and/or the National Association
of Securities Dealers, Inc. (Barnett Investments, Inc. and Barnett Capital
Advisors, Inc.) and the Department of Insurance of the State of Florida
(Barnett Annuities Corp. and Barnett Insurance Services, Inc.)
The FDICIA recapitalized the deposit insurance funds and gave
regulators the authority to restrict the operations, management and capital
distributions of a bank, depending upon its risk. On December 31, 1996, all
of Barnett's subsidiary banks fell into the lowest risk category. FDICIA also
directs regulators to establish underwriting and operations standards,
encompassing such areas as real estate lending, consumer disclosure rules,
internal controls and new reporting requirements.
As discussed under the Competition section, the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 permits an adequately
capitalized and managed bank holding company, with Federal Reserve
Board approval, to acquire banking institutions located in states other than
the bank holding company's home state, which have not opted out of interstate
branching, without regard to whether the transaction is prohibited under state
law.
PROPERTIES
On December 31, 1996, the company and its subsidiaries had consolidated
premises and equipment with a net book value of $1.1 billion. The company and
its affiliates generally own their offices and related facilities. Most of
the company's non-banking subsidiaries and many of the company's consolidated
operations functions are housed in a multi-use office park in Jacksonville.
LEGAL PROCEEDINGS
The company and its subsidiaries are subject to various pending legal
proceedings arising in the normal course of business. After consultation with
legal counsel, management does not anticipate that the ultimate liability, if
any, arising out of these matters will have a material effect on the
company's financial condition, results of operations or liquidity.
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EXECUTIVE OFFICERS
CHARLES E. RICE, 61, Chairman of the Board and Chief Executive Officer
since November 1988 and Chairman of the Board, President and Chief Executive
Officer from April 1984 to November 1988. Mr. Rice, who has been Chief
Executive Officer since 1979, joined the company in 1966 and was first
elected an executive officer in 1971.
ALLEN L. LASTINGER, JR., 54, President and Chief Operating Officer
since January 1991; Vice Chairman and Chief Banking Officer from November
1988 to December 1990; and Vice Chairman/Retail Banking from April 1984 to
November 1988. Mr. Lastinger joined the company in 1971 and was first elected
an executive officer in 1980.
RICHARD A. ANDERSON, 52, Regional Banking Executive, North Region
since April 1996. Regional Banking Executive/ Central Region from April 1994
to April 1996; President and Chief Executive Officer of Barnett Bank of
Broward County, N.A. from January 1990 to April 1994; and President and Chief
Executive Officer of Barnett Bank of Naples from June 1987 to January 1990.
Mr. Anderson joined the company in 1979 and was first elected an executive
officer in 1994.
JUDY BEAUBOUEF, 50, Chief Legal Executive since 1991; Associate
General Counsel from 1988 to 1991. Ms. Beaubouef joined the company in 1988
and was first elected an executive officer in 1991.
SUSAN S. BLASER, 47, Chief Marketing Executive since December 1994;
Senior Vice President for Retail Banking for First Bank System from February
1991 to October 1994; Senior Vice President of CVN Companies from 1988 to
1990. Ms. Blaser joined the company as an executive officer in 1994.
RICHARD C. BREWER, 55, Chief Credit Policy Executive since July 1994;
Regional Banking Executive/Central Region from January 1989 to July 1994; and
Chairman and Chief Executive Officer of Barnett Bank of Southwest Florida
from January 1986 to January 1989. Mr. Brewer joined the company in 1970 and
was first elected an executive officer in 1989.
M. ALEX CROTZER, 43, Chief Business Banking Executive since April
1996; Chief Executive Officer of Barnett Bank of Broward from May 1994 to
April 1996; President and Chief Executive Officer of Barnett Bank of West
Florida from January 1993 to May 1994; Head of Corporate Banking of Barnett
Bank of Central Florida from March 1986 to January 1993; Senior Vice President
of Real Estate of Barnett Bank of Jacksonville from May 1984 to March 1986. Mr.
Crotzer joined the Company in 1978 and was first elected an executive officer
in 1996.
GREGORY M. DELANEY, 33, Chief Accounting Officer and Controller since
January 1997. Mr. Delaney joined the Company in 1990 and was first elected an
executive officer in 1997.
DOUGLAS K. FREEMAN, 46, Chief Consumer Credit Executive since April
1996; Chief Corporate Banking Executive from August 1991 to April 1996;
Executive Vice President for Business Banking of Wells Fargo Bank from
January 1989 to August 1991. Mr. Freeman joined the company as an executive
officer in 1991.
LEE E. HANNA, 47, Chief Retail Delivery Executive since July 1996;
President of Barnett Bank of Broward County from April 1996 to July 1996;
President & Chief Operating Officer of Barnett Bank of South Florida from
February 1994 to April 1996; Executive Vice President of Retail Banking of
Barnett Bank of South Florida from May 1991 to February 1994; Executive Vice
President of Retail Lending, Barnett Bank of Central Florida from 1987 to
May 1991. Mr. Hanna joined the Company in 1977 and was first elected an
executive officer in 1996.
RICHARD J. JONES, 46, Chief Asset Management Executive for Barnett
Banks, Inc. since July 1995; President and Chief Executive Officer of Fleet
Investment Services and Corporate Vice President of Fleet Financial Group
from 1991 to 1995.
PAUL T. KERINS, 53, Chief Human Resources Executive since February
1985, when he joined the company as an executive officer.
PATRICK J. MCCANN, 40, Director of Finance since November 1996;
Controller from September 1992 to November 1996; Director of Finance/Central
Region from January 1989 to September 1992; Chief Financial Officer of Barnett
Bank of Southwest Florida from January 1988 to June 1989; and Controller from
September 1987 to January 1988. Mr. McCann joined the company in 1987 and was
first elected an executive officer in 1992.
JAMES F. MONDELLO, 53, Regional Banking Executive/ South Region since
February 1991; Regional Banking Executive/East Region from January 1989 to
February 1991; and Executive Vice President and Chief Operating Officer of
Barnett Bank of Polk County from January 1988 to January 1989. Mr. Mondello
joined the company in 1983 and was first elected an executive officer in 1989.
CHARLES W. NEWMAN, 47, Chief Financial Officer since January 1992 and
Executive Vice President and Controller from January 1988 to January 1992.
Mr. Newman joined the company in 1983 and was first elected an executive
officer in 1985.
HINTON F. NOBLES, JR., 51, Executive Vice President since April 1985.
Mr. Nobles joined the company in 1974 and was first elected an executive
officer in 1983.
RICHARD J. REDICK, 46, Chief Technology Executive since November 1996;
Director of Finance from February 1993, when he joined the company as an
executive officer, to November 1996; Executive Vice President of BayBank
Boston, N.A. from 1983 to February 1993.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf, thereunto duly authorized.
Date: March 10, 1997
BARNETT BANKS, INC.
BY: *
--------------------------
Charles E. Rice, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
* Director March 10, 1997
- ---------------------
Walter H. Alford
* Director March 10, 1997
- ---------------------
Rita Bornstein
* Director March 10, 1997
- ---------------------
James L. Broadhead
* Director March 10, 1997
- ---------------------
Alvin R. Carpenter
* Director March 10, 1997
- ---------------------
Marshall M. Criser
* Director March 10, 1997
- ---------------------
Jack B. Critchfield
Director March 10, 1997
- ---------------------
Remedios Diaz Oliver
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NAME TITLE DATE
---- ----- ----
* President, Chief March 10, 1997
- --------------------- Operating Officer
Allen L. Lastinger, Jr. and Director
* Director March 10, 1997
- ---------------------
Clarence V. McKee
GREGORY M. DELANEY Controller March 10, 1997
- --------------------- (Principal Accounting
Gregory M. Delaney Officer)
CHARLES W. NEWMAN Chief Financial March 10, 1997
- --------------------- Officer (Principal
Charles W. Newman Financial Officer)
* Director March 10, 1997
- ---------------------
Stewart Turley
* Director March 10, 1997
- ---------------------
Thompson L. Rankin
* Chairman and Chief March 10, 1997
- --------------------- Executive Officer
Charles E. Rice and Director (Principal
Executive Officer)
* Director March 10, 1997
- ---------------------
Frederick H. Schultz
* Director March 10, 1997
- ---------------------
John A. Williams
HINTON F. NOBLES, JR. Executive March 10, 1997
- --------------------- Vice President
Hinton F. Nobles, Jr.
* by signing his name hereto, does sign this document on behalf of each of the
persons indicated by an asterisk above, pursuant to Powers of Attorney duly
executed by such persons and filed with the Securities and Exchange
Commission.
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EXHIBIT INDEX
-------------
3. Articles of Incorporation and Bylaws.
*(a) Amended and Restated Articles of
Incorporation.
***(b) Bylaws.
4. Instruments defining the rights of security
holders, including indentures:
**(a) Indenture dated as of May 15, 1972,
relating to 7 3/4% Sinking Fund Debentures
due 1997.
+(b) Indenture dated as of August 15, 1984,
relating to Floating Rate Subordinated
Capital Notes due 1996 and to 8 1/2%
Subordinated Capital Notes due 1999.
++(c) Indentures as of October 19, 1990,
and supplemental indentures dated April
21, 1991 and May 14, 1993 relating
to Debt Securities of the Company.
++(d) Indenture dated as of October 19, 1990 and supplemental indenture
as of April 22, 1991 related to Debt Securities of the Company.
+++(e) Indenture dated March 16, 1995 relating to Subordinated Debt
Securities of the Company.
+++(f) Indenture dated March 16, 1995 relating to Senior Debt Securities
of the Company.
(g) Registration Rights Agreement dated as of December 2, 1996
relating to the Capital Securities of Barnett Capital II
(including therein a schedule identifying substantially
identical registration rights agreements dated November 27, 1996
and January 28, 1997, relating to the Capital Securities of
Barnett Capital I and Barnett Capital III, respectively).
(h) Guarantee Agreement dated as of December 2, 1996 for the benefit
of holders of the Capital Securities of Barnett Capital II
(including therein a schedule identifying substantially
identical guarantee agreements dated November 27, 1996 and
January 28, 1997, relating to the Capital Securities of Barnett
Capital I and Barnett Capital III, respectively).
(i) Indenture dated as of December 2, 1996 relating to 7.95% Junior
Subordinated Debentures Due 2026 of the Company (including
therein a form of Junior Subordinated Debenture and a schedule
identifying substantially identical indentures dated November
27, 1996 and January 28, 1997 relating to additional issuances
of junior subordinated debentures of the Company).
(j) Amended and Restated Declaration of Trust of Barnett Capital II
dated as of December 2, 1996 relating to $200,000,000 Capital
Securities of the Trust (including therein a form of Capital
Security and a schedule identifying substantially identical
amended and restated declarations of trusts dated November 27,
1996 and January 28, 1997, of Barnett Capital I and Barnett
Capital III, respectively).
10. Material Contracts
-(a) Long Term Incentive Plan of Barnett Banks, Inc., as amended.
--(b) Employment Agreement Messrs. Nobles, Newman,
Rice, Lastinger & Brewer
---(c) Trust under executive benefit plan
11. Statement re Computation of Per Share Earnings.
12. Ratios of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.
13. Annual Report to Security Holders for the fiscal
year ended December 31, 1996.
21. Subsidiaries of the Registrant in addition to page 62
of the Annual Report to Shareholders.
23. Consent of Experts
(a) Consent of Arthur Andersen LLP
24. Powers of Attorney.
27. Financial Data Schedule
__________________________
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*Previously filed as Exhibits to Registrant's Registration
Statement of Form S-3, Registration No. 33-59246 and incorporated
herein by reference.
**Previously filed as Exhibits to Registrant's Form 10-K for the
fiscal year ended December 31, 1981, and incorporated herein by
reference.
***Previously filed as Exhibits to Registrant's Registration Statement
on Form S-3. Registration Statement No. 33-57597 and incorporated
herein by reference.
+Previously filed as Exhibit to Registrant's Registration State-
ment on Form S-3, Registration No. 2-92815, and incorporated
herein by reference.
++Previously filed as Exhibit to Registrant's Form 10-K for the
fiscal year ended December 31, 1990, and incorporated herein by
reference.
+++Previously filed as Exhibit to Registrant's Report on Form 8-K
dated March 22, 1995.
-Previously filed as Exhibit to Registrant's Form 10-K for the
fiscal year ended December 31, 1984, and incorporated herein by
reference.
--Previously filed as Exhibit to Registrant's Form 10-K for the
fiscal year ended December 31, 1993, and incorporated herein by
reference.
- ---Previously filed as Exhibit to Registrant's Registration Statement
on Form S-3, Registration No. 33-21649 and incorporated herein by
reference.
11
<PAGE>
APPENDIX DESCRIBING PICTURES AND CHARTS IN ANNUAL REPORT TO SHAREHOLDERS
On pages 2 and 5 of the printed version, photos of Charles E. Rice, Chairman
and Chief Executive Officer, appear.
On pages 3 and 6 of the printed version, photos of Allen L. Lastinger, Jr.,
President and Chief Operating Officer, appear.
On pages 8 through 17 of the printed version, photos of people (customers)
appear.
On page 19 of the printed version, pie chart graphs show pictorially the
approximate percentage of total company revenue and net income each of the
three business lines contributed as follows: Asset Management Revenue 37%,
Net Income 25%, Consumer Credit Revenue 26%, Net Income 24%, Business Banking
Revenue 23%, Net Income 35%.
12
<PAGE>
EXHIBIT 11
BARNETT BANKS, INC. - CONSOLIDATED
COMPUTATION OF EQUIVALENT SHARES AND PER SHARE EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE TWELVE MONTHS ENDED DECEMBER 31
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------------------------------------------------------------------------
FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Equivalent shares:
Average shares outstanding: 191,033,245 191,033,245 193,070,480 193,070,480 194,524,992 194,524,992
Additional shares due to:
Stock options 3,210,450 4,362,256 1,961,804 2,899,592 1,568,454 1,568,454
Series A preferred stock 0 1,905,029 0 7,501,224 0 7,547,200
Series B preferred stock 54,010 54,010 62,532 62,532 68,936 68,936
Series C preferred stock 0 0 0 4,425,646 0 5,822,680
--------------------------------------------------------------------------------------------
Total equivalent shares 194,297,705 197,354,540 195,094,816 207,959,474 196,162,382 209,532,262
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Earnings per share:
Net income $564,491 $564,491 $533,301 $533,301 $487,971 $487,971
Less: Preferred stock dividends (2,168) 0 (15,861) 0 (18,200) 0
--------------------------------------------------------------------------------------------
Adjusted net income $562,323 $564,491 $517,440 $533,301 $469,771 $487,971
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Total equivalent shares 194,297,705 197,354,540 195,094,816 207,959,474 196,162,382 209,532,262
Earnings per share on net income $2.89 $2.86 $2.65 $2.56 $2.39 $2.33
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 12
BARNETT BANKS, INC. - CONSOLIDATED
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
EXCLUDING INTEREST ON DEPOSITS
Year Ended December 31
----------------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $564,491 $533,301 $487,971 $420,994 $207,656
Provision (benefit) for income taxes 339,659 286,293 249,834 207,482 95,310
----------------------------------------------------------
Earnings before provision (benefit)
for income taxes 904,150 819,594 737,805 628,476 302,966
----------------------------------------------------------
Fixed charges:
Interest expense (excluding interest on
deposits) 212,439 226,207 159,897 91,005 100,953
Minority interest expense 3,804 - - - -
Capitalized interest 1,054 1,386 665 1,364 1,498
Interest portion of rentals (33%) 30,358 29,993 27,450 32,256 31,115
----------------------------------------------------------
Total fixed charges 247,655 257,586 188,012 124,625 133,566
----------------------------------------------------------
Earnings before provision (benefit)
for income taxes and fixed charges $1,151,805 $1,077,180 $925,817 $753,101 $436,532
----------------------------------------------------------
----------------------------------------------------------
Ratio of earnings to fixed charges 4.65 4.18 4.92 6.04 3.27
----------------------------------------------------------
----------------------------------------------------------
<CAPTION>
INCLUDING INTEREST ON DEPOSITS
Year Ended December 31
-----------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $564,491 $533,301 $487,971 $420,994 $207,656
Provision (benefit) for income taxes 339,659 286,293 249,834 207,482 95,310
-----------------------------------------------------------
Earnings before provision (benefit)
for income taxes 904,150 819,594 737,805 628,476 302,966
-----------------------------------------------------------
Fixed charges:
Interest expense (including interest on
deposits) 1,136,770 1,219,253 921,408 880,105 1,143,680
Minority interest expense 3,804 - - - -
Capitalized interest 1,054 1,386 665 1,364 1,498
Interest portion of rentals (33%) 30,358 29,993 27,450 32,256 31,115
-----------------------------------------------------------
Total fixed charges 1,171,986 1,250,632 949,523 913,725 1,176,293
-----------------------------------------------------------
Earnings before provision (benefit)
for income taxes and fixed charges $2,076,136 $2,070,226 $1,687,328 $1,542,201 $1,479,259
-----------------------------------------------------------
-----------------------------------------------------------
Ratio of earnings to fixed charges 1.77 1.66 1.78 1.69 1.26
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 12 - (continued)
BARNETT BANKS, INC. - CONSOLIDATED
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES AND PREFERRED DIVIDENDS
(Dollars in thousands)
<TABLE>
<CAPTION>
EXCLUDING INTEREST ON DEPOSITS
Year Ended December 31
---------------------------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $564,491 $533,301 $487,971 $420,994 $207,656
Provision (benefit) for income taxes 339,659 286,293 249,834 207,482 95,310
---------------------------------------------------------------------
Earnings before provision (benefit)
for income taxes 904,150 819,594 737,805 628,476 302,966
---------------------------------------------------------------------
Fixed charges:
Interest expense (excluding interest on
deposits) 212,439 226,207 159,897 91,005 100,953
Minority interest expense 3,804 - - - -
Capitalized interest 1,054 1,386 665 1,364 1,498
Interest portion of rentals (33%) 30,358 29,993 27,450 32,756 31,115
---------------------------------------------------------------------
Total fixed charges 247,655 257,586 188,012 125,125 133,566
---------------------------------------------------------------------
Earnings before provision (benefit)
for income taxes and fixed charges $1,151,805 $1,077,180 $925,817 $753,601 $436,532
---------------------------------------------------------------------
---------------------------------------------------------------------
Preferred dividend requirements $2,168 15,861 18,234 18,238 18,254
Ratio of pre-tax income to net income 1.60 1.54 1.51 1.49 1.46
---------------------------------------------------------------------
Preferred dividend factor 3,473 24,376 27,570 27,226 26,632
Total Fixed Charges 247,655 257,586 188,012 125,125 133,566
---------------------------------------------------------------------
Combined fixed charges and preferred
dividend requirements $251,128 $281,962 $215,582 $152,351 $160,198
---------------------------------------------------------------------
---------------------------------------------------------------------
Ratio of earnings to combined fixed
charges and preferred dividend
requirements 4.59 3.82 4.29 4.95 2.72
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 12 - (continued)
BARNETT BANKS, INC. - CONSOLIDATED
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES AND PREFERRED DIVIDENDS
(Dollars in thousands)
<TABLE>
<CAPTION>
INCLUDING INTEREST ON DEPOSITS
Year Ended December 31
--------------------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income $564,491 $533,301 $487,971 $420,994 $207,656
Provision (benefit) for income taxes 339,659 286,293 249,834 207,482 95,310
--------------------------------------------------------------------
--------------------------------------------------------------------
Earnings before provision (benefit)
for income taxes 904,150 819,594 737,805 628,476 302,966
--------------------------------------------------------------------
Fixed charges:
Interest expense (including
interest on deposits) 1,136,770 1,219,253 921,408 880,105 1,143,680
Minority interest expense 3,804 - - - -
Capitalized interest 1,054 1,386 665 1,364 1,498
Interest portion of rentals (33%) 30,358 29,993 27,450 32,256 31,115
--------------------------------------------------------------------
Total fixed charges 1,171,986 1,250,632 949,523 913,725 1,176,293
--------------------------------------------------------------------
Earnings before provision for
income taxes and fixed charges $2,076,136 $2,070,226 1,687,328 $1,542,201 $1,479,259
--------------------------------------------------------------------
--------------------------------------------------------------------
Preferred dividend requirements $2,168 15,861 18,234 18,238 18,254
Ratio of pre-tax income to net income 1.60 1.54 1.51 1.49 1.46
--------------------------------------------------------------------
Preferred dividend factor 3,473 24,376 27,570 27,226 26,632
Total Fixed Charges 1,171,986 1,250,632 949,523 913,725 1,176,293
--------------------------------------------------------------------
Combined fixed charges and preferred
dividend requirements $1,175,459 $1,275,008 $977,093 $940,951 $1,202,925
--------------------------------------------------------------------
--------------------------------------------------------------------
Ratio of earnings to combined fixed
charges and preferred dividend
requirements 1.77 1.62 1.73 1.64 1.23
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
<PAGE>
[BARNETT LOGO]
{ IDEAS )
1996 Barnett Banks, Inc. Annual Report
<PAGE>
BARNETT TODAY
Barnett Banks, Inc. is the leading financial institution in Florida and
ranked in the top 25 in the United States. The company offers a comprehensive
line of banking and related financial services to retail and business
customers in its primary markets of Florida and southern Georgia. In Florida,
Barnett commands the leading market share in virtually every major banking
line of business. Barnett's mortgage banking, consumer finance and indirect
automobile finance units offer loans and leases nationwide.
Barnett's goal is to create value for its owners, customers and employees
by enhancing its acknowledged leadership position in the evolving banking
business in its markets and creating a diversified group of other financial
services businesses throughout the nation.
The company's shares are listed on the New York Stock Exchange (BBI).
CONTENTS
Consolidated Financial Highlights 1
A Letter to Our Shareholders 2
Ideas 8
Lines of Business 18
Management Discussion 20
Six-Year Statements 38
Fourth Quarter Management Discussion 40
Annual Financial Statements 46
Notes to Financial Statements 50
Market and Business Directory 66
Board of Directors and Officers 67
Shareholder Information 68
5-YEAR STOCK PRICES { Graph }
$45.00
- ----------------------------------------------
$35.00
- ----------------------------------------------
$25.00
- ----------------------------------------------
$15.00
- ----------------------------------------------
92 93 94 95 96
High $21.81 $25.19 $24.06 $30.75 $44.00
Low $15.50 $18.69 $18.81 $19.38 $27.75
Close $20.63 $20.75 $19.25 $29.50 $41.13
QUARTERLY STOCK PRICES - 1995 & 1996 { Graph }
$45.00 | 1995 | 1996
- --------|--------------------------------|--------------------------------
| |
$35.00 | |
- --------|--------------------------------|--------------------------------
| |
$25.00 | |
- --------|--------------------------------|--------------------------------
| |
$15.00 | |
- --------|--------------------------------|--------------------------------
| 1Q 2Q 3Q 4Q | 1Q 2Q 3Q 4Q
High | $22.88 $26.13 $29.44 $30.75 | $31.88 $32.06 $34.06 $44.00
Low | $19.38 $22.75 $25.63 $27.25 | $27.75 $29.50 $29.25 $34.50
Close | $22.75 $25.69 $28.31 $29.50 | $31.13 $30.50 $33.75 $41.13
5-YEAR DIVIDEND HISTORY
[CHART]
$0.66 $0.71 $0.80 $0.91 $1.05
1992 1993 1994 1995 1996
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
Restated for 2-for-1 stock split in September 1996
<TABLE>
<CAPTION>
Dollars in Millions Except Per Share Data 1996 1995 CHANGE 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR
Net interest income (taxable-equivalent) ......... $1,886.5 $1,772.2 6% $1,677.5 $1,700.3 $1,736.1 $1,568.0
Provision for loan losses ........................ 154.6 122.5 26 74.0 120.4 257.3 453.9
Non-interest income (excluding
securities transactions) ....................... 791.3 714.0 11 555.7 601.1 586.5 528.6
Securities transactions .......................... 19.2 5.0 -- (13.1) (2.1) 34.2 18.2
Non-interest expense
(excluding special charges) .................... 1,592.5 1,518.6 5 1,364.2 1,501.0 1,645.5 1,497.1
Special charges(1) ............................... 24.5 -- -- -- -- 92.6 --
Net income ....................................... 564.5 533.3 6 488.0 421.0 207.7 81.4
=================================================================================================================================
PER COMMON SHARE
Net income:
Primary ........................................ $ 2.89 $ 2.65 9% $ 2.39 $ 2.05 $ .99 $ .40
Fully diluted .................................. 2.86 2.56 12 2.33 2.01 .99 .40
Dividends declared ............................... 1.05 .91 15 .80 .71 .66 .66
Book value(2) .................................... 18.10 17.13 6 15.54 14.17 12.70 12.09
Stock price:
High ........................................... 44.00 30.75 43 24.06 25.19 21.81 18.19
Low ............................................ 27.75 19.38 43 18.81 18.69 15.50 7.75
Close .......................................... 41.13 29.50 39 19.25 20.75 20.63 16.75
=================================================================================================================================
KEY PERFORMANCE RATIOS
Return on assets(3) .............................. 1.42% 1.30% 9% 1.28% 1.13% .55% .21%
Return on equity(3) .............................. 17.44 16.08 8 16.11 15.42 8.27 3.83
Net yield on earning assets ...................... 5.24 4.88 7 4.87 5.07 5.11 4.60
Overhead ratio (excluding special charges) ....... 59.47 61.08 (3) 61.09 65.22 70.85 71.41
Leverage ratio ................................... 8.21 6.16 33 6.97 7.29 6.18 5.54
Total risk-based capital ratio ................... 14.17 11.51 23 12.42 13.33 12.11 10.53
=================================================================================================================================
AVERAGE BALANCES
Assets ........................................... $40,888 $41,105 (1)% $38,169 $37,356 $37,923 $37,900
Deposits ......................................... 33,179 33,691 (2) 31,710 32,485 33,221 33,338
Loans, net of unearned income .................... 30,366 29,772 2 26,810 25,840 26,236 27,201
Earning assets ................................... 35,970 36,308 (1) 34,441 33,513 33,940 34,118
Shareholders' equity ............................. 3,325 3,316 -- 3,029 2,730 2,511 2,128
Fully diluted shares (thousands) ................. 197,355 207,959 (5) 209,532 209,736 205,700 186,108
=================================================================================================================================
AT YEAR END
Assets ........................................... $41,231 $41,554 (1)% $41,278 $38,331 $39,465 $38,491
Deposits ......................................... 33,820 34,234 (1) 35,109 32,634 34,689 33,850
Loans, net of unearned income .................... 30,253 30,486 (1) 28,521 25,930 26,051 26,422
Long-term debt ................................... 1,227 1,191 3 777 682 701 710
Preferred stock .................................. -- 98 -- 215 215 215 216
Shareholders' equity ............................. 3,370 3,272 3 3,134 2,874 2,556 2,314
Common shares (thousands) ........................ 189,669 189,731 -- 193,466 194,809 193,287 183,983
=================================================================================================================================
</TABLE>
(1) SPECIAL CHARGES CONSIST OF A $24.5 MILLION PRE-TAX SAIF ASSESSMENT
DURING 1996 AND A $92.6 MILLION PRE-TAX RESTRUCTURING CHARGE DURING 1992.
(2) COMPUTED ON EQUITY BEFORE DEDUCTION OF THE EMPLOYEE STOCK OWNERSHIP PLAN
OBLIGATION.
(3) EXCLUDING $24.5 MILLION PRE-TAX SAIF ASSESSMENT. INCLUDING THE
ASSESSMENT, RETURN ON ASSETS AND RETURN ON EQUITY WERE 1.38% AND 16.98%,
RESPECTIVELY, IN 1996.
Barnett
1
<PAGE>
A LETTER TO OUR SHAREHOLDERS
THIS IS NOT THE BARNETT OF THE EARLY 1900S...THIS COMPANY HAS CHANGED ITSELF
INTO A MUCH SLEEKER ANIMAL.--Nancy Bush, Brown Brothers Harriman
To Our Shareholders:
This analyst portrayed us that way after attending our bi-annual investor
conference in November. We believe it is an accurate description of Barnett
during a critical time for banking. We are in a Darwinian environment in
which the winners will survive and thrive by adapting to the new realities of
intense competition, broader business opportunities and technological
innovation.
At Barnett, we see change as more than just inevitable. We are excited
about the opportunities change creates. Smart, agile organizations like
Barnett are leveraging their strengths to tap new sources of profitable
revenue and create new customer relationships. As barriers to full and open
competition fall, we are offering a broad array of products like insurance
and business leasing. And we are entering new geographic markets. As
described in our feature section, we are striving to be a company with ideas
to help our customers meet their financial or business goals, to enhance the
well being of our employees and our communities and to work in new as well as
traditional ways to create shareholder value. We have never been more
enthusiastic about your company's future.
FINANCIAL REVIEW
Barnett is building on a strong foundation. This year was the company's
16th year of record profits since 1978.
Barnett earned $564.5 million, or $2.86 per share, representing a 12%
increase in earnings per share. The company earned 1.42% on average assets
and 17.44% on shareholders' equity.
Our revenue growth has been gratifying. Revenues rose 8% during the year,
reflecting solid increases in both net interest and non-interest income. Our
nationwide expansion of consumer lending particularly added to non-interest
income, as EquiCredit had another excellent year. We also significantly
increased our revenue through automobile lending activities.
Winning companies will also control their expenses and manage credit risk
well. During 1996, we reduced our overhead ratio (expenses as a percentage of
revenue) below 60%. Net loan losses ran .51% of total loans, up from the 1995
level due to higher credit card losses. As part of a strategic alliance
established with Household Credit Services, Inc. in October, Barnett sold
$776 million of non-core credit card outstandings. This transaction resulted
in fourth quarter credit card charge-offs being reduced significantly from
earlier periods in 1996.
We continue to maintain a strong balance sheet. The reserve for potential
loan losses stood at 250% of non-performing loans on December 31. Our capital
ratios well exceed regulatory requirements.
[Picture caption] CHARLES E. RICE, Chairman and Chief Executive Officer
Barnett
2
<PAGE>
While these are excellent results, we are not satisfied. Through the
first three quarters of 1996, Barnett ranked near the middle among the
largest 100 banking companies in earnings per share growth and return on
common equity. Our goal is to perform in the top quartile of this group.
Here's how we intend to achieve these objectives.
THIS IS A COMPANY NOT JUST PREPARED FOR THE FUTURE, BUT ONE OF THE FEW BANKS
ARMED WITH BOTH THE STRATEGY AND TECHNOLOGY TO RETURN SUPERIOR PERFORMANCE IN
THE UPCOMING YEARS. --Thomas K. Brown, Donaldson, Lufkin & Jenrette
OUR STRATEGY
As the banking industry changes dramatically, different organizations
are adopting strategies based on their strengths. Some want to be the
low-cost provider, achieving earnings increases by slashing expenses at the
risk of compromising service quality in an attempt to compete on the basis of
price. Others are expanding rapidly through acquisition. This too essentially
is a cost-cutting strategy based on eliminating redundant delivery,
administration and operations.
While those strategies may be appropriate for others, our strong
position in one of the nation's most dynamic markets gives us an opportunity
to pursue a customer-focused, value-added strategy. We will continue to
become more efficient, but our primary initiatives will be to profitably
increase revenues by meeting the needs and expectations of our current and
potential customers.
We are doing this through a two-pronged plan. We are capitalizing on our
position as the leading financial services provider in Florida, the nation's
fourth largest state and one of the fastest growing of the largest states.
And we are expanding nationally along product lines such as consumer finance
and indirect automobile lending (making loans through dealers) where Barnett
has expertise and experience. These strategies play to our operating
strengths and offer the maximum opportunity to generate shareholder value.
In our traditional banking markets of Florida and south Georgia, we are
increasing revenues by expanding our "share of wallet" with the 2.4 million
households we do business with and by establishing relationships with the
more than 700 people who move to Florida every day. Share of wallet is a
relatively new term. We measure what financial assets households own from
checking accounts to insurance to investments. Although Barnett currently has
a relationship with 40% of Florida's households, we have only about 8% of that
household wallet. We have a vast opportunity to improve our position.
We also have impressive market presence among Florida's businesses.
Barnett has a relationship with 25% of Florida's small businesses (less than
$5 million in sales) and with more than 30% of its larger companies. Our
business banking group is also pursuing a strategy to deepen relationships
and expand our share of what the state's businesses spend on financial
services while cutting delivery costs.
[Picture caption] ALLEN L. LASTINGER, JR., President and Chief Operating
Officer
Barnett
3
<PAGE>
A LETTER TO OUR SHAREHOLDERS
At the same time, we are originating consumer and residential mortgage
loans through nationwide networks. Barnett is no longer simply a Florida
bank. In fact, we are no longer merely a bank. Of our 807 offices, 185 are
non-bank offices serving more than 40 states. We are focused on big,
fast-growing, profitable markets that give us greater geographic and revenue
diversification.
To that end, in January 1997 the company moved to enhance our already
strong auto financing business by announcing the acquisition of Oxford
Resources Corp., the nation's largest independent automobile leasing company.
The Melville, N.Y.-based company provides leases for new and used automobiles
through more than 2,000 auto dealers in 21 states across the country. During
1996, its total lease and loan originations exceeded $1 billion. This
transaction moves Barnett into new geographic markets and vaults us into a
leadership position in the fast-growing auto leasing business.
These are strong, fundamental strategies, but it will be how we execute
our strategies that differentiates Barnett.
BARNETT IS ONE OF THE MOST ADVANCED BANKS WE COVER WITH RESPECT TO USING
TECHNOLOGY TO UNDERSTAND ITS CUSTOMER BASE AND REFINE ITS MARKETING
APPROACHES. --Sally Pope Davis, Goldman Sachs & Co.
The critical success factor in our pursuit of profitable revenue
growth--whether in Florida or in our national product lines--is the
intelligent use of information for competitive advantage. Many others in our
industry are gathering information, but few have the depth of data or the
systems and processes in place that we do to use it effectively. We are using
extensive information to better understand customer behavior and
profitability, as well as product and delivery channel usage and
profitability. Using our state-of-the-art management system, we are providing
this information in actionable form to our office managers to pursue their
most attractive relationship opportunities.
This information-based strategy is best reflected in our newest
management system called the Retail Market Management System (RMMS). Using
this system, each of our office managers can gain an understanding of the
profitability of each customer household and, more importantly, what
determines profitability. We are using this information to create attractive
combinations of price, product and service for targeted customer groups that
should create and expand relationships. Using RMMS, managers of our pilot
offices are projecting that they can improve their office profitability by an
average of almost 20%.
This is just one example of how Barnett has a better idea for using
information for our competitive advantage. Our marketing group is using
information to better target our direct mail efforts. We have sent out fewer
solicitations and produced higher response rates using market and customer
information to target the most likely to buy. Our retail delivery division is
also using market and customer information to reconfigure our delivery
channels. We know where
Barnett
4
<PAGE>
our customers access us, whether in the office, at the ATM or on the
telephone. We are using that information to enhance delivery and better meet
customer needs while reducing our cost.
The Business Banking group also has its version of RMMS, which it is
using to expand small business relationships. About 80% of our small business
customers have only one product with Barnett. That represents a significant
opportunity to expand revenue with only incremental increases in cost.
It is clear, Barnett is evolving from a traditional order-taking
institution to a dynamic sales-oriented company aimed at identifying and
meeting customer needs better than the competition. This change is reflected
in our new brand image and the accompanying tag line, IDEAS FOR THE WAY YOU
LIVE. Where in the past we may have concentrated on selling products, today
we are focused on understanding customer needs and expectations, then
fulfilling them with better ideas, products and service.
The second element in our strategy is expansion of our product line. Our
goal is to meet as many of our customers' financial needs as we profitably
can. As such, we are moving to expand our investment offerings, create
insurance products and test innovative new deposit accounts.
Helping customers manage their money represents perhaps Barnett's
greatest growth opportunity. While the deposit market in Florida is expected
to grow by about 3% a year over the remainder of the decade, mutual funds and
other investment products are expected to grow by almost 15%. By both
participating in that growth and expanding our current share of the
investment market, Barnett expects to generate strong revenue growth. To do
that, we have reorganized along customer lines and are dramatically expanding
our sales forces while enhancing our product line. In the past, a customer in
the affluent market might have a banker, a trust officer and a broker, all
under the Barnett umbrella. Today, that customer would be served by one
Private Client Executive who could provide for all financial needs.
Our product line has become much more competitive. We are one of the few
banking organizations that offers both load and no-load mutual funds. We have
introduced SelecTrack, a list of pre-screened funds that we continue to
monitor for quality performance. We have revamped our annuity line to offer
more choices and are integrating our deposit and investment product lines
through our Investor Access Account.
Barnett is also developing innovative services to help people maintain
or improve their lifestyle. Our Retirement Advisory Service that is currently
being piloted helps retirees to manage their money wisely. And, we are
developing the best line of retirement program products for small business in
our markets.
The Business Banking group continues to expand its leading line of small
business products including new lines of credit, new checking account choices
and new value-added products that help owners with such administrative tasks
as employee administration.
[Picture caption] We believe that winning organizations in our industry must
be able to adapt to ever changing circumstances. For us, that has meant
always questioning the status quo.
Barnett
5
<PAGE>
A LETTER TO OUR SHAREHOLDERS
Barnett's Consumer Credit group is also expanding its offerings. From
consumer finance products offered to those who might not qualify for
traditional bank loans to new automobile leasing products, this group is
meeting the needs of more customers in many new markets.
ONE OF THE MOST IMPRESSIVE TRAITS OF BARNETT IN RECENT YEARS IS THAT THEY
HAVE NOT BECOME WED TO STRATEGIES THAT DO NOT PRODUCE SUFFICIENTLY HIGH
RISK-ADJUSTED RETURNS.--Carole S. Berger, Salomon Brothers
1996 DEVELOPMENTS
We believe that winning organizations in our industry must be able to
adapt to ever changing circumstances. For us, that has meant always
questioning the status quo.
This spirit of innovation can be seen in several major developments
during the year. We joined with BankBoston Corporation to form HomeSide,
Inc., the nation's seventh largest servicer of residential mortgages. By
combining forces, we created the scale and growth opportunities that neither
of us could have achieved alone in this rapidly consolidating industry.
We also created an innovative alliance with Household Credit Services,
Inc., the nation's sixth largest Visa/MasterCard issuer. Household will
service our credit cards and we will jointly market cards in our banking
markets. This again allows us to be competitive in a market where scale is
important. Both of these transactions are expected to add to 1997 earnings
per share.
With the unanimous concurrence of our local bank presidents, we
consolidated our bank charters in Florida. This simplified structure allows
us to reduce redundant regulatory and reporting activities while maintaining
our local market focus. Our bank presidents said they needed to spend more
time developing business and this change gives them that opportunity.
Our first 10 supermarket banking offices opened during the year in
Publix Super Markets stores. This partnership represents an alliance between
two of Florida's most recognized companies and the early results from this
initiative are quite encouraging. We are opening a significant number of new
accounts with customers who appreciate the time-and-place convenience made
possible by seven-day-a-week availability. We are also piloting at these
locations new accounts that reward customers who use ATMs for routine
transactions.
Dealer Financial Services, which lends through dealers to car buyers,
expanded into four new states. This is one of Barnett's strongest core
businesses, and we are leveraging our technological and experience advantage
in entering new markets. Indirect auto loan originations grew 11% to $3.16
billion in 1996, and we expect production will continue to increase as we
enter new markets in 1997.
[Picture caption] Our strong position in one of the nation's most dynamic
markets gives us an opportunity to pursue a customer-focused, value-added
strategy.
Barnett
6
<PAGE>
EquiCredit, our consumer finance company, had an excellent year and
opened 35 new offices in 1996. These loans are generally securitized and sold
to investors in the capital markets, so this business primarily produces
non-interest income. EquiCredit is currently the fifth largest closed-end
equity lender in the United States and we plan to continue its expansion in
1997.
WHILE SOME BANKS SEEM TO HAVE A STRATEGY DU JOUR, BARNETT'S STRATEGY HAS BEEN
ON THE MENU FOR SEVERAL YEARS. THE BENEFIT IS A DEEPER STRATEGY WITH MORE
SOPHISTICATED MARKETING AND SYSTEMS THAN THE TYPICAL BANK. --Michael Mayo,
Lehman Brothers, Inc.
OUR MISSION
Our strategies and initiatives are aimed at fulfilling our mission to
create value for owners, customers and employees as a major financial
services provider in the United States. Our goal by the year 2000 is to be a
fully diversified financial services organization with the acknowledged
leadership position in the evolving banking business in our markets and with
a group of other financial businesses throughout the nation.
In 1996, we took important steps in that direction. We are striving to
be the best, not the biggest. We will offer superior value to our customers.
Our brand will stand for a strong mutually beneficial relationship between
Barnett and its customers. As our new advertising tag line says, we will
provide better ideas for the way our customers live, enhancing their lives
with products and services that provide a fair return to our shareholders.
In creating value propositions for our customers, we are mindful that
ours is a people-oriented business. We are proud that Barnett has acquired a
reputation as being a great place to work, highlighted by our top 10 ranking
for four straight years in WORKING MOTHER magazine and recognition by other
organizations. Our 20,000 employees are the backbone of this organization,
and we are confident we will reach our goals because they have proved again
and again that they can compete and win on a national level.
Barnett has a sound strategy to grow revenues in our Florida home and
nationally along select product lines. We have one of the best teams in
banking. And we are executing to achieve the kind of premium performance that
translates into exceptional shareholder value. We are not satisfied to be a
good financial services company. We are determined to be one of the best.
/s/ CHARLES E. RICE /s/ ALLEN L. LASTINGER, JR.
Charles E. Rice Allen L. Lastinger, Jr.
Chairman and Chief Executive Officer President and Chief Operating Officer
Barnett
7
<PAGE>
{ IDEAS ) ACCESS
[GRAPHIC]
WHERE AND WHEN DO YOU WANT TO BANK?
[GRAPHIC]
Time is a currency you can never replace. So at Barnett, we help our
customers save time for what's really important in life--with ideas that help
them bank wherever they live, however they choose, whenever they're ready.
(i) SUPERMARKET BANKING is an idea we've brought to life with 10 full-service
banking offices in Publix Super Markets. Open seven days (and many evenings)
a week, our in-store banks are a convenience to the 25% of Publix customers
who bank with Barnett--and an opportunity to win over those who don't. (Four
of every five accounts we've been opening are for new customers.) Over the
next several years, we'll expand into the majority of Publix' 446 Florida
stores, beginning with 40 in 1997. (i) AT HOME money management is simple for
customers who contact us via their phone or PC to obtain account updates,
transfer money or pay bills. Our wide variety of free telephone banking
services drew a record 60 million calls this year. (i) AWAY FROM HOME
shopping and banking are easier for Barnett customers who carry our SuperCard
Check Card, which lets them bypass checkwriting just about anywhere. We're
always looking for ways to save people money. But when time is beyond price,
every minute freed up for yourself can be worth a fortune.
Barnett
8
<PAGE>
ANYTIME, ANYWHERE }
[GRAPHIC]
YOU HAVE BETTER PLACES
TO GO THAN THE BANK.
[GRAPHIC] - 24 HOURS
- - GET A LOAN AT THE SUPERMARKET
- - ACCOUNT INFORMATION BY PHONE
- - BILL PAYMENT ON YOUR HOME PC
- - CHECKLESS PURCHASES ANYWHERE
- - SUPERTELLER ATM BANKING ANYTIME
WE'RE TAKING BANKING OUT OF THE BANK:
- - TO SERVE OUR CUSTOMERS BETTER AND MORE EFFICIENTLY
- - TO ATTRACT NEW CUSTOMERS WHO VALUE CONVENIENCE
- - TO LET CUSTOMERS BANK WHERE AND WHEN THEY WANT
Barnett
9
<PAGE>
{ IDEAS) EXPANDING
[GRAPHIC]
EXPLORING NEW FRONTIERS WITH CREATIVE STRATEGIES.
[GRAPHIC]
While strengthening our position in traditional markets, we've begun to
explore nationwide growth opportunities in high-potential niches. Building on
core competencies in management, marketing, underwriting and servicing, we're
pioneering national franchises along several lines of strength. (i) AUTO
FINANCING to consumers is streamlined with front-runner technology that
enables Barnett Dealer Financial Services to communicate efficiently with
1,600 participating auto dealers, speed up loan underwriting and gauge
profitability with precision. Loan volume from our indirect lending
subsidiary accelerated in 1996 as we rolled into North Carolina and other new
markets. (i) HOME EQUITY BORROWING through EquiCredit is running at top
speeds. Applications have more than tripled in two years. We now lend in more
than 40 states--and look for continuing growth in this high-potential
business. (i) MORTGAGE BANKING on a national scale makes us a full-service
resource for homebuyers from coast to coast. HomeSide, Inc., our joint
venture with BankBoston, is now the nation's seventh largest mortgage loan
servicer, complementing our nationwide origination capability. With more
initiatives like these, we plan to keep opening up new frontiers for
growth--and introducing more new customers to the value of the Barnett brand.
Barnett
10
<PAGE>
OUR HORIZONS }
[GRAPHIC]
PIONEERING ALONG
PATHS OF EXPERTISE.
[GRAPHIC]
- - GET A MORTGAGE IN HOUSTON
- - ARRANGE A TRUCK LOAN IN CHARLOTTE
- - LEASE A CAR IN NEW YORK
- - CONSOLIDATE BILLS IN PITTSBURGH
- - FINANCE A HOME REMODELING IN PHOENIX
WE CAN BUILD ON OUR CORE CAPABILITIES TO GENERATE NEW BUSINESS IN NATIONWIDE
MARKETS, PRODUCING:
- - MORE REVENUE PLUS BETTER ECONOMIES OF SCALE
- - AN EVER-INCREASING BASE OF CUSTOMERS FOR A WIDE VARIETY OF BARNETT PRODUCTS
- - MARKET POSITION THAT WILL ALLOW US TO PROFIT FROM INDUSTRY CONSOLIDATION
Barnett
11
<PAGE>
{ IDEAS) INVESTING
[GRAPHIC]
WHO SAYS FINANCIAL PLANNING HAS TO BE PAINFUL?
More people trust Barnett with their deposits than any other financial
institution in our markets. We've created more ways for customers like these
to make their dreams a reality with investing and insurance choices tailored
to their own financial style. (i) FLEXIBILITY in investing is more than a
figure of speech at Barnett. We're helping price-sensitive do-it-yourselfers
with no-load versions of our 12 Emerald mutual funds (including a new
international fund). For investors who want more assistance, there's Barnett
SelecTrack, a consultative program that helps them build a portfolio from top
broker-sold funds. New fixed and variable annuities offer extra safety--and
our advanced Personal Asset Planner software lets us present all these ideas
in graphics worth a thousand words. (i) PEACE OF MIND for retirees means
knowing their money will last a lifetime. That's the goal of our innovative
Retirement Advisory Service, which helps customers protect their lifestyle in
retirement. (i) CONVENIENCE is a benefit we want to bring to buying insurance,
whether it's basic life, credit life, homeowners, auto or commercial property
and casualty coverage. We want to deliver tailored packages for targeted
market segments, right where they live, at a price that makes protection
easier to obtain.
[GRAPHIC]
Barnett
12
<PAGE>
YOUR OWN WAY }
[GRAPHIC]
WE HELP PEOPLE BUILD
FOR TODAY AND TOMORROW.
[GRAPHIC]
YOUR PERSONAL PORTFOLIO
- - BUILD A BALANCED PORTFOLIO
- - EARN INCOME TAX FREE
- - PROFIT FROM GLOBAL GROWTH
- - LIVE SECURELY IN RETIREMENT
WE HAVE A TREMENDOUS OPPORTUNITY TO LEVERAGE OUR BRAND AND EXISTING
RELATIONSHIPS:
- - HELPING BOTH DO-IT-YOURSELF INVESTORS AND THOSE WHO SEEK ADVICE TO CREATE
PORTFOLIOS THAT MEET THEIR NEEDS
- - HELPING RETIREES MANAGE THEIR MONEY TO LAST THEIR LIFETIME
- - HELPING FAMILIES BUY INSURANCE TO SAFEGUARD THEIR FUTURE
Barnett
13
<PAGE>
{ IDEAS) BRIGHT SOLUTIONS
[GRAPHIC]
WE HELP KEEP BUSINESSES ON THE FAST TRACK.
[GRAPHIC]
A small business owner has to hit the ground running every morning. In
Florida, nobody provides more financial services to more businesses than
Barnett--and with a market that's growing significantly faster than the U.S.
average, we're picking up the pace. (i) GETTING UP TO SPEED starts with our
popular Sunrise Statement, a report on the previous day's banking activity
that's faxed just in time for the morning coffee. The clock never stops--at
least, not for time-pressured customers who can reach a business banking
expert through our Business SuperPhone 24 hours a day. (i) FASTER TURNAROUND
comes from teaming technology with data about customers and prospects. The
result is consolidated underwriting and streamlined decision-making on loans
(our target: two-hour approval). Better information also helps us serve our
customers with the right product at the right price at the right time.
(i) TOP PERFORMANCE in specialized areas is at our customers' command through
partnerships we've formed with PayChex, AT&T, Staff Leasing and others. We aim
to expand our market leadership by offering a portfolio of superior business
services, partnering when needed with other companies whose strengths
complement our own. Our focus is on what best serves the customer--and we'll
get up as early as necessary to help him (or her) stay ahead.
Barnett
14
<PAGE>
FOR BUSINESS }
[GRAPHIC]
UP WITH THE SUN
TO STAY A STEP AHEAD.
[GRAPHIC]
IT'S ABOUT TIME AND MONEY
- - LOAN DECISIONS IN HOURS
- - BANK STATEMENTS WITH THE MORNING COFFEE
- - CHECKING ACCOUNTS THAT REWARD SELF-SERVICE
- - BUSINESS SUPERPHONE ANSWERS ANYTIME
- - EMPLOYEE LEASING THAT CUTS COSTS
WE BELIEVE STRONG RELATIONSHIPS RESULT FROM PROVIDING GREATER VALUE TO OUR
CUSTOMERS' BUSINESSES:
- - USING INNOVATIVE IDEAS AND TECHNOLOGY TO CREATE UNIQUE BENEFITS
- - ANALYZING INFORMATION TO ANTICIPATE THEIR NEEDS AND SERVE THEM EFFICIENTLY
- - DOING WHATEVER IT TAKES TO OFFER THE BEST PRODUCT AND SERVICE VALUE
Barnett
15
<PAGE>
{ IDEAS) OPPORTUNITY
[GRAPHIC]
MAKING AN INVESTMENT IN TOMORROW.
You won't find it in our financial highlights--but we believe investing in
people doesn't just feel good, it's good business. (i) LEARNING in school while
staying drug- and crime-free is the challenge we offer at-risk youngsters
through our founding of Take Stock in Children. The reward: a college
scholarship funded by Barnett, other corporate partners, local businesses and
individuals. In addition to our sponsoring this program, many of us help
raise scholarship money, mentor students and train other mentors throughout
Florida. (i) GROWING money management skills, businesses and home ownership
in low-to-moderate income areas is the goal of our Community Development
Corporation. Through consumer trade fairs, targeted business loan and
affordable mortgage programs, we create opportunities for firms and families
to prosper. (i) WORKING parents are definitely welcome at Barnett. For the
fourth straight year WORKING MOTHER magazine recognized us as one of the 10
best U.S. companies for working women. With daycare and eldercare programs,
scholarships for employees' children and a focus on promoting talented women
and minorities, we work hard to open doors for our employees--a commitment
that will not only change today's workplace, but help create a world of
difference tomorrow.
[GRAPHIC]
Barnett
16
<PAGE>
FOR INDIVIDUALS }
[GRAPHIC]
TO CHANGE THE FUTURE,
JUST OPEN THE RIGHT DOORS.
[GRAPHIC]
WE BELIEVE ENRICHING LIVES CREATES LONG-TERM PROFITS:
- - BUILDING STRONGER, SAFER COMMUNITIES
- - HELPING CUSTOMERS IN ALL INCOME LEVELS TO MEET THEIR GOALS
- - ATTRACTING AND KEEPING TALENTED, ENTHUSIASTIC EMPLOYEES
Barnett
17
<PAGE>
LINES OF BUSINESS
- ------------------------------------------------------------------------------
ASSET MANAGEMENT
THE ASSET MANAGEMENT GROUP BRINGS UNDER A SINGLE ROOF THE EXPERTISE TO MEET
THE MONEY MANAGEMENT AND RELATED NEEDS OF CUSTOMERS. THE GROUP OFFERS DEPOSIT
ACCOUNTS AND SERVICES, MUTUAL FUNDS, ANNUITIES, TRUST SERVICES, BROKERAGE AND
PRIVATE BANKING PRODUCTS AND WILL BEGIN PROVIDING INSURANCE EARLY IN 1997.
BUSINESS PROFILE AND ACTIVITIES
- - Barnett is the deposit leader in Florida. One in four households has a
Barnett checking account and almost as many have a certificate of deposit.
- - Barnett operates the most comprehensive and convenient financial services
distribution network in Florida. The company has 622 banking offices, 968
ATMs, 24-hour telephone banking and PC banking in Florida and southern
Georgia.
- - Barnett Investments, Inc. offers mutual funds, stocks, annuities, bonds
and other investments. Barnett Capital Advisors, Inc., a registered
investment advisor, manages more than $10 billion in assets for
individual and corporate customers, foundations and pension funds.
- - Barnett offers a family of mutual funds--the Emerald Funds--with a variety
of investment objectives. The Emerald Funds have $4 billion in assets.
- ------------------------------------------------------------------------------
CONSUMER CREDIT
THE CONSUMER CREDIT GROUP OFFERS QUALITY, CUSTOMER-DRIVEN PRODUCTS AND
SERVICES FROM MORTGAGES TO AUTOMOBILE LOANS AND LEASES, HOME EQUITY LOANS,
CREDIT CARDS AND EDUCATION FINANCING. BARNETT PROVIDES THESE SERVICES THROUGH
ITS BANKING OFFICES AS WELL AS EQUICREDIT CORPORATION, BARNETT MORTGAGE
COMPANY, DEALER FINANCIAL SERVICES, INC. AND LOAN AMERICA FINANCIAL
CORPORATION.
BUSINESS PROFILE AND ACTIVITIES
- - Barnett is the leading lender to consumers in Florida. About 22% of
households have a Barnett credit product.
- - Barnett is a leader in the indirect auto loan business. Barnett's Dealer
Financial Services subsidiary does business with more than 1,600 dealers
throughout the South, originating more than 200,000 loans to buy
automobiles and light trucks in 1996.
- - EquiCredit, Barnett's nationwide consumer finance subsidiary with 141
offices in 40 states, is the fifth largest closed-end home equity lender
in the nation.
- - With 48% of the market, Barnett is the largest student loan lender in
Florida. Its student loan portfolio of $1.4 billion is one of the
largest in the nation.
- - Barnett serves more than 500,000 credit cardholders in Florida and
Georgia, with outstanding credit card balances exceeding $1 billion.
- - Barnett Mortgage Company has 29 offices in 19 states. Barnett's wholesale
mortgage unit, Loan America Financial Corporation, has 15 offices in 13
states. Barnett is the leading residential mortgage lender in Florida.
- ------------------------------------------------------------------------------
BUSINESS BANKING
THE BUSINESS BANKING GROUP MEETS THE NEEDS OF COMPANIES OF ALL SIZES WITH
INNOVATIVE FINANCIAL SERVICES AND VALUE-ADDED PRODUCTS RANGING FROM SMALL
BUSINESS LOANS TO INTERNATIONAL BANKING TO CAPITAL MARKET PRODUCTS. THE GROUP
ALSO OFFERS NON-FINANCIAL PRODUCTS SUCH AS EMPLOYEE LEASING, PAYROLL AND
DISCOUNTED TELEPHONE SERVICES.
BUSINESS PROFILE AND ACTIVITIES
- - Barnett has the leading market share in all three business segments in
Florida. The company has a relationship with 40% of Florida's large
corporations (over $50 million in sales), 28% of middle market firms
($5-$50 million) and 25% of small businesses (less than $5 million).
- - Barnett leads the Florida market in retail foreign exchange services,
international wire transfers and correspondent banking. It is the number
one Florida bank user of the U.S. Export-Import Bank's financing programs
for small and mid-size companies.
- - Barnett offers the largest selection of small business products in our
markets. In addition to traditional banking products, the company has
formed partnerships with companies such as PayChex, Staff Leasing and AT&T
to offer small business owners innovative business solutions.
Barnett
18
<PAGE>
CONTRIBUTION TO BARNETT
- ------------------------------------------------------------------------------
ASSET MANAGEMENT
KEY INITIATIVES IN 1996
- - Barnett began to offer no-load mutual funds under the Emerald Funds name.
- - Barnett combined its trust and affluent customer services into Private
Client Services. Customers can now work with one representative backed by
product experts.
- - Barnett introduced the Barnett Charitable Trust Foundation, a
donor-advised gift fund that helps clients with charitable giving by
eliminating their burden of multiple contributions and record keeping.
- - Barnett opened 10 full-service banking centers in Publix Super Markets
stores. Over the next several years, the company will expand into the
majority of Publix' 446 Florida stores, beginning with 40 in 1997.
- - Barnett introduced SelecTrack, a mutual fund selection program that lists
top performing broker-sold funds from leading mutual fund companies.
REVENUE
[GRAPHIC]
LOOKING AHEAD TO 1997
- - Barnett will introduce a new service to focus on lifestyle preservation
for retirees and the soon-to-be-retired.
- - Barnett will introduce targeted insurance products and services, focusing
on convenience and price. Among the first products will be automobile and
life insurance.
- - Barnett will significantly increase its investments sales force by
year-end 1997.
NET INCOME
[GRAPHIC]
- ------------------------------------------------------------------------------
CONSUMER CREDIT
KEY INITIATIVES IN 1996
- - Barnett joined BankBoston Corporation to form HomeSide, Inc., the nation's
seventh largest servicer of home mortgages, handling more than $90
billion in home loans. The new company has the scale necessary for Barnett
to compete in the rapidly consolidating mortgage servicing industry.
- - Barnett entered into a strategic alliance with Household Credit Services,
Inc. to jointly operate the company's credit card business. The transaction
positions Barnett for profitable growth of its credit card portfolio while
improving credit quality.
- - EquiCredit nearly doubled its loan production to $2.0 billion. Its
servicing portfolio grew to $3.5 billion.
- - To increase efficiencies, Barnett consolidated all consumer lending
functions into three regional centers.
REVENUE
[GRAPHIC]
LOOKING AHEAD TO 1997
- - Barnett will enhance its auto financing business through the acquisition
of Oxford Resources Corp., announced in January 1997. Oxford is the
nation's largest independent automobile leasing company.
- - Dealer Financial Services will enter Michigan, Ohio, Illinois, Indiana and
Pennsylvania and will also introduce a used car leasing product.
- - Barnett will employ technology to provide faster credit decisions. In many
instances, consumer loan requests will receive an immediate response.
Barnett will also introduce a "59-minute mortgage."
- - EquiCredit will begin using direct mail and telemarketing to increase
Barnett's home equity loan market.
NET INCOME
[GRAPHIC]
- ------------------------------------------------------------------------------
BUSINESS BANKING
KEY INITIATIVES IN 1996
- - Barnett introduced Barnett Employee Leasing Services, a new service that
enables companies to lease their existing staff, freeing small business
owners from many administrative tasks.
- - Barnett introduced CashPlus, a factoring product that turns a company's
receivables into working capital.
- - Barnett introduced Sunrise Statement, which provides summary balance and
transaction information to businesses over the fax machine by 9:00 every
morning.
- - Barnett opened several retail mall merchant facilities in regional
shopping centers. These facilities provide safe, convenient locations
within major shopping malls for retail merchants to conduct their banking.
- - Barnett Realty Partners, which brokers commercial real estate loans,
placed $179 million in loans during its first year of operation.
REVENUE
[GRAPHIC]
LOOKING AHEAD TO 1997
- - Barnett will introduce two-hour approvals and closings for non-real estate
small business loans. Barnett already offers 24-hour approval for certain
loans.
- - Barnett will introduce equipment leasing products for the middle and large
corporate business market, a $5 billion market in Florida.
NET INCOME
[GRAPHIC]
Barnett
19
<PAGE>
MANAGEMENT DISCUSSION
SUMMARY/OVERVIEW
IN SEPTEMBER, BARNETT COMPLETED A 2-FOR-1 STOCK SPLIT. ALL HISTORICAL DATA
USED IN THIS REPORT HAS BEEN RESTATED TO REFLECT THE SPLIT.
Barnett earned $564.5 million, or $2.86 per fully diluted share, in
1996, which contained a $24.5 million charge for a special assessment to
recapitalize the Savings Association Insurance Fund (SAIF). Earnings per
share increased 12%, reflecting solid revenue growth and continued expense
control, partially offset by increased provision expense. The company earned
$533.3 million, or $2.56 per share, in 1995.
Excluding the SAIF assessment, return on assets rose to 1.42% in 1996
from 1.30% in 1995 and return on shareholders' equity increased to 17.44% from
16.08%.
Revenues rose 8% over 1995. Net interest income was up 6% to $1.9
billion, due to a 36 basis point increase in the net yield on earning assets,
partially offset by a $338 million decline in earning assets. The increase
in the net yield was largely the result of lower funding costs and a
favorable change in the mix of earning assets. Non-interest income rose 13%,
primarily as a result of growth in consumer finance income, investment
services revenue, other retail fees and gains on securities.
