As filed with the Securities and Exchange Commission on ____________, 1997.
Registration No. 33-________ and Registration No. 33-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
<S> <C>
HIGHLANDS BANKSHARES, INC. HIGHLANDS CAPITAL TRUST I
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
Virginia Delaware
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
54-1796693
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
340 West Main Street c/o Highlands Bankshares, Inc.
Abingdon, VA 24210 340 West Main Street
(540) 628-9181 Abingdon, VA 24210
(540) 628-9181
(Address, including zip code, and telephone number, including (Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices) area code, of registrant's principal executive offices)
</TABLE>
Samuel L. Neese
340 West Main Street
Abingdon, VA 24210
(540) 628-9181
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of Communications to:
R. Brian Ball, Esquire
Wayne A. Whitham, Jr., Esquire
Williams, Mullen, Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
(804) 643-1991
Approximate date of commencement of proposed sale to the public:____________.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |_|
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|_________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|__________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================== ====================== ===================== ======================= ===================
Title of Shares Amount of Shares Proposed Maximum Proposed Maximum Amount of
to be Registered to be Registered Offering Price Per Aggregate Offering Registration Fee
Unit Price
- ------------------------------------- ---------------------- --------------------- ----------------------- -------------------
<S> <C> <C> <C> <C>
Junior Subordinated Debt Securities $10,000,000 $1,000 $10,000,000 N/A
of Highlands Bankshares, Inc. (1)(2)
- ------------------------------------- ---------------------- --------------------- ----------------------- -------------------
Capital Securities of Highlands 10,000 $1,000 $10,000,000 $3,030
Capital Trust I (2)
- ------------------------------------- ---------------------- --------------------- ----------------------- -------------------
Guarantee of Highlands Bankshares, N/A N/A N/A N/A
Inc. as to the Capital Securities
(2)(3)
- ------------------------------------- ---------------------- --------------------- ----------------------- -------------------
TOTAL $10,000,000(4) 100% $10,000,000 $3,030
===================================== ====================== ===================== ======================= ===================
</TABLE>
(1) Junior Subordinated Debt Securities to be purchased by Highlands Capital
Trust I with the proceeds of the sale of the Capital Securities. No
separate consideration will be received from purchasers of Capital
Securities for the Junior Subordinated Debt Securities.
(2) This Registration Statement is deemed to cover $10,000,000 aggregate
principal amount of Junior Subordinated Debt Securities the rights of
holders of such debt securities under the related Indenture, the rights of
holders of the Capital Securities under the Amended and Restated
Declaration of Trust of Highlands Capital Trust I, and the rights of
holders of the Capital Securities under the Guarantee of Highlands
Bankshares, Inc., which taken together fully and unconditionally guarantee
the obligations of Highlands Capital Trust I under the Capital Securities.
(3) No separate consideration will be received for the guarantee of Highlands
Bankshares, Inc.
(4) Such amounts represent the aggregate liquidation amount of Capital
Securities to be issued hereunder and $10,000,000 aggregate principal
amount of Junior Subordinated Debt Securities to be issued hereunder.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
<PAGE>
PROSPECTUS
PRELIMINARY PROSPECTUS DATED OCTOBER 15, 1997, SUBJECT TO COMPLETION
HIGHLANDS CAPITAL TRUST I
10,000 __% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
guaranteed to the extent set forth herein by
HIGHLANDS BANKSHARES, INC.
The __% Capital Securities (the "Capital Securities") offered hereby
represent preferred undivided beneficial interests in the assets of HIGHLANDS
CAPITAL TRUST I, a statutory business trust formed under the laws of the State
of Delaware (the "Trust"). HIGHLANDS BANKSHARES, INC., a Virginia corporation
(the "Corporation"), will own all the common securities representing undivided
beneficial interests in the assets of the Trust (the "Common Securities" and,
together with the Capital Securities, the "Trust Securities").
(continued on next page)
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE VIRGINIA STATE CORPORATION COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS ANY STATE OR FEDERAL AGENCY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS, ARE
NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING AFFILIATE OF HIGHLANDS
BANKSHARES, INC., ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<TABLE>
<CAPTION>
- ------------------------ ------------------------- ------------------------------ ----------------------------
Price to Public (1) Underwriting Discount (2) Proceeds to Trust (3)(4)(5)
- ------------------------ ------------------------- ------------------------------ ----------------------------
<S> <C> <C> <C>
Per Capital Security $ (3) $
- ------------------------ ------------------------- ------------------------------ ----------------------------
Total $ (3) $
- ------------------------ ------------------------- ------------------------------ ----------------------------
</TABLE>
(1) Plus accrued distributions, if any, from ____ __, 1997.