Non-interest expense, excluding the SAIF assessment, was up 5% to $1.6
billion, reflecting investments in strategic initiatives expected to enhance
future results, partially offset by reduced FDIC premiums. The provision for
loan losses increased 26% to $154.6 million, primarily due to increased bank
card losses. A six-year summary of income is provided in TABLE 1.
Average total assets declined slightly, reflecting the impact of the
company's mortgage servicing venture, HomeSide, Inc., and the sale of non-core
credit card receivables to Household Credit Services, Inc. Average deposits
declined 2% from the previous year, primarily reflecting the transfer of
mortgage escrow deposits to HomeSide.
In May, the company sold its mortgage servicing operation to HomeSide, a
mortgage banking venture in which Barnett holds a significant ownership
interest. This transaction had no material impact on 1996 operating results
but is expected to add to earnings in 1997.
In October, the company entered into a strategic alliance with Household
to jointly build and manage Barnett's credit card business. As part of that
transaction, Barnett sold $776 million of non-core credit card outstandings,
less related reserves of $31 million, to Household. The company anticipates
this transaction will be accretive to earnings during 1997.
EARNINGS PER COMMON SHARE
FULLY DILUTED
[CHART]
$0.99 $2.01 $2.33 $2.56 $2.86
1992 1993 1994 1995 1996
RETURN ON SHAREHOLDERS' EQUITY
[CHART]
8.3% 15.4% 16.1% 16.1% 17.4%
1992 1993 1994 1995 1996(1)
(1) EXCLUDING SAIF ASSESSMENT
TABLE 1 SIX-YEAR STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Dollars in Millions Except Per Share Data 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income (taxable-equivalent) .......................... $1,886.5 $1,772.2 $1,677.5 $1,700.3 $1,736.1 $1,568.0
Provision for loan losses ......................................... 154.6 122.5 74.0 120.4 257.3 453.9
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income after loan loss provision ..................... 1,731.9 1,649.7 1,603.5 1,579.9 1,478.8 1,114.1
Non-interest income (excluding securities transactions) ........... 791.3 714.0 555.7 601.1 586.5 528.6
Securities transactions ........................................... 19.2 5.0 (13.1) (2.1) 34.2 18.2
Non-interest expense (excluding special charges) .................. 1,592.5 1,518.6 1,364.2 1,501.0 1,645.5 1,497.1
Special charges(1) ................................................ 24.5 -- -- -- 92.6 --
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ........................................ 925.4 850.1 781.9 677.9 361.4 163.8
Income tax provision .............................................. 341.1 286.3 249.8 207.5 95.3 8.4
Taxable-equivalent adjustment ..................................... 17.4 30.5 44.1 49.4 57.8 74.0
- ----------------------------------------------------------------------------------------------------------------------------------
Net income before accounting changes and minority interest ........ 566.9 533.3 488.0 421.0 208.3 81.4
Minority interest, net of taxes ................................... (2.4) -- -- -- -- --
Cumulative effect of changing to different
accounting methods, net of taxes............................... -- -- -- -- (0.6) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income..................................................... $ 564.5 $ 533.3 $ 488.0 $ 421.0 $ 207.7 $ 81.4
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Primary earnings per common share ................................. $2.89 $2.65 $2.39 $2.05 $.99 $.40
Fully diluted earnings per common share ........................... 2.86 2.56 2.33 2.01 .99 .40
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) SPECIAL CHARGES CONSIST OF A $24.5 MILLION PRE-TAX SAIF ASSESSMENT
DURING 1996 AND A $92.6 MILLION PRE-TAX RESTRUCTURING CHARGE DURING 1992.
Barnett
20
<PAGE>
In January 1997, the company moved to enhance its auto financing business
by announcing the acquisition of Oxford Resources Corp., the nation's largest
independent automobile leasing company. The Melville, N.Y.-based company
provides leases and loans for new and used automobiles through more than 2,000
auto dealers in 21 states across the country. During 1996, its total lease and
loan originations approximated $1 billion. This transaction expands Barnett
into new geographic markets and positions the company as a leader in the
fast-growing auto leasing business.
EARNING ASSETS
Average earning assets fell slightly to $36.0 billion in 1996,
primarily reflecting the impact of the HomeSide and Household transactions
and management's decisions to reduce the amount of new residential loans going
into portfolio and the size of the securities portfolio. Average loans
represented 84% of earning assets in 1996 compared to 82% a year earlier. At
the end of the year, Barnett's loan-to-deposit ratio was 89%. The company also
maintains a portfolio of investment-grade securities and short-term
investments to manage liquidity and interest rate risk.
LOANS Average loans grew $594 million, reflecting strong growth in
corporate and non-residential mortgage consumer loans partially offset by a
reduction in residential mortgages and commercial real estate loans. Due to
Barnett's strong emphasis on retail banking, loans to consumers represented
74% of average loans.
Installment loans grew 16% during the year to $10.0 billion from $8.6
billion in the previous year. Expansion of indirect automobile lending to new
markets and increased home equity loans available for sale originated through
the EquiCredit franchise were the principal factors in the growth of the
installment loan portfolio. Motor vehicle loans and leases, which comprise
approximately 60% of Barnett's installment loan portfolio, grew 10% during the
year to $6.0 billion. Barnett provided almost 25% of Florida's auto loans,
more than the next three bank lenders combined. Auto leasing, introduced in
the third quarter of 1995, generated $295 million of lease receivables in
1996. In the fourth quarter of 1995, the company began to expand its auto
lending business beyond Florida. Barnett originated $707 million of auto
loans outside Florida during 1996.
The volume of automobile loans is dependent upon new and used automobile
sales, which can vary depending on economic conditions and other factors. To
continue growing this profitable business, Barnett is expanding into new
markets in 1997 and further developing existing dealer relationships.
The other 40% of the installment loan portfolio is comprised primarily
of home equity and student loans. During 1996, home equity secured
installment loans increased 35% to $2.2 billion, while student loans
increased 25% to $1.3 billion.
RETURN ON ASSETS
[CHART]
.55% 1.13% 1.28% 1.30% 1.42%
1992 1993 1994 1995 1996(1)
(1) EXCLUDING SAIF ASSESSMENT
TABLE 2 LOAN MATURITY
<TABLE>
<CAPTION>
Within 1 to 5 After
December 31, 1996--Dollars in Millions(1) 1 Year Years 5 Years Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural .................... $2,222 $ 2,298 $ 791 $ 5,311
Real estate construction .................................. 460 347 11 818
Commercial mortgages ...................................... 453 1,024 372 1,849
Residential mortgages ..................................... 489 1,326 7,843 9,658
Installment ............................................... 2,276 5,599 2,275 10,150
Bank card ................................................. -- 1,101 -- 1,101
Credit lines .............................................. 798 -- -- 798
- ----------------------------------------------------------------------------------------------------------
Total ......................................... $6,698 $11,695 $11,292 $29,685
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Loans maturing after one year with:
Fixed interest rates ................................ $ 7,619 $ 2,392
Floating or adjustable interest rates ............... 4,076 8,900
- ----------------------------------------------------------------------------------------------------------
Total ......................................... $11,695 $11,292
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) TOTAL LOANS GROSS OF UNEARNED INCOME. EXCLUDES $117 MILLION OF
RESIDENTIAL MORTGAGES HELD FOR SALE AND $496 MILLION OF INSTALLMENT
LOANS HELD FOR SALE.
Barnett
21
<PAGE>
MANAGEMENT DISCUSSION
Residential mortgage loans fell 8% to $10.2 billion, reflecting
management's decision to reduce the amount of new loans going into portfolio.
Also contributing to the decline was the HomeSide transaction which
transferred the secondary market pipeline of loans originated for sale to
HomeSide. At the end of 1996, 76% of the residential loan portfolio consisted
of adjustable-rate mortgages. Most of these mortgages have rates that are
reset annually based on a spread over the one-year constant maturity Treasury
index. In certain circumstances, resetting the rates on these loans will be
limited by period and lifetime caps.
Average bank card receivables grew 5% to $1.6 billion in 1996. However,
the balances at December 31 were down $683 million, or 38%, primarily
reflecting the sale of non-core credit receivables to Household and the
company's decision to discontinue marketing credit cards outside its banking
markets. As part of the strategic alliance, Household will service Barnett's
credit card accounts and the companies will work jointly to build and manage
Barnett's credit card business. The $1.1 billion of card outstandings at year
end are generally held by Florida customers who have other relationships with
Barnett.
Commercial loans rose 9% during 1996 to $5.0 billion. The company has a
strong focus on small and middle market companies located primarily in
Florida. Reflecting this strategy, the company's average commercial loan is
approximately $160,000.
Commercial real estate loans decreased 12% from 1995. Construction loans
declined 13% in 1996 to $811 million. Commercial mortgage loans declined 12%
from last year to $2.1 billion, reflecting increased competition to provide
long-term financing for commercial real estate projects.
The distribution of loan maturities at December 31 is shown in TABLE 2
on page 21. For an analysis of loans that can be repriced in less than one
year and their impact on Barnett's interest rate sensitivity, see TABLE 6 on
page 25.
INVESTMENT SECURITIES AND OTHER EARNING ASSETS Investment securities
decreased 20% to $5.2 billion in 1996, due to the company's decision to
reduce the size of the portfolio. Securities are generally purchased for
investment purposes and are selected primarily for their risk-adjusted,
taxable-equivalent yields. Consideration is also given to the company's
liquidity and asset-liability management needs. U.S. Treasury securities made
up 41% of the total investment portfolio at December 31. The securities are
selected for their high degree of liquidity and credit quality. The
securities in this portfolio mature in three years or less to achieve
appropriate liquidity.
The mortgage-backed securities portfolio, which made up 36% of the total
investment porfolio as of December 31, is comprised of two types of
mortgage-related securities, 15-year fixed-rate mortgage pass-thru
certificates and Collateralized Mortgage Obligations. Mortgage-backed
securities investments inherently contain maturity risk due to exposure to
prepayments of underlying mortgages. The company minimizes this risk through
selection of securities that maintain relative average life stability over a
wide range of interest rates.
Other securities are primarily comprised of asset-backed securities,
which are instruments secured by such collateral as automobile loans, credit
card balances and home equity loans. The securities are selected for their
high degree of credit quality and low prepayment risk characteristics.
Additionally, the asset-backed securities instruments maintain low price risk
due to their relative short average lives. As of December 31, 10.4% of the
investment securities portfolio was comprised of asset-backed securities. For
an analysis of the impact of investment securities on Barnett's interest rate
sensitivity, see TABLE 6.
Securities available for sale are carried at fair value and had an
unrealized gain, net of tax, of $8.2 million at December 31, 1996. A year
earlier, securities available for sale had an unrealized gain of $38.2
million. These unrealized gains, net of tax, do not impact net income or
regulatory capital but are recorded as adjustments to shareholders' equity. At
December 31, 1996, the available for sale portfolio had an average yield of
6.36% and a weighted average maturity of 2.0 years. For further details, see
TABLE 3.
Average federal funds sold and securities purchased under agreement to
resell increased $355 million in 1996 to $438 million, though the balances
at December 31 were down $108 million from a year earlier to $3 million,
reflecting a change in liquidity position.
AVERAGE LOANS
1991
COMMERCIAL
COMMERCIAL REAL ESTATE
18% 23%
CONSUMER
59%
[CHART]
- --------------------------------
1996
COMMERCIAL
COMMERCIAL REAL ESTATE
16% 10%
CONSUMER
74%
[CHART]
Barnett
22
<PAGE>
TABLE 3 MATURITY OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
Available for Sale Held to Maturity
------------------------------- -----------------------------
Amortized Fair Year-End Amortized Fair Year-End
December 31, 1996--Dollars in Thousands Cost Value Yield(1) Cost Value Yield(1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury:(2)
Within 1 year ........................................ $ 890,104 $ 897,459 7.38% -- -- --
1 to 5 years ......................................... 1,219,519 1,222,276 5.94 -- -- --
5 to 10 years ........................................ 2,002 2,144 7.54 $ 997 $ 1,007 6.55%
More than 10 years ................................... 1,621 1,728 7.80 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total ........................................... 2,113,246 2,123,607 6.55 997 1,007 6.55
- -------------------------------------------------------------------------------------------------------------------------------
States and political subdivisions:(2)
Within 1 year ........................................ -- -- -- 24,464 24,881 12.04
1 to 5 years ......................................... 2,551 2,657 8.29 55,085 59,165 12.55
5 to 10 years ........................................ 2,487 2,562 9.10 30,014 35,155 12.34
More than 10 years ................................... 21,237 21,879 8.94 19,035 19,791 8.55
- -------------------------------------------------------------------------------------------------------------------------------
Total ........................................... 26,275 27,098 8.89 128,598 138,992 11.81
- -------------------------------------------------------------------------------------------------------------------------------
Other U.S. Government agencies
and corporations:(2)
Within 1 year ........................................ 102,843 102,986 6.14
1 to 5 years ......................................... 136,706 136,610 6.08
5 to 10 years ........................................ 3,040 3,029 6.38
More than 10 years ................................... 1,070 1,067 8.18
- ---------------------------------------------------------------------------------------------
Total ........................................... 243,659 243,692 6.12
- ---------------------------------------------------------------------------------------------
Mortgage-backed securities:(2)
Within 1 year ........................................ 656,365 656,027 6.13
1 to 5 years ......................................... 529,449 528,188 6.22
5 to 10 years ........................................ 654,447 655,479 6.80
More than 10 years ................................... 974 960 6.69
- ---------------------------------------------------------------------------------------------
Total ........................................... 1,841,235 1,840,654 6.39
- ---------------------------------------------------------------------------------------------
Other securities:(2)
Within 1 year ........................................ 443,610 444,074 5.51
1 to 5 years ......................................... 280,127 280,294 6.03
5 to 10 years ........................................ 57,894 57,939 6.27
More than 10 years(3)................................. 12,258 13,765 6.69
- ----------------------------------------------------------------------------------------------
Total ........................................... 793,889 796,072 5.77
- -------------------------------------------------------------------------------------------------------------------------------
Total securities ................................ $5,018,304 $5,031,123 6.36% $129,595 $139,999 11.77%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Years
----------------------------------------------
December 31, 1996 Held to Maturity Available for Sale Total
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average life of debt securities:(4)
Taxable .............................................. 8.63 1.88 1.89
Tax-free ............................................. 4.44 15.54 6.33
- -------------------------------------------------------------------------------------------------
Total ........................................... 4.47 1.96 2.03
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) COMPUTED ON A TAXABLE-EQUIVALENT BASIS AND INCLUDES ACCRETION OF DISCOUNT
AND AMORTIZATION OF PREMIUM IN THE DETERMINATION OF SECURITIES INCOME.
BALANCE UTILIZED IN CALCULATING YIELDS IS AMORTIZED COST.
(2) PRESENTED BY CONTRACTUAL MATURITY, EXCEPT FOR MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES WHICH ARE PRESENTED AT THEIR EXPECTED MATURITIES.
(3) INCLUDES FEDERAL RESERVE BANK STOCK.
(4) FLOATING RATES ARE INCLUDED AS OF THEIR REPRICING DATE.
Barnett
23
<PAGE>
MANAGEMENT DISCUSSION
TABLE 4 CHANGES IN DEPOSIT MIX
<TABLE>
<CAPTION>
Change
------------------
Average Balances--Dollars in Millions 1996 1995 Amount Percent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Demand deposits ........................................... $ 5,612 $ 5,440 $ 172 3%
NOW and money market accounts ............................. 12,087 12,757 (670) (5)
Savings deposits .......................................... 3,141 3,435 (294) (9)
Certificates of deposit under $100,000 .................... 9,806 9,906 (100) (1)
Other time deposits ....................................... 2,533 2,153 380 18
- ----------------------------------------------------------------------------------------------------
Total deposits .................................. $33,179 $33,691 $(512) (2)%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
TABLE 5 MATURITY OF CDS AND OTHER TIME DEPOSITS $100,000 OR MORE
<TABLE>
<CAPTION>
December 31, 1996--Dollars in Millions BALANCE Percent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
3 months or less .......................................... $ 837 34%
Over 3 to 6 months ........................................ 565 23
Over 6 to 12 months ....................................... 444 18
More than 12 months ....................................... 636 25
- ----------------------------------------------------------------------------------------------------
Total ........................................... $2,482 100%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
DEPOSITS AND OTHER FUNDING SOURCES
DEPOSITS Average deposits declined 2% to $33.2 billion in 1996,
primarily reflecting the transfer of mortgage escrow deposits to HomeSide.
Despite this decline and increased competition, Barnett maintains the largest
market share of bank and thrift deposits in Florida with approximately one
out of every five dollars on deposit. Barnett services this extensive deposit
base through its network of 622 banking offices and 968 ATMs, providing the
most convenient distribution in its markets.
Historically, the company has successfully developed products aimed at
particular customer segments that have produced a significant level of
profitable deposit relationships. Key products include Senior Partners, a
package of services aimed at customers 50 years or older, the Edge Account,
targeted at middle-income consumers, and the Premier Account, targeted at
affluent customers.
Certificates of deposit and other time deposits rose $280 million to
$12.3 billion, reflecting the movement of consumer balances from transaction,
savings and money market accounts into CDs.
In 1996, transaction, savings and money market accounts decreased $792
million and equaled 62% of average deposits, down from 64% in 1995. Part of
this decline was attributable to the transfer of mortgage escrow deposits to
HomeSide. TABLE 4 shows the changes in deposit mix, and TABLE 5 indicates the
maturity of CDs and other time deposits over $100,000.
OTHER FUNDING SOURCES Federal funds purchased, securities sold under
agreements to repurchase and other short-term borrowings decreased 11% to
$2.2 billion, primarily reflecting lower funding needs due to the HomeSide
transaction.
The company issues commercial paper to fund certain consumer lending
activities. For 1996, average borrowing under this facility was $613 million
compared to $418 million in 1995.
Long-term debt increased 32%, or $303 million, from 1995. Of the $1.2
billion in long-term debt outstanding at year end, $585 million qualified as
Tier II capital under risk-based capital guidelines. For more information on
Barnett's long-term debt, refer to NOTE I in the NOTES TO FINANCIAL STATEMENTS.
AVERAGE DEPOSITS
1991 OTHER
12%
NOW &
MONEY MKT CONSUMER CD
32% 36%
DEMAND
13%
SAVINGS
7%
[CHART]
- --------------------------------
1996 OTHER
8%
NOW &
MONEY MKT CONSUMER CD
36% 30%
DEMAND
17%
SAVINGS
9%
[CHART]
Barnett
24
<PAGE>
TABLE 6 INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
Non-Rate
Sensitive
0-30 31-90 91-180 181-365 1-5 and Over
December 31, 1996--Dollars in Millions Days Days Days Days Years Five Years Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural ........................... $ 3,843 $ 172 $ 140 $ 178 $ 780 $ 198 $ 5,311
Real estate construction ......................................... 767 16 10 6 14 5 818
Commercial mortgages ............................................. 860 109 139 211 482 49 1,850
Residential mortgages ............................................ 1,197 1,140 1,884 2,904 2,028 633 9,786
Installment ...................................................... 2,726 785 1,055 1,735 4,207 82 10,590
Other loans ...................................................... 1,454 444 1,898
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans(1) ......................................... 10,847 2,222 3,228 5,034 7,955 967 30,253
Securities(1) .................................................... 345 363 326 985 2,471 671 5,161
Federal funds sold, securities purchased under
agreements to resell and other earning assets ............... 97 97
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets ................................... $11,289 $2,585 $3,554 $6,019 $10,426 $1,638 $35,511
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NOW and money market accounts(1) ................................. $ 7,207 $ 4,956 $12,163
Savings deposits(1) .............................................. 978 1,960 2,938
Time deposits .................................................... 1,812 $2,498 $2,804 $2,429 2,559 $ 89 12,191
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ........................ 9,997 2,498 2,804 2,429 9,475 89 27,292
Short-term borrowings ............................................ 1,303 5 1 1,309
Long-term debt ................................................... 9 452 59 401 306 1,227
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities ..................... $11,309 $2,955 $2,863 $2,429 $9,877 $395 $29,828
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Gap before interest rate swaps ................................... $ (20) $ (370) $ 691 $3,590 $ 549 $1,243
Interest rate swaps .............................................. (1,857) (2,045) 400 920 2,598 (16)
- ----------------------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap adjusted for interest rate swaps ... (1,877) (2,415) 1,091 4,510 3,147 1,227
Cumulative adjusted interest rate sensitivity gap ................ (1,877) (4,292) (3,201) 1,309 4,456
Cumulative adjusted gap as a percentage of earning assets:
December 31, 1996 ........................................... (5.29)% (12.09)% (9.01)% 3.69% 12.55%
December 31, 1995 ........................................... (4.34) (7.28) (4.34) 7.74 8.91
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) MANAGEMENT ADJUSTMENTS REFLECT THE COMPANY'S ESTIMATE OF THE EFFECTS OF
EARLY PRINCIPAL REPAYMENTS ON RESIDENTIAL AND OTHER AMORTIZING LOANS AND
SECURITIES AND THE ANTICIPATED REPRICING SENSITIVITY OF NON-MATURITY
DEPOSIT PRODUCTS. HISTORICALLY, BALANCES ON NON-MATURITY DEPOSIT ACCOUNTS
HAVE REMAINED RELATIVELY STABLE DESPITE CHANGES IN MARKET INTEREST RATES.
MANAGEMENT HAS CLASSIFIED CERTAIN OF THESE ACCOUNTS AS NON-RATE SENSITIVE
BASED ON MANAGEMENT'S HISTORICAL PRICING PRACTICES AND RUNOFF EXPERIENCE.
APPROXIMATELY 40% OF THE NOW AND MONEY MARKET ACCOUNT BALANCES AND
TWO-THIRDS OF THE SAVINGS ACCOUNT BALANCES ARE CLASSIFIED AS OVER ONE
YEAR.
ASSET-LIABILITY MANAGEMENT
Net interest income, the company's primary source of revenue, is
affected by changes in interest rates as well as fluctuations in the level
and duration of assets and liabilities contained on the company's balance
sheet. The impact of changes in interest rates on the company's net interest
income represents Barnett's interest rate risk.
Interest rate sensitivity is primarily a function of the repricing
structure of the company's balance sheet. TABLE 6 shows this structure as of
December 31, with each maturity interval referring to the earliest repricing
opportunity (i.e., the earlier of scheduled contractual maturity or repricing
date) for each asset and liability category. The resulting gap is one measure
of the sensitivity of earnings to changes in interest rates.
In order to more appropriately reflect the repricing structure of the
company's balance sheet, management has made certain adjustments to the
balances shown in the table. Based on historical and industry data, an
estimate of the expected prepayments of amortizing loans and investment
securities is reflected in the balances in the table. Changes in the economic
and interest rate environments may impact these expected prepayments.
Similarly, an adjustment to deposits is made to reflect the behavioral
characteristics of certain core deposits that do not have specified
maturities (i.e., interest-bearing checking, savings and money market deposit
accounts). The footnote accompanying the table more fully explains the
specific adjustments made to the analysis. This interest rate sensitivity
analysis
Barnett
25
<PAGE>
MANAGEMENT DISCUSSION
indicates that the company was liability sensitive on December 31, with a
cumulative six-month negative gap of 9.01%.
In addition to gap analysis, management uses rate-shock simulation and
duration of equity to measure the rate sensitivity of its balance sheet.
Rate-shock simulation is a modeling technique used to estimate the impact of
changes in rates on the company's net interest margin. Duration of equity
measures the change in the market value of the company's equity resulting from
a change in interest rates. It is designed to evaluate the economic impact of
rate changes for periods that extend beyond the time horizons targeted by gap
and rate shock simulation analysis. These analyses, which consider longer
term impacts of rate changes, indicate that Barnett is relatively rate
neutral. The company's rate shock simulation indicates that an instantaneous
1% change in interest rates would have less than a 2% impact on net interest
income over a twelve-month period. This simulation is based on the company's
business mix, as well as interest rate exposures at a point in time and
includes a parallel shift of the yield curve. It also requires certain
assumptions about the future pricing of loans and deposits in response to
changes in interest rates. While this simulation is a useful measure of the
company's sensitivity to changing rates, it is not a forecast of future
results and is based on many assumptions, which if changed, could cause a
different outcome.
The primary objective of Barnett's asset-liability management is to
maximize net interest income while maintaining acceptable levels of
interest-rate sensitivity. The Asset-Liability Management Committee sets
specific rate-sensitivity limits for the company. The committee monitors and
adjusts the company's exposure to changes in interest rates to achieve
predetermined risk targets that it believes are consistent with current and
expected market conditions. Management strives to minimize the negative
impact on net interest income caused by changes in interest rates. At this
time, management believes the company's asset-liability mix is sufficiently
balanced within a broad range of interest rate scenarios to minimize the
impact of significant rate movements.
Barnett controls its interest rate risk by managing the level and
duration of certain balance sheet assets and liabilities. The company also
uses off-balance-sheet instruments (derivatives) to manage its interest rate
sensitivity position. Barnett ensures that both balance-sheet and
off-balance-sheet instruments used for asset-liability management purposes
are consistent with safe and sound banking practices.
The company's derivatives portfolio used for asset-liability management
purposes had a notional amount of $4.5 billion at December 31. This
portfolio consisted of $4.2 billion of interest rate swaps, of which $2.5
billion was added in 1996, and $250 million of interest rate floors. During
1996, $1.4 billion of interest rate swaps matured. The swap portfolio
consists of fixed-term, non-amortizing interest rate swaps, which mature
through October 1999. Most of the company's swaps involve receipt of fixed
cash flows in exchange for variable (primarily LIBOR-based) cash flows. The
purpose of the swaps is to convert cash flows from floating-rate loans to
fixed cash flows. The derivatives reduce the sensitivity of the net interest
margin to flat or falling interest rates.
The derivatives portfolio performed as expected during the year, as the
value of instruments entered into to protect the company in a declining rate
environment fell in value due to a modest rise in interest rates. The
replacement value related to the company's derivative portfolio was a negative
$4.7 million on December 31, 1996, compared to a positive $24.7 million on
December 31, 1995.
The derivatives portfolio, including the amortization of deferred gains
on interest rate floors, increased net interest income in 1996 by $3.1
million, representing a 1 basis point increase in the net yield on earning
assets. The swap portfolio reduced 1995 net interest income by $35.3
million, representing a 10 basis point reduction in the net yield on earning
assets.
Barnett manages the counterparty exposure of its derivatives in a manner
consistent with the granting of credit. Any exposure is generally measured by
the market replacement value at any point in time. Barnett utilizes
collateral exchange agreements with derivatives counterparties in order to
control the level of credit exposure to these entities. A summary of
Barnett's risk management derivatives portfolio is shown in NOTE P in the
NOTES TO FINANCIAL STATEMENTS, and Barnett's accounting policies related to
derivatives are described in NOTE A.
NET INTEREST INCOME
TAXABLE EQUIVALENT $ BILLIONS
[CHART]
$1.74 $1.70 $1.68 $1.77 $1.89
1992 1993 1994 1995 1996
NET YIELD
AS A PERCENTABE OF AVERAGE EARNING ASSETS
[CHART]
5.11% 5.07% 4.87% 4.88% 5.24%
1992 1993 1994 1995 1996
Barnett
26
<PAGE>
TABLE 7 CHANGE IN NET INTEREST INCOME
<TABLE>
<CAPTION>
1996 1995
------------------------ --------------------------
CHANGE FROM Change From
PREVIOUS Previous
YEAR DUE TO: Year Due To:
------------------------ --------------------------
TOTAL Total
Dollars in Millions--Taxable-Equivalent VOLUME RATE(1) CHANGE Volume Rate(1) Change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans ........................................................ $ 65.3 $ 9.4 $ 74.7 $255.5 $161.6 $417.1
Taxable securities ........................................... (59.4) 30.4 (29.0) (38.8) 51.7 12.9
Tax-free securities .......................................... (30.2) (2.4) (32.6) (38.0) (1.3) (39.3)
Federal funds sold and securities purchased under
agreements to resell .................................... 20.8 (2.0) 18.8 .3 1.5 1.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest income ................................... (3.5) 35.4 31.9 179.0 213.5 392.5
- ---------------------------------------------------------------------------------------------------------------------------------
Interest expense:
NOW and money market accounts ................................ (15.4) (37.0) (52.4) (17.9) 13.2 (4.7)
Savings deposits ............................................. (6.1) (10.4) (16.5) (.7) (1.1) (1.8)
Certificates of deposit under $100,000 ....................... (5.2) (13.9) (19.1) 103.1 87.5 190.6
Other time deposits .......................................... 20.7 (1.4) 19.3 21.9 25.5 47.4
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits ......................... (6.0) (62.7) (68.7) 106.4 125.1 231.5
Federal funds purchased and securities sold under
agreements to repurchase ................................ (5.6) (8.0) (13.6) (25.2) 22.2 (3.0)
Other short-term borrowings .................................. (12.3) (3.4) (15.7) 36.6 14.9 51.5
Long-term debt ............................................... 24.9 (9.3) 15.6 24.0 (6.2) 17.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest expense .................................. 1.0 (83.4) (82.4) 141.8 156.0 297.8
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income ..................................... $ (4.5) $118.8 $114.3 $ 37.2 $ 57.5 $ 94.7
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES CHANGES IN INTEREST INCOME AND EXPENSE NOT DUE SOLELY TO VOLUME
OR RATE CHANGES.
NET INTEREST INCOME
Barnett's taxable-equivalent net interest income rose 6% to $1.9
billion. This increase reflects a higher net yield on earning assets, which
rose 36 basis points to 5.24% from 4.88% in 1995. The increase in the net
yield was generated by changes in earning asset mix and reduced funding
costs. The average yield on earning assets increased 16 basis points to
8.40%, as loans increased as a percentage of earning assets, the yield on the
loan portfolio rose 7 basis points and the yield on the securities portfolio
rose 33 basis points. TABLE 7 shows the changes in net interest income by
category during 1996 due to shifts in volume and rate.
Residential mortgage yields rose 15 basis points, reflecting the reset
of rates on the $7.2 billion adjustable-rate mortgage portfolio. These rate
resets, limited by annual and lifetime caps, are generally tied to a 275
basis point spread over the one-year Constant Maturity Treasury (CMT) index.
Partially offsetting the impact of this rate reset was the seven-month
impact of the HomeSide venture. The impact of this transaction affected net
interest margin, net interest income and non-interest expense. Prior
reporting had reflected internal mortgage servicing costs in non-interest
expense. These expenses are now third party costs and reduce the interest
received, resulting in lower net interest income and a lower yield on
residential mortgages. The impact on the residential mortgage loan yield and
net interest margin were 18 and 6 basis points, respectively.
The rate paid on interest-bearing liabilities fell 18 basis points to
3.66%. This decrease reflects lower rates paid on NOW, money market and
savings accounts. This more than offset the higher expense resulting from the
migration of balances from transaction accounts to time deposits and lower
levels of non-interest bearing escrow balances. The rate paid on non-deposit
funding decreased by 44 basis points, reflecting a change in the mix of
funding source.
Information on average balances, yields and rates for the past six years
can be found on pages 38 and 39.
Barnett
27
<PAGE>
MANAGEMENT DISCUSSION
NON-INTEREST INCOME
Non-interest income, excluding securities transactions of $19.2
million, rose 11% to $791.3 million in 1996, led by increases in consumer
finance revenue, brokerage income and other retail fees.
Brokerage income grew 39% to $44.0 million, primarily reflecting a
significant increase in annuity and mutual fund sales.
Consumer finance income, representing revenue generated through the
company's quarterly securitization program of consumer finance loan production
and related loan servicing, rose 51% to $125.9 million. This increase
reflected increased securitization volumes, as Barnett's consumer finance
company, EquiCredit, produced $2.0 billion in loans in 1996, an 82% increase
over the $1.1 billion in 1995. In addition, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights." SFAS No. 122 requires that an enterprise recognize as
separate assets the rights to service mortgage loans for others, however
those servicing rights are acquired. The adoption of this standard increased
consumer finance income by $16.8 million.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The
statement was adopted by the company on January 1, 1997.
Mortgage banking revenue increased 7%, or $4.5 million, from 1995. In
May 1996, Barnett sold its mortgage servicing operations to HomeSide, which
resulted in servicing revenue declining 53% from 1995. Barnett now sells
loans to HomeSide with servicing included. This fact, along with adoption of
SFAS No. 122, resulted in production revenue increasing 82% from 1995.
Other service charges and fees rose 19%, or $22.7 million, to $141.3
million, reflecting higher retail fees, including a new ATM surcharge for
non-Barnett customers.
Credit card fees fell $17.0 million, or 28%, as the company entered
into a joint venture in January to perform bank card merchant processing. As
a result of the joint venture, the company records its share of the net
income under the equity method of accounting rather than gross revenues and
expenses. Fees also fell as a result of the sale of $776 million of credit
card outstandings to Household in October.
The company recognized a $19.0 million pre-tax gain in 1996 on the sale
of its equity ownership in Bank South Corporation, which was acquired by
another institution. In 1995, the sale of a portion of this holding resulted
in a $5.0 million pre-tax gain.
NON-INTEREST EXPENSE
Non-interest expense rose 6%, or $98.4 million, to $1.6 billion.
Non-interest expense, excluding the $24.5 million SAIF assessment, rose 5%,
or $73.8 million, reflecting the company's spending on strategic initiatives
to diversify sources of revenue, improve marketing and expand the use of
technology for competitive advantage. This was somewhat offset by the impact
of transferring costs associated with the residential loan servicing
operation to HomeSide and lower deposit insurance assessments.
Salaries and benefits grew 9% from last year to $829.9 million, due
primarily to staffing related to strategic initiatives, higher
performance-based compensation and annual salary increases. The average
number of full-time-equivalent employees increased by 87 to 19,523.
Net occupancy expense rose 7% to $135.9 million, and furniture and
equipment expense increased 6% from last year to $153.7 million, primarily
related to expansion of the EquiCredit and Dealer Financial Services
franchises.
Other expenses, excluding the SAIF assessment, fell 3% in 1996 to
$472.9 million. The full-year impact of reduced FDIC premiums and lower
expenses related to the impact of the HomeSide transaction were partially
offset by increased marketing and technology expenses related to strategic
initiatives.
On January 1, 1996, the company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of." Adoption of this standard
did not have a significant impact on the financial condition or results of
operations of the company.
The overhead ratio, which excludes the SAIF assessment, was 59.5%, compared
to last year's 61.1%. The lower overhead ratio was achieved as Barnett continued
to focus on operat-
NON INTEREST INCOME
EXCLUDING SECURITIES TRANSACTIONS
$ MILLIONS
[CHART]
$587 $601 $556 $714 $791
1992 1993 1994 1995 1996
OVERHEAD RATIO
[CHART]
70.9% 65.2% 61.1% 61.1% 59.5%
1992(1) 1993 1994 1995 1996(2)
(1) EXCLUDES RESTRUCTURING CHARGE
(2) EXCLUDES SAIF ASSESSMENT
Barnett
28
<PAGE>
ing businesses where it has the greatest market opportunity as well as
processing scale and product expertise. Details of other expenses over the
past three years are shown in NOTE N of the NOTES TO FINANCIAL STATEMENTS.
LINES OF BUSINESS PERFORMANCE
Barnett is organized and managed in three major lines of business:
Asset Management, Consumer Credit and Business Banking.
Using an internal profitability measurement system, management
determines financial results for each of these business lines to gain a
clearer understanding of overall corporate performance and to make capital
investment decisions. The profitability measurement system utilizes funds
transfer pricing to allocate a standard cost for funds used or credit for
funds provided to all business group assets and liabilities using a matched
funding concept. The company's extensive office and electronic delivery
networks serve all three business segments and these costs are allocated to
each segment based upon actual volume. Expenses that directly support a
business line's operations are charged to the line of business. Capital is
allocated based upon credit, operational and business risks.
Management reporting concepts are periodically refined and results may
be restated to reflect methodological enhancements and/or management
organization changes. Although it is valuable as a management tool, no
authoritative guidance exists for management accounting. Therefore, reported
results are not necessarily comparable with other companies.
A description of each major business segment is presented below.
ASSET MANAGEMENT Barnett's Asset Management group serves the money
management and related needs of retail customers, including transaction
services, deposit accounts, mutual funds, annuities, fiduciary services, full
service brokerage and niche products aimed at the affluent and professional
markets. This broad array of products is delivered primarily through
Barnett's retail delivery network in Florida and southern Georgia. Asset
Management aims to meet retail customers' broad financial services needs that
often go beyond traditional banking products in order to maintain, deepen and
enhance the profitability of the company's customer relationships.
Asset Management contributed $1.0 billion, or 37%, of the company's
revenues and $142.3 million, or 25%, of the company's net income,
representing a return on equity of 37.5%. Consumer deposits, which averaged
$26.7 billion in 1996, have traditionally been the core product and continue
to be the largest provider of profit within Asset Management. Barnett Capital
Advisors, a registered investment advisor, has over $10 billion under
management, and Barnett acts as fiduciary for an additional $4.0 billion.
Customer assets of $5.0 billion are held in Barnett Investments, a
full-service brokerage company, including $1.0 billion in equities, $2.1
billion in mutual funds and $1.9 billion in debt securities. Barnett
Annuities held outstanding fixed and variable annuities of $1.3 billion at
year end.
CONSUMER CREDIT With over $12.3 billion in consumer credit average
outstandings representing 41% of the consolidated loan portfolio, Barnett is
the leading lender to Florida's consumers. In 1995, the company began
expanding its consumer lending activities nationally, first through the
acquisition of nationwide mortgage origination and consumer finance
companies, and most recently through the expansion of the company's indirect
auto lending unit to new markets.
In 1996, the Consumer Credit group contributed net income of $135.8
million, or 24%, of Barnett's consolidated earnings, and returned 18.3% on
invested capital. The Consumer Credit group originates loans to consumers
through Barnett banking offices in Florida and southern Georgia, as well as
through automobile dealers in 5 southern states and specialized sales forces
in all 48 contiguous states. The primary products for the group are home
equity loans and loans for the purchases of homes and autos.
EquiCredit, Barnett's home equity secured consumer finance lender which
operates 141 offices in 40 states, originated $2.0 billion of loans in 1996
and produced 29% of the Consumer Credit groups earnings. Dealer Financial
Services, Inc., Barnett's indirect auto lending group, originated $3.5
billion of loans in 1996 and produced 26% of the Consumer Credit group's net
income. The company expects to expand these businesses to leverage the fixed
infrastructure and to employ scale for competitive advantage in this
fragmented industry.
Barnett
29
<PAGE>
MANAGEMENT DISCUSSION
TABLE 8 LINES OF BUSINESS
<TABLE>
<CAPTION>
Funds
Asset Consumer Business Management Consolidated
December 31, 1996--Dollars in Millions Management Credit Banking and Other Barnett
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income (taxable-equivalent) ....................... $665.0 $493.2 $479.9 $248.4 $1,886.5
Non-interest income ............................................ 336.0 214.4 146.6 113.5 810.5
Non-interest expense ........................................... 777.6 301.2 336.7 201.5 1,617.0
Provision for loan losses ...................................... -- 184.0 (17.3) (12.1) 154.6
Income tax provision (taxable-equivalent) ...................... 81.1 86.6 112.5 78.3 358.5
Minority interest, net of taxes ................................ -- -- -- (2.4) (2.4)
- ------------------------------------------------------------------------------------------------------------------------------
Net income ..................................................... $142.3 $135.8 $194.6 $ 91.8 $ 564.5
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Return on equity ............................................... 37.5% 18.3% 35.6% 5.5% 17.4%(1)
Overhead ratio ................................................. 77.7 42.6 52.3 55.7 59.5(1)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) EXCLUDES $24.5 MILLION PRE-TAX SAIF ASSESSMENT.
Barnett originates installment and home equity loans directly through
its retail banking network. Direct originations totaled $1.5 billion in
1996. Direct lending produced 26% of the Consumer Credit groups net income.
Residential lending results are included in Funds Management and Other.
In 1996, the bank card business experienced significant deterioration in
credit quality as losses from the card portfolio rose to 5.84% from 4.29% of
loans in 1995. The company entered into a strategic alliance with Household
Credit Services, Inc. in October 1996. As part of this transaction, Household
purchased $776 million of non-core credit card receivables and agreed to
manage Barnett's bank card operations. This alliance provides Barnett with
marketing and processing scale as well as more sophisticated risk management
to improve the profitability of its bank card business.
BUSINESS BANKING Barnett's Business Banking group provides financial
services to businesses of all sizes. The group focuses on businesses based or
with significant presences in Florida and southern Georgia. Products and
services are delivered through the retail delivery network as well as through
specialized sales forces. Small business products and services, targeted at
companies with less than $5 million in annual sales, are delivered primarily
through Barnett's bank office network. Barnett offers cash management
services, deposit accounts, credit and related value-added financial services
such as discounted long-distance telephone service in order to maintain and
deepen small business relationships profitably.
Products and services for middle market and large corporate clients are
largely delivered through specialized sales forces. Barnett offers such
products and services as deposit accounts, credit, leasing, cash management
services and capital markets products. For those clients with international
banking needs, the company is one of the leading providers of trade-related
services in its markets. Barnett also is a leading source of banking services
delivered to the commercial real estate sector in Florida and southern
Georgia.
The Business Banking group generated net income of $194.6 million, or
35% of Barnett's consolidated earnings, and a return on equity of 35.6%.
Business Banking represents 22% of the company's assets, 26% of the company's
loans and 19% of the company's deposits.
FUNDS MANAGEMENT & OTHER Funds Management and Other includes the
funding mismatch created by match funding the company's assets and
liabilities, as well as items considered non-operating and other activities
not allocated to the three primary segments. Investment securities and
residential mortgages are included in funds management because they are
considered discretionary assets. The asset-liability management function
chooses to invest in higher or lower levels of these earning assets depending
on alternative uses of funding for liquidity and risk-adjusted returns.
Capital not allocated to other business lines based on credit, operational
and business risk is included in Funds Management and Other.
Funds management and other activities contributed $359.2 million, or
13%, of the company's revenues and $91.8 million, or 16% of the company's net
income.
Barnett
30
<PAGE>
TABLE 9 COMMERCIAL REAL ESTATE
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
December 31--Dollars in Millions BALANCE NPA RATIO(1) Balance NPA Ratio(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Residential properties .................................... $ 583 2% $ 609 2%
Rental apartments ......................................... 397 1 441 2
Office buildings .......................................... 392 3 507 3
Shopping centers .......................................... 276 4 445 4
Warehouses/service centers ................................ 238 -- 252 1
Retail business properties ................................ 183 2 180 13
Condominiums .............................................. 141 -- 136 --
Hotels/motels ............................................. 132 1 185 1
Commercial land acquisition and development ............... 63 23 84 16
Health care facilities .................................... 49 1 63 --
Recreational properties ................................... 41 3 55 5
Manufacturing/industrial plants ........................... 19 16 23 15
Multi-family land acquisition and development ............. 14 -- 3 --
Churches, educational and non-profit ...................... 10 -- 16 --
Other ..................................................... 130 15 95 18
- ---------------------------------------------------------------------------------------------------------------
Total ........................................... $2,668 3% $3,094 4%
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) NON-PERFORMING ASSETS TO PERIOD-END LOANS PLUS REAL ESTATE HELD FOR SALE
FOR EACH PROPERTY TYPE.
For a profile of these lines of business, highlights of 1996 initiatives
and plans for 1997, refer to pages 18-19. Lines of business performance is
summarized in TABLE 8.
ASSET QUALITY
RISK ELEMENTS When extending credit to customers, the company is
subjected to the possibility that a customer may not perform in accordance
with contractual terms. To manage this risk, the company uses credit
policies, which include the criteria used in extending credit, and procedures
for reviewing and approving credit and for monitoring compliance with policy.
The company monitors and revises credit policies and procedures based on
regular reassessments.
The company's credit risk objective is to minimize credit losses within
the context of optimizing risk-adjusted returns. To achieve this objective,
the company manages each loan portfolio within tolerance limits established
annually.
For corporate lending, borrowers are assigned an initial risk rating
based on the amount of inherent credit risk. Line and credit personnel
monitor the credits for deterioration in the borrowers financial capacity
which would impact the ability of the borrower to perform under the terms of
the contract. Credit limits, subject to line and credit policy management
approval, are established for the credit exposure to any one relationship.
Additional management approval is required for any requests exceeding certain
credit limits or that involve exceptions to credit policy. For retail
lending, the company uses a credit scoring system to provide standards for
extending credit. The credit risk is monitored primarily through the use of
statistical models to predict portfolio performance.
For certain types of loans, collateral, such as real and personal
property, cash on deposit or other highly liquid instruments, is obtained as
security.
Commercial and commercial real estate loans are placed on non-accrual
status when the collectibility of interest or principal is uncertain.
Residential mortgages four payments in arrears are classified as non-accruing
in conformance with predominant mortgage industry practice. Income recognized
on installment loans and credit card advances is discontinued and the loans
are charged-off after a delinquency period of 120 and 180 days, respectively.
When a loan is placed on non-accrual status, interest accruals cease and
uncollected interest is reversed and charged against current income.
Borrower experience and financial capacity are critical factors in
underwriting and approving all loan requests. Barnett's commercial real estate
loan policies generally require a maximum loan-to-value ratio of 75%.
Barnett
31
<PAGE>
MANAGEMENT DISCUSSION
TABLE 10 FIVE-YEAR HISTORY OF RISK ELEMENTS
<TABLE>
<CAPTION>
Non-Accruing Total Real Total
------------------------- Non- Estate Non- 90 Days
90 Days Less Than Reduced- Performing Held for Performing Past-Due
December 31--Dollars in Millions Past Due 90 Days Total Rate Loans Loans Sale Assets Accruals
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
Commercial, financial and agricultural ........ $ 21.1 $12.7 $ 33.8 -- $ 33.8 $ .7
Real estate construction ...................... 8.2 1.2 9.4 -- 9.4 --
Commercial mortgages .......................... 20.7 4.7 25.4 $5.3 30.7 .7
Residential mortgages ......................... 115.7 .8 116.5 -- 116.5 18.0
Installment ................................... -- -- -- -- -- 14.3
Bank card and credit lines .................... -- -- -- -- -- 7.2
- ----------------------------------------------------------------------------------------------------------------------------------
Total(1) ............................ $165.7 $19.4 $185.1 $5.3 $190.4 $43.6 $234.0 $40.9
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage of total outstanding ............... .55% .06% .61% .02% .63% .14% .77% .13%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1995
Commercial, financial and agricultural ........ $ 20.5 $11.0 $31.5 $ .1 $31.6 $.2
Real estate construction ...................... 13.3 1.5 14.8 -- 14.8 .2
Commercial mortgages .......................... 24.1 18.2 42.3 2.4 44.7 .3
Residential mortgages ......................... 78.8 .4 79.2 -- 79.2 22.5
Installment ................................... -- -- -- -- -- 11.3
Bank card and credit lines .................... -- -- -- -- -- 20.9
- ----------------------------------------------------------------------------------------------------------------------------------
Total(1) ............................ $136.7 $31.1 $167.8 $2.5 $170.3 $67.6 $237.9 $55.4
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage of total outstanding ............... .45% .10% .55% .01% .56% .22% .78% .18%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1994
Commercial, financial and agricultural ........ $ 23.2 $26.2 $49.4 -- $49.4 $2.0
Real estate construction ...................... 9.0 .6 9.6 -- 9.6 1.0
Commercial mortgages .......................... 44.1 43.5 87.6 $2.3 89.9 --
Residential mortgages ......................... 51.6 -- 51.6 -- 51.6 12.9
Installment ................................... -- -- -- -- -- 9.2
Bank card and credit lines .................... -- -- -- -- -- 13.8
- ----------------------------------------------------------------------------------------------------------------------------------
Total(1) ............................ $127.9 $70.3 $198.2 $2.3 $200.5 $90.4 $290.9 $38.9
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage of total outstanding ............... .45% .24% .69% .01% .70% .31% 1.01% .14%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1993
Commercial, financial and agricultural ........ $55.5 $29.6 $ 85.1 -- $85.1 $ .3
Real estate construction ...................... 27.6 2.9 30.5 -- 30.5 .3
Commercial mortgages .......................... 57.9 69.8 127.7 $1.8 129.5 .6
Residential mortgages ......................... 60.6 -- 60.6 -- 60.6 11.5
Installment ................................... -- -- -- -- -- 6.0
Bank card and credit lines .................... -- -- -- -- -- 9.4
- ----------------------------------------------------------------------------------------------------------------------------------
Total(1) ............................ $201.6 $102.3 $303.9 $1.8 $305.7 $152.6 $458.3 $28.1
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage of total outstanding ............... .76% .39% 1.15% .01% 1.16% .58% 1.74% .11%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
1992
Commercial, financial and agricultural ........ $67.4 $50.1 $117.5 -- $117.5 $ 2.5
Real estate construction ...................... 69.7 50.2 119.9 -- 119.9 --
Commercial mortgages .......................... 99.1 76.0 175.1 $5.0 180.1 .3
Residential mortgages ......................... 59.2 3.4 62.6 -- 62.6 21.7
Installment ................................... -- -- -- -- -- 1.3
Bank card and credit lines .................... -- -- -- -- -- 8.1
- ----------------------------------------------------------------------------------------------------------------------------------
Total(1) ............................ $295.4 $179.7 $475.1 $5.0 $480.1 $363.2 $843.3 $33.9
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage of total outstanding ............... 1.10% .67% 1.77% .02% 1.79% 1.35% 3.14% .13%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) BEFORE DEDUCTION FOR UNEARNED INCOME.
Barnett
32
<PAGE>
Barnett has reduced its exposure to commercial real estate from a high
of 28% of loans in 1988 to 10% in 1996. TABLE 9 on page 31 includes a
break-down of commercial real estate non-performing assets by category. The
commercial loan portfolio, representing 16% of total loans, is not
concentrated in any single industry, but reflects the broad-based economies
in Florida and southern Georgia.
Loans to consumers represent 74% of total loans. Barnett's residential
loans generally are secured by 1-4 family homes, conform to federal agency
underwriting standards and have a maximum loan-to-value ratio of 80% unless
they are protected by mortgage insurance. Installment loans consist mainly of
auto, home equity and student loans. The loans are secured by the related
assets. For auto loans, specific insurance coverages are required.
Non-performing assets are comprised of non-performing loans plus real
estate held for sale. TABLE 10 presents detailed information on these assets
for the past five years.
Non-performing assets totaled $234 million on December 31, 1996, down
from $238 million at the end of 1995 and $291 million at the end of 1994.
Non-performing loans totaled $190 million on December 31, 1996, up 12% from a
year ago, primarily due to increased residential non-performing loans. The
loan portfolio is now more heavily weighted toward consumer loans, which,
except for residential real estate, tend to be charged off rather than placed
on non-accrual status.
Barnett's non-performing assets as a percentage of gross loans plus real
estate held for sale were .77% on December 31, 1996, compared to .78% at the
end of last year and 1.01% at the end of 1994.
Loans 90 days or more past due and still accruing interest were $41
million, or .13% of total outstandings. The coverage ratio of the allowance
for loan losses to non-performing loans fell during the year to 250% from
297% a year ago. The increase in non-performing loans was due to a higher
level of non-performing residential mortgage loans, which historically have
low loss rates.
By the end of 1996, the company had reduced its real estate held for
sale to $44 million from $68 million the previous year.
Barnett's policies generally require annual appraisals for properties
securing loans graded substandard or doubtful. In addition, real estate held
for sale is appraised annually and carried at appraised value less estimated
cost to dispose. If, in the judgment of management, a property's value may
have declined significantly, the appraisal may be updated more frequently.
NET CHARGE-OFFS Net charge-offs were $154.4 million, up from $122.0
million in 1995 and $92.3 million in 1994. The increases were primarily a
result of increased bank card net charge-offs.
Net charge-offs in 1996 represented .51% of average outstandings,
compared to .41% in 1995 and .34% in 1994. An analysis of loan charge-offs is
presented in TABLE 11 on page 34.
Net losses from commercial loans were $2.9 million in 1996 compared to
net recoveries of $4.1 million in 1995. Net recoveries from construction
loans were $200,000 compared to net losses of $800,000 in 1995. Recoveries
exceeded charge-offs of commercial mortgages by $7.5 million compared to net
losses of $600,000 in 1995. This improvement in construction and commercial
mortgages resulted from the improved operating environment for commercial
real estate as well as a continued high level of recoveries. This level of
recoveries may not be indicative of future results.
Installment loan net charge-offs rose to $59.6 million from $54.1
million in 1995. The net loss rate of .60% was down from .63% in 1995 and
remains below managements long-term expectations for this portfolio. In
addition to the installment loans recorded on the financial statements, the
company manages $2.9 billion of home equity loans which have been
securitized. Total managed installment loans, which includes those reflected
on the balance sheet and those for which the company services for others and
retains credit risk, were $13.5 billion, up 20% from 1995. Net charge-offs
as a percentage of managed installment loans were .59% compared to .62% in
1995.
Bank card net charge-offs rose 42% to $92.5 million in 1996, reflecting
increased consumer default rates as indebtedness and personal bankruptcies
rose. The net charge-off ratio on this portfolio increased from 4.29% in 1995
to 5.84% in 1996. Bank card losses are
RESERVE COVERAGE OF NON-PERFORMING LOANS
[CHART]
114% 171% 250% 297% 250%
1992 1993 1994 1995 1996
NET CHARGE-OFFS
$ MILLIONS
[CHART]
$262 $142 $92 $122 $154
1992 1993 1994 1995 1996
Barnett
33
<PAGE>
MANAGEMENT DISCUSSION
TABLE 11 LOAN CHARGE-OFF ANALYSIS
<TABLE>
<CAPTION>
Dollars in Millions 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Beginning allowance for loan losses ........................ $505.1 $501.4 $521.8 $547.7 $552.1
- ----------------------------------------------------------------------------------------------------------------------
Charge-offs:
Commercial, financial and agricultural ................. 17.6 10.7 14.7 25.5 64.7
Real estate construction ............................... -- .8 3.1 18.5 31.8
Commercial mortgages ................................... 1.5 12.9 21.1 33.1 64.5
Residential mortgages .................................. 3.2 2.9 2.0 3.4 5.6
Installment ............................................ 79.0 68.6 57.6 73.2 95.8
Bank card .............................................. 103.1 73.5 45.5 43.0 53.8
Credit lines ........................................... 4.7 3.5 4.4 5.7 9.3
- ----------------------------------------------------------------------------------------------------------------------
Total charge-offs .................................. 209.1 172.9 148.4 202.4 325.5
- ----------------------------------------------------------------------------------------------------------------------
Recoveries:
Commercial, financial and agricultural ................. 14.7 14.8 17.7 23.9 20.9
Real estate construction ............................... .2 -- 1.3 1.8 2.4
Commercial mortgages ................................... 9.0 12.3 13.2 8.2 7.0
Residential mortgages .................................. .2 .2 .2 .4 .1
Installment ............................................ 19.4 14.5 15.1 18.5 26.5
Bank card .............................................. 10.6 8.5 7.7 6.8 5.4
Credit lines ........................................... .6 .6 .9 1.0 1.0
- ----------------------------------------------------------------------------------------------------------------------
Total recoveries ................................... 54.7 50.9 56.1 60.6 63.3
- ----------------------------------------------------------------------------------------------------------------------
Net charge-offs:
Commercial, financial and agricultural ................. 2.9 (4.1) (3.0) 1.6 43.8
Real estate construction ............................... (.2) .8 1.8 16.7 29.4
Commercial mortgages ................................... (7.5) .6 7.9 24.9 57.5
Residential mortgages .................................. 3.0 2.7 1.8 3.0 5.5
Installment ............................................ 59.6 54.1 42.5 54.7 69.3
Bank card .............................................. 92.5 65.0 37.8 36.2 48.4
Credit lines ........................................... 4.1 2.9 3.5 4.7 8.3
- ----------------------------------------------------------------------------------------------------------------------
Total net charge-offs .............................. 154.4 122.0 92.3 141.8 262.2
- ----------------------------------------------------------------------------------------------------------------------
Provision for loan losses .................................. 154.6 122.5 74.0 120.4 257.3
Other, net ................................................. (28.6) 3.2 (2.1) (4.5) .5
- ----------------------------------------------------------------------------------------------------------------------
Ending allowance for loan losses ................... $476.7 $505.1 $501.4 $521.8 $547.7
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Ending allowance for loan losses as a percentage of loans .. 1.58% 1.66% 1.76% 2.01% 2.10%
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average loans by category:
Commercial, financial and agricultural ................. .06% (.09)% (.07)% .04% 1.01%
Real estate construction ............................... (.02) .09 .21 1.56 1.86
Commercial mortgages ................................... (.37) .03 .32 .84 1.67
Residential mortgages .................................. .03 .02 .02 .03 .06
Installment ............................................ .60 .63 .56 .79 1.06
Bank card .............................................. 5.84 4.29 3.23 3.50 4.60
Credit lines ........................................... .54 .40 .51 .65 1.17
Total .............................................. .51 .41 .34 .55 1.00
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Allocation of allowance for loan losses by category:
Commercial, financial and agricultural ................. $ 69.3 $ 73.4 $ 84.8 $ 85.8 $ 89.3
Real estate construction ............................... 14.7 14.7 16.1 36.7 60.0
Commercial mortgages ................................... 60.8 87.0 102.6 117.4 108.4
Residential mortgages .................................. 25.4 23.2 23.5 27.0 7.0
Installment ............................................ 133.6 100.7 90.4 107.7 99.9
Bank card .............................................. 70.3 105.6 72.2 59.1 62.4
Credit lines ........................................... 15.2 8.8 9.4 10.1 15.1
Unallocated ............................................ 87.4 91.7 102.4 78.0 105.6
- ----------------------------------------------------------------------------------------------------------------------
Total .............................................. $476.7 $505.1 $501.4 $521.8 $547.7
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
34
<PAGE>
expected to decline during 1997 as a result of the strategic alliance with
Household. As part of this agreement, the company sold in October $776
million of non-core credit card receivables, made up primarily of the
non-relationship, out-of-market and lower credit score accounts. These
balances had been the primary source of the increased level of losses in the
credit card portfolio.
The percentage of installment loans 30 days or more past due increased
to 1.47% on December 31, 1996 from 1.20% a year earlier. The bank card
delinquency ratio decreased to 2.14% at December 31, 1996 from 3.31% a year
earlier. The residential delinquency ratio increased to 4.59% at December 31,
1996 from 4.34% a year earlier.
PROVISION/ALLOWANCE FOR LOAN LOSSES The provision for loan losses is a
charge to earnings in the current period to maintain the allowance for loan
losses at an adequate level. In 1996, Barnett's provision expense was $154.6
million, up from $122.5 million in 1995.
The allowance for loan losses represents a reserve for potential losses
existing in the loan portfolio. Barnett's methodology for evaluating the
adequacy of the allowance is based on the operating and economic environment,
the level and quality of impaired and adversely graded loans, the level of
charge-offs and analyses of individual loans within the portfolio. This
methodology requires detailed review of impaired loans and minimum reserves
for other adversely graded loans.
The allowance for loan losses declined 6% to $477 million and
represented 1.58% of loans on December 31, 1996. This reduction was related
to the sale of $776 million of non-core credit card receivables and an
accompanying $31 million in related reserves. Since the allowance is
established to cover potential losses inherent in the portfolio as a whole,
due to the weighting of the portfolio toward consumer loans, the allowance
will not necessarily change at the same rate as non-performing loans.
Management considers the allowance appropriate and adequate to cover
potential losses inherent in the loan portfolio.
TABLE 11 provides a reconciliation of the allowance for loan losses for
the years 1992 through 1996, as well as gross charge-offs, recoveries and net
charge-offs.
TAXES
Barnett's provision for income taxes rose to $341.1 million in 1996 from
$286.3 million in 1995, primarily as a result of growth in pre-tax earnings.
The effective tax rate increased to 37.6% from 34.9%, reflecting reduced
tax-exempt income and higher state income taxes. A reconciliation of the
effective tax rate to the 1996 federal statutory rate can be found in NOTE O
in the NOTES TO FINANCIAL STATEMENTS.
LIQUIDITY
For banks, liquidity represents the ability to meet loan commitments,
deposit withdrawals and other operating needs. Funds to meet these needs can
be obtained by converting liquid assets to cash or by attracting new deposits
or other sources of funding. Many factors affect a bank's ability to meet
liquidity needs, including variations in the markets served, its
asset-liability mix, its reputation and credit standing in the market, and
general economic conditions.
In addition to its traditional in-market deposit sources, Barnett has
many other sources of liquidity, including proceeds from maturing securities
and loans or the sales of securities, asset securitization and other
non-relationship funding sources such as senior or subordinated debt, bank
notes, commercial paper and wholesale purchased funds.
The high proportion of residential and installment loans on Barnett's
balance sheet provides it with an exceptional amount of contingent liquidity
through the conventional securitization programs that exist today.
The company has a commercial paper program to provide funding for
certain consumer lending operations. On December 31, 1996, the company had
$42 million of commercial paper outstanding compared to $670 million on
December 31, 1995. This facility is supported by $760 million in backup
lines of credit.
At the end of the year, the company had $1.4 billion in debt and
preferred stock available under existing shelf registrations with the
Securities and Exchange Commission. Management believes that the level of
liquidity is sufficient to meet current and future funding requirements.
Barnett
35
<PAGE>
MANAGEMENT DISCUSSION
CAPITAL
On December 31, 1996, Barnett's shareholders' equity totaled $3.4 billion,
up 3% from a year earlier, due to retention of earnings partially offset by the
continued use of internally generated capital to fund the company's repurchases
of common stock. In September, Barnett's common shares outstanding were
increased through a 2-for-1 stock split. All historical data used in this report
has been restated to reflect the split.
In April, the company called for redemption the Series A $4.50 Cumulative
Convertible preferred stock and substantially all of the shares converted into
6.8 million common shares. The company had previously repurchased an equivalent
amount of common shares related to this conversion.
Barnett meets most of its capital requirements through retained earnings,
and in 1996 this source added $363 million to equity. TABLE 12 shows a six-year
history of Barnett's rate of internal capital generation and the component
factors which determine it.
The company declared dividends of $1.05 per common share in 1996,
representing a 37% common dividend payout ratio which is defined as dividends
per common share divided by earnings per fully diluted common share. Reflecting
the increase in the company's earnings, Barnett raised the quarterly dividend
15% in May to $.27 per share. Barnett's goal is to maintain a common dividend
payout ratio in the range of 30% to 40% of earnings.
In the fourth quarter, the company established two statutory business
trusts for the sole purpose of issuing capital securities and investing the
proceeds in the company's junior subordinated debentures. The parent company
issued two fixed-rate junior subordinated debentures totaling $500 million to
the trusts. These trust preferred securities are reflected in the consolidated
financial statements as minority interest.
The company is subject to risk-based capital guidelines that measure
capital relative to risk-weighted assets and off-balance-sheet financial
instruments. Capital guidelines issued by the Federal Reserve Board require bank
holding companies to have a minimum total risk-based capital ratio of 8.00%,
with at least half of total capital in the form of Tier I capital.
As NOTE R in the NOTES TO FINANCIAL STATEMENTS shows, Barnett significantly
exceeded these capital guidelines on December 31. The Tier I capital ratio of
10.97% is up from 8.25% a year ago. The total risk-based capital ratio of 14.17%
is also up from 11.51% in 1995. The minimum leverage ratio, defined as Tier I
capital divided by quarterly average assets, is 3% for the highest-rated bank
holding companies which are not undertaking significant expansion programs. An
additional 1% to 2% may be required for other companies, depending upon their
regulatory ratings and expansion plans. On December 31, 1996, Barnett's leverage
ratio was 8.21%, up 205 basis points from last year. These increases are
primarily due to lower intangible assets as a result of the HomeSide venture and
the issuance of $500 million in trust preferred securities.
TABLE 12 RATE OF INTERNAL CAPITAL GENERATION
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Return on assets(1). . . . . . . . . . . . . 1.42% 1.30% 1.28% 1.13% .55% .21%
Average equity to assets . . . . . . . . . . 8.13 8.07 7.94 7.31 6.62 5.61
- ----------------------------------------------------------------------------------------------------------------------------------
Return on total equity(1). . . . . . . . . . 17.44 16.08 16.11 15.42 8.27 3.83
Total dividend payout ratio. . . . . . . . . 35.71 35.83 35.98 36.26 58.58 120.59
Earnings retention rate. . . . . . . . . . . 64.29 64.17 64.02 63.74 41.42 (20.59)
- ----------------------------------------------------------------------------------------------------------------------------------
Internal capital generation rate . . . . . . 11.21% 10.32% 10.31% 9.83% 3.43% (.79)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excluding $24.5 million pre-tax SAIF assessment. Including the assessment,
return on assets and return on equity were 1.38% and 16.98%, respectively,
in 1996.
AVERAGE SHAREHOLDERS' EQUITY
$ BILLIONS
1992 1993 1994 1995 1996
$2.5 $2.7 $3.0 $3.3 $3.3
BOOK VALUE PER SHARE
1992 1993 1994 1995 1996
$12.70 $14.17 $15.54 $17.13 $18.10
Barnett
36
<PAGE>
COMPARISON OF 1995 WITH 1994
Barnett earned $533.3 million, or $2.56 per fully diluted share, in 1995, a
10% increase in per-share earnings from 1994. This increase reflected solid
revenue growth and continued non-interest expense control.
Profitability continued to be strong in 1995. Return on assets rose to
1.30%, and return on average shareholders' equity was 16.08%.
Revenues, excluding securities transactions, rose 11% over 1994. Net
interest income increased 6%, as the company expanded its earning assets 5%
while maintaining its net yield. Non-interest income rose 28%. The provision for
loan losses rose 66% to $122.5 million during 1995, approaching more normal loss
levels following the post-recession lows. Non-interest income, excluding
securities transactions, rose 28%, primarily due to revenue from companies
acquired during the year. Non-interest expense increased 11% in 1995, primarily
reflecting the expense added from companies acquired during the year.
Average total assets rose 8% in 1995, reflecting 11% growth in loans. Loan
growth in 1995 was paced by increased loans to consumers. Average deposits grew
6% from 1994, reflecting the purchase of $3.4 billion of Florida deposits from
Glendale Federal Bank, FSB in December 1994. Average securities fell 15% during
1995, as the proceeds from maturing securities were redeployed into higher
yielding loans.
In January 1995, Barnett completed the acquisition of EquiCredit
Corporation for $332 million in cash. EquiCredit originates, sells and services
fixed-rate consumer loans secured by first or second mortgages. In February
1995, Barnett purchased BancPLUS Financial Corporation for $162 million in cash.
BancPLUS is a full-service mortgage banking company that originates first
mortgage loans nationwide through a network of retail and wholesale offices.
- --------------------------------------------------------------------------------
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
THIS REPORT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
FEDERAL SECURITIES LAWS. THE FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE
SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN OR IMPLIED BY THE STATEMENTS.
Barnett
37
<PAGE>
SIX-YEAR AVERAGE BALANCES, YIELDS AND RATES
Consolidated--Barnett Banks, Inc. and Affiliates
<TABLE>
<CAPTION>
1996 1995
-------------------------- ---------------------------
AVERAGE Average
AVERAGE YIELD Average Yield
Dollars in Millions--Taxable-Equivalent. . . BALANCE INTEREST OR RATE Balance Interest or Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and agricultural. . $ 4,954 $ 411.2 8.30% $ 4,554 $ 384.2 8.44%
Real estate construction. . . . . . . . . 811 80.5 9.93 931 98.4 10.57
Commercial mortgages. . . . . . . . . . . 2,050 181.9 8.87 2,319 202.1 8.71
Residential mortgages . . . . . . . . . . 10,224 793.3 7.76 11,118 846.3 7.61
Installment . . . . . . . . . . . . . . . 9,977 888.9 8.91 8,603 760.3 8.84
Bank card . . . . . . . . . . . . . . . . 1,585 244.4 15.43 1,515 237.7 15.69
Credit lines. . . . . . . . . . . . . . . 765 75.2 9.84 732 74.4 10.16
- -------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . 30,366 2,666.7 8.78 29,772 2,592.0 8.71
- -------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . . 4,981 311.8 6.26 6,030 340.8 5.65
Tax-free. . . . . . . . . . . . . . . . . 185 21.1 11.41 423 53.7 12.70
- -------------------------------------------------------------------------------------------------------
Total securities . . . . . . . . . . . 5,166 332.9 6.44 6,453 394.5 6.11
- -------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased
under agreements to resell. . . . . . . . 438 23.7 5.40 83 4.9 5.88
Other earning assets . . . . . . . . . . . . -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 35,970 $3,023.3 8.40% 36,308 $2,991.4 8.24%
- -------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . . 2,015 2,013
Other assets . . . . . . . . . . . . . . . . 3,402 3,287
Allowance for loan losses. . . . . . . . . . (499) (503)
- -------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $40,888 $41,105
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND EQUITY
NOW and money market accounts. . . . . . . . $12,087 $ 240.8 1.99% $12,757 $ 293.2 2.30%
Savings deposits . . . . . . . . . . . . . . 3,141 54.5 1.74 3,435 71.0 2.07
Certificates of deposit under $100,000 . . . 9,806 492.3 5.02 9,906 511.4 5.16
Other time deposits. . . . . . . . . . . . . 2,533 136.7 5.40 2,153 117.4 5.45
- -------------------------------------------------------------------------------------------------------
Total interest-bearing deposits. . . . 27,567 924.3 3.35 28,251 993.0 3.52
Federal funds purchased and securities sold
under agreements to repurchase. . . . . . 1,508 77.1 5.11 1,585 90.7 5.73
Other short-term borrowings. . . . . . . . . 724 41.5 5.73 923 57.2 6.19
Long-term debt . . . . . . . . . . . . . . . 1,258 93.9 7.47 955 78.3 8.20
- -------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . 31,057 $1,136.8 3.66% 31,714 $1,219.2 3.84%
Demand deposits. . . . . . . . . . . . . . . 5,612 5,440
Other liabilities. . . . . . . . . . . . . . 849 635
Minority interest. . . . . . . . . . . . . . 45 --
Preferred equity . . . . . . . . . . . . . . 25 187
Common equity. . . . . . . . . . . . . . . . 3,300 3,129
- -------------------------------------------------------------------------------------------------------
Total liabilities, minority interest
and equity . . . . . . . . . . . . . . $40,888 $41,105
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . . . 4.74% 4.40%
Cost of funds supporting earning assets. . . 3.16 3.36
Net yield on earning assets. . . . . . . . . $1,886.5 5.24 $1,772.2 4.88
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCOME ON NON-ACCRUING LOANS IS RECOGNIZED ON A CASH BASIS. INTEREST INCOME
ON INDIVIDUAL LOAN CATEGORIES IS AT CONTRACTUAL RATES, WHILE TOTAL LOAN
INTEREST INCOME IS NET OF REVERSALS OF INTEREST ON NON-ACCRUING LOANS
(2) AVERAGE YIELDS ON INVESTMENT SECURITIES AVAILABLE FOR SALE HAVE BEEN
CALCULATED BASED ON AMORTIZED COST.
Barnett
38
<PAGE>
<TABLE>
<CAPTION>
1994 1993
--------------------------- ----------------------------
Average Average
Average Yield Average Yield
Dollars in Millions--Taxable-Equivalent Balance Interest or Rate Balance Interest or Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and agricultural. . $ 4,220 $ 324.4 7.69% $ 3,927 $ 281.6 7.17%
Real estate construction. . . . . . . . . 851 76.2 8.95 1,068 83.0 7.77
Commercial mortgages. . . . . . . . . . . 2,492 206.6 8.29 2,970 236.5 7.96
Residential mortgages . . . . . . . . . . 9,759 698.0 7.15 9,179 705.7 7.69
Installment . . . . . . . . . . . . . . . 7,633 634.8 8.32 6,941 632.7 9.11
Bank card . . . . . . . . . . . . . . . . 1,168 187.0 16.01 1,034 170.9 16.53
Credit lines. . . . . . . . . . . . . . . 687 55.0 8.01 721 53.9 7.48
- -------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . 26,810 2,174.9 8.11 25,840 2,140.7 8.28
- -------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . . 6,839 327.9 4.79 5,961 302.9 5.08
Tax-free. . . . . . . . . . . . . . . . . 715 93.0 13.01 897 111.0 12.37
- -------------------------------------------------------------------------------------------------------
Total securities . . . . . . . . . . . 7,554 420.9 5.57 6,858 413.9 6.04
- -------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased
under agreements to resell. . . . . . . . 77 3.1 4.03 559 17.7 3.17
Other earning assets . . . . . . . . . . . . -- -- -- 256 8.1 3.18
- -------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 34,441 $2,598.9 7.55% 33,513 $2,580.4 7.70%
- -------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . . 2,092 2,164
Other assets . . . . . . . . . . . . . . . . 2,156 2,218
Allowance for loan losses. . . . . . . . . . (520) (539)
- -------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $38,169 $37,356
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND EQUITY
NOW and money market accounts. . . . . . . . $13,573 $297.9 2.19% $13,453 $283.6 2.11%
Savings deposits . . . . . . . . . . . . . . 3,469 72.8 2.10 3,353 67.4 2.01
Certificates of deposit under $100,000 . . . 7,498 320.8 4.28 8,343 355.1 4.26
Other time deposit . . . . . . . . . . . . . 1,639 70.0 4.27 1,936 83.0 4.29
- -------------------------------------------------------------------------------------------------------
Total interest-bearing deposits. . . . 26,179 761.5 2.91 27,085 789.1 2.91
Federal funds purchased and securities sold
under agreements to repurchase. . . . . . 2,192 93.7 4.27 942 25.0 2.65
Other short-term borrowings. . . . . . . . . 125 5.7 4.59 108 4.2 3.88
Long-term debt . . . . . . . . . . . . . . . 683 60.5 8.85 689 61.8 8.97
- -------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . 29,179 $921.4 3.16% 28,824 $880.1 3.05%
Demand deposits. . . . . . . . . . . . . . . 5,531 5,400
Other liabilities. . . . . . . . . . . . . . 430 402
Minority interest. . . . . . . . . . . . . . -- --
Preferred equity . . . . . . . . . . . . . . 215 215
Common equity. . . . . . . . . . . . . . . . 2,814 2,515
- -------------------------------------------------------------------------------------------------------
Total liabilities, minority interest
and equity . . . . . . . . . . . . . . $38,169 $37,356
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . . . 4.39% 4.65%
Cost of funds supporting earning assets. . . 2.68 2.63
Net yield on earning assets. . . . . . . . . $1,677.5 4.87 $1,700.3 5.07
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<CAPTION>
1992 1991 Growth Rate
-------------------------- -------------------------- -------------
Average Average 5-Year
Average Yield Average Yield Com- 1996/
Dollars in Millions--Taxable-Equivalent Balance Interest or Rate Balance Interest or Rate pound 1995
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and agricultural. . $ 4,341 $ 322.2 7.42% $ 4,811 $ 436.3 9.07% 1% 9%
Real estate construction. . . . . . . . . 1,577 125.8 7.98 2,353 236.5 10.05 (19) (13)
Commercial mortgages. . . . . . . . . . . 3,442 299.3 8.70 3,823 385.3 10.08 (12) (12)
Residential mortgages . . . . . . . . . . 8,564 752.2 8.78 7,780 780.5 10.03 6 (8)
Installment . . . . . . . . . . . . . . . 6,549 670.4 10.24 6,655 739.2 11.11 8 16
Bank card . . . . . . . . . . . . . . . . 1,052 172.6 16.40 1,080 178.7 16.55 8 5
Credit lines. . . . . . . . . . . . . . . 711 55.4 7.79 699 70.8 10.12 2 5
- ---------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . 26,236 2,363.1 9.00 27,201 2,769.8 10.18 2 2
- ---------------------------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . . 5,734 356.6 6.23 4,561 352.6 7.73 2 (17)
Tax-free. . . . . . . . . . . . . . . . . 1,042 124.8 11.97 1,251 148.3 11.86 (32) (56)
- ---------------------------------------------------------------------------------------------------------------------------
Total securities . . . . . . . . . . . 6,776 481.4 7.11 5,812 500.9 8.62 (2) (20)
- ---------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased
under agreements to resell. . . . . . . . 813 29.6 3.64 1,105 61.7 5.58 (17) --
Other earning assets . . . . . . . . . . . . 115 5.7 4.96 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 33,940 $2,879.8 8.48% 34,118 $3,332.4 9.77% 1 (1)
- ---------------------------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . . 2,131 1,889 1 --
Other assets . . . . . . . . . . . . . . . . 2,403 2,450 7 3
Allowance for loan losses. . . . . . . . . . (551) (557) (2) (1)
- ---------------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $37,923 $37,900 2% (1)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND EQUITY
NOW and money market accounts. . . . . . . . $12,426 $ 311.6 2.51% $10,658 $ 450.8 4.23% 3% (5)%
Savings deposits . . . . . . . . . . . . . . 2,941 76.7 2.61 2,432 99.2 4.08 5 (9)
Certificates of deposit under $100,000 . . . 10,318 520.1 5.04 12,022 814.6 6.78 (4) (1)
Other time deposit . . . . . . . . . . . . . 2,672 134.3 5.03 3,915 266.8 6.81 (8) 18
- ---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits. . . . 28,357 1,042.7 3.68 29,027 1,631.4 5.62 (1) (2)
Federal funds purchased and securities sold
under agreements to repurchase. . . . . . 1,013 31.7 3.13 1,295 68.1 5.26 3 (5)
Other short-term borrowings. . . . . . . . . 95 3.3 3.49 140 8.1 5.73 39 (22)
Long-term debt . . . . . . . . . . . . . . . 734 66.0 9.00 653 56.8 8.70 14 32
- ---------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . 30,199 $1,143.7 3.79% 31,115 $1,764.4 5.67% -- (2)
Demand deposits. . . . . . . . . . . . . . . 4,864 4,311 5 3
Other liabilities. . . . . . . . . . . . . . 349 346 20 34
Minority interest. . . . . . . . . . . . . . -- -- -- --
Preferred equity . . . . . . . . . . . . . . 216 119 (27) (87)
Common equity. . . . . . . . . . . . . . . . 2,295 2,009 10 5
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority interest
and equity . . . . . . . . . . . . . . $37,923 $37,900 2% (1)%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . . . 4.69% 4.10%
Cost of funds supporting earning assets. . . 3.37 5.17
Net yield on earning assets. . . . . . . . . $1,736.1 5.11 $1,568.0 4.60
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
39
<PAGE>
FOURTH QUARTER MANAGEMENT DISCUSSION
SUMMARY
Barnett reported net income of $149.8 million, or $.76 per fully diluted
share, in the fourth quarter, up from $127.0 million, or $.65 per share, in the
third quarter and $138.3 million, or $.67 per share, in the fourth quarter of
1995. Third quarter 1996 results included a $24.5 million charge to cover a
potential special assessment to recapitalize the Savings Association Insurance
Fund (SAIF). Excluding this charge, third quarter operating earnings were $142.3
million, or $.73 per share.
Fourth quarter results represent a 1.47% return on assets and a 17.77%
return on equity.
Revenue increased by $4.0 million over the third quarter, reflecting growth
in consumer finance income and other retail fees partially offset by lower net
interest income. Net interest income declined $7.1 million. Average earning
assets fell $292 million and the net yield on earning assets fell 4 basis points
to 5.18%, primarily because of the sale of bank card receivables. (See page 20
of the Management Discussion which describes that transaction). Revenues grew
$18.2 million from the fourth quarter of 1995, reflecting growth in consumer
finance income and other retail fees partially offset by lower credit card
discounts and fees.
Non-interest expense increased $15.3 million from the third quarter,
excluding the SAIF assessment, and $5.8 million over the fourth quarter of 1995.
The overhead ratio was 59.9%. The provision for loan losses decreased $16.3
million, or 36%, from the third quarter and $8.6 million, or 23%, from the same
quarter last year, to $28.6 million. Net charge-offs decreased $16.7 million
from the third quarter and $7.8 million from last year's fourth quarter to $28.4
million. These reductions in the provision for loan losses and net charge-offs
primarily reflect the impact of the sale of $776 million of non-core credit card
receivables. The reserve for loan losses was $477 million on December 31, 1996,
covering 250% of non-performing loans.
Non-performing assets decreased $17.2 million from the third quarter and
$3.9 million from a year earlier to $234.0 million, representing .77% of
outstandings on December 31, 1996. Selected quarterly data can be found in TABLE
13.
<TABLE>
<CAPTION>
TABLE 13 SELECTED QUARTERLY DATA
1996 1995
-------------------------------------------------------------------
DOLLARS IN MILLIONS EXCEPT PER SHARE DATA FOURTH Third Second First Fourth Third Second First
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income (taxable-equivalent) . . . . . . . . . . $461.9 $469.0 $480.3 $475.3 $459.2 $446.9 $435.6 $430.5
Provision for loan losses. . . . . . . . . . . . . . . . . . 28.6 44.9 39.5 41.6 37.2 34.2 26.8 24.3
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income after loan loss provision. . . . . . . . 433.3 424.1 440.8 433.7 422.0 412.7 408.8 406.2
Non-interest income (excluding securities transactions). . . 206.0 194.8 193.9 196.6 185.5 182.6 183.1 162.8
Securities transactions. . . . . . . . . . . . . . . . . . . (.1) -- .3 19.0 4.9 .1 -- --
Non-interest expense (excluding SAIF assessment) . . . . . . 399.7 384.4 400.8 407.6 393.9 379.3 381.9 363.5
SAIF assessment. . . . . . . . . . . . . . . . . . . . . . . -- 24.5 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes . . . . . . . . . . . . . . . . . 239.5 210.0 234.2 241.7 218.5 216.1 210.0 205.5
Income tax provision . . . . . . . . . . . . . . . . . . . . 83.4 78.8 90.3 88.6 75.0 75.4 69.4 66.5
Taxable-equivalent adjustment. . . . . . . . . . . . . . . . 3.9 4.2 4.4 4.9 5.2 6.6 8.4 10.3
- -----------------------------------------------------------------------------------------------------------------------------------
Net income before minority interest. . . . . . . . . . . . . 152.2 127.0 139.5 148.2 138.3 134.1 132.2 128.7
Minority interest, net of taxes. . . . . . . . . . . . . . . (2.4) -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . $149.8 $127.0 $139.5 $148.2 $138.3 $134.1 $132.2 $128.7
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Primary earnings per common share. . . . . . . . . . . . . . $.77 $.65 $.71 $.76 $.69 $.67 $.65 $.64
Fully diluted earnings per common share. . . . . . . . . . . .76 .65 .71 .74 .67 .65 .63 .61
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
40
<PAGE>
EARNING ASSETS
Average earning assets were down 1% from the third quarter and 2% from last
year to $35.6 billion. Earning assets declined primarily due to the impact of
the Household Credit Services, Inc. transaction as well as management's decision
to deploy the proceeds from maturing securities and amortizing residential
mortgage loans into higher yielding loans.
Average loans fell $341 million from the third quarter and $208 million
from the fourth quarter of 1995, reflecting the sale of $776 million non-core
credit card outstandings. The company enjoyed growth in installment and
commercial loans while residential loans fell. Excluding the bank card and
residential portfolios, loans grew $547 million, or at an annualized rate of
12%, from the third quarter and $1.7 billion, or 10%, from the same quarter last
year. Installment loans increased at an annualized rate of 16% from the third
quarter and 18% from the fourth quarter of 1995 to $10.6 billion. Commercial
loans increased $195 million during the quarter and $497 million from last year
to $5.2 billion. Residential loans fell $141 million from the third quarter and
$1.3 billion from the fourth quarter of 1995, as the company used repayments to
fund higher yielding loans. Bank card outstandings fell $747 million from the
third quarter and $631 million from last year, reflecting the impact of the
Household transaction.
Average investment securities continued to decline throughout 1996. The
fourth quarter average balance of $5.0 billion was $138 million lower than the
third quarter and 12% lower than the fourth quarter of 1995, reflecting the
deployment of liquidity from maturing securities into higher yielding loans.
FUNDING SOURCES
Barnett's average deposits rose slightly from the third quarter, but were
down 3% from a year ago, to $32.7 billion, reflecting the transfer of mortgage
escrow deposits to HomeSide, Inc. Average deposits rose slightly from the third
quarter, as seasonal residents returned to Florida. Compared to a year ago,
demand deposits rose $28 million to an average balance of $5.6 billion. Money
market and NOW accounts were down 6%, while savings account balances fell 10%.
Certificates of deposit under $100,000 fell slightly. In contrast, other time
deposits rose 10% from last year.
NET INTEREST INCOME
Barnett's taxable-equivalent net interest income of $461.9 million in the
fourth quarter was $7.1 million lower than the third quarter, but $2.7 million
higher than the corresponding period last year. The decrease from the third
quarter was due to a 4 basis point reduction in the net yield on earning assets
and a $292 million reduction in average earning assets. The decline in net
interest income and net yield on earning assets reflect the impact of the sale
of non-core credit card outstandings to Household. Average bank card
outstandings fell $747 million during the quarter, reducing earning assets. The
decrease in this high yielding earning asset reduced the net yield on earning
assets by approximately 20 basis points. This impact was partially offset by the
favorable change in earning asset mix and the impact of the capital securities
issued during the quarter.
The increase from last year was primarily due to a higher net yield on
earning assets, partially offset by the decrease in earning assets. The net
yield rose 13 basis points, primarily because of lower funding costs. The rate
paid on interest-bearing liabilities fell 16 basis points, and earning assets
fell $714 million as discussed in the EARNING ASSETS section above.
Barnett
41
<PAGE>
FOURTH QUARTER MANAGEMENT DISCUSSION
NON-INTEREST INCOME
Non-interest income, excluding securities gains, rose 6% from the third
quarter and 11% from the fourth quarter of 1995, as consumer finance income and
other retail fees showed healthy gains. These were partially offset by lower
credit card discounts and fees. Consumer finance income rose 31%, or $9.4
million, from the third quarter and 65%, or $15.7 million, from the same period
a year ago, to $39.7 million. The increases reflect higher securitization
volumes, improved gains on loan securitization and the adoption of Statement of
Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights." Other service charges and fees rose 14%, or $4.8 million,
from the third quarter to $40.2 million, reflecting higher retail fees due to
holiday activity and a special promotional program. Other service charges and
fees rose 25%, or $8.1 million, from last year, reflecting higher retail fees
including a new ATM surcharge. Credit card fees fell $5.9 million, or 47%, from
the third quarter, reflecting the impact of the Household transaction. Credit
card fees fell $10.3 million, or 60%, from last year's fourth quarter, as the
company entered into a joint venture in January to perform bank card merchant
processing.
Net securities gains fell $5.0 million from the fourth quarter of last year
due to the sale of a portion of the company's investment in Bank South
Corporation in the fourth quarter of 1995.
NON-INTEREST EXPENSE
Non-interest expense rose 4% from the third quarter, excluding that
period's SAIF charge, to $399.7 million. Non-interest expense was up 1% from the
fourth quarter of 1995.
Salaries and benefits rose 4% from the third quarter and 5% from the same
period last year to $210.0 million, primarily due to performance-based
compensation and staffing related to strategic initiatives. The company had
19,791 full-time equivalent employees on average in the fourth quarter of 1996,
compared to 19,045 in the third quarter and 19,446 in the fourth quarter of
1995.
Other expenses increased 6% from the third quarter, excluding that
quarter's SAIF charge, primarily due to increased expenses related to strategic
initiatives. Other expense fell 7% from last year to $116.1 million, primarily
as a result of lower FDIC premiums. Details on other non-interest expense can be
found in TABLE 14.
<TABLE>
<CAPTION>
TABLE 14 OTHER NON-INTEREST EXPENSE
1996 1995
------------------------------------------ -------------------------------------------
Dollars in Thousands FOURTH Third Second First Fourth Third Second First
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Advertising and marketing. . . . . . . . $ 10,256 $ 11,098 $ 12,693 $ 13,905 $ 11,959 $ 8,407 $ 7,737 $ 5,416
Amortization of intangibles. . . . . . . 11,731 11,970 13,043 13,440 13,031 13,415 14,022 12,326
Communications . . . . . . . . . . . . . 12,388 11,554 11,416 10,970 10,349 10,852 10,464 9,321
Expenses and provision on
real estate held for sale . . . . . 3,233 3,696 3,384 2,409 2,280 2,901 3,418 3,513
FDIC assessments . . . . . . . . . . . . -- 2,545 2,514 2,720 5,517 612 18,565 18,533
Outside computer services. . . . . . . . 10,737 8,637 8,973 9,739 8,474 8,220 7,494 7,790
Postage. . . . . . . . . . . . . . . . . 6,345 6,147 7,390 6,920 6,553 6,878 6,584 6,311
Stationery and supplies. . . . . . . . . 7,545 5,936 5,634 5,762 6,169 4,750 4,770 4,708
Insurance, taxes and other . . . . . . . 53,895 48,060 56,482 59,729 60,122 62,897 51,667 52,736
- ----------------------------------------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . $116,130 $109,643 $121,529 $125,594 $124,454 $118,932 $124,721 $120,654
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
42
<PAGE>
ASSET QUALITY
The provision for loan losses was $28.6 million in the fourth quarter, down
from the third quarter provision of $44.9 million and the fourth quarter 1995
provision of $37.2 million, reflecting the sale of non-core credit card
receivables.
As a percentage of average loans, net charge-offs were .38% compared to
.59% in the third quarter and .48% in the fourth quarter of 1995. The allowance
for loan losses was $477 million at December 31 compared to $505 million last
year. This reduction was related to the sale of $776 million of non-core credit
card receivables and the accompanying $31 million of related reserves.
Non-performing assets decreased $17.2 million from the third quarter and
$3.9 million from a year earlier to $234.0 million, as other real estate owned
fell 26% from the third quarter and 36% from last year. Non-performing assets on
December 31 represented .77% of outstandings compared to .78% last year. For
further details on loan quality, see TABLE 15.
TAXES
Barnett's effective tax rate for the fourth quarter was 35.4%, compared to
35.2% for the fourth quarter of 1995.
<TABLE>
<CAPTION>
TABLE 15 LOAN QUALITY INFORMATION
1996 1995
---------------------------------------------- ------------------------------------------
Dollars in Thousands FOURTH Third Second First Fourth Third Second First
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net charge-offs (recoveries):
Commercial, financial, agricultural. . $ 667 $ 3,271 $ (740) $ (334) $ (1,484) $ 2,049 $ (1,863) $ (2,781)
Real estate construction . . . . . . . 28 (13) -- (175) (1) 428 147 190
Commercial mortgages . . . . . . . . . (572) (2,931) (2,184) (1,850) (2,828) 515 2,392 499
Residential mortgages. . . . . . . . . 1,129 781 608 508 1,140 543 261 739
Installment. . . . . . . . . . . . . . 19,672 11,666 12,795 15,428 17,212 12,318 12,229 12,381
Bank card. . . . . . . . . . . . . . . 6,260 31,186 28,254 26,797 21,443 17,384 13,510 12,683
Credit lines . . . . . . . . . . . . . 1,252 1,133 711 1,031 718 810 629 727
- -----------------------------------------------------------------------------------------------------------------------------------
Total net charge-offs . . . . . . $ 28,436 $ 45,093 $ 39,444 $ 41,405 $ 36,200 $ 34,047 $ 27,305 $ 24,438
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Gross charge-offs. . . . . . . . . . . $ 43,278 $ 61,037 $ 53,284 $ 51,500 $ 50,163 $ 44,062 $ 42,529 $ 36,125
Allowance for loan losses. . . . . . . 476,709 507,109 506,892 506,315 505,148 503,032 502,521 502,800
Non-performing loans . . . . . . . . . 190,425 192,216 192,711 181,382 170,268 207,902 208,142 221,943
Non-performing assets. . . . . . . . . 233,980 251,137 251,969 244,638 237,898 282,194 280,869 297,223
Non-performing asset ratio . . . . . . .77% .82% .82% .80% .78% .92% .93% 1.01%
Net charge-offs to average
loans (annualized). . . . . . . . .38 .59 .52 .55 .48 .45 .37 .34
Allowance to non-performing loans. . . 250 264 263 279 297 242 241 227
Allowance to period-end loans. . . . . 1.58 1.66 1.66 1.67 1.66 1.65 1.68 1.72
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
43
<PAGE>
QUARTERLY AVERAGE BALANCES, YIELDS AND RATES
Consolidated--Barnett Banks, Inc. and Affiliates
<TABLE>
<CAPTION>
1996
----------------------------------------------------------
FOURTH Third
---------------------------- ----------------------------
AVERAGE Average
AVERAGE YIELD OR Average Yield or
Dollars in Millions--Taxable-Equivalent BALANCE INTEREST RATE Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and
agricultural . . . . . . . . . . . . . $ 5,158 $107.6 8.29% $ 4,963 $103.3 8.28%
Real estate construction. . . . . . . . 817 19.9 9.69 805 19.9 9.84
Commercial mortgages. . . . . . . . . . 1,943 43.2 8.83 2,028 44.8 8.79
Residential mortgages . . . . . . . . . 9,865 190.0 7.70 10,006 191.4 7.65
Installment . . . . . . . . . . . . . . 10,596 240.3 9.02 10,188 226.3 8.84
Bank card . . . . . . . . . . . . . . . 1,046 39.0 14.85 1,793 69.4 15.40
Credit lines. . . . . . . . . . . . . . 781 18.8 9.62 764 18.8 9.78
- ---------------------------------------------------------------------------------------------------------
Total loans, net of unearned income 30,206 656.3 8.66 30,547 671.9 8.76
- ---------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . 4,863 78.4 6.44 4,986 77.9 6.23
Tax-free. . . . . . . . . . . . . . . . 160 4.7 11.53 175 5.0 11.60
- ---------------------------------------------------------------------------------------------------------
Total securities . . . . . . . . . . . 5,023 83.1 6.60 5,161 82.9 6.41
- ---------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to
resell . . . . . . . . . . . . . . . . 322 4.4 5.48 135 1.8 5.33
- ---------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 35,551 $743.8 8.34% 35,843 $756.6 8.41%
- ---------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . 2,172 1,979
Other assets . . . . . . . . . . . . . . 3,411 3,336
Allowance for loan losses . . . . . . . (480) (507)
- ---------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $40,654 $40,651
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND
EQUITY
NOW and money market accounts . . . . . $11,806 $ 60.8 2.05% $11,683 $ 59.4 2.02%
Savings deposits . . . . . . . . . . . . 2,970 12.9 1.73 3,075 13.4 1.73
Certificates of deposit under $100,000 . 9,812 123.3 5.00 9,799 122.5 4.98
Other time deposits . . . . . . . . . . 2,508 33.7 5.34 2,643 35.7 5.38
- ---------------------------------------------------------------------------------------------------------
Total interest-bearing deposits . . . 27,096 230.7 3.39 27,200 231.0 3.38
Federal funds purchased and securities
sold under agreements to repurchase. . 1,690 21.8 5.12 2,075 27.0 5.17
Other short-term borrowings . . . . . . 471 6.7 5.69 443 6.6 5.90
Long-term debt . . . . . . . . . . . . . 1,227 22.7 7.40 1,228 23.0 7.51
- ---------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . 30,484 $281.9 3.68% 30,946 $287.6 3.70%
Demand deposits . . . . . . . . . . . . 5,626 5,473
Other liabilities . . . . . . . . . . . 993 921
Minority interest . . . . . . . . . . . 179 --
Preferred equity . . . . . . . . . . . . -- --
Common equity . . . . . . . . . . . . . 3,372 3,311
- ---------------------------------------------------------------------------------------------------------
Total liabilities, minority
interest and equity . . . . . . . . . $40,654 $40,651
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . 4.66% 4.71%
Cost of funds supporting earning assets. 3.16 3.19
Net yield on earning assets . . . . . . $461.9 5.18 $469.0 5.22
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
1996
---------------------------------------------------------------------------
Second First
------------------------------ --------------------------------------------
Average Average
Average Yield or Average Yield or
Dollars in Millions--Taxable-Equivalent Balance Interest Rate Balance Interest Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and
agricultural . . . . . . . . . . . . . $ 4,873 $100.8 8.32% $ 4,821 $ 99.5 8.30%
Real estate construction. . . . . . . . 795 19.8 10.02 826 20.9 10.15
Commercial mortgages. . . . . . . . . . 2,078 46.1 8.92 2,155 47.8 8.92
Residential mortgages . . . . . . . . . 10,303 200.5 7.79 10,729 211.4 7.88
Installment . . . . . . . . . . . . . . 9,813 216.3 8.86 9,301 206.0 8.91
Bank card . . . . . . . . . . . . . . . 1,746 68.0 15.67 1,756 68.0 15.56
Credit lines. . . . . . . . . . . . . . 756 18.6 9.87 759 19.0 10.08
- ----------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . 30,364 667.3 8.83 30,347 671.2 8.88
- ----------------------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . 5,084 79.6 6.28 4,992 75.9 6.09
Tax-free. . . . . . . . . . . . . . . . 196 5.6 11.36 209 5.8 11.18
- ----------------------------------------------------------------------------------------------------------------------
Total securities. . . . . . . . . . . 5,280 85.2 6.47 5,201 81.7 6.29
- ----------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to
resell . . . . . . . . . . . . . . . . 689 9.2 5.35 613 8.3 5.44
- ----------------------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 36,333 $761.7 8.42% 36,161 $761.2 8.45%
- ----------------------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . 1,926 1,980
Other assets. . . . . . . . . . . . . . 3,365 3,501
Allowance for loan losses . . . . . . . (507) (506)
- ----------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $41,117 $41,136
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND
EQUITY
NOW and money market accounts . . . . . $12,268 $ 58.7 1.93% $12,599 $ 61.9 1.97%
Savings deposits . . . . . . . . . . . . 3,213 13.8 1.73 3,310 14.4 1.75
Certificates of deposit under $100,000 9,747 120.8 4.98 9,867 125.7 5.12
Other time deposits . . . . . . . . . . 2,570 34.3 5.36 2,408 33.0 5.52
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 27,798 227.6 3.29 28,184 235.0 3.35
Federal funds purchased and securities
sold under agreements to repurchase. . 1,215 15.0 4.96 1,046 13.3 5.14
Other short-term borrowings . . . . . . 1,045 14.1 5.42 942 14.1 6.00
Long-term debt . . . . . . . . . . . . . 1,337 24.7 7.40 1,242 23.5 7.56
- ----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . 31,395 $281.4 3.60% 31,414 $285.9 3.66%
Demand deposits . . . . . . . . . . . . 5,688 5,661
Other liabilities . . . . . . . . . . . 735 748
Minority interest . . . . . . . . . . . -- --
Preferred equity . . . . . . . . . . . . 1 97
Common equity . . . . . . . . . . . . . 3,298 3,216
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities, minority
interest and equity . . . . . . . . . $41,117 $41,136
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . 4.82% 4.79%
Cost of funds supporting earning assets. 3.12 3.18
Net yield on earning assets . . . . . . $480.3 5.30 $475.3 5.27
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995
---------------------------------------------------------------------------------------
Fourth Third
------------------------------------------- -----------------------------------------
Average Average
Average Yield or Average Yield or
Dollars in Millions--Taxable-Equivalent Balance Interest Rate Balance Interest Rate
- -------------------------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and
agricultural . . . . . . . . . . . . . $ 4,661 $ 99.3 8.46% $ 4,556 $ 97.2 8.47%
Real estate construction. . . . . . . . 904 23.9 10.51 946 25.0 10.48
Commercial mortgages. . . . . . . . . . 2,246 50.0 8.81 2,304 50.7 8.73
Residential mortgages . . . . . . . . . 11,180 217.7 7.79 11,417 219.4 7.69
Installment . . . . . . . . . . . . . . 9,000 202.4 8.92 8,667 195.5 8.95
Bank card . . . . . . . . . . . . . . . 1,677 63.6 15.05 1,566 62.0 15.69
Credit lines. . . . . . . . . . . . . . 746 18.9 10.06 735 19.5 10.50
- ----------------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . 30,414 674.5 8.82 30,191 665.8 8.77
- ----------------------------------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . 5,471 81.4 5.93 5,771 81.0 5.59
Tax-free. . . . . . . . . . . . . . . . 232 6.4 11.10 356 10.5 11.82
- ----------------------------------------------------------------------------------------------------------------------------------
Total securities. . . . . . . . . . . 5,703 87.8 6.14 6,127 91.5 5.95
- ----------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to
resell . . . . . . . . . . . . . . . . 148 2.1 5.78 46 .7 5.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 36,265 $764.4 8.39% 36,364 $758.0 8.29%
- ----------------------------------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . 2,033 1,943
Other assets . . . . . . . . . . . . . . 3,396 3,332
Allowance for loan losses . . . . . . . (504) (503)
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $41,190 $41,136
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND
EQUITY
NOW and money market accounts. . . . . . $12,598 $ 69.0 2.17% $12,576 $ 69.6 2.19%
Savings deposits . . . . . . . . . . . . 3,314 16.7 1.99 3,362 16.9 2.00
Certificates of deposit under $100,000 . 9,863 130.5 5.25 9,990 133.1 5.29
Other time deposits. . . . . . . . . . . 2,281 32.3 5.61 2,209 31.2 5.61
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits. . . . 28,056 248.5 3.51 28,137 250.8 3.54
Federal funds purchased and securities
sold under agreements to repurchase. . 1,228 17.2 5.55 1,491 21.2 5.65
Other short-term borrowings. . . . . . . 1,107 17.0 6.11 1,159 18.2 6.24
Long-term debt . . . . . . . . . . . . . 1,131 22.5 7.98 1,028 20.9 8.11
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 31,522 $305.2 3.84% 31,815 $311.1 3.88%
Demand deposits. . . . . . . . . . . . . 5,598 5,340
Other liabilities. . . . . . . . . . . . 717 634
Minority interest. . . . . . . . . . . . -- --
Preferred equity . . . . . . . . . . . . 104 214
Common equity . . . . . . . . . . . . . 3,249 3,133
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority
interest and equity . . . . . . . . . $41,190 $41,136
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . . 4.55% 4.41%
Cost of funds supporting earning assets. . 3.34 3.39
Net yield on earning assets. . . . . . . . $459.2 5.05 $446.9 4.90
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995
--------------------------------------------------------------------------------------
Second First
--------------------------------------------------------------------------------------
Average Average
Average Yield or Average Yield or
Dollars in Millions--Taxable-Equivalent Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:(1)
Commercial, financial and
agricultural . . . . . . . . . . . . . $ 4,555 $ 95.8 8.43% $ 4,442 $ 91.9 8.39%
Real estate construction. . . . . . . . 948 25.3 10.69 925 24.2 10.62
Commercial mortgages. . . . . . . . . . 2,345 51.0 8.72 2,383 50.5 8.60
Residential mortgages . . . . . . . . . 11,110 210.2 7.57 10,755 198.9 7.40
Installment . . . . . . . . . . . . . . 8,435 185.9 8.84 8,301 176.6 8.63
Bank card . . . . . . . . . . . . . . . 1,439 59.1 16.47 1,375 53.0 15.64
Credit lines. . . . . . . . . . . . . . 730 19.2 10.55 718 16.9 9.53
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans, net of unearned income. . 29,562 643.7 8.73 28,899 608.0 8.49
- ---------------------------------------------------------------------------------------------------------------------------------
Securities:(2)
Taxable . . . . . . . . . . . . . . . . 6,194 86.3 5.58 6,702 92.2 5.57
Tax-free. . . . . . . . . . . . . . . . 514 15.5 12.02 593 21.3 14.34
- ---------------------------------------------------------------------------------------------------------------------------------
Total securities . . . . . . . . . . . 6,708 101.8 6.07 7,295 113.5 6.29
- ---------------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities
purchased under agreements to
resell . . . . . . . . . . . . . . . . 47 .7 6.14 92 1.3 5.92
- ---------------------------------------------------------------------------------------------------------------------------------
Total earning assets . . . . . . . . . 36,317 $746.2 8.23% 36,286 $722.8 8.04%
- ---------------------------------------------------------------------------------------------------------------------------------
Cash . . . . . . . . . . . . . . . . . . 2,012 2,064
Other assets . . . . . . . . . . . . . . 3,401 3,007
Allowance for loan losses. . . . . . . . (498) (499)
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . $41,232 $40,858
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES, MINORITY INTEREST AND
EQUITY
NOW and money market accounts . . . . . $12,665 $ 73.5 2.33% $13,198 $ 81.0 2.49%
Savings deposits . . . . . . . . . . . . 3,451 17.2 2.00 3,619 20.3 2.27
Certificates of deposit under $100,000 . 10,071 131.5 5.24 9,698 116.3 4.86
Other time deposits . . . . . . . . . . 2,133 29.4 5.52 1,983 24.6 5.02
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits. . . . 28,320 251.6 3.56 28,498 242.2 3.45
Federal funds purchased and securities
sold under agreements to repurchase. . 1,892 27.9 5.91 1,734 24.4 5.71
Other short-term borrowings . . . . . . 838 13.3 6.37 579 8.6 6.02
Long-term debt . . . . . . . . . . . . . 842 17.8 8.48 815 17.1 8.40
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities . . 31,892 $310.6 3.91% 31,626 $292.3 3.75%
Demand deposits . . . . . . . . . . . . 5,382 5,441
Other liabilities . . . . . . . . . . . 618 568
Minority interest . . . . . . . . . . . -- --
Preferred equity . . . . . . . . . . . . 215 215
Common equity . . . . . . . . . . . . . 3,125 3,008
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority
interest and equity . . . . . . . . . $41,232 $40,858
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
SPREAD AND NET YIELD
Interest rate spread . . . . . . . . . . 4.32% 4.29%
Cost of funds supporting earning assets. 3.43 3.27
Net yield on earning assets . . . . . . $435.6 4.80 $430.5 4.77
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Income on non-accruing loans is recognized on a cash basis. Interest income
on individual loan categories is at contractual rates, while total loan
interest income is net of reversals of interest on non-accruing loans.
(2) Average yields on investment securities available for sale have been
calculated on amortized cost.
Barnett Barnett
44 45
<PAGE>
STATEMENTS OF FINANCIAL CONDITION
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
December 31--Dollars in Thousands 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,781,146 $2,658,661
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . 2,500 110,484
Investment securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,031,123 5,133,041
Investment securities held to maturity (fair value $139,999 in 1996 and $216,066 in 1995). . . . 129,595 200,960
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,297,954 30,514,418
Less: Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (476,709) (505,148)
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,430) (28,419)
- ----------------------------------------------------------------------------------------------------------------------------------
Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,775,815 29,980,851
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135,644 1,078,057
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592,142 758,297
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,783,410 1,633,194
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,231,375 $41,553,545
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Demand deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,528,006 $ 5,938,694
NOW and money market accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,163,289 12,816,304
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,938,243 3,292,157
Certificates of deposit under $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,708,311 9,853,010
Other time deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,482,409 2,333,403
- ----------------------------------------------------------------------------------------------------------------------------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,820,258 34,233,568
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase. . . . . . . . . 1,265,837 899,667
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,297 669,766
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233 509,516
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004,890 778,028
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,226,529 1,190,814
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,361,044 38,281,359
- ----------------------------------------------------------------------------------------------------------------------------------
MINORITY INTEREST
Company obligated mandatorily redeemable securities of trusts holding solely parent debentures . 500,000 --
SHAREHOLDERS' EQUITY
Preferred stock, $.10 par value: 20,000,000 shares authorized; 8,489 and 1,960,371 outstanding . 212 97,753
Common stock, $2 par value: 400,000,000 shares authorized; 189,668,922 and 189,730,736
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395,338 379,461
Contributed capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,041 385,734
Net unrealized gain on investment securities available for sale. . . . . . . . . . . . . . . . . 8,187 38,242
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,808,749 2,445,810
Less: Employee stock ownership plan obligation, collateralized by 3,852,556 and 4,634,134 shares (62,196) (74,814)
- ----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,370,331 3,272,186
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities, minority interest and shareholders' equity. . . . . . . . . . . . . $41,231,375 $41,553,545
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
Barnett
46
<PAGE>
STATEMENTS OF INCOME
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
For the Years Ended December 31--Dollars in Thousands Except Share Data 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,656,886 $2,580,408 $2,164,320
Investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,206 375,692 387,465
Federal funds sold and securities purchased under agreements to resell . . . . . . . . 23,698 4,887 3,108
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,005,790 2,960,987 2,554,893
- ---------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 924,331 993,046 761,511
Federal funds purchased and securities sold under agreements to repurchase . . . . . . 77,049 90,730 93,714
Other short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,449 57,154 5,719
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,941 78,323 60,464
- ---------------------------------------------------------------------------------------------------------------------------------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,136,770 1,219,253 921,408
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,869,020 1,741,734 1,633,485
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,572 122,531 74,049
- ---------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses. . . . . . . . . . . . . 1,714,448 1,619,203 1,559,436
- ---------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 237,779 225,966 227,573
Consumer finance income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,866 83,477 --
Trust income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,394 78,036 77,357
Credit card discounts and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,015 60,999 54,377
Mortgage banking income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,111 62,640 33,112
Brokerage income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,990 31,694 30,010
Other service charges and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,331 118,616 104,845
Securities transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,197 4,994 (13,086)
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,811 52,601 28,412
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest income. . . . . . . . . . . . . . . . . . . . . . . . . . 810,494 719,023 542,600
- ---------------------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829,939 758,930 648,658
Net occupancy expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,933 126,480 118,251
Furniture and equipment expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,696 144,461 138,546
SAIF assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,524 -- --
Other expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472,896 488,761 458,776
- ---------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . 1,616,988 1,518,632 1,364,231
- ---------------------------------------------------------------------------------------------------------------------------------
Net non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 806,494 799,609 821,631
- ---------------------------------------------------------------------------------------------------------------------------------
EARNINGS
Income before income taxes and minority interest . . . . . . . . . . . . . . . . . . . 907,954 819,594 737,805
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,082 286,293 249,834
- ---------------------------------------------------------------------------------------------------------------------------------
Net income before minority interest. . . . . . . . . . . . . . . . . . . . . 566,872 533,301 487,971
Minority interest, net of income taxes . . . . . . . . . . . . . . . . . . . . . . . . (2,381) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 564,491 $ 533,301 $ 487,971
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Restated for 2-for-1 stock split in September 1996
Primary: Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $2.89 $2.65 $2.39
Average number of shares . . . . . . . . . . . . . . . . . . . . . . . 194,297,705 195,094,816 196,162,382
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . $2,168 $15,861 $18,200
Fully diluted: Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . $2.86 $2.56 $2.33
Average number of shares. . . . . . . . . . . . . . . . . . . . . . . 197,354,540 207,959,474 209,532,262
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
Barnett
47
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
Contri- Net
For the Years Ended December 31-- Preferred Common buted Unrealized Retained ESOP
Dollars in Thousands Stock Stock Capital Gain (Loss) Earnings Obligation Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
Balance at January 1 . . . . . . . . . . . . . . . $215,351 $194,809 $775,719 $ 3,772 $1,786,561 $(102,121) $2,874,091
Adjustment for the effect of a 2-for-1 stock split 194,808 (194,808)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 1 restated. . . . . . . . . . . 215,351 389,617 580,911 3,772 1,786,561 (102,121) 2,874,091
Net income . . . . . . . . . . . . . . . . . . . . 487,971 487,971
Change in net unrealized gain (loss) on
investment securities available for sale. . . (30,770) (30,770)
Cash dividends declared:
Common ($.80 per share) . . . . . . . . . . . (157,321) (157,321)
Preferred . . . . . . . . . . . . . . . . . . (18,234) (18,234)
Issuances of common stock:
Stock purchase, option and
employee benefit plans. . . . . . . . . . . 4,996 42,625 13,898 61,519
Preferred stock conversions . . . . . . . . . (44) 18 26 --
Repurchases of common stock. . . . . . . . . . . . (7,700) (75,373) (83,073)
- -----------------------------------------------------------------------------------------------------------------------------------
1995
Balance at January 1 . . . . . . . . . . . . . . . 215,307 386,931 548,189 (26,998) 2,098,977 (88,223) 3,134,183
Net income . . . . . . . . . . . . . . . . . . . . 533,301 533,301
Change in net unrealized gain (loss) on
investment securities available for sale. . . 65,240 65,240
Cash dividends declared:
Common ($.91 per share) . . . . . . . . . . . (175,196) (175,196)
Preferred . . . . . . . . . . . . . . . . . . (15,890) (15,890)
Issuances of common stock:
Stock purchase, option and
employee benefit plans. . . . . . . . . . . 5,536 69,046 13,409 87,991
Preferred stock conversions . . . . . . . . . (117,554) 11,990 105,006 (558)
Acquisition . . . . . . . . . . . . . . . . . 1,328 2,398 4,618 8,344
Repurchases of common stock. . . . . . . . . . . . (26,324) (338,905) (365,229)
- -----------------------------------------------------------------------------------------------------------------------------------
1996
Balance at January 1 . . . . . . . . . . . . . . . 97,753 379,461 385,734 38,242 2,445,810 (74,814) 3,272,186
Net income . . . . . . . . . . . . . . . . . . . . 564,491 564,491
Change in net unrealized gain (loss) on
investment securities available for sale. . . (30,055) (30,055)
Cash dividends declared:
Common ($1.05 per share) . . . . . . . . . . (199,360) (199,360)
Preferred . . . . . . . . . . . . . . . . . . (2,192) (2,192)
Issuances of common stock:
Stock purchase, option and
employee benefit plans. . . . . . . . . . . 13,281 77,965 12,618 103,864
Preferred stock conversions . . . . . . . . . (97,541) 7,341 89,637 (563)
Employee benefit trust. . . . . . . . . . . . 16,000 (16,000) --
Repurchases of common stock. . . . . . . . . . . . (20,745) (317,295) (338,040)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 . . . . . . . . . . . $ 212 $395,338 $220,041 $ 8,187 $2,808,749 $ (62,196) $3,370,331
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
Barnett
48
<PAGE>
STATEMENTS OF CASH FLOWS
CONSOLIDATED--BARNETT BANKS, INC. AND AFFILIATES
<TABLE>
<CAPTION>
For the Years Ended December 31--Dollars in Thousands 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 564,491 $ 533,301 $ 487,971
Reconcilement of net income to net cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . 154,572 122,531 74,049
Losses (gains) from securities transactions . . . . . . . . . . . . . . . . (19,197) (4,994) 13,086
Gain on securitization and sale of loans. . . . . . . . . . . . . . . . . . (114,847) (64,670) --
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 251,057 234,667 131,813
Employee benefits funded by equity. . . . . . . . . . . . . . . . . . . . . 26,820 24,237 28,682
Deferred income tax provision . . . . . . . . . . . . . . . . . . . . . . . 13,976 6,571 50,975
Decrease (increase) in interest receivable. . . . . . . . . . . . . . . . . 3,763 (11,060) (66,633)
Increase (decrease) in interest payable . . . . . . . . . . . . . . . . . . (1,795) 45,953 37,245
Increase in other assets. . . . . . . . . . . . . . . . . . . . . . . . . . (453,449) (189,870) (131,624)
Increase (decrease) in other liabilities. . . . . . . . . . . . . . . . . . 389,120 (43,179) 45,243
Originations of loans held for sale . . . . . . . . . . . . . . . . . . . . (5,511,965) (5,187,852) (862,817)
Proceeds from sales of loans held for sale. . . . . . . . . . . . . . . . . 5,382,378 4,593,009 555,905
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,524) (77,652) (24,302)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities . . . . . . . . . 650,400 (19,008) 339,593
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities available for sale. . . . . . . . . . . . . . (3,777,464) (1,866,067) (2,532,901)
Proceeds from sales of investment securities available for sale. . . . . . . . . 440,328 339,694 475,102
Proceeds from maturities of investment securities available for sale . . . . . . 3,464,204 2,042,733 1,308,423
Purchases of investment securities held to maturity. . . . . . . . . . . . . . . (2,932) (298,423) (3,569,914)
Proceeds from maturities of investment securities held to maturity . . . . . . . 74,954 2,267,517 4,419,600
Net increase in loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (576,078) (1,054,365) (2,230,534)
Proceeds from sale of bank card loans. . . . . . . . . . . . . . . . . . . . . . 760,804 -- --
Proceeds from sales of premises and equipment. . . . . . . . . . . . . . . . . . 28,778 39,831 42,422
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . . . . . (199,085) (186,825) (77,909)
Receipts (payments) related to dispositions and acquisitions, net of cash
disposed and acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . 378,249 (452,200) 2,939,875
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities. . . . . . . . . . . . . . . 591,758 831,895 774,164
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in demand, NOW, savings and money market accounts . . . . . . . . . (442,254) (1,574,792) (731,521)
Net (decrease) increase in other time deposits . . . . . . . . . . . . . . . . . (88,425) 623,326 (97,642)
Net increase (decrease) in federal funds purchased and securities sold
under agreements to repurchase. . . . . . . . . . . . . . . . . . . . . . . 366,170 (350,839) (471,327)
Issuances (repayments) of short-term notes . . . . . . . . . . . . . . . . . . . (425,000) 425,000 --
Net (decrease) increase in other short-term borrowings . . . . . . . . . . . . . (710,752) 106,376 187,942
Principal repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . (214,285) (187,589) (2,375)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . 250,000 500,000 96,927
Proceeds from issuance of company obligated mandatorily redeemable
securities of trusts holding solely parent debentures. . . . . . . . . . . 500,000 -- --
Issuances of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,481 63,196 32,837
Repurchases of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . (338,040) (365,229) (83,073)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (201,552) (191,086) (175,555)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities . . . . . . . . . . . . . . . . (1,227,657) (951,637) (1,243,787)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . 14,501 (138,750) (130,030)
Cash and cash equivalents, January 1 . . . . . . . . . . . . . . . . . . . . . . 2,769,145 2,907,895 3,037,925
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, December 31 . . . . . . . . . . . . . . . . . . . . . $ 2,783,646 $ 2,769,145 $ 2,907,895
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, INCOME TAXES OF $346
MILLION, $286 MILLION AND $193 MILLION AND INTEREST OF $1.1 BILLION, $1.2
BILLION AND $880 MILLION WERE PAID, RESPECTIVELY.
DURING 1996, THE COMPANY DISPOSED OF $559 MILLION OF NON-CASH ASSETS AND $55
MILLION OF LIABILITIES. DURING 1995, THE COMPANY ACQUIRED $1.1 BILLION OF NON-
CASH ASSETS AND $602 MILLION OF LIABILITIES. DURING 1994, THE COMPANY ACQUIRED
$513 MILLION IN NON-CASH ASSETS AND $3.5 BILLION OF LIABILITIES.
DURING 1996, 1995 AND 1994, $49 MILLION, $83 MILLION AND $64 MILLION OF LOANS
WERE TRANSFERRED TO REAL ESTATE HELD FOR SALE, RESPECTIVELY.
DURING 1995, $2.8 BILLION OF INVESTMENT SECURITIES HELD TO MATURITY WERE
TRANSFERRED TO INVESTMENT SECURITIES AVAILABLE FOR SALE (SEE NOTE C OF NOTES TO
FINANCIAL STATEMENTS).
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
FINANCIAL STATEMENTS.
Barnett
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
IN SEPTEMBER, BARNETT COMPLETED A 2-FOR-1 STOCK SPLIT. ALL HISTORICAL DATA
USED IN THIS REPORT HAS BEEN RESTATED TO REFLECT THE SPLIT.
Barnett Banks, Inc. is a multi-bank holding company headquartered in
Jacksonville, Florida, providing financial services to consumers and businesses
through bank and non-bank subsidiaries. The principal bank, Barnett Bank, N.A.,
and its subsidiaries engage in retail financial services, commercial banking,
trust and investment management services. Indirect auto lending is carried out
in several southern states. Mortgage lending is done through retail and
wholesale offices nationwide. Other banking activities are concentrated in
Florida and southern Georgia. The principal non-bank subsidiary of the company
is EquiCredit Corporation, which engages in consumer finance nationwide.
A. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The consolidated financial statements include the
accounts of the company and its majority-owned subsidiaries, after eliminating
material intercompany balances and transactions. Equity investments in less than
majority-owned companies (20%-50% ownership interest) are generally accounted
for in accordance with the equity method of accounting and are reported in other
assets. The company's pro-rata share of earnings (losses) of these companies is
included in the related line item within non-interest income.
Assets held in an agency or fiduciary capacity by trust and investment
advisory subsidiaries are not assets of the company and, accordingly, are not
included in the consolidated balance sheet.
The accounting policies of Barnett and its subsidiaries conform with
generally accepted accounting principles and prevailing practices within the
financial services industry. Certain previously reported amounts have been
reclassified to conform to current presentation standards.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosed amount of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash and due
from banks, securities purchased under agreements to resell and federal funds
sold. Generally, federal funds are purchased and sold for one-day periods.
SECURITIES Securities are classified based on management's intent on the
date of purchase. The company has the positive intent and ability to hold
certain investment securities to maturity. These held-to-maturity securities are
reported at amortized cost. Other securities are classified as available for
sale and carried at fair value with net unrealized gains and losses included in
shareholders' equity on a net of tax basis. Realized gains and losses from
security sales or impairment are recognized using the specific identification
method. Interest and dividends on securities, including amortization of premiums
and accretion of discounts, are included in interest income.
LOANS Loans and direct financing leases are generally reported at the
principal amount outstanding (including lease residuals), net of unearned
income. Loans held for sale are valued at the lower of cost or fair value. Non-
refundable loan fees and certain direct loan origination costs are capitalized
and recognized as a yield adjustment over the lives of the loans.
Commercial and commercial real estate loans are generally placed on non-
accrual status when the collectibility of interest or principal is uncertain.
Residential mortgages four payments in arrears are classified as non-accrual in
conformance with predominant mortgage industry practice. When a loan is placed
on non-accrual status, interest accruals cease and uncollected interest is
reversed and charged against current income. Income recognized on installment
loans and credit card advances is discontinued and the loans are charged-off
generally after a delinquency period of 120 and 180 days, respectively.
ALLOWANCE FOR LOAN LOSSES The financial statements include an allowance
for estimated losses on loans based on past loss experience and an evaluation of
potential losses in the current loan portfolio.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs, net of recoveries. Management's periodic evaluation of
the adequacy of the allowance is based on the company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral and current economic conditions.