(2) Highlands Capital Trust I and Highlands Bankshares, Inc. have agreed to
indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) In view of the fact that the proceeds of the sale of the Capital Securities
will be invested in the Junior Subordinated Debt Securities as described
herein, Highlands Bankshares, Inc. has agreed to pay directly to the
Underwriter, as compensation (the "Underwriters' Compensation') for its
arranging the investment therein of such proceeds $__ per Capital Security
(or $_________ in the aggregate). See "Underwriting."
(4) Expenses of the offering which are payable by Highlands Bankshares, Inc.
are estimated to be $________.
(5) Assumes the sale of the entire 10,000 Capital Securities offered hereby.
----------------
The Capital Securities are offered by the Underwriter, as selling agent
for the Trust, subject to prior sale, on a best efforts basis, and subject
to certain other conditions, including the right to reject any order in
whole or in part. This offering will close on or about _______ __, 1997.
Funds received by the Underwriter will be deposited at, and held by,
Wilmington Trust Company (the "Escrow Agent") in a noninterest-bearing
escrow account in Wilmington, Delaware. It is expected that such funds will
be released from the escrow account and delivery of the Capital Securities
will be made on or about ______ _, 1997.
---------------
McKinnon & Company, Inc.
The date of this Prospectus is __________, 1997
---------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any state.
<PAGE>
(cover page continued)
The Capital Securities offered hereby represent beneficial ownership
interests in Highlands Capital Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"). Highlands Bankshares, Inc., a
Virginia corporation ("the Corporation"), will be the direct or indirect owner
of all of the beneficial ownership interests represented by common securities of
the Trust (the "Common Securities" and, collectively with the Capital
Securities, the "Trust Securities"). Wilmington Trust Company is the Property
Trustee of the Trust. The Trust exists for the exclusive purposes of issuing the
Trust Securities, investing the proceeds from the sale of the Trust Securities
in Junior Subordinated Debt Securities (the "Junior Subordinated Debt
Securities") to be issued by the Corporation and certain other limited
activities described herein. The Junior Subordinated Debt Securities will mature
on ____ __, 2027 (the "Stated Maturity"). The Capital Securities will have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the Common
Securities. See "Description of Capital Securities-Subordination of Common
Securities."
Holders of the Trust Securities will be entitled to receive cumulative
cash distributions, in each case arising from the payment of interest on the
Junior Subordinated Debt Securities accruing from the date of original issuance
and payable quarterly in arrears on the __th day of _______, ________, ________
and ________ of each year, commencing_____ __, 1997, at __% per annum of the
Liquidation Amount of $1,000 per Trust Security ("Distributions"). Subject to
certain exceptions, the Corporation has the right to defer payments of interest
on the Junior Subordinated Debt Securities at any time or from time to time for
a period not exceeding 20 consecutive quarterly periods with respect to each
deferral period (each, an "Extension Period"); provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon accumulated at __% per annum, compounded quarterly, to the extent
permitted by applicable law), the Corporation may elect to begin a new Extension
Period, subject to the requirements set forth herein. If interest payments on
the Junior Subordinated Debt Securities are so deferred, during any Extension
Period, Distributions on the Capital Securities and on the Common Securities
will also be deferred and the Corporation will not be permitted, subject to
certain exceptions described herein, to declare or pay any cash distributions
with respect to, or make purchases of, the Corporation's capital stock (which
includes common and preferred stock) or to make any payment with respect to debt
securities of the Corporation that rank pari passu in all respects with or
junior to the Junior Subordinated Debt Securities. During an Extension Period,
interest on the Junior Subordinated Debt Securities will continue to accrue (and
the amount of Distributions to which holders of the Capital Securities are
entitled will accumulate) at __% per annum, compounded quarterly, and holders of
Capital Securities will be required to accrue interest income for United States
Federal income tax purposes. See "Description of Junior Subordinated Debt
Securities-Option to Extend Interest Payment Date" and "Certain United States
Federal Income Tax Consequences-Interest Income and Original Issue Discount."
Taken together, the Corporation's obligations under the Guarantee
Agreement, the Declaration, the Junior Subordinated Debt Securities and the
Indenture (each as defined herein), including the Corporation's obligation to
pay the costs, expenses and liabilities of the Trust (other than the Trust's
obligations to holders of the Trust Securities under such Trust Securities),
provide, in the aggregate, a full irrevocable and unconditional guarantee, as
described herein, of all of the payments of Distributions and other amounts due
on the Capital Securities. See "Relationship Among the Capital Securities, the
Junior Subordinated Debt Securities and the Guarantee-Full and Unconditional
Guarantee." The Corporation has agreed to guarantee the payment of Distributions
and payments on liquidation or redemption of the Trust Securities, but only in
each case to the extent of funds held by the Trust, as described herein (the
"Guarantee"). See "Description of Guarantee." If the Corporation does not make
interest payments on the Junior Subordinated Debt Securities held by the Trust,
the Trust will have insufficient funds to pay Distributions on the Capital
Securities. The Guarantee does not cover the payment of Distributions when the
Trust does not have sufficient funds to pay such Distributions. In
ii
<PAGE>
event of a Debenture Event of Default (as hereafter defined), a holder of
Capital Securities may institute a legal proceeding directly against the
Corporation for enforcement of payment to such holder of the principal of or
interest on Junior Subordinated Debt Securities having a principal amount equal
to the aggregate Liquidation Amount of the Capital Securities held by such
holder (a "Direct Action"). See "Description of Junior Subordinated Debt
Securities-Enforcement of Certain Rights by Holders of Capital Securities." The
obligations of the Corporation under the Guarantee and the Junior Subordinated
Debt Securities are subordinate and junior in right of payment to all Senior
Debt (as defined in "Description of Junior Subordinated Debt
Securities-Subordination") of the Corporation. In addition, because the
Corporation is a holding company, the Junior Subordinated Debt Securities and
the Guarantee are effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, including deposits. See "Risk
Factors-Ranking of Obligations Under the Guarantee and the Junior Subordinated
Debt Securities" and "Status of the Corporation as a Bank Holding Company."
The Capital Securities are subject to mandatory redemption (i) in
whole, but not in part, upon repayment of the Junior Subordinated Debt
Securities at the Stated Maturity or their earlier redemption in whole upon the
occurrence of a Tax Event, an Investment Company Event or a Capital Treatment
Event (each as defined herein) and (ii) in whole or in part at any time on or
after ____ __, 2007 contemporaneously with the optional redemption by the
Corporation of the Junior Subordinated Debt Securities in whole or in part. The
Junior Subordinated Debt Securities are redeemable prior to maturity at the
option of the Corporation (i) on or after ____ __, 2007, in whole at any time or
in part from time to time, or (ii) in whole, but not in part, at any time within
90 days following the occurrence and continuation of a Tax Event, Investment
Company Event or Capital Treatment Event (each as defined herein), in each case
at a redemption price set forth herein, which includes the accrued and unpaid
interest on the Junior Subordinated Debt Securities so redeemed to the date
fixed for redemption. The ability of the Corporation to exercise its rights to
redeem the Junior Subordinated Debt Securities or to cause the redemption of the
Capital Securities prior to the Stated Maturity may be subject to prior
regulatory approval by the Board of Governors of the Federal Reserve System (the
"Federal Reserve"), if then required under applicable Federal Reserve capital
guidelines or policies.
The Corporation, as the holder of the outstanding Common Securities,
has the right at any time (including, without limitation, upon the occurrence of
a Tax Event, an Investment Company Event or a Capital Treatment Event (as
defined herein)) to terminate the Trust and cause a Like Amount (as defined
herein) of the Junior Subordinated Debt Securities to be distributed to the
holders of the Trust Securities upon liquidation of the Trust, subject to prior
approval of the Federal Reserve to do so if then required under applicable
capital guidelines or policies of the Federal Reserve. In the event of such
termination of the Trust, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Capital Securities
generally will be entitled to receive a Liquidation Amount of $1,000 per Capital
Security plus accumulated and unpaid Distributions thereon to the date of
payment, which may be in the form of a distribution of a Like Amount of Junior
Subordinated Debt Securities in certain circumstances. See "Description of
Capital Securities-Liquidation of the Trust and Distribution of Junior
Subordinated Debt Securities."
The Capital Securities will be issued only in a block having a
Liquidation Amount of $100,000 (100 Capital Securities) and integral multiples
of $1,000 in excess thereof.