The company defines impaired loans as all non-performing loans except
residential mortgages and small business loans. The allowance for loan losses
related to impaired loans is determined by comparing the recorded investment in
the loan to the present value of expected future cash flows from the loan or to
the fair value of the underlying collateral.
PREMISES AND EQUIPMENT Premises and equipment, including leases meeting
criteria for capitalization, are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed primarily on a
straight-line basis over the estimated useful life or lease term of each type of
asset.
Long-lived assets are evaluated regularly for other-than-temporary
impairment. If circumstances suggest that their value may be impaired and the
writedown would be material, an assessment of recoverability is performed prior
to any writedown of the asset.
INTANGIBLE ASSETS Intangible assets consist primarily of goodwill and core
deposit intangibles. These intangible assets are generally being amortized on a
straight-line basis over 10 to 25 years.
Barnett
50
<PAGE>
Periodically, the company reviews its intangible assets for events or
changes in circumstances that may indicate that the carrying amounts of the
assets are not recoverable.
REAL ESTATE HELD FOR SALE Real estate held for sale includes properties
acquired through, or in lieu of, loan foreclosure and operating premises no
longer intended for business operations. Valuations are performed periodically
and the real estate is carried at the lower of cost or appraised value minus
estimated costs to sell. Credit losses arising at the time of foreclosure are
charged against the allowance for loan losses. Any additional declines are
charged to other expense and recorded in a valuation reserve on an asset by
asset basis. No depreciation is recorded on real estate held for sale.
INCOME TAXES The income tax provision consists of two components: current
and deferred. Current income tax provision is the amount of income taxes payable
for the current year. Deferred income tax provision or benefit is the change
during the year in the company's deferred tax assets and liabilities. Deferred
income tax assets and liabilities reflect the differences between the financial
statement and tax values of assets and liabilities.
The company and its subsidiaries, where eligible, file consolidated federal
and state income tax returns. Under a tax-sharing arrangement, income tax
charges or credits are generally allocated to the company and each subsidiary on
the basis of their respective taxable income or loss included in the
consolidated income tax returns.
DERIVATIVE FINANCIAL INSTRUMENTS The company uses interest rate swaps and
floors to manage its interest rate sensitivity. The company accounts for these
instruments on an accrual basis if the instrument can be demonstrated to
effectively change the cash flows of a designated asset or liability and the
designated asset or liability exposes the company to interest rate risk.
Amounts to be paid or received under interest rate swaps and floors are
recognized as interest income or expense of the related asset or liability.
Gains and losses on early terminations of interest rate swaps and floors are
deferred and amortized as an adjustment to the yield of the related asset or
liability over the shorter of the remaining contract life or the maturity of the
related asset or liability. If the related asset or liability is sold, the
derivative financial instrument is marked to market and the resulting gain or
loss is recognized in income in the same period.
Interest rate swaps and floors that do not meet this criteria would be
carried at market value, and changes in market value would be recognized in
income.
The company acts as an intermediary in arranging interest rate swap
transactions for customers. These are separate agreements that have offsetting
payment streams and the same maturity, repricing dates and notional amounts. Net
revenue related to these agreements is included in other income.
CONSUMER FINANCE INCOME Consumer finance income includes gains on the
securitization and sale of home equity secured installment loans and servicing
income on loans securitized. The gains on sales of such loans include the
present value of servicing revenues in excess of a normal servicing fee over the
expected average life of the loans, discounted at a market rate at the time of
sale and adjusted for projected prepayments and expected foreclosure expenses. A
corresponding asset, capitalized excess servicing income, is recorded at the
time of sale and is included in other assets.
EARNINGS PER COMMON SHARE Primary earnings per common share is computed
from net income after preferred stock dividends and is based on the weighted-
average number of shares of common stock outstanding and common stock
equivalents assumed outstanding during the year.
Fully diluted shares outstanding includes the maximum dilutive effect of
stock issuable upon conversion of convertible preferred stock and exercise of
common stock options.
B. ALLIANCES AND ACQUISITIONS
ALLIANCES In October 1996, the company entered into an agreement with
Household Credit Services, Inc. to form a strategic alliance to manage and build
Barnett's credit card business. The company sold $776 million of non-core credit
card outstandings, less related reserves of $31 million, to Household. In May
1996, the company completed the sale of its mortgage servicing operation and
other assets to HomeSide, Inc., a mortgage servicing venture in which the
company has an approximate one-third interest. The sale included $136 million in
goodwill and $211 million in purchased mortgage servicing rights. The company
invested $118 million into the venture. No significant gains or losses were
incurred related to these transactions.
COMPLETED ACQUISITIONS In October 1995, the company acquired Community
Bank of the Islands for 663,988 shares of Barnett common stock. This acquisition
was accounted for as a pooling of interests. Prior periods have not been
restated as the acquisition was not material.
In February 1995, the company acquired BancPLUS Financial Corporation, a
national full service mortgage banking company, for $162 million. The primary
assets of BancPLUS were mortgage loans held for sale and purchased mortgage
servicing rights of $187 million. The purchase price exceeded net assets
acquired by $113 million.
In January 1995, the company acquired EquiCredit Corporation, a national
consumer finance company, for $332 million. EquiCredit specializes in
originating, securitizing and servicing consumer loans secured by first or
second mortgages. The purchase price exceeded net assets acquired by $201
million.
Unless otherwise noted, all of the above acquisitions were accounted for as
purchases. Results are included from the date acquired.
PENDING ACQUISITION In January 1997, the company entered into a definitive
agreement to purchase Oxford Resources Corp., the nation's largest independent
automobile leasing company for approximately 14 million shares of Barnett stock.
The merger is expected to be accounted for as a purchase and close in the second
quarter of 1997. Prior to this transaction, Barnett purchased a significant
amount of its own shares.
Barnett
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
C. INVESTMENT SECURITIES
<TABLE>
<CAPTION>
Available For Sale
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------------------- --------------------------------------------------------
December 31-- AMORTIZED UNREALIZED UNREALIZED FAIR Amortized Unrealized Unrealized Fair Fair
Dollars in Thousands COST GROSS GAIN GROSS LOSS VALUE Cost Gross Gain Gross Loss Value Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities . . $2,113,246 $12,352 $1,991 $2,123,607 $2,219,790 $35,283 $ 1,007 $2,254,066 $1,870,007
Obligations of states and
political subdivisions. . 26,275 876 53 27,098 11,998 634 24 12,608 10,956
Other U.S. Government
agencies and corporations 243,659 1,328 1,295 243,692 398,351 3,149 3,881 397,619 168,616
Mortgage-backed securities(1). 1,841,235 3,380 3,961 1,840,654 1,562,746 9,916 6,417 1,566,245 231,870
Other securities . . . . . . 793,889 2,844 661 796,072 880,294 23,261 1,052 902,503 457,151
- ------------------------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . $5,018,304 $20,780 $7,961 $5,031,123 $5,073,179 $72,243 $12,381 $5,133,041 $2,738,600
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Held To Maturity
-----------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31-- AMORTIZED UNREALIZED UNREALIZED Fair Amortized Unrealized Unrealized Fair Amortized
Dollars in Thousands COST GROSS GAIN GROSS LOSS Value Cost Gross Gain Gross Loss Value Cost
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities . . $ 997 $ 10 -- $ 1,007 -- -- -- -- $1,269,110
Obligations of states and
political subdivisions. . 128,598 10,410 $16 138,992 $200,960 $15,122 $16 $216,066 639,265
Other U.S. Government
agencies and corporations -- -- -- -- -- -- -- -- 254,637
Mortgage-backed securities(1) -- -- -- -- -- -- -- -- -- 2,164,292
Other securities . . . . . . -- -- -- -- -- -- -- -- 617,504
- ------------------------------------------------------------------------------------------------------------------------------------
Total. . . . . . . . . . $129,595 $10,420 $16 $139,999 $200,960 $15,122 $16 $216,066 $4,944,808
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) BALANCE IS COMPRISED SUBSTANTIALLY OF GOVERNMENT-GUARANTEED MORTGAGE
SECURITIES.
Total Investment Securities
-----------------------------------
Taxable Non-taxable
Dollars in Thousands Interest Income Interest Income
- --------------------------------------------------------------------------------
1996 . . . . . . . . . . . . . . . $311,253 $13,953
1995 . . . . . . . . . . . . . . . 339,966 35,726
1994 . . . . . . . . . . . . . . . 326,026 61,439
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
On December 7, 1995, the company transferred $2.8 billion of
investment securities held to maturity to available for sale. The fair value of
these instruments exceeded cost by $7.5 million. TABLE 3, "Maturity of
Investment Securities," on page 23 of the MANAGEMENT DISCUSSION shows investment
securities by maturity.
Gross gains on sales of investment securities available for sale in 1996,
1995 and 1994 were $19.4 million, $6.3 million and $.7 million, respectively,
and gross losses were $.2 million, $1.3 million and $12.8 million, respectively.
Securities with an amortized cost of approximately $3.1 billion on December
31, 1996 were pledged to secure public deposits and for other purposes.
Barnett
52
<PAGE>
<TABLE>
<CAPTION>
D. LOANS
December 31--Dollars in Thousands
Net of Unearned Income 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural . . . . . . . . . . . . $ 5,310,849 $ 4,693,010 $ 4,445,841 $ 4,086,754 $ 4,230,765
Real estate construction . . . . . . . 818,337 912,359 929,229 853,602 1,265,999
Commercial mortgages . . . . . . . . . 1,849,496 2,181,327 2,379,309 2,624,555 3,201,363
Residential mortgages. . . . . . . . . 9,785,585 10,891,412 10,555,563 9,449,457 8,946,836
Installment. . . . . . . . . . . . . . 10,590,067 9,264,037 8,116,982 7,107,845 6,636,917
Bank card. . . . . . . . . . . . . . . 1,100,614 1,783,420 1,375,292 1,127,784 1,057,599
Credit lines . . . . . . . . . . . . . 797,576 760,434 718,937 679,789 711,362
- ----------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . $ 30,252,524 $ 30,485,999 $ 28,521,153 $ 25,929,786 $ 26,050,841
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
E. ALLOWANCES FOR LOSSES
Dollars in Thousands 1996 1995 1994
- -----------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES
Beginning balance. . . . . $ 505,148 $ 501,447 $ 521,827
Loans charged off. . . . . (209,099) (172,879) (148,450)
Recoveries . . . . . . . . 54,721 50,889 56,135
- -----------------------------------------------------------------------------
Net charge-offs. . . . . . (154,378) (121,990) (92,315)
Provision expense. . . . . 154,572 122,531 74,049
Sales and other, net . . . (28,633) 3,160 (2,114)
- -----------------------------------------------------------------------------
Ending balance . . . $ 476,709 $ 505,148 $ 501,447
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
The company recognizes income on impaired loans primarily on the cash
basis. Any change in the present value of expected cash flows is recognized
through the allowance for loan losses.
IMPAIRED LOANS
December 31 -Dollars in Thousands 1996 1995
- ------------------------------------------------------------------------
Impaired loans with an allowance . . . . . $ 42,987 $ 50,021
Impaired loans without an allowance(1) . . 15,647 28,959
- ------------------------------------------------------------------------
Total impaired loans. . . . . . . . . $ 58,634 $ 78,980
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Allowance for impaired loans . . . . . . . $ 7,463 $ 10,089
Average balance of impaired loans
during the year ended December 31. . . . 72,519 117,277
Interest income recognized on impaired
loans during the year ended December 31 5,876 7,083
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
(1) IMPAIRED LOANS DETERMINED TO BE CARRIED AT OR BELOW FAIR VALUE OF THE
UNDERLYING COLLATERAL, AND AS SUCH, DO NOT REQUIRE AN ALLOWANCE.
The company recognizes any estimated potential decline in the value of real
estate held for sale between appraisal dates on an asset-by-asset basis through
periodic additions to the allowance for losses on real estate held for sale.
Writedowns are taken and charged against this reserve when the related real
estate is sold at a loss.
Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------
ALLOWANCE FOR LOSSES ON
REAL ESTATE HELD FOR SALE
Beginning balance. . . . . . . $ 25,957 $ 40,778 $ 65,165
Provision expense. . . . . . . 3,616 2,145 5,149
Dispositions, net. . . . . . . (10,942) (16,966) (29,536)
- ------------------------------------------------------------------------------
Ending balance. . . . . . $ 18,631 $ 25,957 $ 40,778
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
F. NON-PERFORMING ASSETS
Real
Non- Reduced- Estate
December 31-- Accrual Rate Held
Dollars in Thousands Loans Loans for Sale Total
- --------------------------------------------------------------------------------
1996
Recorded investment. . . . . . . $185,106 $5,319 $43,555 $233,980
Interest at contracted rates(1). 18,537 517 -- 19,054
Interest recorded as income. . . 6,523 387 -- 6,910
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1995
Recorded investment. . . . . . . $167,821 $2,447 $67,630 $237,898
Interest at contracted rates(1). 16,612 200 -- 16,812
Interest recorded as income. . . 5,817 220 -- 6,037
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) INTEREST INCOME THAT WOULD HAVE BEEN RECORDED IF THE LOANS HAD BEEN CURRENT
AND IN ACCORDANCE WITH THEIR ORIGINAL TERMS.
G. PREMISES AND EQUIPMENT
December 31--Dollars in Thousands 1996 1995
- ----------------------------------------------------------------------------
Land . . . . . . . . . . . . . . . . . . . . $ 212,265 $ 205,597
Buildings and leasehold improvements . . . . 1,023,062 1,003,044
Furniture and equipment. . . . . . . . . . . 562,211 494,152
Capitalized leases . . . . . . . . . . . . . 27,320 28,274
Construction in progress and real estate
for future expansion . . . . . . . . . . . 74,577 67,563
- ----------------------------------------------------------------------------
Total cost. . . . . . . . . . . . . . . 1,899,435 1,798,630
Less: Accumulated depreciation and
amortization . . . . . . . . . . . . . . . (763,791) (720,573)
- ----------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . $ 1,135,644 $1,078,057
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
The company has operating leases for equipment and facilities. Future
minimum rental payments required under operating leases having initial or
remaining non-cancelable lease terms in excess of one year at December 31, 1996
were:
Dollars in Thousands Amount
- ------------------------------------------------------------------------------
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,481
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,175
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,323
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,438
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,789
Later years. . . . . . . . . . . . . . . . . . . . . . . . 43,782
- ------------------------------------------------------------------------------
Total minimum payments required . . . . . . . . . . . $217,988
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Barnett
53
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS
H. SHORT-TERM BORROWINGS
Securities
Federal Sold Under Other
Funds Agreements Commercial Short-term
December 31--Dollars in Thousands Purchased to Repurchase Paper Borrowings
- ------------------------------------------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C>
Balance. . . . . . . . . . . . . . . . . . . . $474,563 $ 791,274 $ 42,297 $ 1,233
Maximum indebtedness at any month end. . . . . 939,830 1,550,351 1,029,753 316,317
Daily average indebtedness outstanding . . . . 473,667 1,034,877 613,370 110,320
Average rate paid for the year . . . . . . . . 5.39% 4.98% 5.62% 6.35%
Average rate on period-end borrowings. . . . . 6.10 5.38 5.22 4.50
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
1995
Balance. . . . . . . . . . . . . . . . . . . . $ 148,711 $ 750,956 $669,766 $509,516
Maximum indebtedness at any month end. . . . . 1,422,988 1,118,335 775,591 882,567
Daily average indebtedness outstanding . . . . 759,580 824,984 418,455 504,327
Average rate paid for the year . . . . . . . . 5.99% 5.49% 6.12% 6.26%
Average rate on period-end borrowings. . . . . 5.79 5.20 5.87 5.82
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
1994
Balance. . . . . . . . . . . . . . . . . . . . $ 119,854 $1,130,652 $ 6,199 $397,199
Maximum indebtedness at any month end. . . . . 1,469,131 2,191,536 18,551 397,199
Daily average indebtedness outstanding . . . . 782,577 1,409,128 8,295 116,395
Average rate paid for the year . . . . . . . . 4.53% 4.13% 3.81% 4.64%
Average rate on period-end borrowings. . . . . 5.82 5.41 5.80 5.62
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The company's commercial paper is backed by a $760 million revolving credit
agreement with several financial institutions. At December 31, 1996, no
borrowings were made under this agreement, which expires in April, 1999.
I. LONG-TERM DEBT
December 31--Dollars in Thousands 1996 1995
- ------------------------------------------------------------------------------
PARENT COMPANY:
7.75% Sinking Fund Debentures, due 1997. . . . $ 9,500 $ 10,200
Less: Face value of debentures repurchased and
held for future retirements. . . . . . . . . (72) (772)
- ------------------------------------------------------------------------------
Total outstanding. . . . . . . . . . . . . . 9,428 9,428
8.50% Subordinated Capital Notes, due 1999 . . 200,000 200,000
Medium-term notes, due in varying maturities
through 2003, with interest from a
floating 5.55% to a fixed 9.83%. . . . . . . 401,500 551,150
9.875% Subordinated Capital Notes, due 2001. . 100,000 100,000
10.875% Subordinated Capital Notes, due 2003 . 55,000 55,000
6.90% Subordinated Capital Notes, due 2005 . . 150,000 150,000
8.50% Subordinated Capital Notes, due 2007 . . 100,000 100,000
Senior Notes, with interest from a floating
5.54%, due 1998. . . . . . . . . . . . . . . 200,000 --
SUBSIDIARIES:
Mortgage Collateralized Bonds, due 1996, with
interest from a floating 6.348%. . . . . . . -- 12,886
Capitalized lease obligations. . . . . . . . . 10,601 12,350
- ------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . $1,226,529 $1,190,814
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The contractual maturities of long-term debt for the next five years are
$159.4 million for 1997, $451.0 million for 1998, $200.0 million for 1999 and
$100.0 million for 2001. There are no payments due in 2000.
J. MINORITY INTEREST
On November 27, 1996 and December 2, 1996, the company issued $300 million
and $200 million, respectively, of mandatorily redeemable company-obligated
securities out of two grantor trusts. The two trusts hold debt instruments of
the parent company purchased with the proceeds of the securities issuance.
Interest from the debt securities of the parent, at the terms outlined below, is
used to fund the preferred dividends of the trusts.
December 31--Dollars in Thousands 1996
- -----------------------------------------------------------------------------
8.06% Junior Subordinated Debentures, due 2026 . . . . . . $300,000
7.95% Junior Subordinated Debentures, due 2026 . . . . . . 200,000
- -----------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . $500,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Distributions on the securities are cumulative and are payable at the same
rate as the debt instruments above. These debentures are redeemable beginning
December 1, 2006 at 104% and at decreasing prices thereafter to 100% on or after
December 1, 2016. The preferred securities are subject to mandatory redemption,
in whole or in part, upon the repayment of the debentures. The securities are
considered to be Tier 1 capital for regulatory purposes.
Barnett
54
<PAGE>
K. SHAREHOLDERS' EQUITY
In April 1996, the company called for redemption its Series A $4.50
Cumulative Convertible Preferred Stock. All of those shares were converted into
common shares or redeemed.
On December 31, 1996, the company had 8,489 shares of Series B $2.50
Cumulative Convertible Preferred Stock outstanding, each convertible into 5.1976
shares of common stock. The stock's earliest redemption date was December 7,
1991 and can be redeemed at the holder's option.
On December 31, 1996, a total of 27,172,388 shares of common stock were
reserved for future issuance in connection with the shareholder investment,
employee benefit and long-term incentive plans and conversions of preferred
stock.
During 1996, 8,000,000 common shares were issued to an employee benefit
trust. These shares are not considered to be outstanding for accounting
purposes.
In November 1989, the company incorporated employee stock ownership plan
(ESOP) provisions into its existing 401(k) employee benefit plan. The ESOP
acquired $141 million of the company's common stock using the proceeds of a loan
from the company. The terms of the loan include equal monthly payments of
principal and interest from September 1990 through September 2015. Interest is
at 9.75% and pre-payments of principal are allowed. The loan is generally being
repaid from contributions to the plan by the company and dividends on company
stock held by the ESOP. The loan to the ESOP is classified as a reduction in
shareholders' equity.
Shares held by the ESOP are allocated to plan participants as the loan is
repaid. The company recognizes expense based on the number of shares allocated
to participants (the shares allocated method).
The ESOP shares as of December 31 were as follows:
1996 1995
- --------------------------------------------------------------------------
Released and allocated . . . . . . . . 4,904,644 4,123,066
Unallocated. . . . . . . . . . . . . . 3,852,556 4,634,134
- --------------------------------------------------------------------------
Total ESOP shares. . . . . . . . . . . 8,757,200 8,757,200
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
L. STOCK-BASED COMPENSATION PLANS
The company has long-term incentive plans that provide stock-based awards,
including stock options and restricted stock, to certain officers. The current
terms of the plans allow for a maximum grant of 15,000,000 shares. All options
are granted at current market value for a term of 10 years and, subject to
limited exceptions, are not exercisable before the third anniversary of the date
of grant. At December 31, 1996, there were 4,550,780 shares available for future
option grants.
Options outstanding and the activity for 1996 and 1995 are presented below:
Number Option
1996 of Shares Price
- -----------------------------------------------------------------------------
Beginning balance. . . . . . . . . . 8,686,244 $ 9.19 - $29.13
Granted . . . . . . . . . . . . . . 2,324,942 29.69 - 33.00
Exercised . . . . . . . . . . . . . (1,664,395) 9.19 - 30.69
Cancelled . . . . . . . . . . . . . (280,648) 11.88 - 30.69
- -----------------------------------------------------------------------------
Ending balance . . . . . . . . 9,066,143 $ 9.19 - $33.00
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Options which became exercisable
during the year. . . . . . . . . . 1,315,010 $ 11.88 - $30.69
Options exercisable at December 31 . 3,187,095 9.19 - 30.69
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Number Option
1995 of Shares Price
- -----------------------------------------------------------------------------
Beginning balance. . . . . . . . . . 8,404,544 $ 6.65 - $23.06
Granted . . . . . . . . . . . . . . 1,723,972 21.91 - 29.13
Exercised . . . . . . . . . . . . . (1,271,748) 6.65 - 21.38
Cancelled . . . . . . . . . . . . . (170,524) 9.19 - 23.06
- -----------------------------------------------------------------------------
Ending balance . . . . . . . . 8,686,244 $ 9.19 - $29.13
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Options which became exercisable
during the year. . . . . . . . . . . 1,038,342 $17.00 - $21.31
Options exercisable at December 31 . 3,538,234 9.19 - 21.31
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
The company has granted both time-based and performance-based restricted
stock shares to certain key employees. Time-based awards provide that
restrictions lapse beginning on the third anniversary of the date of the grant.
Performance-based awards require that specific performance criteria be met in
order for restrictions to lapse. As of December 31, 1996, 335,000 grants (of
which 171,500 were time-based and 163,500 were performance-based) were
outstanding with an average grant price of $21. During January 1997,
restrictions will lapse on all currently outstanding performance-based awards
and approximately one-third of the outstanding time-based awards.
Barnett
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The company adopted the disclosure-only option under Statements of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-based
Compensation," as of December 31, 1995. If the accounting provisions of the new
Statement had been adopted as of the beginning of 1995, the effect on 1995 and
1996 net earnings would have been immaterial. Further, based on current and
anticipated use of stock options, it is not envisioned that the impact of the
Statement's accounting provisions would be material in any future period.
The following table summarizes information about stock options outstanding
at December 31, 1996:
Outstanding Exercisable
------------------------------- ---------------------
Average Average
Exercise Average Exercise Exercise
Price Range Shares Life(1) Price Shares Price
- ------------------------------------------------------------------------------
$ 0 - $19.19 2,789,481 3.48 $15.63 2,572,319 $15.52
20.44 - 29.69 4,268,082 7.40 21.76 607,276 21.44
30.69 - 33.00 2,008,580 9.15 30.74 7,500 30.69
- ------------------------------------------------------------------------------
Total 9,066,143 6.58 $21.87 3,187,095 $16.68
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(1) AVERAGE CONTRACTUAL LIFE REMAINING IN YEARS.
M. RETIREMENT AND BENEFIT PLANS
The company and its subsidiaries participate in a non-contributory pension
plan covering substantially all employees who meet certain age and length of
service requirements. Benefits under the plan are based on an employee's years
of service and compensation. The company's funding policy is to contribute an
amount between the minimum required under the Employee Retirement Income
Security Act of 1974 and the maximum amount deductible for federal income tax
purposes.
The components of 1996, 1995 and 1994 net periodic pension cost for the
plan are shown below:
Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Service cost for benefits earned
during the year . . . . . . . . . . $ 15,910 $ 11,740 $ 13,398
Interest cost on projected benefit
obligations . . . . . . . . . . . . 27,599 24,700 20,539
Actual return on plan assets . . . . . (54,497) (71,806) 8,971
Net amortization and deferral. . . . . 19,402 39,527 (38,181)
- ------------------------------------------------------------------------------
Net periodic pension cost
and pension expense . . . . . . $ 8,414 $ 4,161 $ 4,727
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The following table sets forth the funded status of the pension plan and
amounts recognized in the STATEMENTS OF FINANCIAL CONDITION:
December 31--Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Actuarial present value:
Accumulated
benefit obligation(1) . . . . . . $(290,819) $(305,296) $(226,145)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Projected benefit obligation. . . . $(350,103) $(369,419) $(272,309)
Plan assets at fair value. . . . . . . 428,908 362,143 276,003
- ------------------------------------------------------------------------------
Plan assets in excess
of (less than) projected benefit
obligation. . . . . . . . . . . . . 78,805 (7,276) 3,694
Unrecognized net loss. . . . . . . . . 9,534 74,850 41,168
Unrecognized prior service cost. . . . 2,032 2,165 2,297
Unrecognized net asset at adoption
of SFAS No. 87, net of
amortization. . . . . . . . . . . . (18,834) (22,646) (26,458)
- ------------------------------------------------------------------------------
Prepaid pension cost. . . . . . . $ 71,537 $ 47,093 $ 20,701
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(1) Includes vested amounts of $276,035, $287,975, and $213,237 in 1996, 1995
and 1994, respectively.
At December 31, 1996, the plan's assets consisted primarily of investments
in pooled-equity, fixed-income and real estate funds.
The company also maintains a non-qualified supplemental retirement plan for
certain officers of the company. The plan, which is unfunded, provides benefits
in excess of that permitted to be paid by the company's pension plan under the
provisions of the tax law. Supplemental retirement benefits are based on the
participant's compensation during the last two years of employment. Plan cost
was $4.6 million for 1996, $4.2 million for 1995 and $3.8 million for 1994. At
December 31, 1996, 1995 and 1994, the projected benefit obligation was $29.7
million, $31.2 million and $25.7 million, respectively. The accrued liability
for the plan at December 31, 1996, 1995 and 1994 was $22.4 million, $19.2
million and $16.2 million, respectively. Assumptions used to determine the
actuarial present value of benefit obligations were as follows:
December 31 1996 1995 1994
- -------------------------------------------------------------------------------
Weighted-average discount rate . . . . 7.75% 7.25% 8.88%
Increase in compensation levels. . . . 4.00 4.00 4.50
Expected long-term return on assets. . 9.50 9.50 9.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The company also has a multi-employer 401(k) defined contribution plan in
which substantially all employees are eligible to participate. The company makes
matching contributions to the plan, up to a maximum of 6% of employees'
compensation. The company contributed $24.7 million, $20.2 million and $16.3
million in 1996, 1995 and 1994, respectively.
Barnett
56
<PAGE>
The company also provides health care and life insurance benefits to
employees who retire from the company at age 55 or later and meet certain
minimum service requirements. The post-retirement health care plan is
contributory, with retirees' contributions adjusted annually to reflect certain
cost-sharing provisions of the plan. The post-retirement life insurance plan is
non-contributory.
The components of net periodic post-retirement benefit cost are shown below:
Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Service cost . . . . . . . . . . . . . $ 942 $ 734 $1,026
Interest cost. . . . . . . . . . . . . 2,494 2,683 2,782
Actual return on plan assets . . . . . (1,843) (1,563) 52
Net amortization and deferral. . . . . 735 883 (253)
- ------------------------------------------------------------------------------
Net periodic post-retirement
benefit cost . . . . . . . . . . $ 2,328 $2,737 $3,607
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The following table sets forth the funded status of the post-retirement plans
and amounts recognized in the STATEMENTS OF FINANCIAL CONDITION:
Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Accumulated post-retirement
benefit obligation:
Retirees. . . . . . . . . . . . . . $(22,231) $(24,386) $(22,372)
Fully eligible active plan
participants. . . . . . . . . . . (411) (509) (306)
Other active plan participants. . . (10,489) (11,553) (7,608)
- ------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . (33,131) (36,448) (30,286)
Plan assets at fair value. . . . . . . 20,897 11,051 5,206
- ------------------------------------------------------------------------------
Accumulated post-retirement benefit
obligation in excess of plan assets (12,234) (25,397) (25,080)
Unrecognized prior service cost. . . . (567) (609) 359
Unrecognized net (gain) loss . . . . . (716) 3,536 (1,797)
- ------------------------------------------------------------------------------
Accrued post-retirement benefit cost . $(13,517) $(22,470) $(26,518)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
A 9.0% increase in health care costs was assumed for 1996, gradually
decreasing to 5.0% by the year 2003 and remaining constant thereafter.
Increasing the assumed health care costs by one percentage point would increase
the accumulated post-retirement benefit obligation at December 31, 1996 by $1.0
million and increase the aggregate of the service and interest cost components
of net periodic post-retirement benefit cost for 1996 by $100,000. The plan's
assets at December 31, 1996 consisted primarily of investments in pooled-equity
and fixed-income funds.
N. OTHER EXPENSE
Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------
Advertising and marketing. . . . . . . $ 47,952 $ 33,519 $ 29,301
Amortization of intangibles. . . . . . 50,184 52,794 36,576
Communications . . . . . . . . . . . . 46,328 40,986 33,745
Expenses and provision
on real estate held for sale . . . . 12,722 12,112 16,072
FDIC assessments . . . . . . . . . . . 7,779 43,227 71,409
Outside computer services. . . . . . . 38,086 31,978 28,659
Postage. . . . . . . . . . . . . . . . 26,802 26,326 23,177
Stationery, printing, supplies . . . . 24,877 20,397 15,767
Insurance, taxes and other . . . . . . 218,166 227,422 204,070
- ------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . $ 472,896 $ 488,761 $ 458,776
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Barnett
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
O. FEDERAL AND STATE INCOME TAXES
The provisions for income taxes reflected in the STATEMENTS OF INCOME are
detailed below:
Dollars in Thousands 1996 1995 1994
- --------------------------------------------------------------------------------
Current tax provision:
Federal. . . . . . . . . . . . . . . . . . $285,982 $250,797 $178,562
State. . . . . . . . . . . . . . . . . . . 41,124 28,925 20,297
- --------------------------------------------------------------------------------
Total current. . . . . . . . . . . . . . 327,106 279,722 198,859
- --------------------------------------------------------------------------------
Deferred tax provision:
Federal. . . . . . . . . . . . . . . . . . 13,632 6,184 47,943
State. . . . . . . . . . . . . . . . . . . 344 387 3,032
- --------------------------------------------------------------------------------
Total deferred . . . . . . . . . . . . . 13,976 6,571 50,975
- --------------------------------------------------------------------------------
Total income tax provision . . . . . . . $341,082 $286,293 $249,834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The difference between federal income tax computed at the statutory rate
and the actual tax provision is shown below:
Dollars in Thousands 1996 1995 1994
- --------------------------------------------------------------------------------
Income before taxes. . . . . . . . . . . . . $907,954 $819,594 $737,805
- --------------------------------------------------------------------------------
Tax at the statutory rate. . . . . . . . . . 317,784 286,858 258,232
- --------------------------------------------------------------------------------
Increase (decrease) in taxes:
Tax-exempt interest and dividends. . . . . (14,623) (20,982) (28,778)
State income tax, net of federal benefit . 27,039 18,211 15,163
Disallowed interest expense. . . . . . . . 2,053 2,743 2,610
Non-deductible expenses. . . . . . . . . . 11,282 11,679 6,636
Other. . . . . . . . . . . . . . . . . . . (2,453) (12,216) (4,029)
- --------------------------------------------------------------------------------
Total increase (decrease) in taxes . . . 23,298 (565) (8,398)
- --------------------------------------------------------------------------------
Total income tax provision . . . . . . . $341,082 $286,293 $249,834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Effective tax rate . . . . . . . . . . . 37.6% 34.9% 33.9%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Deferred income taxes reflect the impact of differences between the
financial statement and tax bases of assets and liabilities and available tax
carryforwards.
The tax effect of temporary differences and tax carryforwards which create
deferred tax assets and liabilities are detailed below:
December 31--Dollars in Thousands 1996 1995 1994
- --------------------------------------------------------------------------------
Deferred tax assets:
Loan loss reserve. . . . . . . . . . . . . $172,431 $177,345 $173,314
Writedown of real estate held for sale . . 28,052 28,737 22,654
Employee benefits. . . . . . . . . . . . . 28,985 23,206 16,142
Loan fees and expenses . . . . . . . . . . -- -- 7,433
Capital loss carryforward. . . . . . . . . -- -- 3,756
SFAS No. 115 equity adjustment . . . . . . -- -- 17,710
Other. . . . . . . . . . . . . . . . . . . 23,113 38,259 28,358
- --------------------------------------------------------------------------------
Gross deferred tax assets. . . . . . . . 252,581 267,547 269,367
Valuation allowance. . . . . . . . . . . . . -- (3,591) (4,087)
- --------------------------------------------------------------------------------
Gross deferred tax assets net
of valuation allowance. . . . . . . . . 252,581 263,956 265,280
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation . . . . . . . . . . . . . . . 44,157 43,793 41,841
Leasing. . . . . . . . . . . . . . . . . . 20,408 9,055 7,355
Intangibles. . . . . . . . . . . . . . . . 7,411 6,919 17,205
Interest income. . . . . . . . . . . . . . 2,585 7,559 12,535
Loan servicing . . . . . . . . . . . . . . 14,428 52,581 13,938
Securitization . . . . . . . . . . . . . . 38,670 40,918 5,563
SFAS No. 115 equity adjustment . . . . . . 4,632 21,620 --
Other. . . . . . . . . . . . . . . . . . . 22,174 22,464 35,206
- --------------------------------------------------------------------------------
Gross deferred tax liabilities . . . . . 154,465 204,909 133,643
- --------------------------------------------------------------------------------
Net deferred tax asset . . . . . . . . . $ 98,116 $ 59,047 $131,637
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The net deferred tax asset increased $39.1 million during 1996. This
increase was due to fair value adjustments recorded in equity under SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities," of
$17.0 million and the sale of Barnett Mortgage Company, $36.1 million,
partially offset by provisions for deferred taxes of $14.0 million.
Prior to 1996, the Internal Revenue Code permitted qualifying savings and
loan institutions a bad debt deduction under the reserve method which was more
favorable than the bad debt deduction method allowed other taxpayers. The
subsidiaries formerly known as Barnett Bank of Pinellas County and Barnett Bank
of Southwest Florida were treated as qualified savings and loan institutions
until they merged into Barnett Bank, N.A. on September 28, 1996. Under
provisions of the Small Business Protection Act of 1996, the bad debt reserve
balances at these institutions on December 31, 1987, are not subject to federal
income taxes. Retained earnings contain approximately $53 million representing
such bad debt reserves for which no deferred income taxes have been recorded.
Barnett
58
<PAGE>
P. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the company utilizes a variety of off-
balance-sheet financial instruments to service the financial needs of customers
and to manage the company's overall asset-liability position. This includes
commitments to extend credit, standby and commercial letters of credit,
securities lending, interest rate swaps and foreign exchange contracts. Each of
these instruments involve varying degrees of risk. As such, the contract or
notional amounts of these instruments may not be an appropriate indicator of
their credit or market risk.
Generally accepted accounting principles recognize these instruments as
contingent obligations or off-balance-sheet items and accordingly, the contract
or notional amounts are not reflected in the consolidated financial statements.
A summary of the company's off-balance-sheet financial instruments at
December 31, 1996 and 1995 is presented as follows:
Contractual or Notional Amounts--
Dollars in Thousands 1996 1995
- --------------------------------------------------------------------------------
Commitments to extend credit:
Credit card commitments. . . . . . . . . . . . . . . $5,727,699 $7,051,870
Other loan commitments . . . . . . . . . . . . . . . 7,619,067 8,206,132
Standby letters of credit and financial guarantees . . 732,238 608,138
Commercial letters of credit . . . . . . . . . . . . . 118,308 64,938
Loans sold with recourse . . . . . . . . . . . . . . . 3,100,487 2,183,056
Forward commitments. . . . . . . . . . . . . . . . . . 355,000 1,063,812
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Commitments to extend credit are contractual agreements to lend up to a
specified amount, over a stated period of time. Commercial commitments generally
require the payment of a fee. Standby letters of credit are issued to improve a
customer's credit standing with third parties. The company agrees to honor a
financial commitment by issuing a guarantee to third parties in the event the
customer fails to perform. Since loan commitment amounts generally exceed actual
funding requirements and virtually all of the standby letters of credit are
expected to expire unfunded, the total commitment amounts do not represent
future cash requirements. The company's exposure to credit loss from loan
commitments, standby letters of credit and commercial letters of credit is
measured by the contract amount of these instruments. This credit risk is
minimized by subjecting these off-balance-sheet instruments to the same credit
policies and underwriting standards used when making loans. Substantially all of
these commitments expire in less than two years unless renewed by the company.
Commercial letters of credit are short-term commitments issued to finance the
movement of goods between a buyer and seller dealing in international markets.
Loans sold with recourse generally result from the sale and securitization
of consumer finance loans. These first and second mortgage loans are
securitized and sold with recourse as asset-backed securities. In most cases,
the recourse to the company's consumer finance subsidiary, EquiCredit, is
limited to amounts on deposit with the trustee. Loans sold with recourse include
$2.9 billion and $1.9 billion of loans sold under EquiCredit's securitization
program on which the maximum contingent risk is limited to $92 million and
$58 million as of December 31, 1996 and 1995, respectively. At December 31, 1996
and 1995, EquiCredit had estimated recourse reserves of $42 million and $28
million, respectively, classified in other liabilities. The remainder of the
loans sold with recourse are residential mortgages sold to government agencies.
Barnett
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The company enters into interest rate swap transactions primarily as part
of its asset-liability management strategy to manage interest rate risk. These
transactions involve the exchange of interest payments based on a notional
amount. The notional amounts of interest rate swaps express the volume of
transactions and are not an appropriate indicator of the off-balance-sheet
market or credit risk. The credit risk associated with interest rate swaps
arises from the counterparties' failure to meet the terms of the agreements and
is limited to the fair value of contracts with a positive replacement value.
Barnett utilizes bilateral collateral exchange agreements with swap
counterparties in order to minimize this credit exposure. Under these
agreements, swap counterparties are required to deliver collateral as the
replacement value at risk increases with changes in interest rates.
An effective asset-liability management function is required to address the
interest rate risk inherent in the company's core banking activities. If no
other management action is taken, these core banking activities, which include
lending and deposit products, result in an asset-sensitive position.
Accordingly, the company utilizes a variety of discretionary on- and off-
balance-sheet strategies to prudently manage the overall interest rate
sensitivity position.
As summarized in the table below describing Barnett's derivatives
positions, the swap portfolio is primarily comprised of generic contracts
wherein the company receives a fixed rate of interest while paying a variable
rate. As such, the income contribution from the swap portfolio will decrease in
a rising rate environment and increase in a falling rate environment. The
average rate received at December 31, 1996, was 5.56% compared to an average
rate paid of 5.54%, and the average remaining maturity of the total portfolio
was approximately one year. The variable rate component of the interest rate
swaps is based on LIBOR as of the most recent reset date.
The company acts as an intermediary in arranging interest rate swap
transactions for customers. Net trading revenue is included in other income and
is not significant to the company's results of operations. The notional amounts
of those contracts totaled $853 million and $421 million at December 31, 1996
and 1995, respectively. The nature of those instruments is the same as described
for derivative financial instruments.
<TABLE>
<CAPTION>
Weighted Average Interest Rate
-------------------------------------- Average
Notional Replacement Receive Pay Maturity
December 31--Dollars in Millions Amount Value Rate (1) Index Rate (1) Index In Years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996
Interest rate swaps:
Basis swap . . . . . . . . . . . . . . . . . . $ 50 $ .51 5.66% LIBOR 5.43% CMT 1.08
Generic swaps:
Receive fixed. . . . . . . . . . . . . . . . 4,050 (7.19) 5.53 FIXED 5.53 LIBOR 1.07
Pay fixed. . . . . . . . . . . . . . . . . . 116 .52 5.71 LIBOR 5.84 FIXED 2.00
Interest rate floors . . . . . . . . . . . . . . 250 1.51 6.00(2) LIBOR -- -- 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . $4,466 $(4.65) 5.56% 5.54% 1.09
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
1995
Interest rate swaps:
Basis swap . . . . . . . . . . . . . . . . . . $ 50 $ .49 5.75% LIBOR 4.81% CMT 2.08
Generic swaps:
Receive fixed. . . . . . . . . . . . . . . . 2,540 12.19 5.21 Fixed 5.83 LIBOR 1.02
Pay fixed. . . . . . . . . . . . . . . . . . 267 (1.97) 5.84 LIBOR 6.38 Fixed 1.73
Index-principal swaps. . . . . . . . . . . . . 250 (.29) 4.47 Fixed 5.94 LIBOR .08
Interest rate floors . . . . . . . . . . . . . . 250 4.51 6.00 (2) LIBOR -- -- 2.00
Options to purchase securities . . . . . . . . . 500 9.74 -- -- .20
- ------------------------------------------------------------------------------------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . $3,857 $24.67 5.27% 5.87% .98
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) BASED UPON CONTRACTUAL RATES AT DECEMBER 31.
(2) THE COMPANY RECEIVES INTEREST EQUAL TO THE AMOUNT BY WHICH LIBOR IS LESS
THAN 6.00%.
Barnett
60
<PAGE>
Q. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values are based upon quoted market prices, when available. In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other techniques, all of which may be significantly
affected by the assumptions used. Therefore, these values may not be
substantiated by comparison to independent markets and are not intended to
reflect the proceeds that may be realizable from offering for sale at one time
the company's entire holdings of a particular financial instrument. Any
unrealized gains or losses should not be interpreted as a forecast of future
earnings and cash flows.
The value of certain non-financial items, which include trust and credit
card relationships and core deposit intangibles, is significantly in excess of
their aggregate carrying amounts. However, the company also believes their value
is often only reliably determined in arms-length transactions and may vary
significantly depending on specific circumstances. For these reasons, no fair
value estimates of these non-financial instruments are disclosed. As a result,
the following fair values are not comprehensive and therefore do not reflect the
underlying value of the company. Off-balance-sheet financial instruments,
including their fair values, are discussed in greater detail in NOTE P.
The estimated fair values of the company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
CARRYING FAIR Carrying Fair
December 31--Dollars in Thousands AMOUNT VALUE Amount Value
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents(1) . . . . . . . . . . . . . . . . . $ 2,783,646 $ 2,783,646 $ 2,769,145 $ 2,769,145
Investment securities held to maturity(2). . . . . . . . . . . 129,595 139,999 200,960 216,066
Investment securities available for sale(2). . . . . . . . . . 5,031,123 5,031,123 5,133,041 5,133,041
Capitalized excess servicing income, net(3). . . . . . . . . . 220,615 233,404 149,662 169,581
Loans, net of allowance(4) . . . . . . . . . . . . . . . . . . 29,775,815 30,074,385 29,980,851 30,174,023
Financial liabilities
Deposits:
Without stated maturities(1) . . . . . . . . . . . . . . . . 21,629,538 21,629,538 22,047,155 22,047,155
With stated maturities(5). . . . . . . . . . . . . . . . . . 12,190,720 12,266,586 12,186,413 12,219,144
Short-term borrowings(1) . . . . . . . . . . . . . . . . . . . 1,309,367 1,309,367 2,078,949 2,078,949
Long-term debt (excluding capitalized leases)(6) . . . . . . . 1,215,928 1,253,307 1,178,464 1,251,001
Minority interest(6) . . . . . . . . . . . . . . . . . . . . . 500,000 498,653 -- --
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE FOLLOWING METHODS AND ASSUMPTIONS WERE USED TO ESTIMATE FAIR VALUES:
(1) THE CARRYING AMOUNTS APPROXIMATE FAIR VALUE.
(2) FAIR VALUES ARE BASED ON QUOTED MARKET PRICES, IF AVAILABLE. IF A QUOTED
MARKET PRICE IS NOT AVAILABLE, FAIR VALUE IS ESTIMATED USING QUOTED MARKET
PRICES FOR SIMILAR SECURITIES.
(3) FAIR VALUE IS DETERMINED BY CALCULATING THE PRESENT VALUE OF EXPECTED CASH
FLOWS WHICH EXCEED NORMAL SERVICING FEES, USING PREPAYMENT, DEFAULT AND
INTEREST RATE ASSUMPTIONS THAT CURRENT MARKET PARTICIPANTS WOULD USE FOR
SIMILAR INSTRUMENTS.
(4) FOR RESIDENTIAL MORTGAGE LOANS, FAIR VALUE IS ESTIMATED USING QUOTED MARKET
PRICES FOR SALES OF WHOLE LOANS WITH SIMILAR CHARACTERISTICS. FOR OTHER
HOMOGENEOUS CATEGORIES OF LOANS, FAIR VALUE IS ESTIMATED USING QUOTED
MARKET PRICES FOR SECURITIES BACKED BY SIMILAR LOANS, ADJUSTED FOR
DIFFERENCES IN LOAN CHARACTERISTICS. THE FAIR VALUE OF OTHER TYPES OF LOANS
FOR WHICH QUOTED MARKET PRICES ARE NOT AVAILABLE IS ESTIMATED BY
DISCOUNTING EXPECTED FUTURE CASH FLOWS.
(5) THE FAIR VALUE OF FIXED-MATURITY CERTIFICATES OF DEPOSIT IS ESTIMATED USING
RATES CURRENTLY OFFERED FOR DEPOSITS OF SIMILAR REMAINING MATURITIES.
(6) RATES CURRENTLY AVAILABLE TO THE COMPANY FOR DEBT WITH SIMILAR TERMS AND
REMAINING MATURITIES ARE USED TO ESTIMATE THE FAIR VALUE OF EXISTING DEBT.
Barnett
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS
R. REGULATORY RESTRICTIONS
The principal source of cash flows for the parent company is dividends from
Barnett Bank, N.A. Payment of dividends by banks is subject to certain
regulatory restrictions. The most common restriction limits dividends declared
to the banks' net profits for the current year, combined with net retained
profits for the preceding two years. Payment of dividends is also limited by
minimum capital requirements, which all banking subsidiaries exceed. On December
31, 1996, $315 million was available for payment of dividends. Loans from
subsidiary banks to the parent company are limited by law and are required to be
collateralized.
Banking subsidiaries are required by law to maintain non-interest bearing
deposits to meet reserve requirements. At December 31, 1996, these deposits
totaled $454 million.
The company is subject to regulatory capital requirements administered by
federal banking agencies. Failure to meet minimum capital requirements can
initiate actions by regulators that could have an effect on the company's
financial statements. Under the framework for prompt corrective action, the
company must meet capital guidelines that involve quantitative measures of the
company's assets, liabilities, and certain off-balance-sheet items. The
company's capital amounts and classification are also subject to qualitative
judgments by the regulators. Management believes, as of December 31, 1996, that
the company meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the Federal Reserve Bank of Atlanta and the
Comptroller of the Currency considered the company to be "well capitalized"
under the regulatory framework. To be categorized as well capitalized, the
company must maintain minimum ratios set forth in the table. There are no
conditions or events since that notification that management believes have
changed the company's category.
The company's actual capital amounts and ratios are presented below:
<TABLE>
<CAPTION>
Capital Levels
------------------------------------------------------------------
Actual Adequately Capitalized Well Capitalized
---------------- ---------------- ----------------
As of December 31, 1996--Dollars in Millions Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital (to risk weighted assets):(1)
Consolidated . . . . . . . . . . . . . . . . . . . . $4,249 14.17% $2,399 8.00% $2,998 10.00%
Barnett Bank N.A.. . . . . . . . . . . . . . . . . . 3,433 14.14 1,943 8.00 2,428 10.00
Tier I capital (to risk weighted assets):(1)
Consolidated . . . . . . . . . . . . . . . . . . . . 3,288 10.97 1,199 4.00 1,799 6.00
Barnett Bank N.A.. . . . . . . . . . . . . . . . . . 3,061 12.60 971 4.00 1,457 6.00
Tier 1 capital (to average assets):(1)
Consolidated . . . . . . . . . . . . . . . . . . . . 3,288 8.21 1,202 3.00 2,004 5.00
Barnett Bank N.A.. . . . . . . . . . . . . . . . . . 3,061 8.08 1,136 3.00 1,893 5.00
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) AS DEFINED BY THE REGULATIONS.
S. CONTINGENCIES
The company and its subsidiaries are parties to various legal and
administrative proceedings and claims. While any litigation contains an element
of uncertainty, management believes that the outcome of such proceedings or
claims pending or known to be threatened will not have a material adverse effect
on the company's consolidated financial position, results of operations or
liquidity.
Barnett
62
<PAGE>
T. PARENT COMPANY FINANCIAL INFORMATION
CONDENSED FINANCIAL INFORMATION FOR BARNETT BANKS, INC. (PARENT COMPANY ONLY)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31--Dollars in Thousands 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,057 $ 9,336
Investment securities available for sale (amortized cost of $2,328 in 1996 and $18,644 in 1995). . . 2,745 37,426
Investments in and amounts due from subsidiaries:
Banks, at equity in net assets(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,446,383 3,248,343
Non-banking subsidiaries, at equity in net assets(1) . . . . . . . . . . . . . . . . . . . . . . . 429,744 609,190
Securities purchased under agreements to resell. . . . . . . . . . . . . . . . . . . . . . . . . . 242,000 135,007
Amounts due from subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720,552 1,184,225
Cost in excess of fair value of net assets acquired. . . . . . . . . . . . . . . . . . . . . . . . 90,379 97,664
Value of core deposits purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,879 5,660
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,313 196,045
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,273 252,359
- ------------------------------------------------------------------------------------------------------------------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,377,325 $5,775,255
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,297 $ 669,766
Other short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 425,000
Amount due to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,465 --
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,304 242,725
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,215,928 1,165,578
Subordinated debentures supporting mandatorily redeemable trust securities . . . . . . . . . . . . . 500,000 --
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,006,994 2,503,069
- ------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,370,331 3,272,186
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,377,325 $5,775,255
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) THE DOUBLE LEVERAGE RATIO, WHICH REPRESENTS THE PARENT'S TOTAL EQUITY
INVESTMENT IN SUBSIDIARIES PLUS INTANGIBLES DIVIDED BY ITS TOTAL
SHAREHOLDER'S EQUITY PLUS SUBORDINATED DEBENTURES SUPPORTING MANDATORILY
REDEEMABLE TRUST SECURITIES, WAS 1.03% AND 1.21% AT DECEMBER 31, 1996 AND
1995, RESPECTIVELY.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Years Ended December 31--Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Income from subsidiaries:
Dividends ($456,009 in 1996, $446,009 in 1995 and $462,406 in 1994 from banks) . . . . $456,009 $451,906 $462,465
Management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,210 229,052 182,346
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,534 60,681 21,168
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,089 17,360 7,682
- ------------------------------------------------------------------------------------------------------------------------------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833,842 758,999 673,661
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,705 161,052 108,050
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,213 118,354 59,071
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,817 122,084 111,188
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,735 401,490 278,309
- ------------------------------------------------------------------------------------------------------------------------------
EARNINGS
Income before income taxes and equity in undistributed income of subsidiaries. . . . . . 341,107 357,509 395,352
Reduction of consolidated income taxes resulting from parent company operating loss. . . 32,996 34,763 22,429
- ------------------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed income of subsidiaries . . . . . . . . . . . . . . 374,103 392,272 417,781
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . . . 190,388 141,029 70,190
- ------------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $564,491 $533,301 $487,971
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31--Dollars in Thousands 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 564,491 $ 533,301 $ 487,971
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . (190,388) (141,029) (70,190)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,086 13,469 12,152
Amortization of intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,955 9,451 11,945
Deferred income tax expense (benefit). . . . . . . . . . . . . . . . . . . . . . . . 3,402 (37,776) (22,429)
Employee benefits funded by equity (parent company and subsidiaries) . . . . . . . . 26,820 24,237 28,682
Decrease (increase) in other assets. . . . . . . . . . . . . . . . . . . . . . . . . 28,745 (45,020) 17,763
Increase in other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,205 60,891 11,062
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,993) (985) 4,559
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . 450,323 416,539 481,515
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . (2,769) (40,959) (151,466)
Proceeds from sales of investment securities . . . . . . . . . . . . . . . . . . . . . 37,285 -- 95,320
Proceeds from maturities of investment securities. . . . . . . . . . . . . . . . . . . 796 58,698 212,657
Net decrease (increase) in advances to subsidiaries. . . . . . . . . . . . . . . . . . 173,699 (999,042) (17,153)
Net capital contributions to subsidiaries. . . . . . . . . . . . . . . . . . . . . . . (61,134) (202,412) (212,195)
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . (54,052) (46,159) (13,240)
Proceeds from sales of premises and equipment. . . . . . . . . . . . . . . . . . . . . 9,097 150 2,877
Net business dispositions (acquisitions), net of cash acquired . . . . . . . . . . . . 496,234 (313,104) --
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . 599,156 (1,542,828) (83,200)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in commercial paper and other short-term borrowings. . . . . . (1,052,469) 1,088,567 742
Proceeds (repayments) of advances from non-banking subsidiaries. . . . . . . . . . . . 15,465 -- (50,000)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . 250,000 500,000 25,000
Principal repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . (199,650) (25,750) (400)
Proceeds from issuance of subordinated debentures supporting mandatorily
redeemable trust securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 -- --
Net repurchase of common and preferred stock . . . . . . . . . . . . . . . . . . . . . (261,559) (302,033) (50,236)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (201,552) (191,086) (175,555)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . (949,765) 1,069,698 (250,449)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . 99,714 (56,591) 147,866
Cash and cash equivalents, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . 144,343 200,934 53,068
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, December 31 . . . . . . . . . . . . . . . . . . . . . . . . $ 244,057 $ 144,343 $ 200,934
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Barnett
64
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Barnett Banks, Inc.:
We have audited the accompanying consolidated statements of financial
condition of Barnett Banks, Inc. (a Florida corporation) and affiliates as of
December 31, 1996 and 1995, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Barnett Banks, Inc. and
affiliates as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Jacksonville, Florida
January 13, 1997
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Barnett Banks, Inc. has prepared and is responsible for
the accompanying financial statements, together with the other information
presented in this annual report. Management believes that the financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances to reflect the substance of events
and transactions that should be included. The financial statements include
amounts that are based on management's best estimates and judgments.
Management maintains and depends upon an internal accounting control system
designed to provide reasonable assurance that transactions are executed in
accordance with management's authorization, that financial records are reliable
as the basis for the preparation of all financial statements, and that the
company's assets are safeguarded. The design and implementation of all systems
of internal control are based on judgments required to evaluate the costs of
controls in relation to the expected benefits and to determine the appropriate
balance between these costs and benefits. The company maintains a strong
internal audit program to monitor compliance with the system of internal
accounting control. Operational and special audits are conducted and internal
audit reports are submitted to appropriate management.
The Audit Committee of the Board of Directors, comprised solely of outside
directors, meets periodically with the independent certified public accountants,
management and internal auditors to review accounting, auditing and financial
reporting matters. The independent certified public accountants and internal
auditors have free access to the committee, without management present, to
discuss the results of their audit work and their evaluations of the adequacy of
internal controls and the quality of financial reporting.
The financial statements in this annual report have been audited by the
company's independent certified public accountants, Arthur Andersen LLP, for the
purpose of determining that the financial statements are presented fairly. Their
independent professional opinion on the company's financial statements is
presented above.
/s/ Charles E. Rice /s/ Allen L. Lastinger, Jr. /s/ Charles W. Newman
Charles E. Rice Allen L. Lastinger, Jr. Charles W. Newman
Chairman and President and Chief Financial Officer
Chief Executive Officer Chief Operating Officer
Barnett
65
<PAGE>
MARKET AND BUSINESS DIRECTORY
<TABLE>
<S> <C> <C>
FLORIDA NORTHWEST FLORIDA--8 offices COMMUNITY BANK OF THE ISLANDS--
BARNETT BANK, N.A. Headquarters: Ft. Walton Beach 2 offices
President: Freddy G. Carr Headquarters: Sanibel Island
ALACHUA--10 offices President: Lyman Frank
Headquarters: Gainesville PALM BEACH--43 offices
President: Mark D. Walker Headquarters: West Palm Beach
President: R. Michael Strickland GEORGIA
BROWARD--49 offices
Headquarters: Ft. Lauderdale PASCO--19 offices BARNETT BANK OF SOUTHEAST
President: Jeffery H. Atwater Headquarters: Port Richey GEORGIA, N.A.--7 offices
President: Kendall L. Spencer Headquarters: Brunswick
CENTRAL FLORIDA--61 offices President: James H. Hunt
Headquarters: Orlando PINELLAS--48 offices
President: Thomas H. Yochum Headquarters: St. Petersburg BARNETT BANK OF SOUTHWEST
President: Sam A. Davis, II GEORGIA--8 offices
HIGHLANDS--6 offices Headquarters: Columbus
Headquarters: Sebring POLK--20 offices President: Gary Peacock, Jr.
President: James L. Ridley Headquarters: Lakeland
President: Bob Barbree
JACKSONVILLE--48 offices OTHER BUSINESSES
Headquarters: Jacksonville SOUTH FLORIDA--47 offices
President: Andrew B. Cheney Headquarters: Miami ASSET MANAGEMENT
Chairman: William R. Myers Barnett Capital Advisors, Inc.
THE KEYS--8 offices President: Donna L. Terry
Headquarters: Key West SOUTHWEST FLORIDA--26 offices
President: Joe R. Williams Headquarters: Sarasota Barnett Annuities Corp.
President: C. Michael Collins Chairman: Richard H. Jones
LAKE--10 offices
Headquarters: Eustis ST. JOHNS--10 offices Barnett Insurance Services, Inc.
President: Don D. Roberts Headquarters: St. Augustine Chairman: Richard H. Jones
President: Dian S. Williams
LAKE OKEECHOBEE--5 offices Barnett Investments, Inc.
Headquarters: Okeechobee SUNCOAST--13 offices President: Robert K. MacKenzie
President: Richard D. Coleman Headquarters: Brooksville
President: H.M. Shirley, Jr. AUTO LOANS
LEE--19 offices Barnett Dealer Financial Services, Inc.
Headquarters: Fort Myers TALLAHASSEE--10 offices President: Steven A. LaMore
President: Allan L. McLeod, Jr. Headquarters: Tallahassee
President: Ken Stafford CONSUMER FINANCE
MANATEE--15 offices EquiCredit Corporation
Headquarters: Bradenton TAMPA--35 offices President: Jeffrey C. Larsen
President: Harry Woolley Headquarters: Tampa
President: James W. Ivey MERCHANT SERVICES
MARION--13 offices Barnett Merchant Services Corp.
Headquarters: Ocala TREASURE COAST--21 offices President: Lyn Miles
President: Richard L. Andrews Headquarters: Port St. Lucie
President: Leo J. Hill RESIDENTIAL LOANS
NAPLES--14 offices Barnett Mortgage Company
Headquarters: Naples VOLUSIA AND FLAGLER--29 offices President: Douglas K. Freeman
President: James E. Loskill Headquarters: DeLand
President: David M. Strickland
NORTH CENTRAL FLORIDA--7 offices
Headquarters: Lake City WEST FLORIDA--11 offices
President: Tyson Johnson Headquarters: Pensacola
President: Eric Nickelsen
</TABLE>
Barnett
66
<PAGE>
BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
WALTER H. ALFORD JACK B. CRITCHFIELD THOMPSON L. RANKIN
Executive Vice President and General Chairman and Chief Executive Officer President and Chief Executive Officer
Counsel of BellSouth Corporation, of Florida Progress Corporation, of Lykes Bros. Inc., Tampa, Fla.
Atlanta, Ga. St. Petersburg, Fla.;
President Emeritus of Rollins College. CHARLES E. RICE
RITA BORNSTEIN Chairman and Chief Executive Officer
President of Rollins College, REMEDIOS DIAZ OLIVER of Barnett Banks, Inc., Jacksonville, Fla.
Winter Park, Fla. President and Chief Executive Officer
of All American Containers, Inc., FREDERICK H. SCHULTZ
JAMES L. BROADHEAD Miami, Fla. Owner of Schultz Investments,
Chairman and Chief Executive Officer Jacksonville, Fla.; former Vice
of FPL Group, Inc., Juno Beach, Fla. ALLEN L. LASTINGER, JR. Chairman of the Board of Governors
President and Chief Operating Officer of the Federal Reserve System.
ALVIN R. CARPENTER of Barnett Banks, Inc., Jacksonville, Fla.
President and Chief Executive Officer of STEWART TURLEY
CSX Transportation, Inc., Jacksonville, Fla. CLARENCE V. MCKEE Chairman of Eckerd Corporation,
Chairman, President and Chief Executive Largo, Fla.
MARSHALL M. CRISER Officer of McKee Communications, Inc.,
Chairman of Mahoney Adams & Criser, P.A., Tampa, Fla. JOHN A. WILLIAMS
Jacksonville, Fla.; President Emeritus Chairman of Post Properties, Inc.,
of the University of Florida. Atlanta, Ga.
OFFICERS
MANAGEMENT EXECUTIVE COMMITTEE MANAGEMENT OPERATING COMMITTEE
CHARLES E. RICE ALLEN L. LASTINGER, JR.* RICHARD H. JONES
Chairman and Chief Executive Officer Chief Asset Management Executive
RICHARD A. ANDERSON
ALLEN L. LASTINGER, JR. Regional Banking Executive/North Region PAUL T. KERINS
President and Chief Operating Officer Chief Human Resources Executive
SUSAN S. BLASER
JUDY S. BEAUBOUEF Chief Marketing Executive PATRICK J. MCCANN
Chief Legal Executive Director of Finance
M. ALEX CROTZER
RICHARD C. BREWER, JR. Chief Business Banking Executive JAMES F. MONDELLO
Chief Credit Policy Executive Regional Banking Executive/South Region
DOUGLAS K. FREEMAN
CHARLES W. NEWMAN Chief Consumer Credit Executive RICHARD J. REDICK
Chief Financial Officer Chief Technology Executive
LEE E. HANNA
HINTON F. NOBLES, JR. Chief Retail Delivery Executive *Chairman, Management Operating Committee
Executive Vice President
</TABLE>
- ---------------
GREGORY M. DELANEY
Chief Accounting Officer and Controller
Barnett
67
<PAGE>
SHAREHOLDER INFORMATION
SHAREHOLDER ASSISTANCE
Shareholders requiring a change of address, records or information about
lost certificates, dividend checks or dividend reinvestment should contact:
First Chicago Trust, Agent
P.O. Box 2500
Jersey City, NJ 07303-2500
Telephone: 800-328-5822
CORPORATE OFFICES
If you need to contact Barnett's corporate headquarters, call or write:
50 North Laura Street, P.O. Box 40789
Jacksonville, FL 32203-0789
Telephone: 904/791-7720
Email: [email protected]
SECURITIES MARKETS
Shares of Barnett Banks, Inc. are listed on the New York Stock Exchange
(ticker symbol: BBI). The listing found in most newspapers is "Barnett."
Certain debt securities are also listed on the New York Stock Exchange.
Barnett's debt ratings are:
Senior Subordinated
Debt Debt
-------------------------------------------------------
Moody's . . . . . . . . . A2 A3
Standard & Poor's . . . . A- BBB+
Duff & Phelps . . . . . . A A-
SHAREHOLDER DATA
There were 44,814 shareholders of record of Barnett common stock as of
December 31, 1996. In addition, approximately 15,708 Barnett employees own stock
through company-sponsored plans.
ANNUAL MEETING
Barnett's annual meeting of shareholders will be on Wednesday, April 16,
1997, at 10 a.m. in Building 500 of the Barnett Office Park, 9000 Southside
Blvd., Jacksonville, FL.
INFORMATION
For printed financial material, contact Corporate Communications at
904/791-5516. The company's annual report and quarterly earning releases, as
well as other company information, can be accessed on its website on the
Internet at http://www.barnett.com.
Analysts, investors and others seeking financial data should contact
Investor Relations, at 904/791-7254. Others seeking general information should
contact Corporate Communications at 904/791-7668.
DIRECT PURCHASE PLANS
Barnett's Shareholder Investment Plan is a convenient and cost-effective
way to acquire Barnett common stock with no brokerage commissions or service
fees on purchases. If you would like more information on this plan, please
contact First Chicago Trust, Agent, at 800-328-5822.
Barnett
68
<PAGE>
HOW TO REACH US:
<TABLE>
<S> <C>
CREDITS
Barnett Automated Response Telephone: Annual reports for Barnett Banks, Inc. are produced by the
United States 800-562-5725 company's Financial Reporting Committee:
Canada 800-441-2999
Stephen J. Boyle
Customer Service 800-242-2007 Director/Financial Reporting
Business SuperPhone 800-628-5677 Catherine C. Cosby
Senior Counsel/Corporate Secretary
Card Services 800-323-6276
Gregory M. Delaney
Desktop Banking 800-457-6419 Chief Accounting Officer and Controller
Installment Loans: Mark R. Hill
North/Central Florida Region 800-562-6701 Manager/Accounting Policy and Special Projects
South Florida Region 800-962-3422
Canada 800-457-7220 Nancy J. Kesler
Director/Regulatory Relations
Investment Service Center 800-380-8120
David R. Palombi
Merchant Services 800-882-7521 Director/Corporate Communications
Mortgage Company 800-342-7581 Robert L. Stickler
Manager/External Communications
Newcomers Department 800-368-8580
Jennifer A. Wade
Student Loans 800-633-7192 External Communications Officer
Did you know?
CREATIVE SERVICES/PRODUCTION:
In 1996...
Diane Hunt
- - Barnett's 622 banking offices handled an average of 11.7 Art Director/Corporate Communications
million customer contacts per month.
McElwee & McElwee
- - Barnett processed 4.2 million checks each business day. photography
- - Barnett handled 43.5 million Automated Clearing House Paul Figura
transactions during the year. photography, retouching
- - Barnett recycled more than 4 million pounds of paper. Scott MacNeill
illustration
Acme Printing Company
printing
</TABLE>
Barnett, SENIOR PARTNERS, EDGE ACCOUNT, BARNETT SUPERCARD CHECK CARD and
BUSINESS SUPERPHONE are registered trademarks of Barnett Banks, Inc. PREMIER
ACCOUNT is a registered service mark of Barnett Banks, Inc. PayChex is a
registered trademark.
<PAGE>
BARNETT BANKS, INC.
POST OFFICE BOX 40789
JACKSONVILLE, FLORIDA 32203-0789
TELEPHONE 904-791-7720
[GRAPHIC]
BARNETT
IDEAS FOR THE WAY YOU LIVE.
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 33-41184, 33-53357,33-53359,
33-57597, 33-57599, 33-63571, 33-64305, 333-16357, 333-19687, 333-21005,
333-21519, and 333-21649.
ARTHUR ANDERSEN LLP
Jacksonville, Florida
March 18, 1997
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 27nd day of January, 1997.
/s/ Gregory M. Delaney
------------------------------
Gregory M. Delaney
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Stewart Turley
------------------------------
Stewart Turley
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Hinton F. Nobles, Jr.
------------------------------
Hinton F. Nobles, Jr.
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Walter M. Alford
------------------------------
Walter M. Alford
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Rita Bornstein
------------------------------
Rita Bornstein
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ James L. Broadhead
------------------------------
James L. Broadhead
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Alvin R. Carpenter
------------------------------
Alvin R. Carpenter
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Marshall M. Criser
------------------------------
Marshall M. Criser
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Jack B. Critchfield
------------------------------
Jack B. Critchfield
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Remedios Diaz Oliver
------------------------------
Remedios Diaz Oliver
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Clarence V. McKee
------------------------------
Clarence V. McKee
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Thompson L. Rankin
------------------------------
Thompson L. Rankin
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Frederick M. Schultz
------------------------------
Frederick M. Schultz
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ John A. Williams
------------------------------
John A. Williams
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Charles W. Newman
------------------------------
Charles W. Newman
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Charles E. Rice
------------------------------
Charles E. Rice
(SEAL)
<PAGE>
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director or Officer
of Barnett Banks, Inc. (the "Corporation") hereby constitutes and appoints
Hinton F. Nobles, Jr., Charles W. Newman and Patrick J. McCann, and each or
any of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead
to sign the Corporation's Form 10-K Annual Report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Secuities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and
thing necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have set my hand this 22nd day of January, 1997.
/s/ Allen L. Lastinger, Jr.
------------------------------
Allen L. Lastinger, Jr.
(SEAL)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2781
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3
<TRADING-ASSETS> 4
<INVESTMENTS-HELD-FOR-SALE> 5031
<INVESTMENTS-CARRYING> 130
<INVESTMENTS-MARKET> 140
<LOANS> 30253
<ALLOWANCE> 477
<TOTAL-ASSETS> 41231
<DEPOSITS> 33820
<SHORT-TERM> 1309
<LIABILITIES-OTHER> 1005
<LONG-TERM> 1227
500
0
<COMMON> 395
<OTHER-SE> 2975
<TOTAL-LIABILITIES-AND-EQUITY> 41231
<INTEREST-LOAN> 2657
<INTEREST-INVEST> 325
<INTEREST-OTHER> 24
<INTEREST-TOTAL> 3006
<INTEREST-DEPOSIT> 924
<INTEREST-EXPENSE> 1137
<INTEREST-INCOME-NET> 1869
<LOAN-LOSSES> 155
<SECURITIES-GAINS> 19
<EXPENSE-OTHER> 1617
<INCOME-PRETAX> 908
<INCOME-PRE-EXTRAORDINARY> 564
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 564
<EPS-PRIMARY> 2.89
<EPS-DILUTED> 2.86
<YIELD-ACTUAL> 5.24
<LOANS-NON> 185
<LOANS-PAST> 41
<LOANS-TROUBLED> 5
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 505
<CHARGE-OFFS> 209
<RECOVERIES> 55
<ALLOWANCE-CLOSE> 477
<ALLOWANCE-DOMESTIC> 477
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 87
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of December 2, 1996
Among
BARNETT CAPITAL II,
BARNETT BANKS, INC.,
and
MORGAN STANLEY & CO., INCORPORATED,
LEHMAN BROTHERS INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
and
SALOMON BROTHERS INC
as Initial Purchasers
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 2, 1996 by and among Barnett Capital II, a Delaware
statutory business trust (the "Trust"), Barnett Banks, Inc., a Florida
corporation (the "Company"), and Morgan Stanley & Co. Incorporated, Lehman
Brothers Inc., Merrill Lynch, Pirce, Fenner & Smith Incorporated and Salomon
Brothers Inc (together, the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of November 21, 1996, among the Company, the Trust and the
Initial Purchasers (the "Purchase Agreement"), which provides for the sale by
the Trust to the Initial Purchasers of $200,000,000 aggregate principal amount
of the Trust's 7.95% Capital Securities, liquidation amount $1,000 per security
(the "Capital Securities"). The Company will be the owner of all of the
beneficial ownership interest represented by the common securities (the "Common
Securities") of the Trust. The Capital Securities and the Common Securities
will be guaranteed by a guarantee (the "Guarantee") by the Company, to the
extent of funds held by the Trust. Concurrently with the issuance of the
Capital Securities, the Guarantee and the Common Securities, the Trust will
invest the proceeds of each thereof in the Company's 7.95% Junior Subordinated
Debentures (the "Junior Subordinated Debentures" and, together with the Capital
Securities and the Guarantee, the "Securities"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Trust and the Company have
agreed to provide the registration rights set forth in this Agreement for the
benefit of the Initial Purchasers and their direct and indirect transferees and
assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchase obligations to purchase the Capital Securities under the
Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized terms shall have the following meanings:
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
CLOSING DATE: The date on which the Securities were sold.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Securities Act of the Exchange Offer
Registration Statement relating to the New Securities to be issued in the
Exchange Offer, (ii) the maintenance of such Registration Statement
continuously effective and the keeping of the Exchange Offer open for a
period not less than the minimum period required pursuant to Section 3(b)
hereof, and (iii) the delivery by the Company and the Trust of the New
Securities in the same aggregate principal amount as the aggregate
principal amount of Transfer Restricted Securities that were tendered by
Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Securities, each
Distribution Date until the earlier of (i) the date on which Liquidated
Damages no longer are payable or (ii) maturity of the Securities.
<PAGE>
2
DECLARATION: Amended and Restated Declaration of Trust, dated as
of December 2, 1996, among The First National Bank of Chicago, as Property
Trustee, First Chicago Delaware Inc., as Delaware Trustee and the other
trustees named therein, pursuant to which the Capital Securities are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company and the Trust
under the Securities Act of the New Securities pursuant to a Registration
Statement pursuant to which the Company and the Trust offer the Holders of
all outstanding Transfer Restricted Securities the opportunity to exchange
all such outstanding Transfer Restricted Securities held by such Holders
for New Securities in an aggregate amount equal to the aggregate amount of
the Transfer Restricted Securities tendered in such exchange offer by such
Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration
Statement relating to the Exchange Offer, including the Prospectus which
forms a part thereof.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Securities to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Securities Act, to certain
institutional "accredited investors," as such term is defined in Rule
501(a)(1), (2), (3) and (7) of Regulation D under the Securities Act
("Accredited Institutions") and to certain non-U.S. persons pursuant to
Regulation S under the Securities Act.
GUARANTEE AGREEMENT: The Guarantee Agreement, dated as of
December 2, 1996, between the Company and The First National Bank of
Chicago, as Guarantee Trustee, pursuant to which the Guarantee is being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
HOLDERS: As defined in Section 2(b) hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated as of December 2, 1996, between
the Company and The First National Bank of Chicago, as trustee (the
"Trustee"), pursuant to which the Junior Subordinated Debentures are to be
issued, as such Indenture is amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASER: As defined in the preamble hereto.
DISTRIBUTION: As defined in the Declaration.
NASD: National Association of Securities Dealers, Inc.
<PAGE>
3
NEW JUNIOR SUBORDINATED DEBENTURES: The Company Junior
Subordinated Debentures to be issued pursuant to the Indenture in the
Exchange Offer.
NEW SECURITIES: The Securities to be issued pursuant to the
Indenture, the Declaration and the Guarantee Agreement in the Exchange
Offer.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the
Company and the Trust relating to (a) an offering of New Securities
pursuant to an Exchange Offer or (b) the registration for resale of
Transfer Restricted Securities pursuant to the Shelf Registration
Statement, which is filed pursuant to the provisions of this Agreement, in
each case including the Prospectus included therein, all amendments and
supplements thereto (including post-effective amendments) and all exhibits
and material incorporated by reference therein.
SECURITIES ACT: The Securities Act of 1933, as amended.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb).
TRANSFER RESTRICTED SECURITIES: Each Security, until the
earliest to occur of (a) the date on which such Security has been exchanged
by a person other than a Broker-Dealer for New Securities in the Exchange
Offer, (b) following the exchange by a Broker-Dealer in the Exchange Offer
of such Securities for one or more New Securities, the date on which such
New Securities are sold to a purchaser who receives from such Broker-Dealer
on or prior to the date of such sale a copy of the prospectus contained in
the Exchange Offer Registration Statement, (c) the date on which such
Securities have been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (d) the
date on which such Securities are distributed to the public pursuant to
Rule 144 under the Securities Act.
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A
registration in which securities of the Company and the Trust are sold to
an underwriter for reoffering to the public.
<PAGE>
4
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
3. REGISTERED EXCHANGE OFFER.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with), the Company and the Trust
shall (i) cause to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 150 days after the
Closing Date, a Registration Statement under the Securities Act relating to
the New Securities and the Exchange Offer, (ii) use their respective best
efforts to cause such Registration Statement to become effective at the
earliest possible time, but in no event later than 180 days after the
Closing Date, (iii) in connection with the foregoing, file (A) all pre-
effective amendments to such Registration Statement as may be necessary in
order to cause such Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Registration Statement
pursuant to Rule 430A under the Securities Act and (C) cause all necessary
filings in connection with the registration and qualification of the New
Securities to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) unless the
Exchange Offer would not be permitted by applicable law or Commission
policy, the Company will commence the Exchange Offer and use its best
efforts to issue on or prior to 30 business days after the date on which
such Registration Statement was declared effective by the Commission, New
Securities in exchange for all Securities tendered prior thereto in the
Exchange Offer. The Exchange Offer shall be on the appropriate form
permitting registration of the New Securities to be offered in exchange for
the Transfer Restricted Securities and to permit resales of New Securities
held by Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Trust shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the
Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate
the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period
be less than 20 business days. The Company and the Trust shall cause the
Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the New Securities shall be included in the
Exchange Offer Registration Statement. The Company and the Trust shall use
their best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 business days
thereafter.
<PAGE>
5
(c) The Company and the Trust shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in the Exchange
Offer Registration Statement that any Broker-Dealer who holds Securities
that are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Transfer Restricted Securities acquired directly from the
Company and the Trust), may exchange such Securities pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of the New Securities received by such Broker-
Dealer in the Exchange Offer, which prospectus delivery requirement may be
satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such
resales by Broker-Dealers that the Commission may require in order to
permit such resales pursuant thereto, but such "Plan of Distribution" shall
not name any such Broker-Dealer or disclose the amount of New Securities
held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy announced after the date of
this Agreement.
The Company and the Trust shall use their respective best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of New
Securities acquired by Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities, and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of 180 days from the date on which the Exchange Offer
Registration Statement is declared effective.
The Company and the Trust shall provide sufficient copies of the
latest version of such Prospectus to Broker-Dealers promptly upon request at any
time during such 180-day period in order to facilitate such resales.
4. SHELF REGISTRATION.
(a) SHELF REGISTRATION. If (i) the Company and the Trust are
not required to file an Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer is not permitted
by applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with), (ii) the Company has received
an opinion of counsel, rendered by a law firm having a nationally
recognized tax practice, to the effect that, as a result of the
consummation of the Exchange Offer there is more than an insubstantial risk
that (x) the Trust would be subject to United States federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures or New Junior Subordinated Debentures, (y) interest payable by
the Company on such Junior Subordinated Debentures or New Junior
Subordinated Debentures would not be deductible by the Company, in whole or
in part, for United States federal income tax purposes, or (z) the Trust
would be subject to more than a de minimis amount of other taxes, duties or
other governmental charges or (iii) if
<PAGE>
6
any Holder of Transfer Restricted Securities that is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act)
or an "accredited investor" (as defined in Rule 501(A)(1), (2), (3) or
(7) under the Securities Act) shall notify the Company within 20
business days of the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not
resell the New Securities acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the Prospectus contained
in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a
Broker-Dealer and holds Securities acquired directly from the Trust and
the Company or one of its affiliates, then the Trust and the Company
shall use their respective best efforts to:
(x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Securities Act,
which may be an amendment to the Exchange Offer Registration
Statement (in either event, the "Shelf Registration
Statement"), on or prior to the earliest to occur of (1) the
150th day after the date on which the Trust and the Company
determines that they are not required to file the Exchange
Offer Registration Statement or (2) the 150th day after the
date on which the Trust and the Company receive notice from
a Holder of Transfer Restricted Securities as contemplated
by clause (iii) above (such earliest date being the "Shelf
Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities
the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof; and
(y) cause such Shelf Registration Statement to be
declared effective by the Commission on or before the 180th
day after the Shelf Filing Deadline.
the Trust and the Company shall use their respective best efforts to
keep such Shelf Registration Statement continuously effective,
supplemented and amended as required by the provisions of Sections 6(b)
and (c) hereof to the extent necessary to ensure that it is available
for resales of Securities by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a), and to ensure
that it conforms with the requirements of this Agreement, the Securities
Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period ending on the third
anniversary of the Closing Date.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION
WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any
Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Trust and the Company in writing, within 20
business days after receipt of a request therefor, such information as the
Trust and the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No
<PAGE>
7
Holder of Transfer Restricted Securities shall be entitled to Liquidated
Damages pursuant to Section 5 hereof unless and until such Holder shall
have provided all such reasonably requested information. Each Holder as
to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Trust and the Company all information required
to be disclosed in order to make the information previously furnished to
the Trust and the Company by such Holder not materially misleading.
5. LIQUIDATED DAMAGES.
(a) If (a) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date specified for
such filing in this Agreement, (b) any of such Registration Statements has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within two business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself immediately declared effective (each such event
referred to in clauses (a) through (d), a "Registration Default"), the Trust and
the Company will pay liquidated damages ("Liquidated Damages") to each Holder of
Capital Securities (in their capacity as such and not in their capacity as an
indirect Holder of their pro rata share of the Junior Subordinated Debentures)
with respect to the first 90-day period immediately following the occurrence of
such Registration Default in an amount equal to $.25 per week per $1,000
liquidation amount of Capital Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
Liquidated Damages payable to any Holder of Capital Securities shall increase by
an additional $.05 per week per $1,000 in principal amount of Capital Securities
held by such Holder with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.50 per week per $1,000 principal amount of Capital Securities. All
accrued Liquidated Damages shall be paid to Holders by the Trust and the Company
by wire transfer of immediately available funds or by federal funds check on the
last day of each such 90-day period. Following the cure of all Registration
Defaults relating to any particular Transfer Restricted Securities, the accrual
of Liquidated Damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Trust and the Company set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
(b) The Trust and the Company shall notify the Property Trustee within
one business day after each and every date on which an event occurs in respect
of which Liquidated Damages are required to be paid (an "Event Date").
Liquidated Damages shall be paid by depositing with the Property Trustee, in
trust, for the benefit of the Holders thereof, on or before the applicable
Interest Payment Date (whether or not any payment other than Liquidated Damages
is payable on the Capital Securities), immediately available funds in sums
sufficient to pay the Liquidated Damages then due to Holders of Transfer
Restricted Securities with respect to which
<PAGE>
8
the Property Trustee serves. Each obligation to pay Liquidated Damages shall
be deemed to accrue from the applicable date of the occurrence of the
Registration Default.
6. REGISTRATION PROCEDURES.
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with
the Exchange Offer, the Trust and the Company shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect
such exchange to permit the sale of Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Trust
and the Company there is a question as to whether the Exchange Offer
is permitted by applicable law, the Trust and the Company hereby
agrees to seek a no-action letter or other favorable decision from the
Commission allowing the Trust and the Company to Consummate an
Exchange Offer for such Securities. The Trust and the Company hereby
agree to pursue the issuance of such a decision to the Commission
staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The
Trust and the Company hereby agree, however, to (A) participate in
telephonic conferences with the Commission, (B) deliver to the
Commission staff an analysis prepared by counsel to the Trust and the
Company setting forth the legal bases, if any, upon which such counsel
has concluded that such an Exchange Offer should be permitted and
(C) diligently pursue a resolution (which need not be favorable) by
the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Trust or
the Company, prior to the Consummation thereof, a written
representation to the Trust or the Company (which may be contained in
the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate
of the Trust or the Company, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the New Securities to be
issued in the Exchange Offer and (C) it is acquiring the New
Securities in its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise cooperate in
the Company's and the Trust's preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and
any such Holder using the Exchange Offer to participate in a
distribution of the securities to be acquired in the Exchange Offer
(1) could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in MORGAN
STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements
<PAGE>
9
of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of New Securities
obtained by such Holder in exchange for Securities acquired by such
Holder directly from the Trust or the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Trust shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Trust are registering the Exchange Offer in reliance on the
position of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above and (B) including a
representation that the Company and the Trust have not entered into
any arrangement or understanding with any Person to distribute the New
Securities to be received in the Exchange Offer and that, to the best
of the Company's and the Trust's information and belief, each Holder
participating in the Exchange Offer is acquiring the New Securities in
its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of
the New Securities received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Trust shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect
such registration to permit the sale of the Transfer Restricted Securities
being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company and the Trust will
as expeditiously as possible prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Securities Act, which form shall be available for the sale of the
Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale
or resale of Transfer Restricted Securities (including, without limitation,
any Registration Statement and the related Prospectus required to permit
resales of Securities by Broker-Dealers), the Company and the Trust shall:
(i) use their best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company
and the Trust shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either
<PAGE>
10
clause (A) or (B), use their best efforts to cause such amendment
to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s)
as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable,
or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely
manner; 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 method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, to confirm such
advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by
reference therein untrue, or that requires the making of any additions
to or changes in the Registration Statement or the Prospectus in order
to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or
other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the
Trust and the Company shall use their best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after
the initial filing of such Registration
<PAGE>
11
Statement), which documents will be subject to the review of such
Holders and underwriter(s), if any, for a period of at least five
business days, and the Trust and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement
to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which a selling Holder
of Transfer Restricted Securities covered by such Registration
Statement or the underwriter(s), if any, shall reasonably object
within five business days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed,
contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the selling Holders and
to the underwriter(s), if any, make the Trust's and the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by
the selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or
accountant retained by such selling Holders or any of the
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Trust and the Company and cause the
Trust's and the Company's officers, directors, managers and employees
to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase
price being paid therefor and any other terms of the offering of the
Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Trust and the Company are
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered
by the Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Securities covered thereby or the underwriter(s),
if any;
<PAGE>
12
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Trust and the Company hereby consent to the use of the Prospectus and
any amendment or supplement thereto by each of the selling Holders and
each of the underwriter(s), if any, in connection with the offering
and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be requested by any Purchaser or by any
Holder of Transfer Restricted Securities or underwriter in connection
with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement; and in connection with an Underwritten
Registration, the Trust and the Company shall:
(A) upon request, furnish to each selling Holder and
each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the
effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of the
effectiveness of the Shelf Registration Statement, signed by
(y) the Chairman of the Board its President or a Vice
President and (z) the Chief Financial Officer of the
Company, confirming, as of the date thereof, such matters as
such parties may reasonably request;
(2) an opinion, dated the date of the
effectiveness of the Shelf Registration Statement, of
counsel for the Company and the Trust, covering such matters
as such parties may reasonably request, and in any event
including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company and the Trust,
representatives of the independent public accountants for
the Company, the Initial Purchasers' representatives and the
Initial Purchasers' counsel in connection with the
preparation of such Registration Statement and the related
Prospectus and have considered the matters required to
<PAGE>
13
be stated therein and the statements contained therein,
although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the
foregoing (relying as to materiality to a large extent upon
facts provided to such counsel by officers and other
representatives of the Company and the Trust and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in
such Registration Statement as of its date, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
the effectiveness of the Shelf Registration Statement, from
the Company's independent accountants, in the customary form
and covering matters of the type customarily covered in
comfort letters by underwriters in connection with primary
underwritten offerings.
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company and the Trust pursuant to
this clause (xi), if any.
If at any time the representations and warranties of
the Company contemplated in clause (A)(1) above cease to be true
and correct, the Company shall so advise the Initial Purchasers
and the underwriter(s), if any, and each selling Holder promptly
and, if requested by such Persons, shall confirm such advice in
writing;
<PAGE>
14
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in connection
with the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions
as the selling Holders or underwriter(s) may reasonably request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; PROVIDED,
HOWEVER, that neither the Company nor the Trust shall not be required
to register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service
of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of
Securities covered by the Shelf Registration Statement, New Securities
in the same amount as the Securities surrendered to the Company and
the Trust by such Holder in exchange therefor or being sold by such
Holder; such New Securities to be registered in the name of such
Holder or in the name of the purchaser(s) of such Securities, as the
case may be; in return, the Securities held by such Holder shall be
surrendered to the Company and the Trust for cancellation;
(xiv) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities
to be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any,
may request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the
disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by
clause (c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted
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;
(xvii) provide CUSIP numbers for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide certificates for the Transfer Restricted
Securities;
<PAGE>
15
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use its best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing
at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture and the Declaration to be
qualified under the TIA not later than the effective date of the first
Registration Statement required by this Agreement, and, in connection
therewith, cooperate with the Trustee and the Holders of Securities to
effect such changes to the Indenture and the Declaration as may be
required for such Indenture and the Declaration to be so qualified in
accordance with the terms of the TIA; and execute and use their best
efforts to cause the Indenture Trustee, Guarantee Trustee and the
Property Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company or the Trust of the existence
of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder
will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by
the Company or the Trust that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. If so directed by the Company
or the Trust, each Holder will deliver to the Company or the Trust (at the
Company's and the Trust's expense) all copies, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of
such notice. In the event the Company or the Trust shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3
<PAGE>
16
or 4 hereof, as applicable, shall be extended by the number of days
during the period from and including the date of the giving of such
notice pursuant to Section 6(c)(iii)(D) hereof to and including the
date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
7. REGISTRATION EXPENSES.
All expenses incident to the Company's and the Trust's performance of
or compliance with this Agreement will be borne by the Company and the Trust,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the New Securities to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and the Trust; (v) all application and
filing fees in connection with listing Securities on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company and the Trust (including the expenses of any special audit and
comfort letters required by or incident to such performance); provided, however,
that neither the Company nor the Trust shall bear any costs independently
incurred by any Holders in connection with this Agreement, including fees and
expenses associated with such Holder's legal counsel or accountants.).
The Company and the Trust will, in any event, bear their internal
expenses (including, without limitation, all salaries and expenses of their
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Trust.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with a Shelf Registration Statement or in
connection with any delivery of a Prospectus contained in an Exchange Offer
Registration Statement by any participating Broker-Dealer or Initial Purchaser,
as applicable, who seeks to sell New Securities, the Company and the Trust shall
indemnify and hold harmless each Holder of Transfer Restricted Securities
included within any such Shelf Registration Statement and each participating
Broker-Dealer or Initial Purchaser selling New Securities, and each person, if
any, who controls any such person within the meaning of Section 15 of the
Securities Act (each, a "Participant") from and against any loss, claim, damage
or liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Securities) to which such Participant or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in any such Registration Statement or any prospectus forming part
thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a
<PAGE>
17
material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Participant
promptly upon demand for any legal or other expenses reasonably incurred by
such Participant in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that (i) the Company and the Trust
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
any such Registration Statement or any prospectus forming part thereof or in
any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company and the Trust by or on behalf of
any Participant specifically for inclusion therein; and PROVIDED FURTHER that
as to any preliminary Prospectus, the indemnity agreement contained in this
Section 8(a) shall not inure to the benefit of any such Participant or any
controlling person of such Participant on account of any loss, claim, damage,
liability or action arising from the sale of the New Securities to any person
by that Participant if (i) that Participant failed to send or give a copy of
the Prospectus, as the same may be amended or supplemented, to that person
within the time required by the Securities Act and (ii) the untrue statement
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such preliminary Prospectus was
corrected in the Prospectus, unless, in each case, such failure resulted from
non-compliance by the Company and the Trust with Section 6(c). The foregoing
indemnity agreement is in addition to any liability which the Company and the
Trust may otherwise have to any Participant or to any controlling person of
that Participant.
(b) Each Participant, severally and not jointly, shall indemnify and
hold harmless the Company and the Trust, each of its directors, officers,
employees or agents and each person, if any, who controls the Company and the
Trust within the meaning of Section 15 of the Securities Act, from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company and the Trust or any such director, officer,
employees or agents or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary Prospectus,
Registration Statement or Prospectus or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company and the
Trust by or on behalf of that Participant specifically for inclusion herein, and
shall reimburse the Company and the Trust and any such director, officer,
employees or agents or controlling person for any legal or other expenses
reasonably incurred by the Company and the Trust or any such director, officer,
employees or agents or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is
in addition to any liability which any Participant may otherwise have to the
Company and the Trust or any such director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the
<PAGE>
18
indemnifying party in writing of the claim or the commencement of that
action; PROVIDED, HOWEVER, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section
8 except to the extent it has been materially prejudiced by such failure and,
PROVIDED FURTHER, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that
the Initial Purchasers shall have the right to employ counsel to represent
jointly the Initial Purchasers and those other Participants and their
respective officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be
sought by the Participants against the Company and the Trust under this
Section 8 if, in the reasonable judgment of the Initial Purchasers it is
advisable for the Initial Purchasers and those Participants, officers,
employees and controlling persons to be jointly represented by separate
counsel, and in that event the fees and expenses of such separate counsel
shall be paid by the Trust and the Company. Each indemnified party, as a
condition of the indemnity agreements contained in Section 8, shall use its
best efforts to cooperate with the indemnifying party in the defense of any
such action or claim. No indemnifying party shall (i) without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without its written
consent (which consent shall not be unreasonably withheld), but if settled
with its written consent or if there be a final judgment of the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss of liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the Trust
and the Company on the one hand and the Participants on the other with respect
to the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Trust
and the Company or the Participants, the intent of
<PAGE>
19
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Trust and the Participants agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation (even if the Participants were treated as
one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above
in this Section 8(d) shall be deemed to include, for purposes of this Section
8(d), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Participant shall be
required to contribute any amount in excess of the amount by which proceeds
received by such Participant from an offering of the Notes exceeds the amount
of any damages which such Participant has otherwise paid or become liable to
pay by reason of any 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. The Participants' obligations to contribute as provided
in this Section 8(d) are several and not joint.
9. RULE 144A.
The Company and the Trust hereby agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding, to make available to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; PROVIDED, that such investment bankers and managers must be
reasonably satisfactory to the Company.
<PAGE>
20
12. MISCELLANEOUS.
(a) REMEDIES. The Company and the Trust agree that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agree to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company and the Trust will
not on or after the date of this Agreement enter into any agreement with
respect to their securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions
hereof. The Company and the Trust have not previously entered into any
agreement granting any registration rights with respect to their securities
to any Person. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Trust's and the Company's securities under any agreement in
effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company and the Trust
will not take any action, or permit any change to occur, with respect to
Securities that would materially and adversely affect the ability of the
Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company
and the Trust have obtained the written consent of Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-
class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Declaration; and
(ii) if to the Company and the Trust:
Paris P. Thermenos
Barnett Banks, Inc.
50 North Laura Street
Jacksonville, Florida 32202
<PAGE>
21
With a copy to:
Halcyon E. Skinner, Esq.
Mahoney Adams & Criser
3400 Barnett Center
50 North Laura Street
Jacksonville, Florida 32201
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) 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 Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(g) 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.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) 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 every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
<PAGE>
22
(k) ENTIRE AGREEMENT. This Agreement together with the other
transaction documents 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 and
the Trust with respect to the Transfer Restricted Securities. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(l) REQUIRED CONSENTS. Whenever the consent or approval of
Holders of a specified percentage of Transfer Restricted Securities is
required hereunder, Transfer restricted Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
<PAGE>
23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BARNETT BANKS, INC.
By:_________________________________
Name: Hinton F. Nobles, Jr.
Title: Executive Vie President
BARNETT CAPITAL II
By:_________________________________
Name: Paris P. Thermenos
Title: Regular Trustee
Accepted as of the date thereof
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.,
Merrill Lynch, Pirce, Fenner & Smith Incorporated
Salomon Brothers Inc
Acting severally on behalf of
themselves and the several
Purchasers named herein
By MORGAN STANLEY & CO. INCORPORATED.
By: ______________________________
Name:
Title:
<PAGE>
Schedule A to Registration Rights Agreement dated as of
December 2, 1996 among Barnett Banks, Inc. ("Barnett"),
Barnett Capital II, and Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and Salomon Brothers Inc, for the benefit of holders of
Capital Securities of Barnett Capital II
Due to their similarity to the above-referenced agreement, Barnett has
omitted to file the following documents and sets forth their material
differences below:
A. Registration Rights Agreement dated as of November 27, 1996 among
Barnett and Barnett Capital I and Morgan Stanley & Co., Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Salomon Brothers
Inc, for the benefit of holders of Capital Securities of Barnett Capital I.
B. Registration Rights Agreement dated as of January 28, 1997, among
Barnett and Barnett Capital III and Morgan Stanley & Co., Incorporated and
Chase Securities Inc., as initial purchasers, for the benefit of holders of
the Capital Securities of Barnett Capital III.
<PAGE>
- -----------------------------------------------------------------------------
GUARANTEE AGREEMENT
BARNETT CAPITAL II
DATED AS OF DECEMBER 2, 1996
- -----------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE TABLE*
Section of Trust
Indenture Act of Section of
1939, as amended Agreement
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.1(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.1(c)
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.2(b)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(d); 3.2(a)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.7(a)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(c)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.1(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6; 5.4(a)
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10; 5.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1(b)
- --------------------
* This Cross-Reference Table does not constitute part of the Agreement and
shall not have any bearing upon the interpretation of any of its terms
or provisions.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
INTERPRETATION AND DEFINITIONS. . . . . . . . . . . . . . . 1
SECTION 1.1 INTERPRETATION AND DEFINITIONS. . . . . . . . . . . . . . . . 1
ARTICLE 2
TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION . . . . . . . . . . . . . . . 4
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . 5
SECTION 2.3 REPORTS BY GUARANTEE TRUSTEE . . . . . . . . . . . . . . . . . 5
SECTION 2.4 PERIODIC REPORTS TO GUARANTEE TRUSTEE. . . . . . . . . . . . . 5
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT . . . . . . . 5
SECTION 2.6 GUARANTEE EVENT OF DEFAULT; WAIVER . . . . . . . . . . . . . . 5
SECTION 2.7 GUARANTEE EVENT OF DEFAULT; NOTICE . . . . . . . . . . . . . . 6
SECTION 2.8 CONFLICTING INTERESTS. . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.9 DISCLOSURE OF INFORMATION. . . . . . . . . . . . . . . . . . . 6
SECTION 2.10 GUARANTEE TRUSTEE MAY FILE PROOFS OF CLAIM . . . . . . . . . . 6
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE . . . . . . . . 7
SECTION 3.1 POWERS AND DUTIES OF GUARANTEE TRUSTEE . . . . . . . . . . . . 7
SECTION 3.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE. . . . . . . . . . . . . . 8
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. . . . . 10
ARTICLE 4
GUARANTEE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.1 GUARANTEE TRUSTEE; ELIGIBILITY . . . . . . . . . . . . . . . . 10
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE. . . 11
ARTICLE 5
GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.1 GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.2 WAIVER OF NOTICE AND DEMAND. . . . . . . . . . . . . . . . . . 12
SECTION 5.3 OBLIGATIONS NOT AFFECTED . . . . . . . . . . . . . . . . . . . 12
SECTION 5.4 RIGHTS OF HOLDERS. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.5 GUARANTEE OF PAYMENT . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.6 SUBROGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.7 INDEPENDENT OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 14
-i-
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ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION. . . . . . . . . . . 15
SECTION 6.1 LIMITATION OF TRANSACTIONS . . . . . . . . . . . . . . . . . . 15
SECTION 6.2 RANKING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 7
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 8
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 8.1 EXCULPATION . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 8.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 9
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 9.1 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . 16
SECTION 9.2 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 9.3 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 9.4 BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9.6 EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-ii-
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Guarantee"), dated as of December 2,
1996, is executed and delivered by Barnett Banks, Inc., a Florida corporation
(the "Guarantor"), and The First National Bank of Chicago, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) of
the Securities (as defined herein) of Barnett Capital II, a Delaware
statutory business trust (the "Trust").
W I T N E S S E T H :
WHEREAS, pursuant to the Declaration (as defined herein), the Trust
is issuing on the date hereof $200,000,000 aggregate principal amount of
capital securities, having an aggregate liquidation amount of $1,000,
designated the 7.95% Capital Securities (the "Capital Securities") and
6,186,000 common securities, having an aggregate liquidation amount of
$1,000, designated the 7.95% Common Securities (the "Common Securities";
together with the Capital Securities, the "Securities");
WHEREAS, as incentive for the Holders to purchase the Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Guarantee, to pay to the Holders of the Securities the
Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein; and that if a Trust Enforcement
Event has occurred and is continuing, the rights of holders of the Common
Securities to receive payments under this Guarantee are subordinated to the
rights of Holders of Capital Securities to receive Guarantee Payments under
this Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit
of the Holders.
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.1 INTERPRETATION AND DEFINITIONS. In this Guarantee,
unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to
this Guarantee as modified, supplemented or amended from time to time;
<PAGE>
2
(d) all references in this Guarantee to Articles and Sections are
to Articles and Sections of this Guarantee, unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee, unless otherwise defined in this Guarantee
or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa
and a reference to the masculine includes, as applicable, the feminine.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" has the meaning given to such term in the Indenture.
"Corporate Trust Office" means the office of the Guarantee Trustee
at which the corporate trust business of the Guarantee Trustee shall at any
particular time, be principally administered, which office at the date of
execution of this Guarantee is located at 153 West 51st Street, New York, New
York 10019.
"Covered Person" means any Holder or beneficial owner of Securities.
"Debentures" means the series of subordinated deferrable interest
debentures to be issued by the Guarantor, designated the 7.95% Junior
Subordinated Debentures due 2026 held by the Property Trustee (as defined in
the Declaration) of the Trust.
"Declaration" means the Amended and Restated Declaration of Trust,
dated as of December 2, 1996, as amended, modified or supplemented from time
to time, among the trustees of the Trust named therein, the Guarantor, as
sponsor, and the holders from time to time of undivided beneficial ownership
interests in the assets of the Trust.
"Guarantee Event of Default" means a default by the Guarantor on
any of its payment or other obligations under this Guarantee.
"Guarantee Trustee" means The First National Bank of Chicago, until
a successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee and thereafter means each
such Successor Guarantee Trustee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Securities, to the extent not paid
or made by the Trust: (i) any accumulated and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Securities
to the extent the Trust shall have sufficient funds available therefor at the
time, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption with respect to any Securities called
for redemption by the Trust, to the extent the Trust shall have sufficient
funds available therefor at the time, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than
in connection
<PAGE>
3
with the distribution of Debentures to the Holders in exchange for Securities
as provided in the Declaration), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Securities
to the date of payment, and (b) the amount of assets of the Trust remaining
available for distribution to Holders in liquidation of the Trust (in either
case, the "Liquidation Distribution"). If a Trust Enforcement Event (as
defined in the Declaration) has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under this
Guarantee are subordinated to the rights of Holders of the Capital Securities
to receive payments hereunder.
"Holder" shall mean any holder of Securities, as registered on the
books and records of the Trust; provided, however, that, in determining
whether the Holders of the requisite percentage of Capital Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor or any other obligor
on the Capital Securities; and provided further, that in determining whether
the Holders of the requisite liquidation amount of Capital Securities have
voted on any matter provided for in this Guarantee, then for the purpose of
such determination only (and not for any other purpose hereunder), if the
Capital Securities remain in the form of one or more Global Certificates (as
defined in the Declaration), the term "Holders" shall mean the holder of the
Global Certificate acting at the direction of the Preferred Security
Beneficial Owners (as defined in the Declaration).
"Indemnified Person" means the Guarantee Trustee, any Affiliate of
the Guarantee Trustee, and any officers, directors, shareholders, members,
partners, employees, representatives, nominees, custodians or agents of the
Guarantee Trustee.
"Indenture" means the Indenture, dated as of December 2, 1996,
among the Guarantor (the "Company") and The First National Bank of Chicago,
as trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the Property Trustee (as defined in the
Declaration) of the Trust.
"Majority in Liquidation Amount of the Securities" means, except as
provided in the terms of the Securities or by the Trust Indenture Act,
Holder(s) of outstanding Securities, voting separately as a class, who are
the record holders of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined) of all outstanding Securities. In
determining whether the Holders of the requisite amount of Securities have
voted, Securities which are owned by the Guarantor or any Affiliate of the
Guarantor shall be disregarded for the purpose of any such determination.
"Officers' Certificate" means, with respect to any Person, a
certificate signed on behalf of such Person by two Authorized Officers (as
defined in the Declaration) of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided
for in this Guarantee shall include:
<PAGE>
4
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer on behalf of such Person in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer on behalf of such Person to express an informed opinion as
to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer
acting on behalf of such Person, such condition or covenant has been
complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other
entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any officer within the Corporate Trust Office of the Guarantee Trustee,
including any vice president, any assistant vice president, the secretary,
any assistant secretary, the treasurer, any assistant treasurer or other
officer of the Corporate Trust Office of the Guarantee Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION. (a) This Guarantee
is subject to the provisions of the Trust Indenture Act that are required to
be part of this Guarantee and shall, to the extent applicable, be governed by
such provisions.
<PAGE>
5
(b) If and to the extent that any provision of this Guarantee
limits, qualifies or conflicts with the duties imposed by Sections 310 to
317, inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES. (a) The Guarantor
shall provide the Guarantee Trustee with a list, in such form as the
Guarantee Trustee may reasonably require, of the names and addresses of the
Holders of the Securities ("List of Holders"), (i) semi-annually, not later
than June 30 and December 31 of each year and current as of such date, and
(ii) at such other times as the Guarantee Trustee may request in writing,
within 30 days of receipt by the Guarantor of a written request from the
Guarantee Trustee for a List of Holders as of a date no more than 15 days
before such List of Holders is given to the Guarantee Trustee; excluding from
any such list names and addresses received by the Guarantee Trustee in its
capacity as Security Registrar (as defined in the Indenture). The Guarantee
Trustee shall preserve, in as current a form as is reasonably practicable,
all information contained in Lists of Holders given to it, provided that it
may destroy any List of Holders previously given to it on receipt of a new
List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY GUARANTEE TRUSTEE. Within 60 days after
May 15 of each year (commencing with the year of the first anniversary of the
issuance of the Securities), the Guarantee Trustee shall provide to the
Holders of the Securities such reports as are required by Section 313 of the
Trust Indenture Act (if any) in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee such documents, reports and
information as required by Section 314 (if any) of the Trust Indenture Act
and the compliance certificate required by Section 314 of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314 of
the Trust Indenture Act.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee that
relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.6 GUARANTEE EVENT OF DEFAULT; WAIVER. The Holders of a
Majority in Liquidation Amount of the Securities may, by vote or written
consent, on behalf of the Holders of all of the Securities, waive any past
Guarantee Event of default and its consequences. Upon such waiver, any such
Guarantee Event of Default shall cease to exist, and any Guarantee Event of
Default arising therefrom shall be deemed to have been cured, for
<PAGE>
6
every purpose of this Guarantee, but no such waiver shall extend to any
subsequent or other default or Guarantee Event of Default or impair any right
consequent thereon.
SECTION 2.7 GUARANTEE EVENT OF DEFAULT; NOTICE. (a) The
Guarantee Trustee shall, within 90 days after the occurrence of a Guarantee
Event of Default, transmit by mail, first class postage prepaid, to the
Holders of the Securities, notices of all Guarantee Events of Default
actually known to a Responsible Officer of the Guarantee Trustee, unless such
defaults have been cured before the giving of such notice; provided, that the
Guarantee Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Guarantee Event of Default unless the Guarantee Trustee shall have
received written notice thereof or a Responsible Officer of the Guarantee
Trustee charged with the administration of the Declaration shall have
obtained actual knowledge thereof.
SECTION 2.8 CONFLICTING INTERESTS. The Declaration shall be
deemed to be specifically described in this Guarantee for the purposes of
clause (i) of the first provision contained in Section 310(b) of the Trust
Indenture Act.
SECTION 2.9 DISCLOSURE OF INFORMATION. The disclosure of
information as to the names and addresses of the Holders of the Securities in
accordance with Section 312 of the Trust Indenture Act, regardless of the
source from which such information was derived, shall not be deemed to be a
violation of any existing law, or any law hereafter enacted which does not
specifically refer to Section 312 of the Trust Indenture Act, nor shall the
Guarantee Trustee be held accountable by reason of mailing any material
pursuant to a request made under Section 312(b) of the Trust Indenture Act.
SECTION 2.10 GUARANTEE TRUSTEE MAY FILE PROOFS OF CLAIM. Upon the
occurrence of a Guarantee Event of Default, the Guarantee Trustee is hereby
authorized to (a) recover judgment, in its own name and as trustee of an
express trust, against the Guarantor for the whole amount of any Guarantee
Payments remaining unpaid and (b) file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have its claims and
those of the Holders of the Securities allowed in any judicial proceedings
relative to the Guarantor, its creditors or its property.
<PAGE>
7
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF GUARANTEE TRUSTEE.
(a) This Guarantee shall be held by the Guarantee Trustee on
behalf of the Trust for the benefit of the Holders of the Securities, and the
Guarantee Trustee shall not transfer this Guarantee to any Person except a
Holder of Securities exercising his or her rights pursuant to Section 5.4(b)
or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee in and to
this Guarantee shall automatically vest in any Successor Guarantee Trustee,
and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If a Guarantee Event of Default actually known to a
Responsible Officer of the Guarantee Trustee has occurred and is continuing,
the Guarantee Trustee shall enforce this Guarantee for the benefit of the
Holders of the Securities.
(c) The Guarantee Trustee, before the occurrence of any Guarantee
Event of Default and after the curing of all Guarantee Events of Default that
may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Guarantee, and no implied covenants shall be
read into this Guarantee against the Guarantee Trustee. In case a Guarantee
Event of Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to a Responsible Officer of the Guarantee
Trustee, the Guarantee Trustee shall exercise such of the rights and powers
vested in it by this Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Guarantee Event of Default
and after the curing or waiving of all such Guarantee Events of
Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee, and the Guarantee Trustee shall not be liable except
for the performance of such duties and obligations as are
specifically set forth in this Guarantee, and no implied
covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; and
<PAGE>
8
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee Trustee,
the Guarantee Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of
this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in Liquidation Amount of the Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee; and
(iv) no provision of this Guarantee shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the
repayment of such funds or liability is not reasonably assured to it
under the terms of this Guarantee or indemnify, reasonably
satisfactory to the Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
SECTION 3.2 CERTAIN RIGHTS OF GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed
by it to be genuine and to have been signed, sent or presented by
the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee shall be sufficiently evidenced by an Officers'
Certificate.
<PAGE>
9
(iii) Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered by
the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any
recording, filing or registration or any instrument (or any
rerecording, refiling or registration thereof).
(v) The Guarantee Trustee may consult with counsel, and the
advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such counsel
may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration
of this Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
at the request or direction of any Holder, unless such Holder shall
have provided to the Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Guarantee Trustee; provided, that nothing contained
in this Section 3.2(a)(vi) shall be taken to relieve the Guarantee
Trustee, upon the occurrence of a Guarantee Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Guarantee.
(vii) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or
by or through agents, nominees, custodians or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder.
<PAGE>
10
(ix) Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of the Securities, and the
signature of the Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Guarantee
Trustee to so act or as to its compliance with any of the terms and
provisions of this Guarantee, both of which shall be conclusively
evidenced by the Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Guarantee the
Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other
action hereunder, the Guarantee Trustee (i) may request instructions
from the Holders of a Majority in Liquidation Amount of the
Securities, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in
accordance with such instructions.
(b) No provision of this Guarantee shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in
any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable
law, to perform any such act or acts or to exercise any such right, power,
duty or obligation. No permissive power or authority available to the
Guarantee Trustee shall be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Guarantee shall be taken as the statements of
the Guarantor, and the Guarantee Trustee does not assume any responsibility
for their correctness. The Guarantee Trustee makes no representations as to
the validity or sufficiency of this Guarantee.
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.1 GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall be at all times a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers,
<PAGE>
11
having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the
purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE
TRUSTEE.
(a) Subject to Section 4.1(b), the Guarantee Trustee may be
appointed or removed with or without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold such
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has
been appointed and has accepted such appointment by instrument in writing
executed by such Successor Guarantee Trustee and delivered to the Guarantor
and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 30 days after
delivery to the Guarantor of an instrument of removal or resignation, the
removed or resigning Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions
to act of any Successor Guarantee Trustee.
<PAGE>
12
(f) Upon termination of this Guarantee or removal or resignation
of the Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall
pay to the Guarantee Trustee all amounts owing for fees and reimbursement of
expenses which have accrued to the date of such termination, removal or
resignation.
ARTICLE 5
GUARANTEE
SECTION 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full
to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Trust), as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Guarantee
and of any liability to which it applies or may apply, presentment, demand
for payment, any right to require a proceeding first against the Trust or any
other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices
and demands. Notwithstanding anything to the contrary herein, the Guarantor
retains all of its rights under the Indenture to (i) extend the interest
payment period on the Debentures and the Guarantor shall not be obligated
hereunder to make any Guarantee Payments during any Extended Interest Payment
Period (as defined in the Indenture) with respect to the Distributions (as
defined in the Declaration) on the Securities, and (ii) change the maturity
date of the Debentures to the extent permitted by the Indenture.
SECTION 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee shall be absolute and unconditional and shall remain in
full force and effect until the entire liquidation amount of all outstanding
Securities shall have been paid and such obligation shall in no way be
affected or impaired by reason of the happening from time to time of any
event, including without limitation, the following, whether or not with
notice to, or the consent of, the Guarantor:
(a) The release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied
agreement,
<PAGE>
13
covenant, term or condition relating to the Securities to be performed or
observed by the Trust;
(b) The extension of time for the payment by the Trust of all or
any portion of the Distributions, Redemption Price (as defined in the
Indenture), Liquidation Distribution or any other sums payable under the
terms of the Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with the
Securities (other than an extension of time for payment of Distributions,
Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the
Debentures or any change to the maturity date of the Debentures permitted
by the Indenture);
(c) Any failure, omission, delay or lack of diligence on the part
of the Property Trustee or the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Property Trustee or
the Holders pursuant to the terms of the Securities, or any action on the
part of the Trust granting indulgence or extension of any kind;
(d) The voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Trust or any of the assets of the Trust;
(e) Any invalidity of, or defect or deficiency in, the Securities;
(f) The settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) Any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor,
it being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Guarantee Trustee or the
Holders to give notice to, or obtain consent of the Guarantor or any other
Person with respect to the happening of any of the foregoing.
No setoff, counterclaim, reduction or diminution of any obligation,
or any defense of any kind or nature that the Guarantor has or may have
against any Holder shall be available hereunder to the Guarantor against such
Holder to reduce the payments to it under this Guarantee.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in Liquidation Amount of the
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy
<PAGE>
14
available to the Guarantee Trustee in respect of this Guarantee or exercising
any trust or power conferred upon the Guarantee Trustee under this Guarantee.
(b) If the Guarantee Trustee fails to enforce this Guarantee, then
any Holder of Securities may, subject to the subordination provisions of
Section 6.2, institute a legal proceeding directly against the Guarantor to
enforce the Guarantee Trustee's rights under this Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity. Notwithstanding the foregoing, if the Guarantor
has failed to make a Guarantee Payment, a Holder of Securities may, subject
to the subordination provisions of Section 6.2, directly institute a
proceeding against the Guarantor for enforcement of the Guarantee for such
payment to the Holder of the Securities of the principal of or interest on
the Debentures on or after the respective due dates specified in the
Debentures, and the amount of the payment will be based on the Holder's pro
rata share of the amount due and owing on all of the Securities. The
Guarantor hereby waives any right or remedy to require that any action on
this Guarantee be brought first against the Trust or any other person or
entity before proceeding directly against the Guarantor.
SECTION 5.5 GUARANTEE OF PAYMENT.
This Guarantee creates a guarantee of payment and not of collection.
SECTION 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Securities against the Trust in respect of any amounts paid to
such Holders by the Guarantor under this Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any right that it may
acquire by way of subrogation of any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if at
the time of any such payment, any amounts are due and unpaid under this
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Guarantee Trustee for the benefit
of the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the Securities,
and that the Guarantor shall be liable as principal and as debtor hereunder
to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections 5.3(a)
through 5.3(g), inclusive, hereof.
<PAGE>
15
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS.
So long as any Securities remain outstanding, if there shall have
occurred a Guarantee Event of Default or a Trust Enforcement Event, then the
Guarantor shall not, and shall not permit any subsidiary of the Guarantor, to
(i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, the Guarantor's
capital stock or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities that rank pari
passu with or junior to the Debentures or make any guarantee payments with
respect to any guarantee by the Guarantor of the debt securities of any
subsidiary of the Guarantor if such guarantee ranks pari passu with or junior
to the Debentures (other than (a) dividends or distributions in common stock
of the Guarantor, (b) payments under this Guarantee and (c) any declaration
of a dividend in connection with the implementation of a stockholders' rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, and (d)
purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans).
SECTION 6.2 RANKING.
This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all
other liabilities of the Guarantor, except those liabilities of the Guarantor
made pari passu or subordinate by their terms.
If a Trust Enforcement Event has occurred and is continuing under
the Declaration, the rights of the holders of the Common Securities to
receive Guarantee Payments hereunder shall be subordinated to the rights of
the holders of the Securities to receive payment of all amounts due and owing
hereunder.
ARTICLE 7
TERMINATION
SECTION 7.1 TERMINATION.
This Guarantee shall terminate upon (i) full payment of the
Redemption Price of all Securities, (ii) upon the distribution of the
Debentures to the Holders of all the Securities or (iii) upon full payment of
the amounts payable in accordance with the Declaration upon liquidation of
the Trust. Notwithstanding the foregoing, this Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any
Holder of Securities must restore payment of any sums paid under the
Securities or under this Guarantee.
<PAGE>
16
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person
for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith in accordance
with this Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such
Indemnified Person by this Guarantee or by law, except that an Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason
of such Indemnified Person's negligence or willful misconduct with respect to
such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as
to matter the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence
and amount of assets from which Distributions to Holders of Securities might
properly be paid.
SECTION 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and
to hold each Indemnified Person harmless against any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees
and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The obligation to indemnify as set forth in this
Section 8.2 shall survive the termination of this Guarantee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Guarantee shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Securities
then outstanding.
<PAGE>
17
SECTION 9.2 AMENDMENTS.
Except with respect to any changes that do not adversely affect the
rights of the Holders (in which case no consent of the Holders will be
required), this Guarantee may only be amended with the prior approval of the
Holders of at least a Majority in Liquidation Amount of the Securities. The
provisions of Section 12.2 of the Declaration with respect to meetings of,
and action by written consent of the Holders of the Securities apply to the
giving of such approval.
SECTION 9.3 NOTICES.
All notices provided for in this Guarantee shall be in writing,
duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Guarantee Trustee, at the
Guarantee Trustee's mailing address set forth below (or
such other address as the Guarantee Trustee may give
notice of to the Guarantor and the Holders of the
Securities):
The First National Bank of Chicago
153 West 51st Street
New York, New York 10019
Attention: Corporate Trust Administration
Fax: (212) 373-1383
(b) If given to the Guarantor, at the Guarantor's
mailing addresses set forth below (or such other
address as the Guarantor may give notice of to the
Guarantee Trustee and the Holders of the Securities):
Barnett Banks, Inc.
Post Office Box 40789
Jacksonville, Florida 32203
Attn: Secretary
Fax: (904) 791-7124
(c) If given to any Holder of Securities, at the
address set forth on the books and records of the
Trust.
All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no
notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
<PAGE>
18
SECTION 9.4 BENEFIT.
This Guarantee is solely for the benefit of the Holders of the
Securities and, subject to Section 3.1(a), is not separately transferable
from the Securities.
SECTION 9.5 GOVERNING LAW.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.6 EXECUTION.
This guarantee may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument, and
may be executed by manual or facsimile signature.
<PAGE>
IN WITNESS WHEREOF, this Guarantee is executed as of the day and
year first above written.
BARNETT BANKS, INC.,
as Guarantor
By:
-------------------------------
Name: Hinton F. Nobles, Jr.
Title: Executive Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee
By:
-------------------------------
Name: Mary R. Fonti
Title: Assistant Vice President
<PAGE>
Schedule A to Guarantee Agreement dated as of December 2, 1996,
between Barnett Banks, Inc. ("Barnett") and The First National
Bank of Chicago, as trustee (the "Guarantee Trustee"), for the
benefit of holders of Securities of Barnett Capital II
Due to their similarity to the above-referenced agreement, Barnett has
omitted to file the following documents and sets forth their material
differences below:
A. Guarantee Agreement dated as of November 27,
1996 between Barnett and the Guarantee Trustee for the
benefit of holders of securities of Barnett Capital I.
B. Guarantee Agreement dated as of January 28,
1997, between Barnett and the Guarantee Trustee for the
benefit of holders of Securities of Barnett Capital
III.
<PAGE>
BARNETT BANKS, INC.