As used herein, (i) the "Indenture" means the Junior Subordinated
Indenture, as amended and supplemented from time to time, between the
Corporation and Wilmington Trust Company, as trustee (the "Debenture Trustee"),
and (ii) the "Declaration means the Amended and Restated Declaration of Trust
relating to the Trust among the Corporation, as Depositor (the "Depositor"),
Wilmington Trust Company, as Property Trustee (the "Property Trustee"),
Wilmington Trust Company, as Delaware Trustee (the "Delaware Trustee"), and the
individuals named as Administrative Trustees therein (the "Administrative
Trustees") (collectively with the Property Trustee and the Delaware Trustee, the
"Trustees").
iii
<PAGE>
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), NO ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN
THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN, MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST THEREIN, UNLESS
SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER
U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23,
95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL BE
DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT EITHER
(A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES
ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO SUCH PURCHASE OR HOLDING.
iv
<PAGE>
NOTICE TO INVESTORS
Because of the following restrictions, purchasers of the Capital
Securities are advised to consult legal counsel prior to making any reoffer,
resale, pledge or other transfer of the Capital Securities.
Each purchaser of Capital Securities, by its acceptance thereof, will
be deemed to have acknowledged, represented to and agreed with the Corporation
and the Trust as follows:
(1) It acknowledges that it (a) is not itself, and is not
acquiring Capital Securities with "plan assets" of an employee benefit
or other plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") (each, a
"Plan"), or an entity whose underlying assets include "plan assets" by
reason of any Plan's investment in the entity (a "Plan Asset Entity")
or (b) (1) is itself, or is acquiring Capital Securities with the
assets of an "investment fund" (within the meaning of Part V(b) of PTCE
84-14) managed by a "qualified professional asset manager" (within the
meaning of Part V(a) of PTCE 84-14) which has made or properly
authorized the decision for such fund to purchase Capital Securities
under circumstances such that PTCE 84-14 is applicable to the purchase
and holding of such Capital Securities, (2) is itself, or is acquiring
Capital Securities with the assets of, a Plan managed by an "in-house
asset manager" (within the meaning of Part IV(a) of PTCE 96-23) which
has made or properly authorized the decision for such Plan to purchase
Capital Securities under circumstances such that PTCE 96-23 is
applicable to the purchase and holding of such Capital Securities, (3)
is an insurance company pooled separate account purchasing Capital
Securities pursuant to Part I of PTCE 90-1 or a bank collective
investment fund purchasing Capital Securities pursuant to Part I of
PTCE 91-38, and in either case, no Plan owns more than 10% of the
assets of such account or collective fund (when aggregated with other
Plans of the same employer (or its affiliates) or employee
organization) or (4) is an insurance company using the assets of its
general account to purchase the Capital Securities pursuant to Part I
of PTCE 95-60, in which case the reserves and liabilities for the
general account contracts held by or on behalf of any Plan, together
with any other Plans maintained by the same employer (or its
affiliates) or employee organization, do not exceed 10% of the total
reserves and liabilities of the insurance company general account
(exclusive of separate account liabilities), plus surplus as set forth
in the National Association of Insurance Commissioners Annual Statement
filed with the state of domicile of the insurer. The Capital Securities
will bear legends reflecting the restrictions described above.
(2) It acknowledges that the Trust, the Corporation and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that if any of
the acknowledgments, representations, warranties and agreements deemed
to have been made with respect to its purchase of the Capital
Securities are no longer accurate, it shall promptly notify the
Corporation. If it is acquiring any Capital Securities as a fiduciary
or agent for one or more investor accounts, it represents that it has
full power to make the foregoing acknowledgments, representations,
warranties and agreements on behalf of each such investor account.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit
plan (a "Plan") subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Capital Securities. Accordingly, among other factors, the fiduciary
should consider whether the investment
1
<PAGE>
would satisfy the prudence and diversification requirements of ERISA and would
be consistent with the documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") prohibit Plans, as well as individual retirement
accounts and Keogh plans subject to Section 4975 of the Code (also "Plans"),
from engaging in certain transactions involving "plan assets" with persons who
are "parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") with respect to such Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other liabilities
under ERISA and/or Section 4975 of the Code for such persons, unless exemptive
relief is available under an applicable statutory or administrative exemption.