TO
THE FIRST NATIONAL BANK OF CHICAGO
a national banking association, Trustee
INDENTURE
Dated as of December 2, 1996
7.95% Junior Subordinated Debentures due 2026
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION. . . . . . . . . . . 1
SECTION 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Adjusted Treasury Rate. . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Comparable Treasury Issue . . . . . . . . . . . . . . . . . . . . . . . 3
Comparable Treasury Price . . . . . . . . . . . . . . . . . . . . . . . 3
Corporate Trust Office. . . . . . . . . . . . . . . . . . . . . . . . . 4
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DWAC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Extension Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Initial Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Institutional Accredited Investor . . . . . . . . . . . . . . . . . . . 5
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Company Event. . . . . . . . . . . . . . . . . . . . . . . . 5
-i-
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Junior Subordinated Securities. . . . . . . . . . . . . . . . . . . . . 6
Legal Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
New Junior Subordinated Securities. . . . . . . . . . . . . . . . . . . 6
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 6
Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Predecessor Security. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Private Placement Legend. . . . . . . . . . . . . . . . . . . . . . . . 7
Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Qualified Institutional Buyer" or "QIB. . . . . . . . . . . . . . . . . 7
Quotation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Reference Treasury Dealer Quotations. . . . . . . . . . . . . . . . . . 8
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . 8
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulation S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulation S Global Security. . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Capital Event. . . . . . . . . . . . . . . . . . . . . . . . 8
Remaining Life. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Restricted Global Security. . . . . . . . . . . . . . . . . . . . . . . 9
Restricted Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Restricted Security . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Security Registrar. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Special Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Stated Maturity". . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Treasury Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . 10
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . 10
Vice President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . 10
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . 11
SECTION 104. Acts of Holders; Record Dates. . . . . . . . . . . . . . . . . 11
SECTION 105. Notices, Etc. to Trustee and the Company . . . . . . . . . . . 12
SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . 13
SECTION 107. Conflict With Trust Indenture Act. . . . . . . . . . . . . . . 13
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . 13
SECTION 109. Separability Clause. . . . . . . . . . . . . . . . . . . . . . 13
SECTION 110. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . 14
SECTION 111. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 112. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE TWO
SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE THREE
THE SECURITIES. . . . . . . . . . . . . . . 15
SECTION 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . 17
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . 18
SECTION 305. Registration; Registration of Transfer and Exchange. . . . . . 18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . 19
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . 20
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SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . 21
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 310. Computation of Interest. . . . . . . . . . . . . . . . . . . . 22
SECTION 311. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 312. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 313. Global Securities. . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 314. Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 315. Special Transfer Provisions. . . . . . . . . . . . . . . . . . 26
ARTICLE FOUR
SATISFACTION AND DISCHARGE; DEFEASANCE. . . . . . . . . 29
SECTION 401. Satisfaction and Discharge of Indenture. . . . . . . . . . . . 29
SECTION 402. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 403. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 404. Conditions to Legal Defeasance or Covenant Defeasance. . . . . 31
SECTION 405. Application of Trust Money . . . . . . . . . . . . . . . . . . 32
SECTION 406. Indemnity for U.S. Government Obligations. . . . . . . . . . . 32
ARTICLE FIVE
REMEDIES . . . . . . . . . . . . . . . . 32
SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . 33
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 504. Trustee may File Proofs of Claim . . . . . . . . . . . . . . . 35
-iv-
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SECTION 505. Trustee may Enforce Claims Without Possession of Securities. . 35
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . 35
SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . 36
SECTION 508. Unconditional Right of Holders to Receive Principal and
Interest; Capital Security Holders' Rights . . . . . . . . . . 36
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . 37
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . 37
SECTION 511. Delay or Omission not Waiver . . . . . . . . . . . . . . . . . 37
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . 38
SECTION 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . 38
SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . 39
ARTICLE SIX
TRUSTEE . . . . . . . . . . . . . . . . 39
SECTION 601. Certain Duties and Responsibilities. . . . . . . . . . . . . . 39
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . . 40
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . 41
SECTION 605. Trustee and Other Agents may Hold Securities . . . . . . . . . 41
SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . 41
SECTION 607. Compensation; Reimbursement; and Indemnity . . . . . . . . . . 41
SECTION 608. Disqualification; Conflicting Interests. . . . . . . . . . . . 42
-v-
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SECTION 609. Corporate Trustee Required; Eligibility. . . . . . . . . . . . 42
SECTION 610. Resignation and Removal; Appointment of Successor. . . . . . . 42
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . 43
SECTION 612. Merger, Conversion, Consolidation or Succession to Business. . 44
SECTION 613. Preferential Collection of Claims Against Company. . . . . . . 44
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY. . . . . . 44
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. . . 44
SECTION 702. Preservation of Information; Communications to Holders . . . . 45
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . 46
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms . . . . . 46
SECTION 802. Successor Person Substituted . . . . . . . . . . . . . . . . . 46
ARTICLE NINE
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . 47
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . 47
SECTION 902. Supplemental Indentures With Consent of Holders. . . . . . . . 48
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . 49
SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . . . . 49
SECTION 905. Conformity With Trust Indenture Act. . . . . . . . . . . . . . 49
-vi-
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SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . 49
ARTICLE TEN
COVENANTS. . . . . . . . . . . . . . . . 49
SECTION 1001. Payment of Principal and Interest . . . . . . . . . . . . . . 49
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . 49
SECTION 1003. Money for Security Payments to be Held in Trust . . . . . . . 50
SECTION 1004. Statements by Officers as to Default. . . . . . . . . . . . . 51
SECTION 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . 51
SECTION 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . 52
SECTION 1008. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . 52
SECTION 1009. Payment of the Trust's Costs and Expenses . . . . . . . . . . 52
ARTICLE ELEVEN
SUBORDINATION OF SECURITIES . . . . . . . . . . . 53
SECTION 1101. Securities Subordinate to Indebtedness. . . . . . . . . . . . 53
SECTION 1102. Default on Indebtedness . . . . . . . . . . . . . . . . . . . 53
SECTION 1103. Prior Payment of Indebtedness Upon Acceleration of
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 1104. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . . 54
SECTION 1105. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 1106. Trustee to Effectuate Subordination . . . . . . . . . . . . . 57
SECTION 1107. Notice by the Company . . . . . . . . . . . . . . . . . . . . 57
SECTION 1108. Rights of the Trustee; Holders of Indebtedness. . . . . . . . 58
-vii-
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SECTION 1109. Subordination may not be Impaired . . . . . . . . . . . . . . 58
ARTICLE TWELVE
REDEMPTION OF SECURITIES . . . . . . . . . . . . 59
SECTION 1201. Optional Redemption; Conditions to Optional Redemption. . . . 59
SECTION 1202. Applicability of Article. . . . . . . . . . . . . . . . . . . 60
SECTION 1203. Election to Redeem; Notice to Trustee . . . . . . . . . . . . 60
SECTION 1204. Selection by Trustee of Securities to be Redeemed . . . . . . 60
SECTION 1205. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . 60
SECTION 1206. Deposit of Redemption Price . . . . . . . . . . . . . . . . . 61
SECTION 1207. Securities Payable on Redemption Date . . . . . . . . . . . . 61
-viii-
<PAGE>
Sections 310 through 318 of the
Trust Indenture Act of 1939:
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .608, 610
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .702(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .703(a)
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101, 1004
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .703(a)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .703(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .703(b)
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
<PAGE>
This INDENTURE is dated as of December 2, 1996, between BARNETT
BANKS, INC., a corporation duly organized and existing under the laws of the
State of Florida (herein called the "Company"), having its principal office
at 50 North Laura Street, Jacksonville, Florida 32202, and THE FIRST NATIONAL
BANK OF CHICAGO, a national banking association, as Trustee (herein called
the "Trustee").
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of its 7.95% Junior Subordinated Debentures due 2026 (the "Junior
Subordinated Securities") and its 7.95% New Junior Subordinated Debentures due
2026 (the "New Junior Subordinated Securities", and together with the Junior
Subordinated Securities, the "Securities") to be issued in exchange for the
Junior Subordinated Securities.
WHEREAS, Barnett Capital II (the "Trust") has offered to the public
$200,000,000 aggregate liquidation amount of its 7.95% Capital Securities (the
"Capital Securities") representing undivided beneficial interests in the assets
of the Trust and proposes to invest the proceeds from such offering and the
proceeds from the issuance of its Common Securities in $206,186,000 aggregate
principal amount of the Securities.
WHEREAS, to provide the terms and conditions upon which the Securities
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture.
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as expressly provided or
unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular and the
masculine as well as the feminine;
<PAGE>
2
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(5) a reference to any Person shall include its successor and
assigns;
(6) a reference to any agreement or instrument shall mean such
agreement or instrument as supplemented, modified, amended or amended and
restated and in effect from time to time;
(7) a reference to any statute, law, rule or regulation, shall
include any amendments thereto applicable to the relevant Person, and any
successor statute, law, rule or regulation; and
(8) a reference to any particular rating category shall be deemed to
include any corresponding successor category, or any corresponding rating
category issued by a successor or subsequent rating agency.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Adjusted Treasury Rate" means, with respect to any Redemption Date,
the Treasury Rate plus (i) 1.25% if such Redemption Date occurs on or before
December 1, 1997 or (ii) 0.50% if such Redemption Date occurs after December 1,
1997.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board as the context requires.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors
<PAGE>
3
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed or a day on which the Corporate Trust
Office of the Trustee, or the principal office of the Property Trustee, under
the Declaration, is closed for business.
"Capital Securities" has the meaning specified in the Recitals to this
instrument.
"Cedel" means Cedel, S.A.
"Closing Date" means December 2, 1996.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Securities" means the common securities issued by the Trust.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, a President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Comparable Treasury Issue" means with respect to any Redemption Date
the United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States treasury security has a maturity which is within a
period from three months before to three months after December 1, 2006, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Comparable Treasury Price" means (A) the average of five Reference
Treasury Dealer Quotations for such Redemption Date, after excluding the highest
and lowest such Reference Treasury Dealer Quotations, or (B) if the Indenture
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
<PAGE>
4
"Corporate Trust Office" means the principal office of the Trustee in
the City of New York, at which at any particular time its corporate trust
business shall be administered and which at the date of this Indenture is
located at 153 West 51st Street, New York, New York 10019.
"Covenant Defeasance" has the meaning specified in Section 403.
"Declaration" means the Amended and Restated Declaration of Trust
among the Company, as Sponsor and the Trustee, as the initial Property Trustee,
First Chicago Delaware Inc., a Delaware corporation, as the initial Delaware
Trustee, and Paris P. Thermenos, Charles W. Newman and Patrick J. McCann, as the
initial Regular Trustees, dated as of December 2, 1996.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to Securities issuable in whole or in
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated to act as Depositary for such
Securities.
"DWAC" means Deposit and Withdrawal At Custodian Service.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor legislation.
"Extension Period" has the meaning specified in Section 301.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Global Security" means a Security that evidences all or part of the
Securities and is authenticated and delivered to, and registered in the name of,
the Depositary for such Securities or a nominee thereof.
"Guarantee" means the Guarantee Agreement, dated as of December 2,
1996, made by the Company in favor of The First National Bank of Chicago, as
trustee thereunder for the benefit of the Holders (as defined therein) of the
Capital Securities and the holder of the Common Securities.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
<PAGE>
5
"Indebtedness" means, with respect to any Person, whether recourse is
to all or a portion of the assets of such Person and whether or not contingent,
(i) every obligation of such Person for money borrowed, (ii) every obligation
of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) every capital lease obligation of such Person,
(vi) every obligation of such person for claims (as defined in Section 101(4) of
the United States Bankruptcy Code of 1978, as amended) in respect of derivative
products such as interest and foreign exchange rate contracts, commodity
contracts and similar arrangements and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another person and all dividends of
another person the payment of which, in either case, such person has guaranteed
or is responsible or liable, directly or indirectly, as obligor or otherwise;
PROVIDED that "Indebtedness" shall not include (i) any obligations which, by
their terms, are expressly stated to rank PARI PASSU in right of payment with,
or to not be superior in right of payment to, the Securities, (ii) any
Indebtedness of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (iii) any Indebtedness of the
Company to any of its subsidiaries, (iv) Indebtedness to any employee of the
Company or (v) any indebtedness in respect of debt securities issued to any
trust, or a trustee of such trust, partnership or other entity affiliated with
the Company that is a financing entity of the Company in connection with the
issuance of such financing entity or securities that are similar to the Capital
Securities.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated, Lehman
Brothers Inc., Merrill Lynch & Co. and Salomon Brothers Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as the term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date", when used with respect to any installment of
interest on a Security, means the date specified in such Security as the fixed
date on which an installment of interest with respect to the Securities is due
and payable.
"Investment Company Event" means the receipt by the Trust of an
Opinion of Counsel having a recognized national securities practice to the
effect that, as a result of the occurrence of a change in law or regulation or a
change in interpretation or application of law
<PAGE>
6
or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be
considered an "investment company" that is required to be registered under
the Investment Company Act of 1940 as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Securities.
"Junior Subordinated Securities" has the meaning specified in the
Recitals to this instrument.
"Legal Defeasance" has the meaning specified in Section 402.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"New Junior Subordinated Securities" has the meaning specified in the
Recitals to this instrument.
"Officers' Certificate" means a certificate signed on behalf of the
Company by the Chairman of the Board, a Vice Chairman of the Board, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee. One of the officers signing an Officers' Certificate given pursuant to
Section 1004 shall be the principal executive, financial or accounting officer
of the Company. Any Officers' Certificate delivered with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each officer signing the Officers' Certificate
on behalf of the Company has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer on behalf of the Company in rendering
the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company (and who may be an employee of the Company), and who
shall be reasonably acceptable to the Trustee. An opinion of counsel may rely
on certificates as to matters of fact.
<PAGE>
7
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities authenticated and delivered under this
Indenture, except: (i) Securities cancelled by the Trustee or delivered to the
Trustee for cancellation; (ii) Securities for whose payment or redemption money
in the necessary amount has been deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holder of
such Securities; PROVIDED that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and (iii) Securities which
have been paid pursuant to Section 306, or in exchange or for in lieu of which
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such 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 Company.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Private Placement Legend" as defined in Section 314 of this
Indenture.
"Property Trustee" has the meaning set forth in the Declaration.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Quotation Agent" means (i) Morgan Stanley & Co. Incorporated and its
successors; PROVIDED, HOWEVER, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer;
and (ii) any other Primary Treasury Dealer selected by the Indenture Trustee
after consultation with the Company.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined
by the Indenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Indenture Trustee by such Reference Treasury
Dealer at 5:00 p.m. New York City time, on the third business day preceding
such Redemption Date.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof between the Company and the Initial Purchasers
for the benefit of themselves and the Holders (as defined therein) of the
Capital Securities as the same may be amended from time to time in accordance
with the terms thereof.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the 15th day of the month prior to the relevant Interest Payment
Date.
"Regulation S" means Regulation S under the Securities Act and any
successor regulation thereto.
"Regulation S Global Security" means any Global Security or Securities
evidencing Securities that are to be traded pursuant to Regulation S.
"Regulatory Capital Event" means that the Company shall have received
an opinion of independent bank regulatory counsel experienced in such matters to
the effect that, as a result of (a) any amendment to or change (including any
announced prospective change) in the laws (or any regulations thereunder) of the
United States or any rules, guidelines or policies of the Federal Reserve or (b)
any official administrative pronouncement or judicial decision for interpreting
or applying such laws or regulations which amendment or change is effective or
such pronouncement or decision is announced on or after the date of original
issuance of the Capital Securities, the Capital Securities do not constitute, or
within 90 days of the date thereof, will not constitute Tier I capital (or its
then equivalent); PROVIDED, HOWEVER, that the distribution of the Securities in
connection with the liquidation of the Trust by the Company shall not in and of
itself constitute a Regulatory Capital Event unless such liquidation shall have
occurred in connection with a Tax Event or an Investment Company Event.
"Remaining Life" has the meaning specified in Section 1201.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any Vice President, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
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9
"Restricted Global Security" means any Global Security or Securities
evidencing Securities that are to be traded pursuant to Rule 144A.
"Restricted Period" shall have the meaning specified in Section 315.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) of the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" has the meaning specified in the Recitals to this
instrument.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Event" means either an Investment Company Event, a Regulatory
Capital Event or a Tax Event.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the date on which the principal, together with any accrued and unpaid interest,
of such Security or such installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel,
rendered by a law firm having a recognized national tax practice, to the effect
that, as a result of any amendment to, change in or announced proposed change in
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is adopted or which
pronouncement or decision is announced on or after the date of original issuance
of the Capital Securities under the Declaration, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Securities, (ii) interest payable by the
Company on the Securities is not, or within 90 days of the date of such opinion,
will
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10
not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) the Trust is, or will be within 90 days of
the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Treasury Rate" means (i) the yield, under the heading which
represents the average for the immediately prior week, appearing in the most
recently published statistical release designated "H.15(519)" or any
successor publication which is published weekly by the Federal Reserve and
which establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities", for the maturity corresponding to the Remaining Life (if no
maturity is within three months before or after the Remaining Life, yields
for the two published maturities most closely corresponding to the Remaining
Life shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such Redemption Date. The
Treasury Rate shall be calculated on the third business day preceding the
Redemption Date.
"Trust" means Barnett Capital II, a statutory business trust declared
and established pursuant to the Delaware Business Trust Act by the Declaration.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; PROVIDED, HOWEVER,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"U.S. Government Obligations" has the meaning specified in Section
404.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall
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11
comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or given an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee at the address specified in Section 105 and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the
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12
execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 701)
prior to such first solicitation or vote, as the case may be.
With regard to any record date, only the Holders on such date (or
their duly designated proxies) shall be entitled to give or take, or vote on,
the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, Etc. to Trustee and the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, Attention: Corporate Trust
Trustee Administration; or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to it
at the address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
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SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the provision of the Trust Indenture Act
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as to modified or so
be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Separability Clause.
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.
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SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Indebtedness, the holders of Capital Securities (to
the extent provided herein) and the Holders of Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE PROVISIONS OF THE
TRUST INDENTURE ACT THAT ARE REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO
THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal of the Securities need not be made on such date, but may be made on
the next succeeding Business Day (except that, if such Business Day is in the
next succeeding calendar year, such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, shall be the immediately preceding Business
Day) with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity, PROVIDED that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
The Junior Subordinated Securities in definitive form and the New
Junior Subordinated Securities in definitive form shall be in the form attached
hereto as Exhibit A; PROVIDED, that the New Junior Subordinated Securities shall
not contain any of the provisions following the Trustee's authentication.
If the Securities are distributed to the holders of Capital
Securities and Common Securities, the record holder (including any
Depositary) of any Capital Securities or Common Securities shall be issued
Securities in definitive, fully registered form without interest coupons,
substantially in the form of Exhibit A hereto, with the legends in
substantially the form of the legends existing on the security representing
the Capital Securities or Common Securities to be exchanged (with such
changes thereto as the officers
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15
executing such Securities determine to be necessary or appropriate, as
evidenced by their execution of the Securities) and such other legends as may
be applicable thereto (including any legend required by Section 313 or
Section 314 hereof), duly executed by the Company and authenticated by the
Trustee or the authenticating agent as provided herein, which Securities, if
to be held in global form by any Depositary, may be deposited on behalf of
the holders of the Securities represented thereby with the Trustee, as
custodian for the Depositary, and registered in the name of a nominee of the
Depositary.
Any Global Security shall represent such of the outstanding Securities
as shall be specified therein and shall provide that it shall represent the
aggregate amount of outstanding Securities from time to time endorsed thereon
and that the aggregate amount of outstanding Securities represented thereby may
from time to time be increased or reduced to reflect transfers or exchanges
permitted hereby. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in such manner and upon instructions given by the holder of such
Securities in accordance with the Indenture. Payment of principal of and
interest and premium, if any, on any Global Security shall be made to the holder
of such Global Security.
The Securities shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these or other methods, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $206,186,000
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1208.
The Securities' Maturity shall be December 1, 2026.
The Securities shall bear interest at the rate of 7.95% per annum,
from December 2, 1996 or from the most recent Interest Payment Date to which
interest has been
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16
paid or duly provided for, as the case may be, payable semi-annually (subject
to deferral as set forth herein), in arrears, on June 1 and December 1 of
each year, commencing June 1, 1997, until the principal thereof is paid or
made available for payment. Interest will compound semi-annually and will
accrue at the rate of 7.95% per annum on any interest installment in arrears
for more than one semi-annual period or during an extension of an interest
payment period as set forth below in this Section 301. In the event that any
date on which interest is payable on the Securities is not a Business Day,
then a payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay).
The Company shall have the right, at any time during the term of the
Securities, from time to time, to defer payment of interest on such Security for
up to 10 consecutive semi-annual periods (an "Extension Period") PROVIDED that
no Extension Period may extend past the Maturity of the Security. There may be
multiple Extension Periods of varying lengths during the term of the Securities.
At the end of each Extension Period, if any, the Company shall pay all interest
then accrued and unpaid, together with interest thereon, compounded semi-
annually at the rate specified on this Security to the extent permitted by
applicable law. During any such Extension Period, the Company may not, and may
not permit any Subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank PARI PASSU with or junior in interest
to the Securities or make any guarantee payments with respect to any guarantee
by the Company of the debt securities of any Subsidiary of the Company if such
guarantee ranks PARI PASSU or junior in interest to the Securities (other than
(a) dividends or distributions in common stock of the Company, (b) payments
under the Guarantee, (c) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (d) purchases of common stock related to the issuance of
common stock or rights under any of the Company's benefit plans). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, PROVIDED that no Extension Period may exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of the
Securities. Upon the termination of any such Extension Period and the payment
of all amounts then due on any Interest Payment Date, the Company may elect to
begin a new Extension Period subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Property Trustee, the Regular Trustees and the
Debenture Trustee notice of its election of such Extension Period at least one
Business Day prior to the record date for the related interest payment.
The Trustee shall promptly give notice of the Company's selection of
such Extension Period to the Holders of the Capital Securities.
The principal of and interest on the Securities shall be payable at
the office or agency of the Paying Agent in the United States maintained for
such purpose and at any other office or agency maintained by the Company for
such purpose in such coin or currency of the
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17
United States of America as at the time of payment is legal tender for
payment of public and private debts; PROVIDED, HOWEVER, that at the option of
the Company payment of interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer in immediately available funds at
such place and to such account as may be designated by the Person entitled
thereto as specified in the Security Register.
The Securities shall be subordinated in right of payment to
Indebtedness as provided in Article Eleven.
The Securities shall be redeemable as provided in Article Twelve.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form, without
coupons, and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, a President or one of its
Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
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SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration; Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
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19
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
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 connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Sections 304, 906 or 1208 not involving any transfer.
If the Securities are to be redeemed in part, the Company shall not be
required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption under Section 1204 and ending at the close of business on the day of
such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
So long as the Securities are eligible for book-entry settlement with
the Depositary, or unless otherwise required by law, all Securities to be traded
on the PORTAL Market shall be represented by the Restricted Global Security
registered in the name of the Depositary or the nominee of the Depositary.
The transfer and exchange of beneficial interests in any Global
Security, which does not involve the issuance of a definitive Security or the
transfer of interests to another Global Security, shall be effected through the
Depositary (but not the Trustee or the Custodian) in accordance with this
Indenture (including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor. Neither the Trustee nor the Custodian
(in such respective capacities) will have any responsibility for the transfer
and exchange of beneficial interests in such Global Security that does not
involve the issuance of a definitive Security or the transfer of interests to
another Global Security.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall
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20
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
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.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the
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21
payment of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first-class postage prepaid, to each Holder at
his address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and if so listed, upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee. Subject to the
foregoing provisions of this Section, each Security delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and unpaid, and to
accrue which, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee shall treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and (subject to
Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company Order.
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22
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months. The amount of interest payable for any period
shorter than a full semi-annual period for which interest is computed will be
computed on the basis of actual number of days elapsed in such 180-day semi-
annual period.
SECTION 311. Right of Set-off.
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
thereunder to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a related payment under the Guarantee.
SECTION 312. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
SECTION 313. Global Securities.
If the Securities are distributed to the holders of Capital
Securities, Securities distributed in respect of Capital Securities that are
held in global form by a Depositary will initially be issued as a Global
Security, unless such transfer cannot be effected through book-entry settlement.
If the Company shall establish that the Securities are to be issued in the form
of one or more Global Securities, then the Company shall execute and the Trustee
shall, in accordance with Section 303 and the Company Order, authenticate and
deliver one or more Global Securities that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of all of the
Securities to be issued in the form of Global Securities and not yet cancelled,
(ii) shall be registered in the name of the Depositary for such Global Security
or Securities or the nominee of such Depositary, and (iii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instructions.
Global Securities shall bear a legend substantially to the following effect:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee of a Depositary. Notwithstanding the provisions of Section 305,
unless and until it is exchanged in whole or in part for Securities in
definitive registered form, a Global Security representing all or a part of the
Securities may not be transferred in the manner provided in Section 305 except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such
<PAGE>
23
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Every Security delivered upon registration or transfer
of, or in exchange for, or in lieu of, this Global Security shall be a Global
Security subject to the foregoing, except in the limited circumstances
described above. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to the Company or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede &
Co. or in such other name as is requested by an authorized representative of
DTC (and any payment is to be made to Cede & Co. or to such other entity as
is 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."
Definitive Securities issued in exchange for all or a part of a Global
Security pursuant to this Section 313 shall be registered in such names and in
such authorized denominations as the Depositary, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct the Trustee.
Upon execution and authentication, the Trustee shall deliver such definitive
Securities to the persons in whose names such definitive Securities are so
registered.
At such time as all interests in Global Securities have been redeemed,
repurchased or canceled, such Global Securities shall be, upon receipt thereof,
canceled by the Trustee in accordance with standing procedures and instructions
existing between the Depositary and the Custodian. At any time prior to such
cancellation, if any interest in Global Securities is exchanged for definitive
Securities, redeemed, canceled or transferred to a transferee who receives
definitive Securities therefor or any definitive Security is exchanged or
transferred for part of Global Securities, the principal amount of such Global
Securities shall, in accordance with the standing procedures and instructions
existing between the Depositary and the Custodian, be reduced or increased, as
the case may be, and an endorsement shall be made on such Global Securities by
the Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
The Company and the Trustee may for all purposes, including the making
of payments due on the Securities, deal with the Depositary as the authorized
representative of the Holders for the purposes of exercising the rights of
Holders hereunder. The rights of the owner of any beneficial interest in a
Global Security shall be limited to those established by law and agreements
between such owners and depository participants or Euroclear and Cedel;
PROVIDED, that no such agreement shall give any rights to any person against the
Company or the Trustee without the written consent of the parties so affected.
Multiple requests and directions from and votes of the Depositary as holder of
Securities in global form with respect to any particular matter shall not be
deemed inconsistent to the extent they do not represent an amount of Securities
in excess of those held in the name of the Depositary or its nominee.
If at any time the Depositary for any Securities represented by one or
more Global Securities notifies the Company that it is unwilling or unable to
continue as Depositary for such Securities or if at any time the Depositary for
such Securities shall no longer be
<PAGE>
24
eligible under this Section 313, the Company shall appoint a successor
Depositary with respect to such Securities. If a successor Depositary for
such Securities is not appointed by the Company within 90 days after the
Company receives such notice or becomes aware of such ineligibility, the
Company's election that such Securities be represented by one or more Global
Securities shall no longer be effective and the Company shall execute, and
the Trustee, upon receipt of a Company Order for the authentication and
delivery of definitive Securities, will authenticate and deliver Securities
in definitive registered form, in any authorized denominations, in an
aggregate principal amount equal to the principal amount of the Global
Security or Securities representing such Securities in exchange for such
Global Security or Securities.
The Company may at any time and in its sole discretion determine that
the Securities issued in the form of one or more Global Securities shall no
longer be represented by a Global Security or Securities. In such event the
Company shall execute, and the Trustee, upon receipt of a Company Order or an
Officers' Certificate for the authentication and delivery of definitive
Securities, shall authenticate and deliver, Securities in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 314(a)), Global Securities may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Interests of beneficial owners in Global Security may be transferred
or exchanged for definitive Securities and definitive Securities may be
transferred or exchange for Global Securities in accordance with rules of the
Depositary and the provisions of Section 315.
Any Security in global form may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Indenture as may be required by the Custodian, the
Depositary or by the National Association of Securities Dealers, Inc. in order
for the Securities to be tradeable on the PORTAL Market or as may be required
for the Securities to be tradeable on any other market developed for trading of
securities pursuant to Rule 144A or required to comply with any applicable law
or any regulation thereunder or with Regulation S or with the rules and
regulations of any securities exchange upon which the Securities may be listed
or traded or to conform with any usage with respect thereto, or to indicate any
special limitations or restrictions to which any particular Securities are
subject.
SECTION 314. Restrictive Legend.
(a) Each Global Security and definitive Security that constitutes a
Restricted Security shall bear the following legend (the "Private Placement
Legend") on the face thereof
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25
until three years after the later of the date of original issue and the last
date on which the Company or any affiliate of the Company was the owner of
such Capital Securities (or any predecessor thereto) (the "Resale Restriction
Termination Date"), unless otherwise agreed by the Company and the Holder
thereof:
"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 PRIOR TO THE LATER OF THE DATE WHICH IS THREE YEARS
AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH RESTRICTED
SECURITIES (OR ANY PREDECESSOR) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) 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, (D)
OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE, ANY OFFER,
SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E)
IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE PROPERTY
TRUSTEE FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND
SUBSTANCE."
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26
Any Security (or security issued in exchange or substitution therefor)
as to which such restrictions on transfer shall have expired in accordance with
their terms may, upon satisfaction of the requirements of Section 314(b) and
surrender of such Security for exchange to the Security registrar in accordance
with the provisions of this Section 314, be exchanged for a new Security or
Securities, of like tenor and aggregate principal amount, which shall not bear
the restrictive legend required by this Section 314(a).
(b) Upon any sale or transfer of any Restricted Security (including
any interest in a Global Security) (i) that is effected pursuant to an effective
registration statement under the Securities Act or (ii) in connection with which
the Trustee receives certificates and other information (including an opinion of
counsel, if requested) reasonably acceptable to the Company and the Trustee to
the effect that such security will no longer be subject to the resale
restrictions under federal and state securities laws, then (A) in the case of a
Restricted Security in definitive form, the Security registrar or co-registrar
shall permit the holder thereof to exchange such Restricted Security for a
security that does not bear the legend set forth in Section 314(a), and shall
rescind any such restrictions on transfer and (B) in the case of Restricted
Securities represented by a Global Security, such Security shall no longer be
subject to the restrictions contained in the legend set forth in Section 314(a)
(but still subject to the other provisions hereof). In addition, any Security
(or security issued in exchange or substitution therefor) as to which the
restrictions on transfer described in the legend set forth in Section 314(a)
have expired by their terms, may, upon surrender thereof (in accordance with the
terms of this Indenture) together with such certifications and other information
(including an opinion of counsel having substantial experience in practice under
the Securities Act and otherwise reasonably acceptable to the Company, addressed
to the Company and the Trustee and in a form acceptable 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) acceptable to the Company and the
Trustee as either of them may reasonably require, be exchanged for a new
Security or Securities of like tenor and aggregate principal amount, which shall
not bear the restrictive legends set forth in Section 314(a).
SECTION 315. Special Transfer Provisions.
At any time at the request of the beneficial holder of an interest in
a Security in global form, such beneficial holder shall be entitled to obtain a
definitive Security upon written request to the Trustee in accordance with the
standing instructions and procedures existing between the Depositary and the
Trustee for the issuance thereof. Any transfer of a beneficial interest in a
Security in global form which cannot be effected through book-entry settlement
must be effected by the delivery to the transferee (or its nominee) of a
definitive Security or Securities registered in the name of the transferee (or
its nominee) on the books maintained by the Trustee. With respect to any such
transfer, the Trustee will cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Trustee, the aggregate
principal amount of the Security in global form to be reduced and, following
such reduction, the Company will execute and the Trustee will authenticate and
deliver to the transferee (or such transferee's nominee, as the case may be), a
Security or Securities in the appropriate aggregate principal amount in the name
of such transferee (or its nominee) and bearing such restrictive legends as may
be required by this Indenture. In
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27
connection with any such transfer, the Trustee may request such
representations and agreements relating to the restrictions on transfer of
such Security or Securities from such transferee (or such transferee's
nominee) as the Trustee may reasonably require.
So long as the Securities are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a definitive Security to
a QIB in accordance with Rule 144A, unless otherwise requested by the
transferor, and upon receipt of the definitive Security or Securities being so
transferred, together with a certification from the transferor that the
transferor reasonably believes the transferee is a QIB (or other evidence
satisfactory to the Trustee), the Trustee shall make an endorsement on the
Restricted Global Security to reflect an increase in the aggregate principal
amount of the Securities represented by the Restricted Global Security, the
Trustee shall cancel such definitive Security or Securities and cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Trustee, the aggregate principal amount of Securities
represented by the Restricted Global Security to be increased accordingly.
So long as the Securities are eligible for book-entry settlement, or
unless otherwise required by law, upon any transfer of a definitive Security in
accordance with Regulation S, if requested by the transferor, and upon receipt
of the definitive Security or Securities being so transferred, together with a
certification from the transferor that the transfer was made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 under the Securities Act (or other
evidence satisfactory to the Trustee), the Trustee shall make or direct the
Custodian to make, an endorsement on the Regulation S Global Security to reflect
an increase in the aggregate principal amount of the Securities represented by
the Regulation S Global Security, the Trustee shall cancel such definitive
Security or Securities and cause, or direct the Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Custodian, the aggregate principal amount of Securities
represented by the Regulation S Global Security to be increased accordingly.
If a holder of a beneficial interest in the Restricted Global Security
wishes at any time to exchange its interest in the Restricted Global Security
for an interest in the Regulation S Global Security, or to transfer its interest
in the Restricted Global Security to a person who wishes to take delivery
thereof in the form of an interest in the Regulation S Global Security, such
holder may, subject to the rules and procedures of the Depositary and to the
requirements set forth in the following sentence, exchange or cause the exchange
or transfer or cause the transfer of such interest for an equivalent beneficial
interest in the Regulation S Global Security. Upon receipt by the Trustee, as
transfer agent of (1) instructions given in accordance with the Depositary's
procedures from or on behalf of a holder of a beneficial interest in the
Restricted Global Security, directing the Trustee (via DWAC), as transfer agent,
to credit or cause to be credited a beneficial interest in the Regulation S
Global Security in an amount equal to the beneficial interest in the Restricted
Global Security to be exchanged or transferred, (2) a written order given in
accordance with the Depositary's procedures containing information regarding the
Euroclear or Cedel account to be credited with such increase and the name of
such account, and (3) a certificate given by the holder of such beneficial
interest stating that the exchange or transfer of such interest has been made
pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S or Rule
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28
144 under the Securities Act (or other evidence satisfactory to the Trustee),
the Trustee, as transfer agent, shall promptly deliver appropriate instructions
to the Depositary (via DWAC), its nominee, or the custodian for the Depositary,
as the case may be, to reduce or reflect on its records a reduction of the
Restricted Global Security by the aggregate principal amount of the beneficial
interest in such Restricted Global Security to be so exchanged or transferred
from the relevant participant, and the Trustee, as transfer agent, shall
promptly deliver appropriate instructions (via DWAC) to the Depositary, its
nominee, or the custodian for the Depositary, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Regulation S Global Security by the aggregate principal
amount of the beneficial interest in such Restricted Global Security to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the person specified in such instructions (who may be Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear or Cedel or
another agent member of Euroclear or Cedel, or both, as the case may be, acting
for and on behalf of them) a beneficial interest in such Regulation S Global
Security equal to the reduction in the principal amount of such Restricted
Global Security.
If a holder of a beneficial interest in the Regulation S Global
Security wishes at any time to exchange its interest in the Regulation S Global
Security for an interest in the Restricted Global Security, or to transfer its
interest in the Regulation S Global Security to a person who wishes to take
delivery thereof in the form of an interest in the Restricted Global Security,
such holder may, subject to the rules and procedures of Euroclear or Cedel and
the Depositary, as the case may be, and to the requirements set forth in the
following sentence, exchange or cause the exchange or transfer or cause the
transfer of such interest for an equivalent beneficial interest in such
Restricted Global Security. Upon receipt by the Trustee, as transfer agent of
(1) instructions given in accordance with the procedures of Euroclear or Cedel
and the Depositary, as the case may be, from or on behalf of a beneficial owner
of an interest in the Regulation S Global Security directing the Trustee, as
transfer agent, to credit or cause to be credited a beneficial interest in the
Restricted Global Security in an amount equal to the beneficial interest in the
Regulation S Global Security to be exchanged or transferred, (2) a written order
given in accordance with the procedures of Euroclear or Cedel and the
Depositary, as the case may be, containing information regarding the account
with the Depositary to be credited with such increase and the name of such
account, and (3) prior to the expiration of the Restricted Period, a certificate
given by the holder of such beneficial interest and stating that the person
transferring such interest in such Regulation S Global Security reasonably
believes that the person acquiring such interest in the Restricted Global
Security is a QIB and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable securities laws of any
state of the United States or any other jurisdiction (or other evidence
satisfactory to the Trustee), the Trustee, as transfer agent, shall promptly
deliver (via DWAC) appropriate instructions to the Depositary, its nominee, or
the custodian for the Depositary, as the case may be, to reduce or reflect on
its records a reduction of the Regulation S Global Security by the aggregate
principal amount of the beneficial interest in such Regulation S Global Security
to be exchanged or transferred, and the Trustee, as transfer agent, shall
promptly deliver (via DWAC) appropriate instructions to the Depositary, its
nominee, or the custodian for the Depositary, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
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29
principal amount of the Restricted Global Security by the aggregate principal
amount of the beneficial interest in the Regulation S Global Security to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the person specified in such instructions a beneficial interest in the
Restricted Global Security equal to the reduction in the principal amount of the
Regulation S Global Security. After the expiration of the Restricted Period (as
defined below), the certification requirement set forth in clause (3) of the
second sentence of the above paragraph will no longer apply to such exchanges
and transfers.
Any beneficial interest in one of the Global Securities that is
transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.
Prior to or on the 40th day after the later of the commencement of the
offering of the Capital Securities and the Closing Date (the "Restricted
Period"), beneficial interests in a Regulation S Global Security may only be
held through Morgan Guaranty Trust Company of New York, Brussels office, as
operator of Euroclear or Cedel or another agent member of Euroclear and Cedel
acting for and on behalf of them, unless delivery is made through the Restricted
Global Security in accordance with the certification requirements hereof.
During the Restricted Period, interests in the Regulation S Global Security, if
any, may be exchanged for interests in the Restricted Global Security or for
definitive Securities only in accordance with the certification requirements
described above.
ARTICLE FOUR
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on written demand of and at the
expense of the Company, shall execute instruments supplied by the Company
acknowledging satisfaction and discharge of this Indenture, when (1) either (A)
all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited 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 1003) have been delivered to the Trustee for
cancellation; or (B) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, or (ii) will become
due and payable at their Maturity within one year, or (iii) if redeemable at the
option of the Company, are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the
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Company and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as funds in trust for
the purpose on amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Maturity or
Redemption Date, as the case may be; (2) the Company has paid or ceased to be
paid all other sums payable hereunder by the Company; and (3) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 402
and the last paragraph of Section 1003 shall survive.
SECTION 402. Legal Defeasance.
In addition to discharge of this Indenture pursuant to Section 401, in
the case of any Securities with respect to which the exact amount described in
subparagraph (a) of Section 404 can be determined at the time of making the
deposit referred to in such subparagraph (a), the Company shall be deemed to
have paid and discharged the entire indebtedness on all the Securities as
provided in this Section on and after the date the conditions set forth in
Section 404 are satisfied, and the provisions of this Indenture with respect to
the Securities shall no longer be in effect (except as to (i) rights of
registration of transfer and exchange of Securities, (ii) substitution of
mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of
Holders of Securities to receive, solely from the trust fund described in
subparagraph (a) of Section 404, payments of principal thereof and interest, if
any, thereon upon the original stated due dates therefor (but not upon
acceleration), (iv) the rights, obligations, duties and immunities of the
Trustee hereunder, (v) this Section 402 and (vi) the rights of the Holders of
Securities as beneficiaries hereof with respect to the property so deposited
with the Trustee payable to all or any of them) (hereinafter called "Legal
Defeasance"), and the Trustee, at the cost and expense of the Company, shall
execute proper instruments acknowledging the same.
SECTION 403. Covenant Defeasance.
In the case of any Securities with respect to which the exact amount
described in subparagraph (a) of Section 404 can be determined at the time of
making the deposit referred to in such subparagraph (a), (i) the Company shall
be released from its obligations under any covenants specified in or pursuant to
this Indenture (except as to (i) rights of registration of transfer and exchange
of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities, (iii) rights of Holders of Securities to receive, from the
Company pursuant to Section 1001, payments of principal thereof and interest, if
any, thereon upon the original stated due dates therefor (but not upon
acceleration), (iv) the rights, obligations, duties and immunities of the
Trustee hereunder and (v) the rights of the Holders of Securities as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them), and (ii) the occurrence of any event specified
in Section
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31
501(3) (with respect to any of the covenants specified in or pursuant to this
Indenture) shall be deemed not to be or result in an Event of Default, in
each case with respect to the Outstanding Securities as provided in this
Section on and after the date the conditions set forth in Section 404 are
satisfied (hereinafter called "Covenant Defeasance"), and the Trustee, at the
cost and expense of the Company, shall execute proper instruments
acknowledging the same. For this purpose, such Covenant Defeasance means
that the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant
(to the extent so specified in the case of Section 501(3)), whether directly
or indirectly by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document, but the remainder of this
Indenture and the Securities shall be unaffected thereby.
SECTION 404. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
402 or 403 to the Outstanding Securities:
(a) with reference to Section 402 or 403, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of Securities (i) cash in an amount, (ii) direct
obligations of the United States of America, backed by its full faith and credit
("U.S. Government Obligations"), maturing as to principal and interest, if any,
at such times and in such amounts as will ensure the availability of cash, (iii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, or (iv) a combination thereof, in each case 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 principal of and interest, if any, on all Securities on each
date that such principal or interest, if any, is due and payable;
(b) in the case of Legal Defeasance under Section 402, the Company
has delivered to the Trustee an Opinion of Counsel based on the fact that (x)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (y), since the date hereof, there has been a change
in the applicable United States federal income tax law, in either case to the
effect that, and such opinion shall confirm that, the Holders of the Securities
of such series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and Legal Defeasance and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and Legal Defeasance had not
occurred;
(c) in the case of Covenant Defeasance under Section 403, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that, and such
opinion shall confirm that, the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and Covenant Defeasance and will be subject
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32
to federal income tax on the same amount in the same manner and at the same
times as would have been the case if such deposit and Covenant Defeasance had
not occurred;
(d) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Company is a party or by which it is bound; and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent contemplated by this provision have been complied with.
SECTION 405. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations deposited with the Trustee pursuant to
Section 401 shall be held in trust and such money and all money from such U.S.
Government Obligations shall be applied by it, in accordance with the provisions
of the Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal and
interest for whose payment such money and U.S. Government Obligations has been
deposited with the Trustee.
SECTION 406. Indemnity for U.S. Government Obligations.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 or the principal or interest received in
respect of such obligations other than any such tax, fee or other charge that by
law is for the account of the Holders of Outstanding Securities.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default" wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article Eleven or be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) failure for 30 days to pay any interest on the Securities when
due (subject to the deferral of any due date in the case of an Extension
Period); or
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(2) failure to pay any principal on the Securities when due, whether
at Maturity, upon redemption, by declaration of acceleration or otherwise;
(3) failure to observe or perform in any material respect any other
covenant herein that continues 90 days after written notice to the Company from
the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities; or
(4) entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or State law, at appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of substantially all of the property of the
Company, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 90 consecutive days; or
(5) (A) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or (B) the consent by the Company or to the
entry of a decree or order for relief in respect of itself in an involuntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Company, or (C) the filing by the
Company of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or (D) the consent by the Company to
the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of all or substantially all of the property
of the Company, or (E) the making by the Company of an assignment for the
benefit of creditors.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have the right to declare the principal of and
the interest on all the Securities and any other amounts payable hereunder to be
due and payable immediately, PROVIDED, HOWEVER, that if upon an Event of
Default, the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities fail to declare the payment of all amounts
on the Securities to be immediately due and payable, the holders of at least 25%
in aggregate liquidation preference of Capital Securities then outstanding shall
have such right, by a notice in writing to the Company (and to the Trustee if
given by Holders or the holders of Capital Securities) and upon any such
declaration such principal and all accrued interest shall become immediately due
and payable.
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At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if (1) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Securities, (B) the principal
of (and premium, if any, on) any Securities which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Securities, (C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and (D) all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the principal of
Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513. Should the Holders of
such Securities fail to annul such declaration and waive such default, the
holders of a majority in aggregate liquidation amount of the Capital Securities
shall have such right. No such rescission shall affect any subsequent default
or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of any Security
at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment thereof
shall be legally enforceable, interest on any overdue principal and on any
overdue interest, at the rate borne by the Securities, and, in addition thereto,
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.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
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35
SECTION 504. Trustee may File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Company (or any other obligor upon the Securities),
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions
authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee
shall be authorized to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder 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, to pay to the Trustee any
amount due 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 607. No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganizations, 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 Holder in any such proceeding.
SECTION 505. Trustee may Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trust without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of any express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Eleven, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal, upon presentation of the Securities and the notation thereon of
the payment, if only partially paid, and upon surrender thereof, if fully paid;
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable as such
Securities for principal and interest, respectively.
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SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities; it being understood and intended
that no one or more Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal and Interest;
Capital Security Holders' Rights.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and (subject to Section 307) interest on
such Security on the Stated Maturity expressed in such Security (or, in the case
of redemption, on the Redemption Date) and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder.
If an Event of Default constituting the failure to pay interest or
principal on the Securities on the date such interest or principal is otherwise
payable has occurred and is continuing, then a holder of Capital Securities may
directly institute a proceeding (a "Direct Action") for enforcement of payment
to such holder directly of the principal of or interest on the Securities having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities as such holder on or after the respective due date specified in the
Securities. The Company may not amend this Section without the prior written
consent of the holders of
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all of the Capital Securities. Notwithstanding any payment made to such
holder of Capital Securities by the Company in connection with such a Direct
Action, the Company shall remain obligated to pay the principal of or
interest on the Securities held by the Trust or the Property Trustee and the
Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent
of any payments made by the Company to such holder in any Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the Holders of the Securities.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
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(1) such direction shall not be in conflict with any rule of law or
with this Indenture; and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
Subject to Sections 902 and 1008 hereof, the Holders of not less than
a majority in principal amount of the Outstanding Securities may on behalf of
the Holders of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of or interest on any Security
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected;
PROVIDED, HOWEVER, that such waiver or modification to such waiver shall not be
effective until the holders of a majority in liquidation preference of Capital
Securities shall have consented to such waiver or modification to such waiver;
PROVIDED FURTHER, that if the consent of the Holder of each of the Outstanding
Securities is required, such waiver shall not be effective until each holder of
the Capital Securities shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist, effective as
of the date specified in such waiver (and effective retroactively to the date of
default, if so specified) and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 514. 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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and any assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED, that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company or the Trustee or in
any suit for the enforcement of the right to receive the principal of and
interest on any Security.
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SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which 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 the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, 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. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default hereunder as
and to the extent provided by the Trust Indenture Act; PROVIDED, HOWEVER, that
except in the case of a default in the payment of the principal of or interest
on any Security, the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
of Securities; PROVIDED, FURTHER, that in the case of any default of the
character specified in Section 501(3), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default. For purposes of this
Section, the Trustee shall not be deemed to have knowledge of a default unless
the Trustee has actual knowledge of such default or has received written notice
of such default in the manner contemplated by Section 105.
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SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(d) 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 it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders 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;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, the Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 605. Trustee and Other Agents may Hold Securities.
The Trustee, any Paying Agent, any Security Registrar, or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledge of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent. Money held
by the Trustee in trust hereunder shall not be invested by the Trustee pending
distribution thereof to the holders of the Securities.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. Compensation; Reimbursement; and Indemnity.
The Company, in its capacity as the issuer of the Securities, agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from tine to time agree in
writing for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim, liability or
expense, including taxes (other than taxes based on the income, revenues or
gross receipts of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this trust or the trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
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The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and lands held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premiums, if
any, on) or interest on particular Securities.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act and to act as such
and has a combined capital and surplus of at least $50,000,000 and has its
Corporate Trust Office in New York, New York. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of removal, the removed Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
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(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (i) the Company by a Board
Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the Retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; PROVIDED that, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers
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and trusts of the retiring Trustee and shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or becomes a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee (a)
semiannually, not later than June 30 and December 31 in each year, a list, in
such form as the Trustee may reasonably require, of the names and addresses of
the Holders to the extent the Company has knowledge thereof as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Trustee may request in writing, within 30 days after the receipt by the
Company of any such, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished, excluding from any such
list names and addresses received by the Trustee in its capacity as Security
Registrar.
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SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701, and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be provided by the Trust
Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; PROVIDED that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934
shall be filed with the Trustee within 15 days after the same is so required to
be filed with the Commission.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, unless:
(1) the Person formed by such consolidation or into which the Company
is merged or the Person that acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
shall be a corporation, partnership or trust, shall be organized and existing
under the laws of the United States of America or any State or the District of
Columbia, and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, the
due and punctual payment of the principal of (and premium, if any) and interest
(including any additional interest) on all the Securities and the performance of
every covenant of this Indenture on the part of the Company to be performed or
observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
(3) for so long as Securities registered on the Securities Register
in the name of the Trust (or the Property Trustee) are outstanding, such
consolidation, merger, conveyance, transfer or lease is permitted under the
Declaration and the Guarantee and does not give rise to any breach or violation
of the Declaration or the Guarantee;
(4) any such lease shall provide that it will remain in effect so
long as any Securities are Outstanding; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance, transfer or lease and any such supplemental indenture complies with
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with; and the Trustee, subject to Section
601, may rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 801.
SECTION 802. Successor Person Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
801, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may
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exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
and in the event of any such conveyance, transfer or lease the Company shall
be discharged from all obligations and covenants under the Indenture and the
Securities and may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, 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 Person
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 of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein and
in the Securities; or
(2) 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
(3) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided that such action pursuant to this clause (3) shall not adversely affect
the interests of the Holders of the Securities or, so long as any of the Capital
Securities shall remain outstanding, the holders of the Capital Securities; or
(4) to comply with any requirement of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act, if so required.
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SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) except to the extent permitted and subject to the conditions set
forth in Section 301 with respect to the extension of the Stated Maturity of the
Securities, change the Stated Maturity of, the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the rate
of interest thereon, or change the place of payment where, or the coin or
currency in which, any Security or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1008, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby;
PROVIDED, that, so long as any of the Capital Securities remains outstanding, no
such amendment shall be made that adversely affects the holders of the Capital
Securities, and no termination of this Indenture shall occur, and no waiver of
any Event of Default or compliance with any covenant under this Indenture shall
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation preference of the outstanding Capital Securities
unless and until the principal of and any premium on the Securities and all
accrued and unpaid interest thereon have been paid in full.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trust created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into such supplemental indenture which affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York an office or agency
where Securities may be presented or surrendered for registration of transfer or
exchange,
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where Securities may be surrendered for conversion and where notices and
demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies in the United States where the Securities may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; PROVIDED, HOWEVER, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in the United States for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on, or at the option of the Company, or before each due date of the principal of
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act. In such case the Company shall not invest the
amount so segregated and held in trust pending the distribution thereof.
Whenever the Company shall have one or more Paying Agents, it will, on
or prior to each due date of the principal of or interest on any Securities,
deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be
held as provided by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act; PROVIDED, HOWEVER, that any such deposit on a due date shall
be initiated prior to 1:00 p.m. (New York time) in same-day funds.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
the trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which
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such sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Payment Agent shall be released from
all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal or interest that has
become due and payable shall be paid to the Company on Company Request, or (if
then held by the Company) shall be discharged from such trust; and the Holder of
such Security shall thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease.
SECTION 1004. Statements by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders and, while
any Capital Securities are outstanding, the holders of the Capital Securities.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
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SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary that
comprise more than 10% of the assets of the Company and its Subsidiaries, taken
as a whole; PROVIDED, HOWEVER, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 1008. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301 for
Securities, the Company may, with respect to the Securities, omit in any
particular instance to comply with any term, provision or condition set forth in
any covenant provided pursuant to Section 901(2) for the benefit of the Holders
if before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
SECTION 1009. Payment of the Trust's Costs and Expenses.
Since the Trust is being formed solely to facilitate an investment in
the Securities, the Company, in its capacity as the issuer of the Securities,
hereby covenants to pay all debts and obligations (other than with respect to
the Capital Securities and Common Securities) and all costs and expenses of the
Trust (including, but not limited to, all costs and expenses relating to the
organization of the Trust, the fees and expenses of the Trustees and all costs
and expenses relating to the operation of the Trust) and to pay any and all
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed on the Trust by the United States, or any other
taxing authority, so that the net amounts received and retained by the Trust and
the Property Trustee after paying such expenses will be equal to the amounts the
Trust and the Property Trustee would have received had no such costs or expenses
been incurred by or imposed on the Trust. The foregoing obligations of the
Company are for the benefit of, and shall be enforceable by, any person to whom
any such debts, obligations, costs, expenses and taxes are owed (each, a
"Creditor") whether or not such Creditor has received notice thereof. Any such
Creditor may enforce such obligations of the Company directly against the
Company, and the Company irrevocably waives any right or remedy to require that
any such Creditor take any action against the Trust or any other person before
proceeding against the Company. The Company shall execute such additional
agreements as may be necessary or desirable to give full effect to the
foregoing. The obligations of the Company to pay all the debts, obligations,
costs and
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expenses of the Trust (other than with respect to the Capital Securities and
the Common Securities) shall constitute additional indebtedness hereunder and
shall survive the satisfaction and discharge of this Indenture.
ARTICLE ELEVEN
SUBORDINATION OF SECURITIES
SECTION 1101. Securities Subordinate to Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article (subject to Article Four),
the payment of the principal of and interest on each and all of the Securities
are hereby expressly made subordinate and subject in right of payment to the
prior payment in full in cash of all Indebtedness.
This Article Eleven shall constitute a continuing offer to all persons
who become holders of, or continue to hold, Indebtedness, and such provisions
are made for the benefit of the holders of Indebtedness and such holders are
made obligees hereunder and any one or more of them may enforce such provisions.
Holders of Indebtedness need not prove reliance on the subordination provisions
hereof.
SECTION 1102. Default on Indebtedness.
In the event and during the continuation of any default in the payment
of principal, premium, interest or any other payment due on any Indebtedness, or
in the event that any event of default with respect to any Indebtedness shall
have occurred and be continuing and shall have resulted in such Indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable (unless and until such event of default
shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled) or in the event any judicial
proceeding shall be pending with respect to any such default in payment or such
event of default, then no payment shall be made by the Company with respect to
the principal (including redemption payments) of, or interest on, the
Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Holder when such payment is prohibited by the
preceding paragraph of this Section 1102, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that
the holders of the Indebtedness (or their representative or representatives or a
trustee) notify the Trustee within 90 days of such payment of the amounts then
due and owing on the Indebtedness and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Indebtedness.
<PAGE>
54
SECTION 1103. Prior Payment of Indebtedness Upon Acceleration of Securities.
In the event that the Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Indebtedness
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all amounts then due on or in respect of
such Indebtedness (including any amounts due upon acceleration), or provision
shall be made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Indebtedness, before the Holders of the
Securities are entitled to receive any payment or distribution of any kind or
character, whether in cash, properties or securities, by the Company on account
of the principal of or interest on the Securities or on account of the purchase
or other acquisition of Securities by the Company or any Subsidiary; PROVIDED,
HOWEVER, that holders of Indebtedness shall not be entitled to receive payment
of any such amounts to the extent that such holders would be required by the
subordination provisions of such Indebtedness to pay such amounts over to the
obligees on trade accounts payable or other liabilities arising in the ordinary
course of the Company's business.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Holder when such payment is prohibited by the
preceding paragraph of this Section 1103, such payment shall be held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that
the holders of the Indebtedness (or their representative or representatives or a
trustee) notify the Trustee within 90 days of such payment of the amounts then
due and owing on the Indebtedness and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Indebtedness.
SECTION 1104. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due upon all Indebtedness (including interest after
the commencement of any bankruptcy, insolvency, receivership or other
proceedings at the rate specified in the applicable Indebtedness, whether or not
such interest is an allowable claim in any such proceeding) shall first be paid
in full, or payment thereof provided for in money in accordance with its terms,
before any payment is made on account of the principal or interest on the
Securities; and upon any such dissolution or winding-up or liquidation or
reorganization any payment by the Company, or distribution of substantially all
of the assets of the Company of any kind or character, whether in cash, property
or securities, to which the Holders of the Securities or the Trustee would be
entitled, except for the provisions of this Article Eleven, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution, or by the Holders of the
Securities or by the Trustee under this Indenture if received by them or
<PAGE>
55
it, directly to the holders of Indebtedness (pro rata to such holders on the
basis of the respective amounts of Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Indebtedness in full
(including interest after the commencement of any bankruptcy, insolvency,
receivership or other proceedings at the rate specified in the applicable
Indebtedness, whether or not such interest is in an allowable claim in any
such proceeding) or to provide for such payment in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to
or for the holders of Indebtedness, before any payment or distribution is
made to the Holders of Securities or to the Trustee; PROVIDED, HOWEVER, that
such holders of Indebtedness shall not be entitled to receive payment of any
such amounts to the extent that such holders would be required by the
subordination provisions of such Indebtedness to pay such amounts over to the
obligees on trade accounts payable or other liabilities arising in the
ordinary course of the Company's business.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or the Holders of the Securities before all Indebtedness is paid in full
(including interest after commencement of any bankruptcy, insolvency,
receivership or other proceedings at the rate specified in the applicable
Indebtedness, whether or not such interest is an allowable claim in any such
proceeding), or provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust for the benefit
of and shall be paid over or delivered to the holders of Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Indebtedness may have
been issued, as their respective interests may appear, as calculated by the
Company, for application to the payment of all Indebtedness remaining unpaid to
the extent necessary to pay all Indebtedness in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of such Indebtedness.
Any holder of Indebtedness may file any proof of claim or similar
instrument on behalf of the Trustee and the Holders if such instrument has not
been filed by the date which is 30 days prior to the date specified for filing
thereof.
For purposes of this Article Eleven, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Eleven with
respect to the Securities to the payment of all Indebtedness that may at the
time be outstanding, PROVIDED, HOWEVER, that (i) the Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of the Indebtedness are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or merger of the Company
into, another corporation or the liquidation or
<PAGE>
56
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article Eight hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 1103 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Eight hereof. Nothing in Section 1102 or in this Section 1103 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 607.
SECTION 1105. Subrogation.
Subject to the payment in full of all Indebtedness to the extent
provided in Sections 1103 and 1104, the rights of the Holders of the Securities
shall be subrogated to the rights of the holders of Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Indebtedness until the principal of (and 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 the Indebtedness of
any cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article Eleven,
shall, as between the Company, its creditors other than holders of Indebtedness,
and the Holders of the Securities, be deemed to be a payment by the Company to
or on account of the Indebtedness. It is understood that the provisions of this
Article Eleven are and are intended solely for the purposes of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of the Indebtedness on the other hand.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Indebtedness, and the Holders
of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
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 the 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 Eleven of the
holders of Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article Eleven, the Trustee, subject to the provisions of Section 601,
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 such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders of the Securities, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of the Indebtedness
and other indebtedness of the Company, the
<PAGE>
57
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Eleven.
SECTION 1106. Trustee to Effectuate Subordination.
Each Holder of a Security by acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Eleven and
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes.
SECTION 1107. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Eleven. Notwithstanding the
provisions of this Article Eleven or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provisions of this Article Eleven,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office of the Trustee from the
Company or a holder or holders of Indebtedness or from any trustee therefor; and
before the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received
the notice provided for in this Section 1106 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 601, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Indebtedness (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Indebtedness to participate in
any payment or distribution pursuant to this Article Eleven, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of 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
Eleven, 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.
<PAGE>
58
SECTION 1108. Rights of the Trustee; Holders of Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article Eleven in respect of any Indebtedness at any
time held by it, to the same extent as any other holder of Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its rights as such
holder.
With respect to the holders of Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Eleven, and no implied covenants or
obligations with respect to the holders of Indebtedness shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Indebtedness and, subject to the provisions of
Section 601, the Trustee shall not be liable to any holder of Indebtedness if it
shall pay over or deliver to holders of Securities, the Company or any other
Person money or assets to which any holder of Indebtedness shall be entitled by
virtue of this Article Eleven or otherwise.
SECTION 1109. Subordination may not be Impaired.
No right of any present or future holder of any Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Indebtedness, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Indebtedness or
otherwise amend or supplement in any manner Indebtedness or any instrument
evidencing the same or any agreement under which Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Indebtedness; (iii) release any Person liable in
any manner for the collection of Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
<PAGE>
59
ARTICLE TWELVE
REDEMPTION OF SECURITIES
SECTION 1201. Optional Redemption; Conditions to Optional Redemption.
At any time on or after December 1, 2006, the Company shall have the
right, subject to the last paragraph of this Section 1201 and to the receipt of
any necessary prior approval of the Federal Reserve, to redeem the Securities,
in whole or in part, from time to time, at the Redemption Prices (expressed as a
percentage of the principal amount of such Securities) set forth below, plus any
accrued but unpaid interest to the Redemption Date, if redeemed during the
twelve-month period beginning on the December 1 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2006 103.975%
2007 103.578%
2008 103.180%
2009 102.783%
2010 102.385%
2011 101.988%
2012 101.590%
2013 101.193%
2014 100.795%
2015 100.398%
On or after December 1, 2016, the Redemption Price will be 100%, plus
accrued and unpaid interest, if any, to the Redemption Date.
Prior to December 1, 2006, if a Special Event shall occur and be
continuing, the Company shall have the right, subject to the last paragraph of
this Section 1201 and to the receipt of any necessary prior approval of the
Federal Reserve, to redeem, upon not less than 30 days nor more than 60 days
notice, the Securities in whole, but not in part, at a Redemption Price equal to
the greater of (i) 100% of the principal amount of Securities then outstanding
and (ii) as determined by a Quotation Agent, the sum of the present values of
the principal amount and premium payable with respect to an optional redemption
on such Securities on December 1, 2006, together with scheduled payments of
interest from the Redemption Date to December 1, 2006 (the "Remaining Life")
discounted to the Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of 30-day months) at the Adjusted Treasury Rate, plus, in each
case, accrued interest thereon to the Redemption Date.
For so long as the Trust is the Holder of all Securities Outstanding,
the proceeds of any redemption described in this Section 1201 shall be used by
the Trust to redeem Common Securities and Capital Securities in accordance with
their terms. The Company shall not redeem the Securities in part unless all
accrued and unpaid interest has
<PAGE>
60
been paid in full on all Securities outstanding for all semi-annual interest
periods terminating on or prior to the Redemption Date.
SECTION 1202. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by Section 1201, shall be made in accordance with such provision and this
Article.
SECTION 1203. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities pursuant to Section
1201 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 45 (unless a shorter notice
period shall be satisfactory to the Trustee) days and no more than 60 days prior
to the Redemption Date fixed by the Company, notify the Trustee of such
Redemption Date and of the principal amount of Securities to be redeemed and
provide a copy of the notice of redemption given to Holders of Securities to be
redeemed pursuant to Section 1205.
SECTION 1204. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities are to be redeemed (unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected by lot (or such other method of selection as the
Trustee may customarily employ) not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1205. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
<PAGE>
61
All notices of redemption shall identify the Securities to be
redeemed (including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(4) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1206. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all
the Securities which are to be redeemed on that date; PROVIDED, HOWEVER, that
any such deposit on a Redemption Date shall be initiated prior to 1:00 p.m.
(New York time) in same-day funds.
SECTION 1207. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price therein specified, and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest to the Redemption Date; PROVIDED, HOWEVER, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant
Record Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
<PAGE>
62
SECTION 1208. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a place of payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder therefor or his
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
<PAGE>
63
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
BARNETT BANKS, INC.
By:
---------------------------------
Name: Hinton F. Nobles, Jr.
Title: Executive Vice President
Attest:
------------------------------
Catherine C. Cosby
Secretary
THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------------------
Name:
Title:
Attest:
------------------------------
<PAGE>
EXHIBIT A
BARNETT BANKS, INC.
Junior Subordinated Debenture due 2026
$________
No.________
CUSIP No. ________
BARNETT BANKS, INC., a corporation duly organized and existing under
the laws of the State of Florida (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ________________, or registered
assigns, the principal sum of ________ DOLLARS ($__________) on December 1,
2026, and to pay interest on said principal sum from ________ __, 1996 or from
the most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, semi-annually
(subject to deferral as set forth herein) in arrears on June 1 and December 1 of
each year, commencing June 1, 1997, at the rate of 7.95% per annum until the
principal hereof shall have become due and payable, and on any overdue principal
and (without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum. The amount of interest payable for any period will be
computed on the basis of twelve 30-day months and a 360-day year. The amount of
interest payable for any period shorter than a full semi-annual period for which
interest is computed, will be computed on the basis of actual number of days
elapsed in such 180-day period. In the event that any date on which interest is
payable on this Security is not a Business Day, then a payment of the interest
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
with the same force and effect as if made on the date the payment was originally
payable. A "Business Day" shall mean any day other than a Saturday or a Sunday
or a day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the Property
Trustee under the Declaration, is closed for business. The interest installment
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name the
Securities (or one or more Predecessor Securities, as defined in the Indenture)
is registered at the close of business on the Regular Record Date for such
interest installment, which shall be the 15th day of the month prior to such
Interest Payment Date. Any such interest installment not so punctually paid or
duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name the
Securities for one or more Predecessor Securities is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
<PAGE>
The Company shall have the right at any time during the term of this
Security, from time to time, to defer payment of interest on such Security for
up to 10 semi-annual periods, (an "Extension Period"), provided that no
Extension Period may extend past the Maturity of this Security. There may be
multiple Extension Periods of varying lengths during the term of this Security.
At the end of each Extension Period, if any, the Company shall pay all interest
then accrued and unpaid, together with interest thereon, compounded semi-
annually at the rate specified on this Security to the extent permitted by
applicable law. During any such Extension Period, the Company may not, and may
not permit any subsidiary of the Company to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank PARI PASSU with or junior in interest
to the Securities or make any guarantee payments with respect to any guarantee
by the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks PARI PASSU or junior in interest to the Securities (other than
(a) dividends or distributions in common stock of the Company, (b) payments
under the Guarantee, (c) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto and (d) purchases of common stock related to the issuance of
common stock or rights under any of the Company's benefit plans). Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period, provided that no Extension Period may exceed 10
consecutive semi-annual periods or extend beyond the Stated Maturity of the
Securities. Upon the termination of any such Extension Period and the payment
of all amounts then due on any Interest Payment Date, the Company may elect to
begin a new Extension Period subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Property Trustee, the Regular Trustees and the
Trustee notice of its election of such Extension Period at least one Business
Day prior to the record date for the related interest payment.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Paying Agent maintained for that purpose in the
United States, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
PROVIDED, HOWEVER, that at the option of the Company, payment of interest may be
made (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the Security Register.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes. Each
Holder hereof, by his acceptance hereof, waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Indebtedness, whether now
-2-
<PAGE>
outstanding or hereafter incurred, and waives reliance by each such holder
upon said provisions.
Reference is hereby made to the further provisions of the Indenture
summarized on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, Barnett Banks, Inc. has caused this instrument to
be duly executed under its corporate seal.
Dated: ________, 1996
BARNETT BANKS, INC.
By:
---------------------------------
Name:
Title:
Attest:
- -------------------------------------
-3-
<PAGE>
[Form of Reverse of Security]
This Security is one of a duly authorized issue of Securities of
Barnett Banks, Inc. (the "Company"), designated as its 7.95% Junior Subordinated
Debentures due 2026 (herein called the "Securities"), limited in aggregate
principal amount to $206,186,000 issued under an Indenture, dated as of December
2, 1996 (herein called the "Indenture"), between the Company and The First
National Bank of Chicago, a national banking association, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Trustee, the Company and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
At any time on or after December 1, 2006, the Company shall have the
right, subject to the terms and conditions of Article Twelve of the Indenture,
to redeem this Security at the option of the Company, in whole or in part, at
the Redemption Price (expressed as a percentage of the principal amount of such
securities) set forth below, plus accrued but unpaid interest to the Redemption
Date, if redeemed during the twelve-month period beginning on December 1 of the
years indicated below:
Year Percentage
---- ----------
2006 104.030%
2007 103.627%
2008 103.224%
2009 102.821%
2010 102.418%
2011 102.015%
2012 101.612%
2013 101.209%
2014 100.806%
2015 100.403%
On or after December 1, 2016, the Redemption Price will be 100%, plus
accrued and unpaid interest, if any, to the Redemption Date.
Prior to December 1, 2006, if a Special Event as defined in Article
Twelve of the Indenture shall occur and be continuing, the Company shall have
the right, subject to the terms and conditions of Article Twelve of the
Indenture, to redeem this Security at the option of the Company, without premium
or penalty, in whole but not in part, at a Redemption Price equal to the greater
of (i) 100% of the principal amount thereof and (ii) as determined by a
Quotation Agent, the sum of the present values of the principal amount and
premium payable with respect to an optional redemption on such Securities on
December 1, 2006, together with scheduled payments of interest from the
Redemption Date to December 1, 2006 (the
-4-
<PAGE>
"Remaining Life") discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued interest thereon to the Redemption
Date. Any redemption pursuant to this paragraph will be made upon not less
than 30 nor more than 60 days notice, at the Redemption Price. If the
Securities are only partially redeemed by the Company, the Securities will be
redeemed by lot (or such other method of selection as the Trustee may
customarily employ). In the event of redemption of this Security in part
only, a new Security or Securities for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
If an Event of Default with respect to the Securities shall occur and
be continuing, the principal of the Securities may be declared due and payable
in the manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions for satisfaction and discharge or
legal defeasance of the entire indebtedness of this Security and for the
defeasance of certain covenants under the Indenture at any time upon compliance
by the Company with certain conditions set forth in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of Holders of not less than a majority in principal
amount of the Outstanding Securities affected by such modification, to modify
the Indenture in a manner affecting the rights of the Holders of the Securities;
PROVIDED that so such modification may, without the consent of the Holder of
each Outstanding Security affected thereby, (i) except to the extent permitted
and subject to the conditions set forth in the Indenture with respect to the
extension of the Stated Maturity of the Security, change the maturity of, the
principal of, or any installment of interest on, the Security or reduce the
principal amount thereof, or the rate of payment of interest thereon, or change
the place of payment where, or the coin or currency in which, this Security or
interest thereon is payable, or impair the right to institute suit for the
enforcement of such payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or modify the provisions
of the Indenture with respect to the subordination of the Securities in a manner
adverse to the Holders, (ii) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for such
supplemental Indenture or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences) provided for in the Indenture, or
(iii) modify any of the provisions of Section 513, Section 902 or Section 1008
of the Indenture, except to increase any such percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby,
PROVIDED that, so long as any of the Preferred Securities remains outstanding,
no such amendment shall be made that adversely affects the holders of the
Preferred Securities, and no termination of the Indenture shall occur, and no
waiver of an Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate liquidation preference of the outstanding
Preferred Securities unless and until the principal of and any premium on the
Securities and all accrued and unpaid interest thereon have been paid in full.
-5-
<PAGE>
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
THE SECURITIES AND THE INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
This is one of the Securities referred to in the within-mentioned
Indenture.
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By:
---------------------------------
Authorized Officer
-6-
<PAGE>
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act covering resales of this Security (which effectiveness shall not have been
suspended or terminated at the date of the transfer) and (ii) three years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Capital Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date"), the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer:
[CHECK ONE]
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) ___ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) ___ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) ___ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered Holder thereof; PROVIDED, HOWEVER, that if box (3), (4), (5)
or (7) is checked, the Company or the Trustee may require, prior to registering
any such transfer of the Securities, in its sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
-7-
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the name of any person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 315 of the Indenture shall have
been satisfied.
Dated: __________________ Signed:______________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:____________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ________ ________________________________________________
NOTICE: To be executed by an executive officer
-8-
<PAGE>
Schedule A to Indenture Dated December 2, 1996 between
Barnett Banks, Inc. ("Barnett")
and The First National Bank of Chicago, Trustee (the "Trustee"),
relating to the issuance of Barnett's $200,000,000 7.95%
Junior Subordinated Debentures Due 2026
(the "Barnett Capital II Indenture")
Due to their similarity to the above-referenced indenture, Barnett has
omitted filing the following documents and sets forth the material differences
in such documents in this schedule:
A. Indenture dated November 27, 1996, between Barnett and the
Trustee relating to the issuance of Barnett's $300,000,000 8.06% Junior
Subordinated Debentures Due 2026. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Barnett
Capital II Indenture.
MATERIAL DIFFERENCES:
Maturity Date: December 1, 2026
Interest Rate: 8.06% per annum from November 27, 1996
Optional Redemption:
Barnett has option to redeem at any time after December 1, 2026
at the following Redemption Prices:
Year Percentage
---- ----------
2006 104.030%
2007 103.627%
2008 103.224%
2009 102.821%
2010 102.418%
2011 102.015%
2012 101.612%
2013 101.209%
2014 100.806%
2015 100.403%
On or after December 1, 2016, the Redemption Price will be 100%,
plus accrued and unpaid interest, if any, to the Redemption Date.
Prior to December 1, 2006, if a Special Event shall occur and be
continuing, Barnett shall have the right, subject to certain
conditions, to redeem, upon not less than 30 days nor more than 60
days notice, the Securities in whole, but not in part, at a Redemption
Price equal to the greater of (i) 100% of the principal amount of
Securities then outstanding and (ii) as
<PAGE>
determined by a Quotation Agent, the sum of the present values of
the principal amount and premium payable with respect to an
optional redemption on such Securities on December 1, 2006,
together with scheduled payments of interest from the Redemption
Date to December 1, 2006 (the "Remaining Life") discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of 30-day months) at the Adjusted Treasury Rate, plus,
in each case, accrued interest thereon to the Redemption Date.
B. Indenture dated January 28, 1997 between Barnett and the Trustee
relating to the issuance of Barnett's $250,000,000 Floating Rate Junior
Subordinated Debentures Due 2027. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned thereto in the Barnett
Capital II Indenture.
MATERIAL DIFFERENCES:
Maturity Date: February 1, 2027
Interest Rate: A variable interest rate per annum equal to
three-month LIBOR plus 0.625% per annum,
from January 28, 1997, payable on February 1,
May 1, August 1, and November 1 of each year,
commencing May 1, 1997, interest compounding
quarterly.
Redemption Pricing:
Barnett has option to redeem at any time after February 1, 2007,
at a redemption price equal to 100% of the principal amount of
Securities to be redeemed.
If a Special Event shall occur and be continuing, Barnett shall
have the right, subject to certain conditions, to redeem, upon not
less than 30 days nor more than 60 days notice, the Securities in
whole, but not in part, at a redemption price equal to 100% of the
principal amount of securities to be redeemed.
<PAGE>
- -------------------------------------------------------------------------------
AMENDED AND RESTATED DECLARATION OF TRUST
BARNETT CAPITAL II
Dated as of December 2, 1996
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
INTERPRETATION AND DEFINITIONS. . . . . . . . . . . 1
Section 1.1 Interpretation and Definitions . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Authorized Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Trust Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capital Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificate of Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Securities Holder. . . . . . . . . . . . . . . . . . . . . . . . 3
Common Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Security Certificate . . . . . . . . . . . . . . . . . . . . . . 3
Corporate Trust Office. . . . . . . . . . . . . . . . . . . . . . . . . 3
Covered Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debenture Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debenture Issuer Indemnified Person . . . . . . . . . . . . . . . . . . 3
Debenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DWAC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Federal Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fiduciary Indemnified Person. . . . . . . . . . . . . . . . . . . . . . 4
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indemnified Person. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Initial Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Institutional Accredited Investor . . . . . . . . . . . . . . . . . . . 4
Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Company Event. . . . . . . . . . . . . . . . . . . . . . . . 5
Legal Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
List of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Majority in Liquidation Amount. . . . . . . . . . . . . . . . . . . . . 5
New Capital Securities. . . . . . . . . . . . . . . . . . . . . . . . . 5
i
<PAGE>
Page
----
New Capital Security Certificate. . . . . . . . . . . . . . . . . . . . 5
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Payment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Private Placement Legend. . . . . . . . . . . . . . . . . . . . . . . . 6
Property Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Property Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Property Trustee Account. . . . . . . . . . . . . . . . . . . . . . . . 6
Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Qualified Institutional Buyer . . . . . . . . . . . . . . . . . . . . . 6
Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . 6
Regular Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Regulation S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Regulation S Global Security. . . . . . . . . . . . . . . . . . . . . . 7
Regulatory Capital Event. . . . . . . . . . . . . . . . . . . . . . . . 7
Related Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Restricted Global Security. . . . . . . . . . . . . . . . . . . . . . . 7
Restricted Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Restricted Security . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Rule 3a-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Securities Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Special Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Successor Delaware Trustee. . . . . . . . . . . . . . . . . . . . . . . 8
Successor Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Successor Property Trustee. . . . . . . . . . . . . . . . . . . . . . . 8
Successor Security. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Super Majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10% in Liquidation Amount . . . . . . . . . . . . . . . . . . . . . . . 8
Transfer Restricted Securities. . . . . . . . . . . . . . . . . . . . . 8
Transfer Restricted Securities Certificate. . . . . . . . . . . . . . . 9
Treasury Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Enforcement Event . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustee" or "Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustees' Authorization Certificate . . . . . . . . . . . . . . . . . . 9
ARTICLE 2
TRUST INDENTURE ACT . . . . . . . . . . . . . 9
Section 2.1 Trust Indenture Act; Application . . . . . . . . . . . . . 9
Section 2.2 Lists of Holders of Securities . . . . . . . . . . . . . . 10
Section 2.3 Reports by the Property Trustee. . . . . . . . . . . . . . 10
Section 2.4 Periodic Reports to the Property Trustee . . . . . . . . . 10
ii
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Page
----
Section 2.5 Evidence of Compliance with Conditions Precedent . . . . . 10
Section 2.6 Trust Enforcement Events; Waiver . . . . . . . . . . . . . 11
Section 2.7 Trust Enforcement Event; Notice. . . . . . . . . . . . . . 12
ARTICLE 3
ORGANIZATION . . . . . . . . . . . . . . . 13
Section 3.1 Name and Organization. . . . . . . . . . . . . . . . . . . 13
Section 3.2 Office . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.3 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.5 Title to Property of the Trust . . . . . . . . . . . . . . 14
Section 3.6 Powers and Duties of the Regular Trustees. . . . . . . . . 14
Section 3.7 Prohibition of Actions by the Trust and the Trustees . . . 17
Section 3.8 Powers and Duties of the Property Trustee. . . . . . . . . 18
Section 3.9 Certain Duties and Responsibilities of the Property
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.10 Certain Rights of Property Trustee. . . . . . . . . . . . 22
Section 3.11 Delaware Trustee. . . . . . . . . . . . . . . . . . . . . 24
Section 3.12 Execution of Documents. . . . . . . . . . . . . . . . . . 25
Section 3.13 Not Responsible for Recitals or Issuance of Securities. . 25
Section 3.14 Duration of Trust . . . . . . . . . . . . . . . . . . . . 25
Section 3.15 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.16 Property Trustee May File Proofs of Claim . . . . . . . . 27
ARTICLE 4
SPONSOR . . . . . . . . . . . . . . . . 28
Section 4.1 Responsibilities of the Sponsor. . . . . . . . . . . . . . 28
Section 4.2 Indemnification and Expenses of the Trustee. . . . . . . . 28
ARTICLE 5
TRUST COMMON SECURITIES HOLDER. . . . . . . . . . . 29
Section 5.1 Debenture Issuer's Purchase of Common Securities . . . . . 29
Section 5.2 Covenants of the Common Securities Holder. . . . . . . . . 29
ARTICLE 6
TRUSTEES . . . . . . . . . . . . . . . . 29
Section 6.1 Number of Trustees . . . . . . . . . . . . . . . . . . . . 29
Section 6.2 Delaware Trustee . . . . . . . . . . . . . . . . . . . . . 30
Section 6.3 Property Trustee; Eligibility. . . . . . . . . . . . . . . 30
Section 6.4 Qualifications of Regular Trustees and Delaware Trustee
Generally. . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.5 Initial Trustees . . . . . . . . . . . . . . . . . . . . . 31
Section 6.6 Appointment, Removal and Resignation of Trustees . . . . . 31
Section 6.7 Vacancies among Trustees . . . . . . . . . . . . . . . . . 33
Section 6.8 Effect of Vacancies. . . . . . . . . . . . . . . . . . . . 33
Section 6.9 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.10 Delegation of Power . . . . . . . . . . . . . . . . . . . 33
Section 6.11 Merger, Conversion, Consolidation or Succession to
Business. . . . . . . . . . . . . . . . . . . . . . . . . 34
iii
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Page
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ARTICLE 7
THE SECURITIES. . . . . . . . . . . . . . . 34
Section 7.1 General Provisions Regarding Securities. . . . . . . . . . 34
Section 7.2 Distributions. . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.3 Redemption of Securities . . . . . . . . . . . . . . . . . 37
Section 7.4 Redemption Procedures. . . . . . . . . . . . . . . . . . . 38
Section 7.5 Voting Rights of Capital Securities. . . . . . . . . . . . 39
Section 7.6 Voting Rights of Common Securities . . . . . . . . . . . . 41
Section 7.7 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.8 Transfer of Securities . . . . . . . . . . . . . . . . . . 43
Section 7.9 Mutilated, Destroyed, Lost or Stolen Certificates. . . . . 44
Section 7.10 Deemed Security Holders . . . . . . . . . . . . . . . . . 44
Section 7.11 Global Securities . . . . . . . . . . . . . . . . . . . . 44
Section 7.12 Restrictive Legend. . . . . . . . . . . . . . . . . . . . 47
Section 7.13 Special Transfer Provisions . . . . . . . . . . . . . . . 48
ARTICLE 8
DISSOLUTION AND TERMINATION OF TRUST . . . . . . . . . 51
Section 8.1 Dissolution and Termination of Trust . . . . . . . . . . . 51
Section 8.2 Liquidation Distribution Upon Termination and Dissolution
of the Trust . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 9
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS. . . . . . . . 53
Section 9.1 Liability. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.2 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . 55
Section 9.5 Outside Businesses . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 10
ACCOUNTING. . . . . . . . . . . . . . . . 58
Section 10.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.2 Certain Accounting Matters. . . . . . . . . . . . . . . . 58
Section 10.3 Banking . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.4 Withholding . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 11
AMENDMENTS AND MEETINGS . . . . . . . . . . . . 59
Section 11.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.2 Meetings of the Holders of Securities; Action by Written
Consent . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 12
iv
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Page
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REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE . . . . . . . . . . . . . 63
Section 12.1 Representations and Warranties of the Property Trustee. . 63
Section 12.2 Representations and Warranties of the Delaware Trustee. . 64
ARTICLE 13
MISCELLANEOUS. . . . . . . . . . . . . . . 64
Section 13.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 13.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . 65
Section 13.3 Intention of the Parties. . . . . . . . . . . . . . . . . 65
Section 13.4 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 13.5 Successors and Assigns. . . . . . . . . . . . . . . . . . 66
Section 13.6 Partial Enforceability. . . . . . . . . . . . . . . . . . 66
Section 13.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 66
v
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
THIS AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration")
dated as of December 2, 1996 between Barnett Banks, Inc., a Florida
corporation, as Sponsor, and Paris P. Thermenos, Charles W. Newman and
Patrick J. McCann as the initial Regular Trustees, The First National Bank of
Chicago, as the initial Property Trustee and First Chicago Delaware Inc., as
the initial Delaware Trustee, not in their individual capacities but solely
as Trustees, and the holders, from time to time, of undivided beneficial
ownership interests in the Trust to be issued pursuant to this Declaration.
WHEREAS, the Trustees and the Sponsor established Barnett Capital
II (the "Trust"), a business trust under the Business Trust Act (as defined,
together with other capitalized terms, herein) pursuant to a Trust Agreement,
dated as of November 21, 1996 (the "Original Declaration"), and a Certificate
of Trust filed with the Secretary of State of the State of Delaware on
November 21, 1996 (the "Certificate of Trust"); and
WHEREAS, the sole purpose of the Trust shall be to issue and sell
certain securities representing undivided beneficial ownership interests in
the assets of the Trust, to invest the proceeds from such sales in the
Debentures issued by the Debenture Issuer and to engage in only those
activities necessary or incidental thereto; and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original
Declaration.
NOW, THEREFORE, it being the intention of the parties hereto that
the Trust constitute a business trust under the Business Trust Act, the
Trustees hereby declare that all assets contributed to the Trust be held in
trust for the benefit of the Holders, from time to time, of the Securities
representing undivided beneficial ownership interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE 1
INTERPRETATION AND DEFINITIONS
Section 1.1 Interpretation and Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in
the preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration" are
to this Declaration as modified, supplemented or amended from time to time;
<PAGE>
2
(d) all references in this Declaration to Articles and Sections
are to Articles and Sections of this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa
and a reference to any masculine form of a term shall include the feminine
form of a term, as applicable.
"Affiliate" has the same meaning as given to that term in Rule 405
of the Securities Act or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is expressly
authorized to bind such Person.
"Business Day" means any day other than a Saturday or Sunday or a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the
Property Trustee, under the Declaration, is closed for business.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to
time, or any successor legislation.
"Capital Security" has the meaning specified in Section 7.1.
"Capital Security Certificate" means a certificate representing a
Capital Security.
"Cedel" means Cedel, S.A.
"Certificate" means a Common Security Certificate or a Capital
Security Certificate.
"Certificate of Trust" has the meaning specified in the recitals
hereto.
"Closing Date" means the date on which the Capital Securities are
issued and sold.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation. A reference to a specific
section of the Code refers not only to such specific section but also to any
corresponding provision of any federal tax statute enacted after the date of
this Declaration, as such specific section or corresponding provision
<PAGE>
3
is in effect on the date of application of the provisions of this Declaration
containing such reference.
"Commission" means the Securities and Exchange Commission.
"Common Securities Holder" means Barnett Banks, Inc. in its
capacity as purchaser and holder of all of the Common Securities issued by
the Trust.
"Common Security" has the meaning specified in Section 7.1
"Common Security Certificate" means a definitive certificate in
fully registered form representing a Common Security.
"Corporate Trust Office" means the office of the Property Trustee
at which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at 153 West 51st Street, New York,
New York 10019.
"Covered Person" means (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii)
the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Barnett Banks, Inc. in its capacity as
issuer of the Debentures under the Indenture.
"Debenture Issuer Indemnified Person" means (a) any Regular
Trustee; (b) any Affiliate of any Regular Trustee; (c) any officers,
directors, shareholders, members, partners, employees, representatives or
agents of any Regular Trustee or any Affiliate thereof; or (d) any officer,
employee or agent of the Trust or its Affiliates.
"Debenture Trustee" means The First National Bank of Chicago, in
its capacity as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.
"Debentures" means the Securities (as defined in the Indenture) to
be issued by the Debenture Issuer and to be held by the Property Trustee.
"Delaware Trustee" has the meaning set forth in Section 6.2.
"Depositary" means, with respect to Securities issuable in whole or
in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities.
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 7.2.
<PAGE>
4
"DTC" means The Depository Trust Company, the initial Depositary.
"DWAC" means Deposit and Withdrawal At Custodian Service.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Fiduciary Indemnified Person" has the meaning set forth in Section
9.4(b).
"Fiscal Year" has the meaning set forth in Section 11.1.
"Global Security" has the meaning set forth in Section 7.11.
"Guarantee" means the guarantee agreement of the Sponsor in respect
of the Capital Securities and the Common Securities.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act; provided, however, that in determining
whether the Holders of the requisite liquidation amount of Capital Securities
have voted on any matter provided for in this Declaration, then for the
purpose of such determination only (and not for any other purpose hereunder),
if the Capital Securities remain in the form of one or more Global
Securities, the term "Holders" shall mean the holder of the Global Security
acting at the direction of the Capital Security Beneficial Owners.
"Indemnified Person" means a Debenture Issuer Indemnified Person or
a Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of December 2, 1996, among
the Debenture Issuer and the Debenture Trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued.
"Indenture Event of Default" means an "Event of Default" as defined
in the Indenture.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Brothers Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as the term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
<PAGE>
5
"Investment Company" means an investment company as defined in the
Investment Company Act and the regulations promulgated thereunder.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time, or any successor legislation.
"Investment Company Event" means the receipt by the Trust of an
opinion of counsel, rendered by a law firm having a recognized national
securities practice, to the effect that, as a result of the occurrence of a
change in law or regulation or a change in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be
considered an "investment company" that is required to be registered under
the Investment Company Act, which Change in 1940 Act Law becomes effective on
or after the Closing Date.
"Legal Action" has the meaning set forth in Section 3.6(g).
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount" means, except as provided in the
terms of the Capital Securities or by the Trust Indenture Act, Holder(s) of
outstanding Securities, voting together as a single class, or, as the context
may require, Holders of outstanding Capital Securities or Holders of
outstanding Common Securities, voting separately as a class, who are the
record owners of more than 50% of the aggregate liquidation amount (including
the stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant
class.
"New Capital Securities" has the meaning specified in Section 7.1.
"New Capital Security Certificate" has the meaning specified in
Section 7.1.
"Officers' Certificate" means, with respect to any Person (other
than Regular Trustees who are natural persons), a certificate signed by two
Authorized Officers of such Person on behalf of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer on behalf of such Person in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an
<PAGE>
6
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such
officer and on behalf of such Person, such condition or covenant has been
complied with; provided, that the term "Officers' Certificate", when used
with reference to Regular Trustees who are natural persons shall mean a
certificate signed by two of the Regular Trustees which otherwise satisfies
the foregoing requirements.
"Paying Agent" has the meaning specified in Section 3.8(h).
"Payment Amount" has the meaning specified in Section 7.2(a).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof or any other entity
of whatever nature.
"Private Placement Legend" as defined in Section 314 of the
Indenture.
"Property Account" has the meaning specified in Section 3.8(c).
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 6.3.
"Property Trustee Account" has the meaning set forth in Section
3.8(c).
"Pro Rata" means pro rata to each Holder of Securities according to
the aggregate liquidation amount of the Securities held by the relevant
Holder in relation to the aggregate liquidation amount of all Securities
outstanding.
"Qualified Institutional Buyer" or "QIB" has the meaning specified
in Rule 144A under the Securities Act.
"Quorum" means a majority of the Regular Trustees or, if there are
only two Regular Trustees, both of them.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof among the Company, the Trust and the Initial
Purchasers for the benefit of themselves and the Holders as the same may be
amended from time to time in accordance with the terms thereof.
"Regular Trustee" means any Trustee other than the Property Trustee
and the Delaware Trustee.
<PAGE>
7
"Regulation S" means Regulation S under the Securities Act and any
successor regulation thereto.
"Regulation S Global Security" means any Global Security or
Securities evidencing Securities that are to be traded pursuant to Regulation
S.
"Regulatory Capital Event" means that the Company shall have
received an opinion of independent bank regulatory counsel experienced in
such matters to the effect that, as a result of (a) any amendment to or
change (including any announced prospective change) in the laws (or any
regulations thereunder) of the United States or any rules, guidelines or
policies of the Federal Reserve or (b) any official administrative
pronouncement or judicial decision for interpreting or applying such laws or
regulations which amendment or change is effective or such pronouncement or
decision is announced on or after the date of original issuance of the
Capital Securities, the Capital Securities do not constitute, or within 90
days of the date thereof, will not constitute Tier I capital (or its then
equivalent); PROVIDED, HOWEVER, that the distribution of the Securities in
connection with the liquidation of the Trust by the Company shall not in and
of itself constitute a Regulatory Capital Event unless such liquidation shall
have occurred in connection with a Tax Event or an Investment Company Event.
"Related Party" means, with respect to the Sponsor, any direct or
wholly owned subsidiary of the Sponsor or any Person that owns, directly or
indirectly, 100% of the outstanding voting securities of the Sponsor.
"Responsible Officer" means, with respect to the Property Trustee,
any officer within the Corporate Trust Office of the Property Trustee,
including any vice-president, any assistant vice-president, the secretary,
any assistant secretary, the treasurer, any assistant treasurer or other
officer of the Corporate Trust Office of the Property Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of
that officer's knowledge of and familiarity with the particular subject.
"Restricted Global Security" means any Global Security or
Securities evidencing Securities that are to be traded pursuant to Rule 144A.
"Restricted Period" shall have the meaning specified in Section
7.13.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) of the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any
successor rule thereunder.
<PAGE>
8
"Securities" means the Common Securities and the Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Special Event" means a Tax Event, a Regulatory Capital Event or an
Investment Company Event.
"Sponsor" means Barnett Banks, Inc., a Florida corporation, or any
successor entity in a merger, consolidation or amalgamation, in its capacity
as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning specified in Section
6.6(b).
"Successor Entity" has the meaning specified in Section 3.15(b)(i).
"Successor Property Trustee" has the meaning specified in Section
6.6(b).
"Successor Security" has the meaning specified in Section
3.15(b)(i)b.
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
"Tax Event" means the receipt by the Trust of an opinion of
counsel, rendered by a law firm having a national tax practice, to the effect
that, as a result of any amendment to, change in or announced proposed change
in the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result
of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is adopted or such proposed change, pronouncement or decision is announced on
or after the Closing Date, there is more than an insubstantial risk that (i)
the Trust is, or will be within 90 days of the date of such opinion, subject
to the United States federal income tax with respect to income received or
accrued on the Debentures, (ii) interest payable by the Debenture Issuer on
such Debentures is not, or within 90 days of the date of such opinion, will
not be deductible by the Debenture Issuer, in whole or in part, for United
States federal income tax purposes, or (iii) the Trust is, or will be within
90 days of the date of such opinion, subject to more than a de minimus amount
of other taxes, duties or other governmental charges.
"10% in Liquidation Amount" means, except as provided in the terms
of the Capital Securities or by the Trust Indenture Act, Holder(s) of
outstanding Securities, voting together as a single class, or, as the context
may require, Holders of outstanding Capital Securities or Holders of
outstanding Common Securities, voting separately as a class, who are the
record owners of 10% or more of the aggregate liquidation amount (including
the stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant
class.
"Transfer Restricted Securities" has the meaning specified in
Section 7.1.
<PAGE>
9
"Transfer Restricted Securities Certificate" has the meaning
specified in Section 7.1.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust Enforcement Event" in respect of the Securities means an
Indenture Event of Default has occurred and is continuing in respect of the
Debentures.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees
shall refer to such Person or Persons solely in their capacity as trustees
hereunder.
"Trustees' Authorization Certificate" means a written certificate
signed by two of the Regular Trustees for the purpose of establishing the
terms and form of the Capital Securities and the Common Securities as
determined by the Regular Trustees.
ARTICLE 2
TRUST INDENTURE ACT
Section 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to
the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the Trust's classification as a grantor trust for United
States federal income tax purposes and shall not affect the nature of the
Securities as equity securities representing undivided beneficial ownership
interests in the assets of the Trust.
<PAGE>
10
Section 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide the Property Trustee with a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Holders of the Securities ("List of Holders"), (i) not later than June 30 and
December 31 of each year and current as of such date, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request from the
Property Trustee for a List of Holders as of a date no more than 15 days
before such List of Holders is given to the Property Trustee; provided that
neither the Sponsor nor the Regular Trustees on behalf of the Trust shall be
obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Property
Trustee by the Sponsor and the Regular Trustees on behalf of the Trust. The
Property Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it or
which it receives in the capacity as Paying Agent (if acting in such
capacity), provided that the Property Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under,
and shall be entitled to the benefits of, Sections 311(a), 311(b) and 312(b)
of the Trust Indenture Act.
Section 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year (commencing with the year
of the first anniversary of the issuance of the Capital Securities), the
Property Trustee shall provide to the Holders of the Capital Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture
Act. The Property Trustee shall also comply with the requirements of Section
313(d) of the Trust Indenture Act.
Section 2.4 Periodic Reports to the Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such documents, reports and information
as required by Section 314 of the Trust Indenture Act (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
Section 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
<PAGE>
11
Section 2.6 Trust Enforcement Events; Waiver.
(a) The Holders of a Majority in Liquidation Amount of the Capital
Securities may, by vote or written consent, on behalf of the Holders of all
of the Capital Securities, waive any past Trust Enforcement Event in respect
of the Capital Securities and its consequences, provided that, if the
underlying Indenture Event of Default:
(i) is not waivable under the Indenture, the Trust
Enforcement Event under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of greater than a majority
in principal amount of the holders of the Debentures (a
"Super Majority") to be waived under the Indenture, the
Trust Enforcement Event under the Declaration may only be
waived by the vote or written consent of the Holders of
at least the proportion in liquidation amount of the
Capital Securities that the relevant Super Majority
represents of the aggregate principal amount of the
Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act. Upon such
waiver, any such default shall cease to exist, and any Trust Enforcement
Event with respect to the Capital Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration and the
Capital Securities, but no such waiver shall extend to any subsequent or
other Trust Enforcement Event with respect to the Capital Securities or
impair any right consequent thereon. Any waiver by the Holders of the
Capital Securities of a Trust Enforcement Event with respect to the Capital
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Trust Enforcement Event with respect to the
Common Securities for all purposes of this Declaration without any further
act, vote, or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote or written consent, on behalf of the Holders of all
of the Common Securities, waive any past Trust Enforcement Event in respect
of the Common Securities and its consequences, provided that, if the
underlying Indenture Event of Default:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have
waived such Trust Enforcement Event under the Declaration
as provided below in this Section 2.6(b), the Trust
Enforcement Event under the Declaration shall also not be
waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived under the Indenture, except where the Holders of
the Common Securities are deemed to have waived such
Trust Enforcement Event under the
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12
Declaration as provided below in this Section 2.6(b), the
Trust Enforcement Event under the Declaration may only be
waived by the vote or written consent of the Holders of
at least the proportion in liquidation amount of the
Common Securities that the relevant Super Majority
represents of the aggregate principal amount of the
Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have
waived any Trust Enforcement Event and all Trust Enforcement Events with
respect to the Common Securities and the consequences thereof until all Trust
Enforcement Events with respect to the Capital Securities have been cured,
waived or otherwise eliminated, and until such Trust Enforcement Events with
respect to the Capital Securities have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf
of the Holders of the Capital Securities and only the Holders of the Capital
Securities will have the right to direct the Property Trustee in accordance
with the terms of the Securities. The foregoing provisions of this Section
2.6(b) shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such Sections 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act are hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act. Subject to the
foregoing provisions of this Section 2.6(b), upon such waiver, any such
default shall cease to exist and any Trust Enforcement Event with respect to
the Common Securities arising therefrom shall be deemed to have been cured
for every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other Trust Enforcement Event with respect to the Common
Securities or impair any right consequent thereon.
(c) A waiver of an Indenture Event of Default by the Property
Trustee at the direction of the Holders of the Capital Securities constitutes
a waiver of the corresponding Trust Enforcement Event with respect to the
Capital Securities under this Declaration. The foregoing provisions of this
Section 2.6(c) shall be in lieu of Section 316(a)(1)(B) of the Trust
Indenture Act and such Section 316(a)(1)(B) of the Trust Indenture Act is
hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.
Section 2.7 Trust Enforcement Event; Notice.
(a) The Property Trustee shall, within 90 days after the
occurrence of a Trust Enforcement Event, transmit by mail, first class
postage prepaid, to the Holders of the Securities, notices of all defaults
with respect to the Securities actually known to a Responsible Officer of the
Property Trustee, unless such defaults have been cured before the giving of
such notice (the term "defaults" for the purposes of this Section 2.7(a)
being hereby defined to be an Indenture Event of Default, not including any
periods of grace provided for therein and irrespective of the giving of any
notice provided therein); provided that, except for a default in the payment
of principal of (or premium, if any) or interest on any of the Debentures,
the Property Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Property Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the Securities.
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13
(b) The Property Trustee shall not be deemed to have knowledge of
any default except:
(i) a default under Sections 501(1) and 501(2) of the
Indenture; or
(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer
of the Property Trustee charged with the administration
of this Declaration shall have actual knowledge.
ARTICLE 3
ORGANIZATION
Section 3.1 Name and Organization.
The Trust hereby continued is named "Barnett Capital II" as such
name may be modified from time to time by the Regular Trustees following
written notice to the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by
the Regular Trustees.
Section 3.2 Office.
The address of the principal office of the Trust is c/o Barnett
Banks, Inc., 50 North Laura Street, Jacksonville, Florida 32202. On 10
Business Days' written notice to the Holders of Securities, the Regular
Trustees may designate another principal office.
Section 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue
and sell Securities and use the gross proceeds from such sale to acquire the
Debentures, and (b) except as otherwise limited herein, to engage in only
those other activities necessary or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments,
pledge any of its assets or otherwise undertake (or permit to be undertaken)
any activity that would cause the Trust not to be classified as a grantor
trust for United States federal income tax purposes.
By the acceptance of this Trust, none of the Trustees, the Sponsor,
the Holders of the Capital Securities or Common Securities or the Capital
Securities Beneficial Owners will take any position for United States federal
income tax purposes which is contrary to the classification of the Trust as a
grantor trust.
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14
Section 3.4 Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Regular Trustees shall have
exclusive authority to carry out the purposes of the Trust. An action taken
by the Regular Trustees in accordance with their powers shall constitute the
act of and serve to bind the Trust and an action taken by the Property
Trustee on behalf of the Trust in accordance with its powers shall constitute
the act of and serve to bind the Trust. In dealing with the Trustees acting
on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust
are entitled to rely conclusively on the power and authority of the Trustees
as set forth in this Declaration.
(a) Except as expressly set forth in this Declaration and except
if a meeting of the Regular Trustees is called with respect to any matter
over which the Regular Trustees have power to act, any power of the Regular
Trustees may be exercised by, or with the consent of, any one such Regular
Trustee.
(b) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6(b), provided, that the registration
statements referred to in Section 3.6(b)(i), including any amendments
thereto, shall be signed by or on behalf of a majority of the Regular
Trustees; and
(c) a Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his
or her power for the purposes of signing any documents which the Regular
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
Section 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures,
the Guarantee and the Property Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of
the Trust, but shall have an undivided beneficial ownership interest in the
assets of the Trust.
Section 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to establish the terms and form of the Capital Securities and
the Common Securities in the manner specified in Section 7.1 and issue and
sell the Capital Securities and the Common Securities in accordance with this
Declaration; provided, however, that the Trust
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15
may issue no more than two series of Capital Securities (which will consist
exclusively of the Transfer Restricted Securities and the New Capital
Securities) and no more than one series of Common Securities, and, provided
further, that there shall be no interests in the Trust other than the
Securities, and the issuance of Securities shall be limited to a one-time,
simultaneous issuance of both Transfer Restricted Securities and Common
Securities on the Closing Date and a one-time issuance of New Capital
Securities pursuant to an exchange offer required pursuant to the
Registration Rights Agreement;
(b) in connection with the issue and sale of the Capital
Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission one or more
registration statements on the applicable forms prepared
by the Sponsor, including any amendments thereto,
pertaining to the Capital Securities, the Guarantee and
the Debentures;
(ii) if deemed necessary or desirable by the Sponsor, execute
and file an application, prepared by the Sponsor, to the
New York Stock Exchange, Inc. or any other national stock
exchange or the Nasdaq National Market for listing of any
Capital Securities, the Guarantee and the Debentures;
(iii) if deemed necessary or desirable by the Sponsor, execute
and file with the Commission a registration statement on
Form 8-A, including any amendments thereto, prepared by
the Sponsor, relating to the registration of the Capital
Securities, the Guarantee and the Debentures under
Section 12(b) of the Exchange Act;
(iv) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be
necessary, in order to qualify or register all or part of
the Capital Securities in any State in which the Sponsor
has determined to qualify or register such Capital
Securities for sale;
(v) execute and enter into a purchase agreement and other
related agreements providing for the sale of the Capital
Securities to the Initial Purchasers; and
(vi) execute and enter into the Registration Rights Agreement.
(c) to acquire the Debentures with the proceeds of the sale of the
Capital Securities and the Common Securities; provided, however, that the
Regular Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of
the Capital Securities and the Holders of the Common Securities;
<PAGE>
16
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event; provided that the Regular
Trustees shall consult with the Sponsor and the Property Trustee before
taking or refraining from taking any action in relation to any such Special
Event;
(e) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including and with
respect to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue
relevant notices to the Holders of Capital Securities and Holders of Common
Securities as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required
of the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action or otherwise adjust claims or demands of or against
the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Property
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants to conduct only those services that the Regular Trustees have
authority to conduct directly, and to and pay reasonable compensation for
such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the
Trust Indenture Act to the Property Trustee, which certificate may be
executed by any Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry
out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities
of any notice received from the Debenture Issuer of its election to defer
payments of interest on the Debentures by extending the interest payment
period under the Debentures as authorized by the Indenture;
(n) to take all action that may be necessary or appropriate for
the preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the
<PAGE>
17
Capital Securities and the Holders of the Common Securities or to enable the
Trust to effect the purposes for which the Trust was created;
(o) to take any action, not inconsistent with applicable law, that
the Regular Trustees determine in their discretion to be necessary or
desirable in carrying out the purposes and functions of the Trust as set out
in Section 3.3 or the activities of the Trust as set out in this Section 3.6,
including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment
Company Act;
(ii) causing the Trust to be classified as a grantor trust for
United States federal income tax purposes; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the
Debenture Issuer for United States federal income tax
purposes.
(p) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Regular Trustees,
on behalf of the Trust; and
(q) to execute all documents or instruments, perform all duties
and powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.
The Regular Trustees shall exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Regular Trustees shall have no
power to, and shall not, take any action that is inconsistent with the
purposes and functions of the Trust set forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none
of the powers or the authority of the Property Trustee set forth in Section
3.8.
Any expenses incurred by the Regular Trustees pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.
Section 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including the Property
Trustee) shall cause the Trust not to, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust shall
not and the Trustees (including the Property Trustee) shall cause the Trust
not to:
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18
(i) invest any proceeds received by the Trust from holding
the Debentures, but shall distribute all such proceeds to
Holders of Securities pursuant to the terms of this
Declaration and of the Securities;
(ii) acquire any assets other than the Debentures (and any
interest or proceeds received thereon) and the Guarantee
(and the proceeds received thereon or with respect
thereto);
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets;
(vi) possess any power or otherwise act in such a way as to
vary the terms of the Securities in any way whatsoever
(except to the extent expressly authorized in this
Declaration or by the terms of the Securities);
(vii) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other
than the Securities; or
(viii) other than as provided in this Declaration or by the
terms of the Securities, (A) direct the time, method and
place of exercising any trust or power conferred upon the
Debenture Trustee with respect to the Debentures, (B)
waive any past default that is waivable under the
Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of all the Debentures
shall be due and payable, or (D) consent to any
amendment, modification or termination of the Indenture
or the Debentures where such consent shall be required
unless the Trust shall have received an opinion of
counsel to the effect that such modification will not
cause more than an insubstantial risk that the Trust will
be deemed an Investment Company required to be registered
under the Investment Company Act, or the Trust will not
be classified as a grantor trust for United States
federal income tax purposes; or
(ix) take any action inconsistent with the status of the Trust
as a grantor trust for United States federal income tax
purposes.
Section 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held
of record in the name of the Property Trustee in trust for the benefit of the
Trust and the Holders of the Securities. The right, title and interest of
the Property Trustee to the Debentures shall vest automatically in each
Person who may hereafter be appointed as Property Trustee in
<PAGE>
19
accordance with Section 6.6. Such vesting and cessation of title shall be
effective whether or not conveyancing documents with regard to the Debentures
have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Account") in the name of and
under the exclusive control of the Property Trustee on
behalf of the Holders of the Securities and, upon the
receipt of payments of funds made in respect of the
Debentures held by the Property Trustee, deposit such
funds into the Property Account and make payments to the
Holders of the Capital Securities and Holders of the
Common Securities from the Property Account in accordance
with Section 7.2. Funds in the Property Account shall be
held uninvested until disbursed in accordance with this
Declaration. The Property Account shall be an account
that is maintained with a banking institution the rating
on whose long-term unsecured indebtedness is at least
equal to the rating assigned to the Capital Securities by
a "nationally recognized statistical rating
organization", as that term is defined for purposes of
Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the
Capital Securities and the Common Securities to the
extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the Regular
Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as so directed and
as shall be necessary or appropriate to effect the
distribution of the Debentures to Holders of Securities
upon the occurrence of a Special Event.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to
the terms of the Securities.
(e) The Property Trustee shall take any Legal Action which arises
out of or in connection with a Trust Enforcement Event of which a Responsible
Officer of the Property Trustee has actual knowledge or the Property
Trustee's duties and obligations under this Declaration or the Trust
Indenture Act.
(f) The Property Trustee shall continue to serve as a Trustee
until either:
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20
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders of
Securities pursuant to the terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 6.6.
(g) Subject to such limitations as are necessary to insure
compliance with Section 3.3, the Property Trustee shall have the legal power
to exercise all of the rights, powers and privileges of a holder of
Debentures under the Indenture and, if a Trust Enforcement Event actually
known to a Responsible Officer of the Property Trustee occurs and is
continuing, the Property Trustee shall, for the benefit of Holders of the
Securities, enforce its rights as holder of the Debentures subject to the
rights of the Holders pursuant to the terms of such Securities.
(h) The Property Trustee may authorize one or more Persons (each,
a "Paying Agent") to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all Securities and any such
Paying Agent shall comply with Section 317(b) of the Trust Indenture Act.
Any Paying Agent may be removed by the Property Trustee at any time and a
successor Paying Agent or additional Paying Agents may be appointed at any
time by the Property Trustee. In the event the Capital Securities do not
remain in the form of one or more Global Securities, the Property Trustee
will act as Paying Agent and may designate an additional or substitute Paying
Agent at any time.
(i) Subject to this Section 3.8, the Property Trustee shall have
none of the duties, liabilities, powers or the authority of the Regular
Trustees set forth in Section 3.6.
The Property Trustee shall exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Property Trustee shall have no
power to, and shall not, take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.
Section 3.9 Certain Duties and Responsibilities of the Property
Trustee.
(a) The Property Trustee, before the occurrence of any Trust
Enforcement Event and after the curing of all Trust Enforcement Events that
may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Declaration and no implied covenants shall be
read into this Declaration against the Property Trustee. In case a Trust
Enforcement Event has occurred (that has not been cured or waived pursuant to
Section 2.6) of which a Responsible Officer of the Property Trustee has
actual knowledge, the Property Trustee shall exercise such of the rights and
powers vested in it by this Declaration, and use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
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21
(b) No provision of this Declaration shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of a Trust Enforcement Event and
after the curing or waiving of all such Trust Enforcement
events that may have occurred:
a. the duties and obligations of the Property Trustee
shall be determined solely by the express provisions
of this Declaration and the Property Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set forth
in this Declaration, and no implied covenants or
obligations shall be read into this Declaration
against the Property Trustee; and
b. in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the
correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the
Property Trustee and conforming to the requirements
of this Declaration; but in the case of any such
certificates or opinions that by any provision
hereof are specifically required to be furnished to
the Property Trustee, the Property Trustee shall be
under a duty to examine the same to determine
whether or not they conform to the requirements of
this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of
the Property Trustee, unless it shall be proved that the
Property Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it without
negligence, in good faith in accordance with the
direction of the Holders of not less than a Majority in
Liquidation Amount of the Securities relating to the
time, method and place of conducting any proceeding for
any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property
Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of
any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms
of this Declaration or indemnity reasonably
<PAGE>
22
satisfactory to the Property Trustee against such risk or
liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safe-keeping and physical preservation of the
Debentures and the Property Account shall be to deal with
such property in a similar manner as the Property Trustee
deals with similar property for its own account, subject
to the protections and limitations on liability afforded
to the Property Trustee under this Declaration and the
Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or
sufficiency of the Debentures or the payment of any taxes
or assessments levied thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise
agree with the Sponsor. Money held by the Property
Trustee need not be segregated from other funds held by
it except in relation to the Property Account maintained
by the Property Trustee pursuant to Section 3.8(c)(i) and
except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the
Sponsor with their respective duties under this
Declaration, nor shall the Property Trustee be liable for
any default or misconduct of the Regular Trustees or the
Sponsor.
Section 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to
be genuine and to have been signed, sent or presented by
the proper party or parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be
sufficiently evidenced by an Officers' Certificate (or,
with respect to the establishment of the terms and form
of the Securities by the Regular Trustees, by a Trustees'
Authorization Certificate);
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be
proved or established before
<PAGE>
23
taking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith
on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such
request, shall be promptly delivered by the Sponsor or
the Regular Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument
(including any financing or continuation statement or any
filing under tax or securities laws) or any rerecording,
refiling or registration thereof;
(v) the Property Trustee may consult with counsel of its
choice or other experts and the advice or opinion of such
counsel and experts with respect to legal matters or
advice within the scope of such experts' area of
expertise shall be full and complete authorization and
protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance
with such advice or opinion, such counsel may be counsel
to the Sponsor or any of its Affiliates, and may include
any of its employees. The Property Trustee shall have
the right at any time to seek instructions concerning the
administration of this Declaration from any court of
competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder,
unless such Holder shall have provided to the Property
Trustee security and indemnity, reasonably satisfactory
to the Property Trustee, against the costs, expenses
(including attorneys, fees and expenses and the expenses
of the Property Trustee's agents, nominees or custodians)
and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable
advances as may be requested by the Property Trustee;
provided that, nothing contained in this Section 3.10(a)
shall be taken to relieve the Property Trustee, upon the
occurrence of an Indenture Event of Default, of its
obligation to exercise the rights and powers vested in it
by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Property Trustee, in its
discretion, may make such further inquiry or
investigation into such facts or matters as it may see
fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents,
<PAGE>
24
custodians, nominees or attorneys and the Property
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Property Trustee or
its agents alone shall be sufficient and effective to
perform any such action and no third party shall be
required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which
shall be conclusively evidenced by the Property Trustee's
or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders of
the Securities which instructions may only be given by
the Holders of the same proportion in liquidation amount
of the Securities as would be entitled to direct the
Property Trustee under the terms of the Securities in
respect of such remedy, right or action, (ii) may refrain
from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii)
shall be protected in conclusively relying on or acting
in or accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any
obligation to take any action that is discretionary under
the provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action
taken, suffered or omitted to be taken by it without
negligence, in good faith and reasonably believed by it
to be authorized or within the discretion, rights or
powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
Section 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 6.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware
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25
Trustee have any of the duties and responsibilities of the Regular Trustees
or the Property Trustee described in this Declaration. Except as set forth in
Section 6.2, the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of Section 3807 of the Business Trust
Act.
Section 3.12 Execution of Documents.
Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act, any Regular Trustee is authorized
to execute on behalf of the Trust any documents that the Regular Trustees have
the power and authority to execute pursuant to Section 3.6.
Section 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration, the Securities, the Debentures or the Indenture.
Section 3.14 Duration of Trust.
The Trust shall exist until terminated pursuant to the provisions of
Article 8 hereof.
Section 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described in Section
3.15(b) and (c) and as set forth in Article 8.
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and without the
consent of the Holders of the Securities, the Delaware Trustee or the Property
Trustee, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties substantially as an entirety to a trust
organized as such under the laws of any State; provided that:
(i) if the Trust is not the successor, such successor entity
(the "Successor Entity") either:
a. expressly assumes all of the obligations of the Trust
under the Securities; or
b. substitutes for the Capital Securities other
securities having substantially the same terms as
the Capital Securities (the "Successor Securities")
so long as the Successor Securities rank
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26
the same as the Capital Securities rank with respect
to Distributions and payments upon liquidation,
redemption and otherwise;
(ii) the Debenture Issuer expressly appoints a trustee of such
Successor Entity that possesses the same powers and
duties as the Property Trustee as the holder of the
Debentures;
(iii) the Capital Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities
exchange or with any other or organization on which the
Capital Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical
rating organization;
(v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect
the rights, preferences and privileges of the Holders of
the Capital Securities (including any Successor
Securities) in any material respect;
(vi) such Successor Entity has a purpose identical to that of
the Trust;
(vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease the Sponsor
has received an opinion of independent counsel to the
Trust experienced in such matters to the effect that:
a. such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and
privileges of the Holders of the Capital Securities
(including any Successor Securities) in any material
respect;
b. following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease neither
the Trust nor the Successor Entity will be required
to register as an Investment Company; and
c. following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will
continue to be classified as a grantor trust for
United States federal income tax purposes;
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27
(viii) the Sponsor or any permitted successor or assignee owns
all of the Common Securities and guarantees the
obligations of such Successor Entity under the Successor
Securities at least to the extent provided by the
Guarantee; and
(ix) such Successor Entity expressly assumes all of the
obligations of the Trust with respect to the Trustees.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other Person
or permit any other Person to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes and each Holder of the
Securities not to be treated as owning an undivided interest in the Debentures.
Section 3.16 Property Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Securities (or, if the
Securities are original issue discount Securities, such portion of the
liquidation amount as may be specified in the terms of such Securities) and to
file such other papers or documents as may be necessary or advisable in order to
have the claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
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Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.
ARTICLE 4
SPONSOR
Section 4.1 Responsibilities of the Sponsor.
In connection with the issue and sale of the Capital Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare for filing by the Trust with the Commission one or
more registration statements on the applicable forms, including any amendments
thereto, pertaining to the Capital Securities, the Guarantee and the Debentures;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;
(c) to prepare any filing by the Trust of an application to the New
York Stock Exchange, Inc. or any other national stock exchange or the Nasdaq
National Market for listing, if such filing is determined to be necessary or
desirable by the Sponsor;
(d) to prepare any filing by the Trust with the Commission of a
registration statement on Form 8-A, including any amendments thereto, if such
filing is determined to be necessary or desirable by the Sponsor;
(e) to negotiate the terms of a purchase agreement and other related
agreements providing for the sale of the Capital Securities to the Initial
Purchasers; and
(f) to negotiate the terms of the Registration Rights Agreement.
Section 4.2 Indemnification and Expenses of the Trustee.
The Sponsor, in its capacity as the Debenture Issuer, agrees to
indemnify the Property Trustee and the Delaware Trustee for, and to hold each of
them harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Property Trustee or the Delaware
Trustee, as the case may be, arising out of or in connection
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29
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending either of them against any
claim or liability in connection with the exercise or performance of any of
their respective powers or duties hereunder; the provisions of this Section
4.2 shall survive the resignation or removal of the Delaware Trustee or the
Property Trustee or the termination of this Declaration.
ARTICLE 5
TRUST COMMON SECURITIES HOLDER
Section 5.1 Debenture Issuer's Purchase of Common Securities.
On the Closing Date the Debenture Issuer will purchase all of the
Common Securities issued by the Trust, for an amount at least equal to 3% of the
capital of the Trust, at the same time as the Capital Securities are sold.
Section 5.2 Covenants of the Common Securities Holder.
For so long as the Capital Securities remain outstanding, the Common
Securities Holder will covenant (i) to maintain directly 100% ownership of the
Common Securities, (ii) to cause the Trust to remain a statutory business trust
and not to voluntarily dissolve, wind up, liquidate or be terminated, except as
permitted by this Declaration, (iii) to use its commercially reasonable efforts
to ensure that the Trust will not be an investment company for purposes of the
Investment Company Act, and (iv) to take no action which would be reasonably
likely to cause the Trust to be classified as an association or a publicly
traded partnership taxable as a corporation for United States federal income tax
purposes.
ARTICLE 6
TRUSTEES
Section 6.1 Number of Trustees.
The number of Trustees initially shall be five (5), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities or by written consent in lieu of such meeting; provided
that the number of Trustees shall be at least three; and provided further that
(1) the Delaware Trustee, in the case of a natural person, shall be a person who
is a resident of the State of Delaware or that, if not a natural person, is
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an entity which has its principal place of business in the State of Delaware;
(2) at least one Regular Trustee is an employee or officer of, or is
affiliated with, the Sponsor; and (3) one Trustee shall be the Property
Trustee for so long as this Declaration is required to qualify as an
indenture under the Trust Indenture Act, and such Trustee may also serve as
Delaware Trustee if it meets the applicable requirements.
Section 6.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
Section 6.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as
Property Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a
corporation or other Person permitted by the Commission
to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise
corporate trust owners, having a combined capital and
surplus of at least 50 million U.S. dollars
($50,000,000), and subject to supervision or examination
by Federal, State, Territorial or District of Columbia
authority. If such Person publishes reports of condition
at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to
above, then for the purposes of this Section 6.3(a)(ii),
the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 6.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 6.6(c).
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(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
Obliger referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
(d) The Guarantee shall be deemed to be specifically described in
this Declaration for purposes of clause (i) of the first provision contained in
Section 310(b) of the Trust Indenture Act.
Section 6.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
Section 6.5 Initial Trustees.
The initial Regular Trustees shall be:
Paris P. Thermenos, Charles W. Newman and Patrick J. McCann, the
business address of all of whom is c/o Barnett Banks, Inc., 50 North Laura
Street, Jacksonville, Florida 32202.
Section 6.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 6.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the
Holders of a Majority in Liquidation Amount of the Common
Securities voting as a class at a meeting of the Holders
of the Common Securities.
(b) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 6.6(a) until a successor Trustee possessing the
qualifications to act as Property Trustee under Section 3.8(h) (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and delivered to
the Regular Trustees and the Sponsor. The Trustee that acts as Delaware Trustee
shall not be removed in accordance with Section 6.6(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 6.2 and
6.4 (a "Successor Delaware Trustee") has been appointed and has accepted such
appointment by
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written instrument executed by such Successor Delaware Trustee and delivered
to the Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his or its
successor shall have been appointed, until his death or its dissolution or until
his or its removal or resignation. Any Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing signed by
the Trustee and delivered to the Sponsor and the Trust, which resignation shall
take effect upon such delivery or upon such later date as is specified therein;
provided, however, that:
(i) No such resignation of the Trustee that acts as the Property Trustee
shall be effective:
a. until a Successor Property Trustee has been appointed and has
accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Trust, the
Sponsor and the resigning Property Trustee; or
b. until the assets of the Trust have been completely liquidated
and the proceeds thereof distributed to the holders of the
Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware Trustee
shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed
by such Successor Delaware Trustee and delivered to the Trust, the
Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor Property Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 6.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee,
as the case may be, shall have been appointed and accepted appointment as
provided in this Section 6.6 within 60 days after delivery to the Sponsor and
the Trust of an instrument of resignation or removal, the resigning or removed
Property Trustee or Delaware Trustee, as applicable, may petition any court of
competent jurisdiction for appointment of a Successor Property Trustee or
Successor Delaware Trustee, as applicable. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
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Section 6.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 6.1, or if the number of Trustees is
increased pursuant to Section 6.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 6.6.
Section 6.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate, or annul the Trust. Whenever a vacancy in
the number of Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section 6.6, the Regular
Trustees in office, regardless of their number, shall have all the powers
granted to the Regular Trustees and shall discharge all the duties imposed upon
the Regular Trustees by this Declaration.
Section 6.9 Meetings.
If there is more than one Regular Trustee, meetings of the Regular
Trustees shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place fixed
by resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 48
hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice
of such meeting except where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the ground that the
meeting has not been lawfully called or convened. Unless provided otherwise in
this Declaration, any action of the Regular Trustees may be taken at a meeting
by vote of a majority of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Regular Trustees. In the event there is only one Regular Trustee, any and all
action of such Regular Trustee shall be evidenced by a written consent of such
Regular Trustee.
Section 6.10 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any natural person over the age of 21 his, her or
its power for the purpose of
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executing any documents contemplated in Section 3.6, including any
registration statement or amendment thereto filed with the Commission, or
making any other governmental filing.