Employee benefit plans that are governmental plans (as defined in Section 3(32)
of ERISA), certain church plans (as defined in Section 3(33) of ERISA) and
foreign plans (as described in Section 4(b)(5) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Trust would not be deemed to be "plan assets" of investing Plans
if, immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interest in the Trust
were held by Plans, other employee benefit plans not subject to ERISA or Section
4975 of the Code (such as governmental, church and foreign plans) and entities
holding assets deemed to be "plan assets" of any Plan (collectively, "Benefit
Plan Investors"). No assurance can be given that the value of the Capital
Securities held by Benefit Plan Investors will be less than 25% of the total
value of such Capital Securities at the completion of this offering or
thereafter, and no monitoring or other measures will be taken with respect to
the satisfaction of the conditions to this exception. All of the Common
Securities will be purchased and held directly or indirectly by the Corporation.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities were acquired with "plan
assets" of such Plan and assets of the Trust were deemed to be "plan assets" of
Plans investing in the Trust. For example, if the Corporation is a Party in
Interest with respect to an investing Plan (either directly or by reason of its
ownership of the Trust or of any of the Corporation's other subsidiaries),
extensions of credit between the Corporation and the Trust (as represented by
the Junior Subordinated Debt Securities and the Guarantee) would likely be
prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the
Code, unless exemptive relief were available under an applicable administrative
exemption (see below).
The DOL has issued five prohibited transaction class exemptions
("PTCEs") that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the Capital Securities,
assuming that assets of the Trust were deemed to be "plan assets" of Plans
investing in the Trust (see above). Those class exemptions are PTCE 96-23 (for
certain transactions determined by in-house asset managers), PTCE 95-60 (for
certain transactions involving insurance company general accounts), PTCE 91-38
(for certain transactions involving bank collective investment funds), PTCE 90-1
(for certain transactions involving insurance company pooled separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified
professional asset managers).
2
<PAGE>
Because the Capital Securities may be deemed to be equity interests in
the Trust for purposes of applying ERISA and Section 4975 of the Code, the
Capital Securities may not be purchased or held by any Plan, any entity whose
underlying assets include "plan assets" by reason of any Plan's investment in
the entity (a "Plan Asset Entity") or any person investing "plan assets" of any
Plan, unless such purchaser or holder is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any purchaser or holder
of the Capital Securities or any interest therein will be deemed to have
represented by its purchase and holding thereof that it either (a) is not a Plan
or a Plan Asset Entity and is not purchasing such securities on behalf of or
with "plan assets" of any Plan or (b) is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such
purchase or holding. See "Notice to Investors." Furthermore, to avoid certain
prohibited transactions under ERISA and the Code that could result under certain
circumstances if the Capital Securities are deemed to be such equity interests,
each investing Plan, by purchasing the Capital Securities, will be deemed to
have directed the Trust to invest in the Junior Subordinated Debentures and to
have appointed the Property Trustee.
Due to the complexity of these rules and the penalties that may be
imposed upon persons involved in nonexempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering purchasing
the Capital Securities on behalf of or with "plan assets" of any Plan consult
with their counsel regarding the potential consequences if the assets of the
Trust were deemed to be "plan assets" and the availability of exemptive relief
under PITCE 96-23, 95-60, 91-38, 90-1 or 84-14.
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov.).
No separate financial statements of the Trust have been included
herein. The Corporation and the Trust do not consider that such financial
statements would be material to holders of the Capital Securities because the
Trust is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Junior Subordinated Debt
Securities and issuing the Trust Securities. See "Highlands Capital Trust I,"
"Description of Capital Securities," "Description of Junior Subordinated Debt
Securities" and "Description of Guarantee." In addition, the Corporation does
not expect that the Trust will file reports under the Exchange Act with the
Commission.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission
are incorporated into this Prospectus by reference:
1996 Annual Report to Shareholders.
The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996.
The Corporation's Quarterly Report on Form 10-Q for the three months
ended June 30, 1997.
Copies of these reports are being delivered with this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus, including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein do not purport to
be complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. The
Corporation will provide without charge to any person to whom this Prospectus is
delivered, on the written or oral request of such person, a copy of any or all
of the foregoing documents incorporated by reference herein (other than exhibits
not specifically incorporated by reference into the texts of such documents).
Requests for such documents should be directed to:
Highlands Bankshares, Inc.
340 West Main St.,
Abingdon, VA 24210
Attention: Samuel L. Neese
(540) 628-9181
4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and in the documents
incorporated by reference. See "Incorporation of Certain Documents by
Reference."