(b) The Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
Section 6.11 Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from an merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the case
may be, shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of the Property Trustee or the Delaware Trustee, as
the case may be, shall be the successor of the Property Trustee or the Delaware
Trustee, as the case may be, hereunder, provided such Person shall be otherwise
qualified and eligible under this Article without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
ARTICLE 7
THE SECURITIES
Section 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust issue a class
of capital securities representing undivided beneficial ownership interests in
the assets of the Trust (the "Transfer Restricted Securities"), a class of
capital securities to be only issued in exchange for the Transfer Restricted
Securities (the "New Capital Securities," and together with the Transfer
Restricted Securities the "Capital Securities"), and one class of common
securities representing undivided beneficial ownership interests in the assets
of the Trust (the "Common Securities").
(i) Capital Securities. The Capital Securities of the Trust
have an aggregate liquidation amount with respect to the
assets of the Trust of $200,000,000 and a liquidation
amount with respect to the assets of the Trust of $1,000
per Capital Security. The New Capital Security
Certificates and the Transfer Restricted Capital
Certificates evidencing the Capital Securities shall be
substantially in the form of Exhibit A to the Declaration
PROVIDED, that the New Capital Security Certificate shall
not contain any of the provisions following the Property
Trustee's or authenticating agent's authentication, with
such changes and additions thereto or deletions therefrom
as may be required by ordinary usage,
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custom or practice or to conform to the rules of any stock
exchange on which the Capital Securities are listed.
(ii) Common Securities. The Common Securities of the Trust have
an aggregate liquidation amount with respect to the
assets of the Trust of $6,186,000 and a liquidation
amount with respect to the assets of the Trust of $1,000
per Common Security. The Common Security Certificates
evidencing the Common Securities shall be substantially
in the form of Exhibit B to the Declaration, with such
changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice.
(b) Payment of Distributions on, and the Redemption Price payable
upon a redemption of, the Capital Securities and the Common Securities, as
applicable, shall be made Pro Rata based on the liquidation amount of such
Capital Securities and Common Securities; provided, however, that if on any date
on which such amounts are payable an Indenture Event of Default shall have
occurred and be continuing, no payment of any distribution on, or the Redemption
Price of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of such Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Capital Securities for all distribution periods
terminating on or prior thereto, or in the case of amounts payable on redemption
the full amount of the Redemption Price for all of the outstanding Capital
Securities then called for redemption, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions on, or amounts payable on
redemption of, the Capital Securities then due and payable.
(c) The Trust shall issue no securities or other interests in the
assets of the Trust other than the Capital Securities and the Common Securities.
(d) The Certificates shall be signed on behalf of the Trust by a
Regular Trustee. Such signature shall be the manual or facsimile signature of
any present or any future Regular Trustee. In case a Regular Trustee of the
Trust who shall have signed any of the Certificates shall cease to be such
Regular Trustee before the Certificates so signed shall be delivered by the
Trust, such Certificates nevertheless may be delivered as though the person who
signed such Certificates had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons who, at the
actual date of execution of such Certificate, shall be the Regular Trustees of
the Trust, although at the date of the execution and delivery of the Declaration
any such person was not such a Regular Trustee. Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Regular Trustees, as evidenced by one or more of their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be required to comply with any law or
with any rule or regulation of any stock exchange on which Securities may be
listed, or to conform to usage.
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A Certificate shall not be valid until authenticated by the manual
signature of an authorized officer of the Property Trustee or the authenticating
agent. Such signature shall be conclusive evidence that the Certificate has
been authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular Trustee, the
Property Trustee shall authenticate the Certificates for original issue. The
aggregate number of Capital Securities outstanding at any time shall not exceed
the liquidation amount set forth in Section 7(a)(i).
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Certificates. An authenticating agent may
authenticate Certificates whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as
the Property Trustee to deal with the Sponsor or an Affiliate of the Sponsor.
(e) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(f) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(g) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration and the terms of the Securities, the Guarantee,
the Indenture and the Debentures.
(h) The Securities shall have no preemptive rights.
Section 7.2 Distributions.
(a) Holders of Securities shall be entitled to receive cumulative
cash distributions at the rate per annum of 7.95% of the stated liquidation
amount of $1,000 per Security, calculated on the basis of a 360-day year
consisting of twelve 30-day months. For any period shorter than a full 180-day
semi-annual period, distributions will be computed on the basis of the actual
number of days elapsed in such 180-day semi-annual period. Except as otherwise
provided in Section 7.1(b), Distributions shall be made on the Capital
Securities and the Common Securities on a Pro Rata basis. Distributions on the
Securities shall, from the date of original issue, accrue and be cumulative and
shall be payable semi-annually only to the extent that the Trust has funds
available for the payment of such Distributions in the Property Account.
Distributions not paid on the scheduled payment date will accumulate and
compound semi-annually at the rate of 7.95% per annum ("Compounded
Distributions"). "Distributions" shall mean ordinary cumulative distributions
together with any Compounded Distributions. If and to the extent that the
Debenture Issuer makes a payment of interest (including Compounded Interest (as
defined in the Indenture)), premium and/or principal on
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the Debentures held by the Property Trustee (the amount of any such payment
being a "Payment Amount"), the Property Trustee shall and is directed, to the
extent funds are available for that purpose and, except as otherwise provided
in Section 7.1(b), to make a Pro Rata distribution (a "Distribution") of the
Payment Amount to Holders.
(b) Distributions on the Securities will be cumulative, will accrue
from the date of initial issuance and will be payable semi-annually in arrears
on each June 1 and December 1, commencing June 1, 1997, when, as and if
available for payment, by the Property Trustee, except as otherwise described
below. If Distributions are not paid when scheduled, the accrued Distributions
shall be paid to the Holders of record of Securities as they appear on the books
and records of the Trust on the record date as determined under Section 7.2(c).
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which relevant record date shall be the 15th of the month prior to
the relevant payment dates. In the event that any date on which Distributions
are payable on the Securities is not a Business Day, payment of the Distribution
payable on such date will be made on the next succeeding day which is a Business
Day (without any interest or other payment in respect of any such delay) with
the same force and effect as if made on such date.
Section 7.3 Redemption of Securities.
(a) Except as otherwise provided in Section 7.1(b), upon the
repayment or redemption, in whole or in part, of the Debentures, the proceeds
from such repayment or redemption shall be simultaneously applied Pro Rata to
redeem Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so repaid or redeemed for an amount equal to
the redemption price paid by the Debenture Issuer in respect of such Debentures
plus an amount equal to accrued and unpaid Distributions thereon through the
date of the redemption or such lesser amount as shall be received by the Trust
in respect of the Debentures so repaid or redeemed (the "Redemption Price").
Holders will be given not less than 30 or more than 60 days notice of such
redemption.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be redeemed as described in
Section 7.4 below.
(c) If, at any time, a Special Event shall occur and be continuing,
the Regular Trustees may elect to, unless the Debentures are redeemed, within 90
days following the occurrence of such Special Event, subject to the receipt of
any necessary approval by the Federal Reserve, dissolve the Trust upon not less
than 30 nor more than 60 days' notice and, after satisfaction of creditors, if
any, cause the Debentures to be distributed to the Holders of the Securities in
liquidation of the Trust.
(d) On the date fixed for any distribution of Debentures, upon
dissolution of the Trust, (i) the Capital Securities and the Common Securities
will no longer be deemed to
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38
be outstanding and (ii) certificates representing Securities will be deemed
to represent the Debentures having an aggregate principal amount equal to the
stated liquidation amount of, and bearing accrued and unpaid distributions
equal to accrued and unpaid Distributions on, such Securities until such
certificates are presented to the Sponsor or its agent for transfer or
reissuance.
Section 7.4 Redemption Procedures.
(a) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution Notice")
will be given by the Trust by mail to each Holder of Securities to be redeemed
or exchanged not fewer than 30 nor more than 60 days before the date fixed for
redemption or exchange thereof which, in the case of a redemption, will be the
date fixed for redemption of the Debentures. For purposes of the calculation of
the date of redemption or exchange and the dates on which notices are given
pursuant to this Section 7.4, a Redemption/Distribution Notice shall be deemed
to be given on the day such notice is first mailed by first-class mail, postage
prepaid, to Holders of Securities. Each Redemption/Distribution Notice shall be
addressed to the Holders of Securities at the address of each such Holder
appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with respect
to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed and
the Capital Securities to be redeemed will be redeemed as described below. The
Trust may not redeem the Securities in part unless all accrued and unpaid
interest has been paid in full on all Securities then outstanding plus accrued
but unpaid interest to the date of redemption. For all purposes of this
Declaration, unless the context otherwise requires, all provisions relating to
the redemption of Capital Securities shall relate, in the case of any Capital
Security redeemed or to be redeemed only in part, to the portion of the
aggregate liquidation preference of Capital Securities which has been or is to
be redeemed.
(c) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 7.4 (which notice will be
irrevocable), then (A) by 12:00 noon, New York City time, on the redemption
date, the Property Trustee will deposit irrevocably with the DTC (in the case of
book-entry form Capital Securities) or its nominee (or successor Clearing Agency
or its nominee) funds sufficient to pay the applicable Redemption Price with
respect to the Capital Securities and will give the DTC irrevocable instructions
and authority to pay the Redemption Price to the Holders of the Capital
Securities, and (B) with respect to Capital Securities and Common Securities
issued in definitive form, the Property Trustee will pay the relevant Redemption
Price to the Holders of such Securities by check mailed to the address of the
relevant Holder appearing on the books and records of the Trust on the
redemption date. If a Redemption/Distribution Notice shall have been given and
funds deposited as required, then immediately prior to the close of business on
the date of such deposit, Distributions will cease to accrue on the Securities
so
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39
called for redemption and all rights of Holders of such Securities will
cease, except the right of the Holders of such Securities to receive the
Redemption Price, but without interest on such Redemption Price. If any date
fixed for redemption of Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of any Securities is
improperly withheld or refused and not paid either by the Property Trustee or by
the sponsor as guarantor pursuant to the Guarantee, Distributions on such
Securities will continue to accrue at the then applicable rate from the original
redemption date to the actual date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price. For these purposes, the applicable Redemption
Price shall not include Distributions which are being paid to Holders who were
Holders on a relevant record date. Upon satisfaction of the foregoing
conditions, then immediately prior to the close of business on the date of such
deposit or payment, all rights of Holders of such Debentures so called for
redemption will cease, except the right of the Holders to receive the Redemption
Price, but without interest on such Redemption Price, and from and after the
date fixed for redemption, such Debentures will not accrue Distributions or bear
interest.
Neither the Regular Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Securities that have been
called for redemption.
(d) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), the Debenture Issuer or its
subsidiaries may at any time and from time to time purchase outstanding Capital
Securities by tender, in the open market or by private agreement.
Section 7.5 Voting Rights of Capital Securities.
(a) Except as provided under this Article VII and as otherwise
required by the Business Trust Act, the Trust Indenture Act and other applicable
law, the Holders of the Capital Securities will have no voting rights.
(b) Subject to the requirement of the Property Trustee obtaining a
tax opinion in certain circumstances set forth in Section 7.5(d) below, the
Holders of a Majority in liquidation amount of the Capital Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or to direct the exercise of any trust
or power conferred upon the Property Trustee under the Declaration, including
the right to direct the Property Trustee, as holder of the Debentures, to
(i) exercise the remedies available to it under the Indenture as a holder of the
Debentures or (ii) consent to any amendment or modification of the Indenture or
the Debentures where such consent shall be required; provided, however, that
where a consent or action under the Indenture would require the consent or act
of the holders of more than a majority of the aggregate liquidation amount of
Debentures affected thereby, only the Holders of the
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40
percentage of the aggregate stated liquidation amount of the Capital
Securities which is at least equal to the percentage required under the
Indenture may direct the Property Trustee to give such consent to take such
action.
(c) If the Property Trustee fails to enforce its rights under the
Debentures after a Holder of record of Capital Securities has made a written
request, such Holder of record of Capital Securities may institute a legal
proceeding, to the fullest extent permitted by laws directly against the
Debenture Issuer to enforce the Property Trustee's rights under the Indenture
without first instituting any legal proceeding against the Property Trustee or
any other Person. Notwithstanding the foregoing, if a Trust Enforcement Event
has occurred and is continuing and such event is attributable to the failure of
the Debenture Issuer to make any required payment when due under the Indenture,
then a Holder of Capital Securities may directly institute a proceeding against
the Debenture Issuer for enforcement of such payment under the Indenture.
(d) The Property Trustee shall notify all Holders of the Capital
Securities of any notice of any Indenture Event of Default received from the
Debenture Issuer with respect to the Debentures. Such notice shall state that
such Indenture Event of Default also constitutes a Trust Enforcement Event.
Except with respect to directing the time, method, and place of conducting a
proceeding for a remedy, the Property Trustee shall be under no obligation to
take any of the actions described in clause 7.4(b)(i) and (ii) above unless the
Property Trustee has obtained an opinion of independent tax counsel to the
effect that as a result of such action, the Trust will not fail to be classified
as a grantor trust for United States federal income tax purposes and each Holder
will be treated as owning an undivided beneficial ownership interest in the
Debentures.
(e) In the event the consent of the Property Trustee, as the holder
of the Debentures, is required under the Indenture with respect to any amendment
or modification of the Indenture, the Property Trustee shall request the
direction of the Holders of the Securities with respect to such amendment or
modification and shall vote with respect to such amendment or modification as
directed by a Majority in liquidation amount of the Securities voting together
as a single class; provided, however, that where a consent under the Indenture
would require the consent of the holders of more than a majority of the
aggregate principal amount of the Debentures, the Property Trustee may only give
such consent at the direction of the Holders of at least the same proportion in
aggregate stated liquidation amount of the Securities. The Property Trustee
shall not take any such action in accordance with the directions of the Holders
of the Securities unless the Property Trustee has obtained an opinion of tax
counsel to the effect that, as a result of such action, the Trust will not be
classified as other than a grantor trust for United States federal income tax
purposes and each Holder will be treated as owning an undivided beneficial
ownership interest in the Debentures.
(f) A waiver of an Indenture Event of Default with respect to the
Debentures will constitute a waiver of the corresponding Trust Enforcement
Event.
(g) Any required approval or direction of Holders of Capital
Securities may be given at a separate meeting of Holders of Capital Securities
convened for such purpose, at a
<PAGE>
41
meeting of all of the Holders of Securities or pursuant to written consent.
The Regular Trustees will cause a notice of any meeting at which Holders of
Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each
Holder of record of Capital Securities. Each such notice will include a
statement setting forth the following information: (i) the date of such
meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such Holders
are entitled to vote or of such matter upon which written consent is sought;
and (iii) instructions for the delivery of proxies or consents.
(h) No vote or consent of the Holders of Capital Securities will be
required for the Trust to redeem and cancel Capital Securities or distribute
Debentures in accordance with the Declaration.
(i) Notwithstanding that Holders of Capital Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Securities that are owned at such time by the Debenture Issuer or any entity
directly or indirectly controlled by, or under direct or indirect common control
with, the Debenture Issuer, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Securities were not
outstanding, provided, however that persons otherwise eligible to vote to whom
the Debenture Issuer or any of its subsidiaries have pledged Capital Securities
may vote or consent with respect to such pledged Capital Securities under any of
the circumstances described herein.
(j) Holders of the Capital Securities will have no rights to appoint
or remove the Trustees, who may be appointed, removed or replaced solely by the
Debenture Issuer, as the Holder of all of the Common Securities.
Section 7.6 Voting Rights of Common Securities.
(a) Except as provided under Section 6.1(b) or this Section 7.6 or as
otherwise required by the Business Trust Act, the Trust Indenture Act or other
applicable law or provided by the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance
with Article V of the Declaration, to vote to appoint, remove or replace any
Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after all
Trust Enforcement Events with respect to the Capital Securities have been cured,
waived, or otherwise eliminated and subject to the requirement of the Property
Trustee obtaining a tax opinion in certain circumstances set forth in this
paragraph (c), the Holders of a Majority in liquidation amount of the Common
Securities have the right to direct the time, method and place of conduction any
proceeding for any remedy available to the Property Trustee, or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as holder of
the Debentures, to
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42
(i) exercise the remedies available to it under the Indenture as a holder of
the Debentures, or (ii) consent to any amendment or modification of the
Indenture or the Debentures where such consent shall be required; provided,
however, that where a consent or action under the Indenture would require the
consent or act of the Holders of more than a majority of the aggregate
liquidation amount of Debentures affected thereby, only the Holders of the
percentage of the aggregate stated liquidation amount of the Common
Securities which is at least equal to the percentage required under the
Indenture may direct the Property Trustee to have such consent or take such
action. Except with respect to directing the time, method, and place of
conducting a proceeding for a remedy, the Property Trustee shall be under no
obligation to take any of the actions described in clause 7.6(c)(i) and (ii)
above unless the Property Trustee has obtained an opinion of independent tax
counsel to the effect that, as a result of such action, for United States
federal income tax purposes the Trust will not fail to be classified as a
grantor trust and each Holder will be treated as owning an undivided
beneficial ownership interest in the Debentures.
(d) If the Property Trustee fails to enforce its rights under the
Debentures after a Holder of record of Common Securities has made a written
request, to the fullest extent permitted by law, such Holder of record of Common
Securities may directly institute a legal proceeding directly against the
Debenture Issuer, as sponsor of the Trust, to enforce the Property Trustee's
rights under the Debentures without first instituting any legal proceeding
against the Property Trustee or any other Person.
(e) A waiver of an Indenture Event of Default with respect to the
Debentures will constitute a waiver of the corresponding Trust Enforcement
Event.
(f) Any required approval or direction of Holders of Common
Securities may be given at a separate meeting of Holders of Common Securities
convened for such purpose, at a meeting of all of the Holders of Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Trust Common Securities are entitled to vote, or of
any matter on which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such Holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents.
(g) No vote or consent of the holders of the Common Securities will
be required for the Trust to redeem and cancel Common Securities or to
distribute Debentures in accordance with the Declaration and the terms of the
Securities.
Section 7.7 Paying Agent.
In the event that any Capital Securities are not in book-entry only
form, the Trust shall maintain in the Borough of Manhattan, City of New York,
State of New York, an office or agency where the Capital Securities may be
presented for payment ("Paying Agent"). The Trust may appoint the paying agent
and may appoint one or more additional paying
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43
agents in such other locations as it shall determine. The term "Paying
Agent" includes any additional paying agent. The Trust may change any Paying
Agent without prior notice to the Holders. The Trust shall notify the
Property Trustee of the name and address of any Paying Agent not a party to
this Declaration. If the Trust fails to appoint or maintain another entity
as Paying Agent, the Property Trustee shall act as such. The Trust or any of
its Affiliates may act as Paying Agent. The First National Bank of Chicago
shall initially act as Paying Agent for the Capital Securities and the Common
Securities.
Section 7.8 Transfer of Securities.
(a) The Trust shall cause to be kept at the Corporate Trust Office of
the Property Trustee a register (the register maintained in such office being
herein sometimes referred to as the "Security Register") in which, subject to
such reasonable regulations as it may prescribe, the Trust shall provide for the
registration of Capital Securities and of transfers of Capital Securities. The
Property Trustee is hereby appointed "Security Registrar" for the purpose of
registering Capital Securities and transfers of Capital Securities as herein
provided.
(b) Upon surrender for registration of transfer of any Security at an
office or agency of the Trust designated for such purpose, a Regular Trustee on
behalf of the Trust shall execute by manual or facsimile signature, and the
Property Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any authorized
denominations and of a like aggregate principal amount.
(c) At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, a
Regular Trustee on behalf of the Trust shall execute (by manual or facsimile
signature), and the Property Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
(d) Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Trust or the Property
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Trust and the Security Registrar duly executed, by
the Holder thereof or his attorney duly authorized in writing.
(e) No service charge shall be made for any registration of transfer
or exchange of Securities, but the Trust may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities.
(f) If the Securities are to be redeemed in part, the Trust shall not
be required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption pursuant to Section's 7.3 and 7.4 hereof and ending at the close of
business on the day of such mailing, or (B) to register the transfer of or
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44
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
Section 7.9 Mutilated, Destroyed, Lost or Stolen Certificates.
If:
(a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Regular Trustees such security or
indemnity as may be required by them to keep each of them, the Sponsor and the
Trust harmless, then, in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, any Regular Trustee on behalf of the
Trust shall execute and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 7.9, the Regular Trustees may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the relevant
Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 7.10 Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall
be registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
Section 7.11 Global Securities.
If the Trust shall establish that the Capital Securities are to be
issued in the form of one or more Global Securities (each, a "Global Security"),
then a Regular Trustee on behalf of the Trust shall execute (by manual or
facsimile signature) and the Property Trustee shall authenticate and deliver one
or more Global Securities that (i) shall represent and shall be denominated in
an amount equal to the aggregate liquidation amount of all of the Capital
Securities to be issued in the form of Global Securities and not yet cancelled,
(ii) shall be registered in the name of the Depositary for such Global Security
or Capital Securities or the nominee of such Depositary, and (iii) shall be
delivered by the Property Trustee to such Depositary or pursuant to such
Depositary's instructions. Global Securities shall bear a legend substantially
to the following effect:
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45
"This Capital Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee of a Depositary. Notwithstanding the provisions of Section 7.8,
unless and until it is exchanged in whole or in part for Capital Securities in
definitive registered form, a Global Security representing all or a part of the
Capital Securities may not be transferred in the manner provided in Section 7.8
except as a whole by the Depositary to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. Every Capital Security delivered
upon registration or transfer of, or in exchange for, or in lieu of, this Global
Security shall be a Global Security subject to the foregoing, except in the
limited circumstances described above. Unless this certificate is presented by
an authorized representative of DTC to the Trust or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is to be made to Cede & Co. or to such
other entity as is 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."
Definitive Capital Securities issued in exchange for all or a part of
a Global Security pursuant to this Section 7.11 shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Property Trustee. Upon execution and authentication, the Property
Trustee shall deliver such definitive Capital Securities to the Persons in whose
names such definitive Capital Securities are so registered.
At such time as all interests in Global Securities have been redeemed,
repurchased or canceled, such Global Securities shall be, upon receipt thereof,
canceled by the Property Trustee in accordance with standing procedures and
instructions existing between the Depositary and the Custodian. At any time
prior to such cancellation, if any interest in Global Securities is exchanged
for definitive Capital Securities, redeemed, canceled or transferred to a
transferee who receives definitive Capital Securities therefor or any definitive
Capital Security is exchanged or transferred for part of Global Securities, the
principal amount of such Global Securities shall, in accordance with the
standing procedures and instructions existing between the Depositary and the
Custodian, be reduced or increased, as the case may be, and an endorsement shall
be made on such Global Securities by the Property Trustee or the Custodian, at
the direction of the Property Trustee, to reflect such reduction or increase.
The Trust and the Property Trustee may for all purposes, including the
making of payments due on the Capital Securities, deal with the Depositary as
the authorized representative of the Holders for the purposes of exercising the
rights of Holders hereunder. The rights of the owner of any beneficial interest
in a Global Security shall be limited to those established by law and agreements
between such owners and depository participants or Euroclear and Cedel;
PROVIDED, that no such agreement shall give any rights to any Person against the
Trust or the Property Trustee without the written consent of the parties so
affected. Multiple requests and directions from and votes of the Depositary as
holder of Capital
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46
Securities in global form with respect to any particular matter shall not be
deemed inconsistent to the extent they do not represent an amount of Capital
Securities in excess of those held in the name of the Depositary or its
nominee.
If at any time the Depositary for any Capital Securities represented
by one or more Global Securities notifies the Trust that it is unwilling or
unable to continue as Depositary for such Capital Securities or if at any time
the Depositary for such Capital Securities shall no longer be eligible under
this Section 7.11, the Trust shall appoint a successor Depositary with respect
to such Capital Securities. If a successor Depositary for such Capital
Securities is not appointed by the Trust within 90 days after the Trust receives
such notice or becomes aware of such ineligibility, the Trust's election that
such Capital Securities be represented by one or more Global Securities shall no
longer be effective and a Regular Trustee on behalf of the Trust shall execute
by manual or facsimile signature, and the Property Trustee will authenticate and
deliver Capital Securities in definitive registered form, in any authorized
denominations, in an aggregate liquidation amount equal to the principal amount
of the Global Security or Capital Securities representing such Capital
Securities in exchange for such Global Security or Capital Securities.
The Trust may at any time and in its sole discretion determine that
the Capital Securities issued in the form of one or more Global Securities shall
no longer be represented by a Global Security or Capital Securities. In such
event a Regular Trustee on behalf of the Trust shall execute by manual or
facsimile signature, and the Property Trustee, shall authenticate and deliver,
Capital Securities in definitive registered form, in any authorized
denominations, in an aggregate liquidation amount equal to the principal amount
of the Global Security or Capital Securities representing such Capital
Securities, in exchange for such Global Security or Capital Securities.
Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in Section 7.12, Global Securities may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Interests of beneficial owners in Global Security may be transferred
or exchanged for definitive Capital Securities and definitive Capital Securities
may be transferred or exchange for Global Securities in accordance with rules of
the Depositary and the provisions of Section 7.13.
Any Capital Security in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Declaration as may be required by the
Custodian, the Depositary or by the National Association of Securities Dealers,
Inc. in order for the Capital Securities to be tradeable on the PORTAL Market or
as may be required for the Capital Securities to be tradeable on any other
market developed for trading of securities pursuant to Rule 144A or required to
comply with any applicable law or any regulation thereunder or with Regulation S
or with the rules and regulations of any securities exchange upon which the
Capital Securities
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47
may be listed or traded or to conform with any usage with respect thereto, or
to indicate any special limitations or restrictions to which any particular
Capital Securities are subject.
Section 7.12 Restrictive Legend.
(a) Each Global Security and definitive Capital Security that
constitutes a Restricted Security shall bear the following legend (the "Private
Placement Legend") on the face thereof until three years after the later of the
date of original issue and the last date on which the Sponsor or any affiliate
of the Sponsor was the owner of such Capital Securities (or any predecessor
thereto) (the "Resale Restriction Termination Date"), unless otherwise agreed by
the Trust and the Holder thereof:
"THIS CAPITAL 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 CAPITAL 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 CAPITAL 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
CAPITAL SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND
AGREES FOR THE BENEFIT OF THE TRUST 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 CAPITAL
SECURITY PRIOR TO THE LATER OF THE DATE WHICH IS THREE YEARS AFTER THE DATE
OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE TRUST OR ANY
AFFILIATE OF THE TRUST WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY
PREDECESSOR) EXCEPT (A) TO THE TRUST, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THIS CAPITAL 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, (D) OUTSIDE THE UNITED
STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
CAPITAL SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE, ANY
OFFER, SALE OR
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OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D)
AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS CAPITAL SECURITY AND
THE PROPERTY TRUSTEE FOR SUCH CAPITAL SECURITIES TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO
THEM IN FORM AND SUBSTANCE."
Any Capital Security (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms may, upon satisfaction of the requirements of
Section 7.12(b) and surrender of such Capital Security for exchange to the
Capital Security registrar in accordance with the provisions of this Section
7.12(a), be exchanged for a new Capital Security or Capital Securities, of like
tenor and aggregate liquidation amount, which shall not bear the restrictive
legend required by this Section 7.12(a).
Upon any sale or transfer of any Restricted Security (including any
interest in a Global Security) (i) that is effected pursuant to an effective
registration statement under the Securities Act or (ii) in connection with which
the Trustee receives certificates and other information (including an opinion of
counsel, if requested) reasonably acceptable to the Debenture Issuer and the
Trustee to the effect that such security will no longer be subject to the resale
restrictions under federal and state securities laws, then (A) in the case of a
Restricted Security in definitive form, the Capital Security registrar or
co-registrar shall permit the holder thereof to exchange such Restricted
Security for a security that does not bear the legend set forth in Section
314(a), and shall rescind any such restrictions on transfer and (B) in the case
of Restricted Securities represented by a Global Security, such Capital Security
shall no longer be subject to the restrictions contained in the legend set forth
in Section 7.12(a) (but still subject to the other provisions hereof). In
addition, any Capital Security (or security issued in exchange or substitution
therefor) as to which the restrictions on transfer described in the legend set
forth in Section 7.12(a) have expired by their terms, may, upon surrender
thereof (in accordance with the terms of this Indenture) together with such
certifications and other information (including an opinion of counsel having
substantial experience in practice under the Securities Act and otherwise
reasonably acceptable to the Debenture Issuer, addressed to the Debenture Issuer
and the Trustee and in a form acceptable to the Debenture Issuer, to the effect
that the transfer of such Restricted Security has been made in compliance with
Rule 144 or such successor provision) acceptable to the Debenture Issuer and the
Trustee as either of them may reasonably require, be exchanged for a new Capital
Security or Capital Securities of like tenor and aggregate principal amount,
which shall not bear the restrictive legends set forth in Section 7.12(a).
Section 7.13 Special Transfer Provisions.
(a) At any time at the request of the beneficial holder of a Capital
Security in global form, such beneficial holder shall be entitled to obtain a
definitive Capital Security upon written request to the Property Trustee in
accordance with the standing instructions and procedures existing between the
Depositary and the Property Trustee for the issuance thereof. Any transfer of a
beneficial interest in a Capital Security in global form which cannot be
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49
effected through book-entry settlement must be effected by the delivery to
the transferee (or its nominee) of a definitive Capital Security or
Securities registered in the name of the transferee (or its nominee) on the
books maintained by the Security Registrar. With respect to any such
transfer, the Property Trustee will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Property
Trustee, the aggregate liquidation amount of the Global Security to be
reduced and, following such reduction, the Property Trustee will cause
Definitive Capital Securities in the appropriate aggregate liquidation amount
in the name of such transferee (or its nominee) and bearing such restrictive
legends as may be required by this Declaration to be delivered. In
connection with any such transfer, the Property Trustee may request such
representations and agreements relating to the restrictions on transfer of
such Capital Securities from such transferee (or such transferee's nominee)
as the Property Trustee may reasonably require.
(b) So long as the Capital Securities are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Capital Security to a QIB in accordance with Rule 144A, unless
otherwise requested by the transferor, and upon receipt of the definitive
Capital Security being so transferred, together with a certification from the
transferor that the transferor reasonably believes the transferee is a QIB
(or other evidence satisfactory to the Property Trustee), the Property
Trustee shall make an endorsement on the Restricted Global Security to
reflect an increase in the aggregate liquidation amount of the Restricted
Global Security, and the Property Trustee shall cancel such definitive
Capital Security and cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Property Trustees, the
aggregate liquidation amount of Capital Securities represented by the
Restricted Global Security to be increased accordingly.
(c) So long as the Capital Securities are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Capital Security in accordance with Regulation S, if requested by
the transferor, and upon receipt of the definitive Capital Security or
Capital Securities being so transferred, together with a certification from
the transferor that the transfer was made in accordance with Rule 903 or 904
of Regulation S or Rule 144 under the Securities Act (or other evidence
satisfactory to the Property Trustee), the Property Trustee shall make an
endorsement on the Regulation S Global Security to reflect an increase in the
aggregate liquidation amount of the Capital Securities represented by the
Regulation S Global Security, the Property Trustee shall cancel such
definitive Capital Security or Capital Securities and cause, in accordance
with the standing instructions and procedures existing between the Depositary
and the Property Trustee, the aggregate liquidation amount of Capital
Securities represented by the Regulation S Global Security to be increased
accordingly.
(d) If a holder of a beneficial interest in the Restricted Global
Security wishes at any time to exchange its interest in the Restricted Global
Security for an interest in the Regulation S Global Security, or to transfer
its interest in the Restricted Global Security to a Person who wishes to take
delivery thereof in the form of an interest in the Regulation S Global
Security, such holder may, subject to the rules and procedures of the
Depositary and to the requirements set forth in the following sentence,
exchange or cause the exchange or transfer or cause the transfer of such
interest for an equivalent beneficial interest in the
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50
Regulation S Global Security. Upon receipt by the Property Trustee, as
transfer agent, of (1) instructions given in accordance with the Depositary's
procedures from or on behalf of a holder of a beneficial interest in the
Restricted Global Security, directing the Property Trustee (via DWAC), as
transfer agent, to credit or cause to be credited a beneficial interest in
the Regulation S Global Security in an amount equal to the beneficial
interest in the Restricted Global Security to be exchanged or transferred,
(2) a written order given in accordance with the Depositary's procedures
containing information regarding the Euroclear or Cedel account to be
credited with such increase and the name of such account, and (3) a
certificate given by the holder of such beneficial interest stating that the
exchange or transfer of such interest has been made pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S or Rule 144 under the
Securities Act (or other evidence satisfactory to the Property Trustee), the
Property Trustee, as transfer agent, shall promptly deliver appropriate
instructions to the Depositary (via DWAC), its nominee, or the custodian for
the Depositary, as the case may be, to reduce or reflect on its records a
reduction of the Restricted Global Security by the aggregate liquidation
amount of the beneficial interest in such Restricted Global Security to be so
exchanged or transferred from the relevant participant, and the Property
Trustee, as transfer agent, shall promptly deliver appropriate instructions
(via DWAC) to the Depositary, its nominee, or the custodian for the
Depositary, as the case may be, concurrently with such reduction, to increase
or reflect on its records an increase of the liquidation amount of such
Regulation S Global Security by the aggregate liquidation amount of the
beneficial interest in such Restricted Global Security to be so exchanged or
transferred, and to credit or cause to be credited to the account of the
Person specified in such instructions (who may be Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear or Cedel or
another agent member of Euroclear or Cedel, or both, as the case may be,
acting for and on behalf of them) a beneficial interest in such Regulation S
Global Security equal to the reduction in the liquidation amount of such
Restricted Global Security.
(e) If a holder of a beneficial interest in the Regulation S
Global Security wishes at any time to exchange its interest in the Regulation
S Global Security for an interest in the Restricted Global Security, or to
transfer its interest in the Regulation S Global Security to a Person who
wishes to take delivery thereof in the form of an interest in the Restricted
Global Security, such holder may, subject to the rules and procedures of
Euroclear or Cedel and the Depositary, as the case may be, and to the
requirements set forth in the following sentence, exchange or cause the
exchange or transfer or cause the transfer of such interest for an equivalent
beneficial interest in such Restricted Global Security. Upon receipt by the
Property Trustee, as transfer agent, of (l) instructions given in accordance
with the procedures of Euroclear or Cedel and the Depositary, as the case may
be, from or on behalf of a beneficial owner of an interest in the Regulation
S Global Security directing the Property Trustee, as transfer agent, to
credit or cause to be credited a beneficial interest in the Restricted Global
Security in an amount equal to the beneficial interest in the Regulation S
Global Security to be exchanged or transferred, (2) a written order given in
accordance with the procedures of Euroclear or Cedel and the Depositary, as
the case may be, containing information regarding the account with the
Depositary to be credited with such increase and the name of such account,
and (3) prior to the expiration of the Restricted Period, a certificate given
by the holder of such beneficial interest and stating that the Person
transferring such interest in such Regulation S Global Security reasonably
believes that the Person acquiring
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51
such interest in the Restricted Global Security is a QIB and is obtaining
such beneficial interest in a transaction meeting the requirements of Rule
144A and any applicable securities laws of any state of the United States or
any other jurisdiction (or other evidence satisfactory to the Property
Trustee), the Property Trustee, as transfer agent, shall promptly deliver
(via DWAC) appropriate instructions to the Depositary, its nominee, or the
custodian for the Depositary, as the case may be, to reduce or reflect on its
records a reduction of the Regulation S Global Security by the aggregate
liquidation amount of the beneficial interest in such Regulation S Global
Security to be exchanged or transferred, and the Property Trustee, as
transfer agent, shall promptly deliver (via DWAC) appropriate instructions to
the Depositary, its nominee, or the custodian for the Depositary, as the case
may be, concurrently with such reduction, to increase or reflect on its
records an increase of the liquidation amount of the Restricted Global
Security by the aggregate liquidation amount of the beneficial interest in
the Regulation S Global Security to be so exchanged or transferred, and to
credit or cause to be credited to the account of the person specified in such
instructions a beneficial interest in the Restricted Global Security equal to
the reduction in the liquidation amount of the Regulation S Global Security.
After the expiration of the Restricted Period, the certification requirement
set forth in clause (3) of the second sentence of this Section 7.13(e) will
no longer apply to such exchanges and transfers.
(f) Any beneficial interest in one of the Global Securities that
is transferred to a Person who takes delivery in the form of an interest in
the other Global Security will, upon transfer, cease to be an interest in
such Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions and
other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(g) Prior to or on the 40th day after the later of the
commencement of the offering of the Capital Securities and the Closing Date
(the "Restricted Period"), beneficial interests in a Regulation S Global
Security may only be held through Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or Cedel or another agent member of
Euroclear and Cedel acting for and on behalf of them, unless delivery is made
through the Restricted Global Security in accordance with the certification
requirements hereof. During the Restricted Period, interests in the
Regulation S Global Security, may be exchanged for interests in the
Restricted Global Security or for definitive Securities only in accordance
with the certification requirements described above.
ARTICLE 8
DISSOLUTION AND TERMINATION OF TRUST
Section 8.1 Dissolution and Termination of Trust.
(a) The Trust shall dissolve upon the earliest of:
(i) the bankruptcy of the Holder of the Common Securities or the
Sponsor;
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(ii) the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor; the filing of a
certificate of cancellation with respect to the Trust after
obtaining the consent of the Holders of at least a Majority
in Liquidation Amount of the Securities to the filing of a
certificate of cancellation with respect to the Trust or the
revocation of the Sponsor's charter and the expiration of 90
days after the date of revocation without a reinstatement
thereof;
(iii) the entry of a decree of judicial dissolution of the Sponsor
or the Trust;
(iv) the time when all of the Securities shall have matured or
been called for redemption and the amounts then due shall
have been paid to the Holders in accordance with the terms
of the Securities;
(v) upon the election of the Regular Trustees, following the
occurrence and continuation of a Special Event and subject to
the receipt of any necessary approvals by the Federal
Reserve, pursuant to which the Trust shall have been
dissolved in accordance with the terms of the Securities, and
all of the Debentures shall have been distributed to the
Holders of Securities in exchange for all of the Securities;
or
(vi) the time when all of the Regular Trustees and the Sponsor
shall have consented to dissolution of the Trust provided
such action is taken before the issuance of any Securities.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a) and upon completion of the winding up of the
Trust, the Trustees shall terminate by filing a certificate of cancellation
with the Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9 and Article 10 shall survive the
termination of the Trust.
Section 8.2 Liquidation Distribution Upon Termination and
Dissolution of the Trust.
(a) In the event of any voluntary or involuntary liquidation,
dissolution, winding-up or termination of the Trust (each a "Liquidation"),
the Holders of the Capital Securities on the date of the Liquidation will be
entitled to receive, out of the assets of the Trust available for
distribution to Holders of Securities after satisfaction of the Trusts'
liabilities and creditors, distributions in cash or other immediately
available funds in an amount equal to the aggregate of the stated liquidation
amount of $1,000 per Security plus accrued and unpaid Distributions thereon
to the date of payment (such amount being the "Liquidation Distribution"),
unless, in connection with such Liquidation, Debentures in an aggregate
stated liquidation amount equal to the aggregate stated liquidation amount
of, with a distribution rate identical to the distribution rate of, and
accrued and unpaid distributions equal
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53
to accrued and unpaid Distributions on, such Securities shall be distributed
on a Pro Rata basis to the Holders of the Securities in exchange for such
Securities.
(b) If, upon any such Liquidation, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available
to pay in full the aggregate Liquidation Distribution, then the amounts
payable directly by the Trust on the Securities shall be paid on a Pro Rata
basis. The Holders of the Common Securities will be entitled to receive
Distributions upon any such Liquidation Pro Rata with the Holders of the
Capital Securities except that if an Indenture Event of Default has occurred
and is continuing, the Capital Securities shall have a preference over the
Common Securities with regard to such distributions.
ARTICLE 9
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
Section 9.1 Liability.
(a) Except as expressly set forth in this Declaration, the
Guarantee and the terms of the Securities, the Sponsor:
(i) shall not be personally liable for the return of any portion
of the capital contributions (or any return thereon) of the
Holders of the Securities which shall be made solely from
assets of the Trust; and
(ii) shall not be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or
otherwise.
(b) The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Capital Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of Delaware.
Section 9.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of the Trust
and in a manner such Indemnified Person reasonably believed to be within the
scope of the authority conferred on such Indemnified Person by this
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54
Declaration or by law, except that an Indemnified Person shall be liable or
any such loss, damage or claim incurred by reason of such Indemnified
Person's gross negligence or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports
or statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets
from which Distributions to Holders of Securities might properly be paid.
Section 9.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to
the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to an other Covered
Person for its good faith reliance on the provisions of this Declaration.
The provisions of this Declaration, to the extent that they restrict the
duties and liabilities of an Indemnified Person otherwise existing at law or
in equity (other than the duties imposed on the Property Trustee under the
Trust Indenture Act), are agreed by the parties hereto to replace such other
duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between any
Covered Persons; or
(ii) whenever this Declaration or any other agreement contemplated
herein or therein provides that an Indemnified Person shall
act in a manner that is, or provides terms that are, fair
and reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest
of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made,
taken or provided by the Indemnified Person shall not constitute a breach of
this Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
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55
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the
Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard
imposed by this Declaration or by applicable law.
Section 9.4 Indemnification.
(a)(i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Debenture Issuer Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Debenture Issuer Indemnified Person
against expenses (including attorney fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good fait and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Debenture Issuer Indemnified Person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Trust, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Debenture Issuer Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a
Judgment in its favor by reason of the fact that he is or was a Debenture
Issuer Indemnified Person against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Trust and except that no such indemnification shall be made in respect of any
claim, issue or matter as to which such Debenture Issuer Indemnified Person
shall have been adjudged to be liable to the Trust unless and only to the
extent that the Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper.
(iii) Any indemnification under paragraphs (i) and (ii) of this Section
9.4(a) (unless ordered by a court) shall be made by the Debenture Issuer only as
authorized in
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the specific case upon a determination that indemnification of the Debenture
Issuer Indemnified Person is proper in the circumstances because he has met
the applicable standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority vote of
a quorum consisting of such Regular Trustees who were not parties to such
action, suit or proceeding, (2) if such a quorum is not obtainable, or, even
if obtainable, if a quorum of disinterested Regular Trustees so directs, by
independent legal counsel in a written opinion, or (3) by the Common Security
Holder of the Trust.
(iv) Expenses (including attorneys' fees) incurred by a Debenture
Issuer Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 9.4(a) shall be paid by the Debenture Issuer in advance
of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such Debenture Issuer Indemnified Person to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Debenture Issuer as authorized in this
Section 9.4(a). Notwithstanding the foregoing, no advance shall be made by
the Debenture Issuer if a determination is reasonably and promptly made (i)
by the Regular Trustees by a majority vote of a quorum of disinterested
Regular Trustees, (ii) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so directs, by
independent legal counsel in a written opinion or (iii) the Common Security
Holder of the Trust, that, based upon the facts known to the Regular
Trustees, counsel or the Common Security Holder at the time such
determination is made, such Debenture Issuer Indemnified Person acted in bad
faith or in a manner that such person did not believe to be in or not opposed
to the best interests of the Trust, or, with respect to any criminal
proceeding, that such Debenture Issuer Indemnified Person believed or had
reasonable cause to believe his conduct was unlawful. In no event shall any
advance be made in instances where the Regular Trustees, independent legal
counsel or Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or Capital Security
Holders.
(v) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4(a) shall not be
deemed exclusive of any other rights to which those seeking indemnification
and advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Debenture Issuer or Capital
Security Holders of the Trust or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. All
rights to indemnification under this Section 9.4(a) (a) shall be deemed to be
provided by a contract between the Debenture Issuer and each Debenture Issuer
Indemnified Person who serves in such capacity at any time while this Section
9.4(a) is in effect. Any repeal or modification of this Section 9.4(a) shall
not affect any rights or obligations then existing.
(vi) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Debenture Issuer
Indemnified Person against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or
not the Debenture Issuer would have the power to indemnify him against such
liability under the provisions of this Section 9.4(a).
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57
(vii) For purposes of this Section 9.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was serving
at the request of such constituent entity as a director, trustee, officer,
employee or agent of another entity, shall stand in the same position under
the provisions of this Section 9.4(a) with respect to the resulting or
surviving entity as he would have with respect to such constituent entity if
its separate existence had continued.
(viii) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
Debenture Issuer Indemnified Person and shall inure to the benefit of the
heirs, executors and administrators of such a person. The obligation to
indemnify as set forth in this Section 9.4(a) shall survive the satisfaction
and discharge of this Declaration.
(b) The Debenture Issuer agrees to indemnify the (i) Property
Trustee, (ii) the Delaware Trustee, (iii) an Affiliate of the Property
Trustee and the Delaware Trustee, and (iv) any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Property Trustee and the Delaware Trustee (each of
the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified
Person") for, and to hold each Fiduciary Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The
obligation to indemnify as set forth in this Section 9.4(a) shall survive the
satisfaction and discharge of this Declaration.
Section 9.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Property Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar
or dissimilar to the activities of the Trust, and the Trust and the Holders
of Securities shall have no rights by virtue of this Declaration in and to
such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the activities of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee or the Property Trustee shall be obligated to
present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee
and the Property Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any
such particular investment or other opportunity. Any Covered Person, the
Delaware Trustee and the Property Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the
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Sponsor, or may act as depositary for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the
Sponsor or its Affiliates.
ARTICLE 10
ACCOUNTING
Section 10.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
Section 10.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted
accounting principles. The Trust shall use the accrual method of accounting
for United States federal income tax purposes. The books of account and the
records of the Trust shall be examined by and reported upon as of the end of
each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered
to each of the Holders of Securities, within 90 days after the end of each
Fiscal Year of the Trust, annual financial statements of the Trust, including
a balance sheet of the Trust as of the end of such Fiscal Year, and the
related statements of income or loss.
(c) The Regular Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, an annual United States
federal income tax information statement, required by the Code, containing
such information with regard to the Securities held by each Holder as is
required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Regular
Trustees shall endeavor to deliver all such statements within 30 days after
the end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed
with the appropriate taxing authority, an annual United States federal income
tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to
be filed by the Regular Trustees on behalf of the Trust with any state or
local taxing authority.
Section 10.3 Banking.
The Trust shall maintain one or more bank accounts in the name and
for the sole benefit of the Trust; provided, however, that all payments of
funds in respect of the
<PAGE>
59
Debentures held by the Property Trustee shall be made directly to the
Property Account and no other funds of the Trust shall be deposited in the
Property Account. The sole signatories for such accounts shall be designated
by the Regular Trustees; provided, however, that the Property Trustee shall
designate the signatories for the Property Account.
Section 10.4 Withholding.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law.
The Trust shall request, and the Holders shall provide to the Trust, such
forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder, and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Regular
Trustees shall file required forms with applicable jurisdictions and, unless
an exemption from withholding is properly established by a Holder, shall
remit amounts withheld with respect to the Holder to applicable
jurisdictions. To the extent that the Trust is required to withhold and pay
over any amounts to any authority with respect to distributions or
allocations to any Holder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Holder. In the event of
any claimed over withholding, Holders shall be limited to an action against
the applicable jurisdiction. If the amount required to be withheld was not
withheld from actual Distributions made, the Trust may reduce subsequent
Distributions by the amount of such withholding.
ARTICLE 11
AMENDMENTS AND MEETINGS
Section 11.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by (i) the Regular Trustees (or, if
there are more than two Regular Trustees, a majority of the Regular Trustees)
and (ii) by the Property Trustee if the amendment affects the rights, powers,
duties, obligations or immunities of the Property Trustee; and (iii) by the
Delaware Trustee if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment
shall be void and ineffective:
(i) unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officers' Certificate
from each of the Trust and the Sponsor that such amendment
is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
<PAGE>
60
(ii) unless, in the case of any proposed amendment which affects
the rights, powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee shall have first
received:
a. an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including
the terms of the Securities); and
b. an opinion of counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Declaration (including
the terms of the Securities); and
(iii) to the extent the result of such amendment would be to:
a. cause the Trust to be classified other than as a grantor
trust for United States federal income tax purposes;
b. reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture
Act; or
c. cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company
Act.
(c) At such time after the Trust has issued any Securities that
remain outstanding, any amendment that would (i) adversely affect the powers,
preferences or special rights of the Securities, whether by way of amendment
to the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of the Trust other than pursuant to the terms of the Declaration,
then the holders of the Securities voting together as a single class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of at least a Majority in
Liquidation Amount of the Securities affected thereby; provided that, if any
amendment or proposal referred to in clause (i) above would adversely affect
only the Capital Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
Majority in Liquidation Amount of such class of Securities.
(d) Section 7.8(b) and this Section 11.1 shall not be amended
without the consent of all of the Holders of the Securities.
(e) Article 4 shall not be amended without the consent of the
Holders of a Majority in Liquidation Amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under
Article 5 to increase or decrease the number of, and appoint and remove
Trustees shall not be amended
<PAGE>
61
without the consent of the Holders of a Majority in Liquidation Amount of the
Common Securities.
(g) Notwithstanding Section 11.1(c), this Declaration may be
amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other
provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor;
(iv) to conform to any change in Rule 3a-5 or written change in
interpretation or application of Rule 3a-5 by any
legislative body, court, government agency or regulatory
authority which amendment does not have a material adverse
effect on the rights, preferences or privileges of the
Holders; and
(v) to modify, eliminate and add to any provision of this
Declaration, provided such modification, elimination or,
addition would not adversely affect the rights, privileges
or preferences of any Holder of the Securities.
(h) The issuance of a Trustees' Authorization Certificate by the
Regular Trustees for purposes of establishing the terms and form of the
Securities as contemplated by Section 8.1 shall not be deemed an amendment of
this Declaration subject to the provisions of this Section 12.1.
Section 11.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Regular Trustees (or as provided in the terms of
the Securities) to consider and act on any matter on which Holders of such
class of Securities are entitled to act under the terms of this Declaration,
the terms of the Securities or the rules of any stock exchange on which the
Capital Securities are listed or admitted for trading. The Regular Trustees
shall call a meeting of the Holders of such class if directed to do so by the
Holders of at least 10% in Liquidation Amount of such class of Securities.
Such direction shall be given by delivering to the Regular Trustees one or
more calls in a writing stating that the signing Holders of Securities wish
to call a meeting and indicating the general or specific purpose for which
the meeting is to be called. Any Holders of Securities calling a meeting
shall specify in writing the Certificates held by the Holders of Securities
exercising the right to call a meeting and only those Securities specified
shall be counted for purposes of determining whether the required percentage
set forth in the second sentence of this paragraph has been met.
<PAGE>
62
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at
least 7 days and not more than 60 days before the date of
such meeting. Whenever a vote, consent or approval of
the Holders of Securities is permitted or required under
this Declaration or the rules of any stock exchange on
which the Capital Securities are listed or admitted for
trading, such vote, consent or approval may be given at a
meeting of the Holders of Securities. Any action that
may be taken at a meeting of the Holders of Securities
may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the
Holders of Securities owning not less than the minimum
amount of Securities in liquidation amount that would be
necessary to authorize or take such action at a meeting
at which all Holders of Securities having a right to vote
thereon were present and voting. Prompt notice of the
taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not
consented in writing. The Regular Trustees may specify
that any written ballot submitted to the Security Holders
for the purpose of taking any action without a meeting
shall be returned to the Trust within the time specified
by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of
Securities is entitled to participate, including waiving
notice of any meeting, or voting or participating at a
meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the
pleasure of the Holder of Securities executing such
proxy. Except as otherwise provided herein, all matters
relating to the giving, voting or validity of proxies
shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a
Delaware corporation and the Holders of the Securities
were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person
that the Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the
listing rules of any stock exchange on which the Capital
Securities are then listed for trading, otherwise
provides, the Regular Trustees, in their sole
discretion, shall establish all other provisions
relating to meetings of Holders of Securities, including
notice of the time, place or purpose of any meeting
<PAGE>
63
at which any matter is to be voted on by any Holders of Securities,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise
of any such right to vote.
ARTICLE 12
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
Section 12.1 Representations and Warranties of the Property Trustee.
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) the Property Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States, with trust power and authority to execute and deliver, and to carry
out and perform its obligations under the terms of, this Declaration;
(b) the Property Trustee satisfies the requirements set forth in
Section 6.3(a);
(c) the execution, delivery and performance by the Property
Trustee of this Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee. This Declaration has
been duly executed and delivered by the Property Trustee, and it constitutes
a legal, valid and binding obligation of the Property Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law);
(d) the execution, delivery and performance of this Declaration by
the Property Trustee does not conflict with or constitute a breach of the
articles of association or incorporation, as the case may be, or the by-laws
(or other similar organizational documents) of the Property Trustee; and
(e) no consent, approval or authorization of, or registration with
or notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee of this
Declaration.
<PAGE>
64
Section 12.2 Representations and Warranties of the Delaware Trustee.
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) the Delaware Trustee satisfies the requirements set forth in
Section 6.2 and has the power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration
and, if it is not a natural person, is duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization;
(b) the Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Declaration. This
Declaration under Delaware law constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and
to general principles of equity and the discretion of the court (regardless
of whether the enforcement of such remedies is considered in a proceeding in
equity or at law); and
(c) no consent, approval or authorization of, or registration with
or notice to, any State or Federal banking authority is require for the
execution, delivery or performance by the Delaware Trustee of this
Declaration.
ARTICLE 13
MISCELLANEOUS
Section 13.1 Notices.
All notices provided for in this Declaration shall be in writing,
duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Property Trustee, the Delaware Trustee and the
Holders of the Securities):
Barnett Capital II
c/o Barnett Banks, Inc.
50 North Laura Street
Jacksonville, Florida 32202
<PAGE>
65
(b) if given to the Delaware Trustee, at the mailing address set
forth below (or such other address as the Delaware Trustee may give notice of
to the Regular Trustees, the Property Trustee and the Holders of the
Securities):
First Chicago Delaware Inc.
300 King Street
Wilmington, Delaware 19801
Attention: Michael J. Majchrzak
(c) if given to the Property Trustee, at its Corporate Trust
Office (or such other address as the Property Trustee may give notice of to
the Regular Trustees, the Delaware Trustee and the Holders of the Securities).
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice of to the Property Trustee,
the Delaware Trustee and the Trust):
Barnett Banks, Inc.
50 North Laura Street
Jacksonville, Florida 32202
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed or mailed by first class mail, postage
prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
Section 13.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of
Delaware.
Section 13.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted in a manner
consistent with such classification.
Section 13.4 Headings.
Headings contained in this Declaration are inserted for convenience
of reference only and do not affect the interpretation of this Declaration or
any provision hereof.
<PAGE>
66
Section 13.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether so expressed.
Section 13.6 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder
of this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
Section 13.7 Counterparts.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed
a single signature page.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to
be executed as of the day and year first above written.
BARNETT BANKS, INC.,
as Sponsor and Common Securities Holder
BY:____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
as Property Trustee
BY:____________________________________
Name: Mary R. Fonti
Title: Assistant Vice President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee
BY:____________________________________
Name: Mary R. Fonti
Title: Assistant Vice President
Paris P. Thermenos, as Regular Trustee
BY:____________________________________
Name:
Title:
Charles W. Newman, as Regular Trustee
BY:____________________________________
Name:
Title:
Patrick J. McCann, as Regular Trustee
BY:____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
CERTIFICATE NO. 1 NUMBER OF CAPITAL SECURITIES:
CUSIP NO. ________
CERTIFICATE EVIDENCING CAPITAL SECURITIES
OF
BARNETT CAPITAL II
7.95% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
BARNETT CAPITAL II, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of ___ capital securities of the Trust
representing undivided beneficial ownership interests in the assets of the
Trust designated the 7.95% Capital Securities (liquidation amount $1,000 per
Capital Security) (the "Capital Securities"). The Capital Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer as provided in the Declaration (as defined below).
The designation, rights, privileges, restrictions, preferences and other
terms and provisions of the Capital Securities represented hereby are issued
and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust, dated as of December 2, 1996 (as
the same may be amended from time to time (the "Declaration"), among Barnett
Banks, Inc., as Sponsor, Paris P. Thermenos, Charles W. Newman and Patrick J.
McCann, as Regular Trustees, The First National Bank of Chicago, as Property
Trustee, and First Chicago Delaware Inc., as Delaware Trustee. Capitalized
terms used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Guarantee to the
extent described therein. The Sponsor will provide a copy of the
Declaration, the Guarantee and the Indenture to a Holder without charge upon
written request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Capital
Securities as evidence of undivided indirect beneficial ownership interests
in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this
____ day of _____________________, 1996.
BARNETT CAPITAL II
By: ____________________________________
Name:
Title: Regular Trustee
<PAGE>
2
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the
Securities Act covering resales of this Security (which effectiveness shall
not have been suspended or terminated at the date of the transfer) and (ii)
three years after the later of the date of original issue and the last date
on which the Company or any affiliate of the Company was the owner of such
Capital Securities (or any predecessor thereto) (the "Resale Restriction
Termination Date"), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer:
[CHECK ONE]
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
(3) ___ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended) that has furnished to the Trustee a signed letter containing
certain representations and agreements (the form of which letter can
be obtained from the Trustee); or
(4) ___ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(5) ___ pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended; or
(6) ___ pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; PROVIDED, HOWEVER, that if box (3),
(4), (5) or (7) is checked, the Company or the Trustee may require, prior to
registering any such transfer of the Securities, in its sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or the Company
has reasonably requested to confirm that such transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
<PAGE>
3
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Security in the name of any person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 315 of the Indenture shall have
been satisfied.
Dated: ________________________ Signed: ________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee: ____________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ________________________ ________________________________________
NOTICE: To be executed by an executive
officer
<PAGE>
EXHIBIT B
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NO. 1 NUMBER OF COMMON SECURITIES: ____
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
BARNETT CAPITAL II
COMMON SECURITIES
(LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY)
Barnett Capital II, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that Barnett
Bank, Inc. (the "Holder") is the registered owner of common securities of the
Trust representing an undivided beneficial ownership interest in the assets
of the Trust designated the 7.95% Common Securities (liquidation amount
$1,000 per Common Security) (the "Common Securities"). The Common Securities
are not transferable and any attempted transfer thereof shall be void. The
designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Common Securities represented hereby are issued and
shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust, dated as of December 2, 1996 (as
the same may be amended from time to time, the "Declaration"), among Barnett
Banks, Inc., as Sponsor, Paris P. Thermenos, Charles W. Newman and Patrick J.
McCann, as Regular Trustees, The First National Bank of Chicago, as Property
Trustee and First Chicago (Delaware) Inc., as Delaware Trustee. The Holder
is entitled to the benefits of the Guarantee to the extent described therein.
Capitalized terms used herein but not defined shall have the meaning given
them in the Declaration. The Sponsor will provide a copy of the Declaration,
the Guarantee and the Indenture to a Holder without charge upon written
request to the Sponsor at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of an undivided indirect beneficial ownership interest
in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this
____ day of _____________________, 1996.
BARNETT CAPITAL II
By: ____________________________________
Name:
Title: Regular Trustee
<PAGE>
Schedule A to Amended and Restated Declaration of Trust
of Barnett Capital II dated as of December 2, 1996,
by and among Barnett Banks, Inc. ("Barnett"), The First National
Bank of Chicago, as Property Trustee (the "Property Trustee"),
First Chicago Delaware, Inc., as the Delaware Trustee
(the "Delaware Trustee") and the initial Regular Trustees
named therein (the "Barnett Capital II Trust")
Due to their similarity to the above-referenced document, Barnett has
omitted to file the following documents and described their material
differences below:
A. Amended and Restated Declaration of Trust of Barnett Capital I
dated as of November 27, 1996 by and among Barnett, the Property Trustee,
the Delaware Trustee and the initial Regular Trustees named therein and
relating to the issuance of $300,000,000 8.06% Capital Securities of the
Trust. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned thereto in the Barnett Capital II Trust.
MATERIAL DIFFERENCES:
Distributions: Holders of Securities of the Trust are entitled to
receive cumulative cash distributions at the rate per
annum of 8.06% of the stated liquidation amount of
$1,000 per security, payable semi-annually on each
June 1 and December 1 and commencing June 1, 1997.
Redemption: The proceeds from any redemption or repayment of
Barnett's 8.06% Junior Subordinated Debentures Due
2026 shall be applied pro rata to redeem Securities of
Barnett Capital I of an equal aggregate liquidation
amount to the principal amount of such debentures so
redeemed.
B. Amended and Restated Declaration of Trust of Barnett Capital
III dated as of January 28, 1997, by and among Barnett, the Property
Trustee, the Delaware Trustee and the initial Regular Trustees named
therein and relating to the issuance of $250,000,000 Floating Rate Capital
Securities of the Trust. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned thereto in the Barnett Capital II
Trust.
MATERIAL DIFFERENCES:
Initial Regular Trustees: Paris P. Thermenos, Charles W. Newman and
Gregory M. Delaney.
Distributions: Holders of Securities of the Trust are entitled to
receive cumulative cash distributions at a variable
interest rate per annum equal to three-month LIBOR
plus 0.625% per annum, from January 28, 1997, payable
on February 1, May 1, August 1, and November 1 of each
year, commencing May 1, 1997, interest compounding
quarterly.
Redemption: The proceeds from any redemption or repayment of
Barnett's Floating Rate Junior Subordinated Debentures
Due 2027 shall be applied pro rata to redeem Securities
of Barnett Capital III of an equal aggregate
liquidation amount to the principal amount of such
debentures so redeemed.