HIGHLANDS CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) the Declaration and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on October 3, 1997. The Trust's business
and affairs are conducted by the Trustees: Wilmington Trust Company, as Property
Trustee, Wilmington Trust Company, as Delaware Trustee, and individual
Administrative Trustees who are employees or officers of or affiliated with the
Corporation. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debt Securities issued by the
Corporation and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. The Junior Subordinated Debt Securities will be
the sole assets of the Trust, and payments under the Junior Subordinated Debt
Securities will be the sole revenues of the Trust. All of the Common Securities
will be owned directly or indirectly by the Corporation.
HIGHLANDS BANKSHARES, INC.
Highlands Bankshares, Inc., a Virginia corporation (the "Corporation"),
is a bank holding company that was formed in 1995 and is headquartered in
Abingdon, Virginia. The Corporation's only subsidiary is Highlands Union Bank
(the "Bank"), which opened for business in 1985. Currently the Bank operates
five offices in southwestern Virginia (three in Abingdon and two in Bristol,
Virginia). In addition, the Bank recently purchased an operations center in
Abingdon and plans to open a sixth office in Marion, Virginia in Smyth County in
November, 1997. All of the Bank offices are owned, with no liens, are free
standing brick structures and have ATMs. The new operations center,
approximately half of which is currently leased to third parties, has 18,000
square feet and is a steel reinforced concrete building.
From December 31, 1991 through December 31, 1996 the Corporation's
assets, loans, deposits and net income increased at compound annual growth rates
of: 28.9%; 33.1%; 29.4% and 29.9%, respectively. In the prior five year period,
1986 through 1991, the Corporation's assets, loans, deposits and net income
increased at compound annual growth rates of: 29.9%; 39.8%; 31.3% and 32.7%
respectively. At June 30, 1997 total assets of the Corporation were $229.1
million, total deposits $206.4 million, and stockholders' equity $15.8 million.
Net income for the six months ended June 30, 1997 increased 25.8% to $974,000,
up from $774,000 in the first six months of 1996, while earnings per share
increased 23.4% from the comparable fiscal of 1996 to $.79.
Washington County, including the City of Abingdon, had a population of
approximately 45,000 in 1990 and 1980, while Bristol, Virginia and Bristol,
Tennessee, with a common border, had populations of approximately 20,000 each in
1990 and 1980. The Corporation's growth has been accomplished by hiring
experienced bank officers, particularly loan and credit officers, from large
state-wide banks and achieving significant gains in market share of deposits and
loans. Over the last five years the Corporation's market share in Washington
County, as measured by
5
<PAGE>
deposits, steadily increased to approximately 21% at June 30, 1996, which was
the second highest of nine commercial banks operating in Washington County.
Management believes it will be the largest commercial bank, as measured by
deposits, as of June 30, 1997, in Washington County. Similarly, in Bristol,
Virginia the Corporation has achieved approximately a 19% market share, as
measured by deposits, which is third in size among seven commercial banks
operating there. Total deposits of the Corporation in Bristol, Virginia were
approximately $68.0 million at June 30, 1997. The Corporation's second Bristol
office, which opened in 1995, reached $31.0 million in deposits and
approximately $34.0 million in loans within the first eighteen months of
opening, due primarily to hiring experienced, local loan officers from larger
regional banks.
The Corporation is a legal entity separate and distinct from the Bank
and its nonbanking subsidiaries. Accordingly, the right of the Corporation, and
thus the right of the Corporation's creditors, to participate in any
distribution of the assets or earnings of the Bank or any other subsidiary is
necessarily subject to the prior claims of creditors of the Bank or such
subsidiary, except to the extent that claims of the Corporation in its capacity
as a creditor may be recognized. The principal sources of the Corporation's
revenues are dividends from the Bank.
The Corporation is a bank holding company registered with the Board of
Governors of the Federal Reserve under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). The Corporation's executive offices are located at 340
West Main Street, Abingdon, Virginia 24210. Its mailing address is P. O. Box
1128, Abingdon, Virginia 24210-1128, and its telephone number is (540) 628-9181.
6
<PAGE>
THE OFFERING
Securities Offered................ $10.0 million aggregate Liquidation Amount
of Capital Securities (Liquidation Amount
$1,000 per Capital Security).
Offering Price.................... $_______ per Capital Security (Liquidation
Amount $1,000), plus accrued
Distributions, if any.
Distributions..................... Holders of the Capital Securities will be
entitled to receive cumulative cash
distributions at __% per annum on the
stated liquidation amount of $1,000 per
Capital Security, accruing from the
original date of issuance of the Capital
Securities, and (subject to the extension
of distribution payment periods described
below) will be payable quarterly, in
arrears, on the __th day of _______,
_______, _______ and _______of each year,
commencing______ __, 1997. See
"Description of Capital
Securities-Distributions."
Extension Periods................. Distributions on Capital Securities will
be deferred for the duration of any
Extension Period elected by the
Corporation with respect to the payment of
interest on the Junior Subordinated Debt
Securities. No Extension Period will
exceed 20 consecutive quarterly periods or
extend beyond the Stated Maturity of the
Junior Subordinated Debt Securities. See
"Description of Junior Subordinated Debt
Securities-Option to Extend Interest
Payment Date" and "Certain United States
Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
Ranking........................... The Capital Securities will rank pari
passu. and payments thereon will be made
pro rata, with the Common Securities
except as described under "Description of
Capital Securities--Subordination of
Common Securities." The Junior
Subordinated Debt Securities will rank
pari passu with all other junior
subordinated debt securities to be issued
by the Corporation pursuant to the
Indenture with substantially similar
subordination terms ("Other Debentures"),
and which may be issued and sold (if at
all) to other trusts to be established by
the Corporation (if any), in each case
similar to the Trust ("Other Trusts"), and
will be unsecured and subordinate and
junior in right of payment to the extent
and in the manner set forth in the
Indenture to all Senior Debt of the
Corporation. See "Description of Junior
Subordinated Debt Securities." The
Guarantee will rank pari passu with all
other guarantees (if any) which may be
issued by the Corporation with respect to
capital securities (if any) which may be
issued by Other Trusts ("Other
Guarantees") and will constitute an
unsecured obligation of the Corporation
and will rank subordinate and junior in
right
7
<PAGE>
of payment to the extent and in the manner
set forth in the Guarantee to all Senior
Debt of the Corporation. See "Description
of Guarantee." In addition, because the
Corporation is a holding company, the
Junior Subordinated Debt Securities and
the Guarantee are effectively subordinated
to all existing and future liabilities of
the Corporation's subsidiaries, including
deposits. See "Risk Factors-Status of the
Corporation as a Bank Holding Company."
Redemption........................ The Trust Securities are subject to
mandatory redemption (i) in whole, but not
in part, at the Stated Maturity upon
repayment of the Junior Subordinated Debt
Securities, (ii) in whole, but not in
part, contemporaneously with the optional
redemption at any time by the Corporation
of the Junior Subordinated Debt Securities
at any time within 90 days following the
occurrence and during the continuation of
a Tax Event, Investment Company Event or
Capital Treatment Event in each case,
subject to possible regulatory approval
and (iii) in whole or in part, at any time
on or after ____ __, 2007,
contemporaneously with the optional
redemption by the Corporation of the
Junior Subordinated Debt Securities in
whole or in part, in each case at the
applicable Redemption Price (as defined
herein). See "Description of Capital
Securities -- Mandatory Redemption."
No Rating......................... The Capital Securities are not expected to
be rated by any rating service, nor is any
other security issued by the Corporation
so rated.
ERISA Considerations.............. Prospective purchasers must carefully
consider the restrictions on purchase set
forth. under "Notice to Investors" and
"Certain -ERISA Considerations."
Absence of Market for the
Capital Securities................ The Capital Securities will be a new issue
of securities for which there is currently
no market. Although the Underwriter has
informed the Trust and the Corporation
that it currently intends to make a market
in the Capital Securities, the Underwriter
is not obligated to do so, and any such
market making may be discontinued at any
time without notice. Accordingly, there
can be no assurance as to the development
or liquidity of any market for the Capital
Securities. See "Plan of Distribution."
8
<PAGE>
Use of Proceeds................... All of the proceeds from the sale of the
Trust Securities will be invested by the
Trust in the Junior Subordinated Debt
Securities. The Corporation intends to
apply the net proceeds from the sale of
the Junior Subordinated Debt Securities to
its general funds and for general
corporate purposes, including, from time
to time, the making of advances to the
Bank to support its continued growth. A
portion of such net proceeds could be used
in connection with one or more future
acquisitions. From time to time, the
Corporation investigates and holds
discussions and negotiations in connection
with possible transactions with other
banks. As of the date of this Prospectus,
the Corporation has not entered into any
agreements or understandings with respect
to any potential acquisitions or any other
material transactions of the type referred
to above, and no discussions or
negotiations are taking, place with
respect thereto. Pending any such
application by the Corporation, the net
proceeds may be invested in
interest-bearing securities.
For additional information regarding the
Capital Securities, see "Notice to
Investors," "Description of Capital
Securities," "Description of Junior
Subordinated Debt Securities,"
"Description of Guarantee" and "Certain
United States Federal Income Tax
Consequences."
RISK FACTORS
Prospective investors should carefully consider the matters set forth
under "Risk Factors."
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to
fixed charges for the Corporation for each of the year in the five-year period
ended December 31, 1996 and for the six months ended June 30, 1997. For purposes
of computing these ratios, earnings represent net income, plus total taxes based
on income, plus fixed charges. Fixed charges include interest expense (ratios
are presented both excluding and including interest on deposits), the estimated
interest component of net rental expense and amortization of debt expense.
<TABLE>
<CAPTION>
Six
Months
Ended
June 30 Years Ended December 31
----------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges
Excluding interest on deposits(1) 67.83x 97.60x 111.35x 318.11x - -
Including interest on deposits 1.31x 1.34x 1.37x 1.44x 1.44x 1.40x
</TABLE>
- ------------------
(1) The Corporation had no fixed charges other than interest on deposits in
1992 and 1993.
9
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following unaudited consolidated summary sets forth selected
financial data for the Corporation and its subsidiaries for the periods and at
the dates indicated. The following summary is qualified in its entirety by the
detailed information and the financial statements included in the documents
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
Six Months Ended June 30 Years Ended December 31
------------------------- -------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
Income Statement data: (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross interest income............. $ 8,814 $ 6,828 $ 14,596 $ 11,585 $ 8,425 $ 6,433 $ 5,581
Gross interest expense............ 4,824 3,696 7,822 6,161 3,985 3,064 2,718
Net interest income............... 3,990 3,132 6,774 5,424 4,440 3,369 2,863
Provision for possible
loan losses..................... 390 135 374 143 120 150 304
Net interest income after
provision for loan losses....... 3,600 2,997 6,400 5,281 4,320 3,219 2,559
Non-interest income............... 354 313 660 488 425 395 402
Non-interest expense.............. 2,470 2,159 4,439 3,541 3,004 2,264 1,873
Income before income taxes........ 1,484 1,151 2,621 2,228 1,741 1,350 1,088
Income taxes...................... 510 377 857 779 581 442 382
Net income........................ 974 774 1,764 1,449 1,160 908 706
Per Share Data (1):
Net income (2).................... $ 0.79 $ 0.64 $ 1.45 $ 1.19 $ 0.96 $ 0.98 $ 0.78
Cash dividends.................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Book value at period end.......... 12.82 10.98 11.97 10.52 8.43 8.33 6.16
Tangible book value at
period end...................... 12.82 10.98 11.97 10.52 8.43 8.33 6.16
Period-End Balance Sheet Data:
Total assets...................... $229,066 $180,161 $207,739 $162,543 $128,749 $105,520 $ 78,024
Total loans (net of
unearned income)................ 173,830 130,390 154,951 113,743 93,738 67,212 49,213
Total deposits.................... 206,420 163,141 189,719 147,327 117,314 94,853 71,697
Long-term debt.................... 2,739 1,000 1,858 -0- -0- -0- -0-
Shareholders' equity.............. 15,748 13,371 14,617 12,812 10,243 10,042 5,610
Performance Ratios
Return on average assets.......... 0.87% 0.90% 0.97% 1.00% 1.00% 1.02% 1.06%
Return on average
shareholders' equity............ 12.62% 11.42% 13.01% 12.45% 11.38% 14.77% 13.52%
Average shareholders' equity
to average total assets......... 6.73% 7.66% 7.46% 8.05% 8.75% 7.64% 8.58%
Net interest margin (3)........... 2.99% 3.05% 3.18% 3.18% 3.32% 3.28% 4.21%
Asset Quality Ratios
Net charge-offs to average loans.. 0.09% 0.13% 0.14% 0.07% 0.08% 0.01% 0.10%
Allowance to period-end loans..... 0.75% 0.67% 0.69% 0.80% 0.89% 1.16% 1.26%
Allowance to performing loans..... 318.91% 147.67% 108.28% 133.53% 394.33% 1,015.58% 477.89%
Nonaccrual loans to loans......... 0.22% 0.05% 0.06% 0.22% -0- 0.12% 0.15%
Nonperforming assets to loans
and foreclosed properties....... 0.05% 0.19% 0.01% 0.60% 0.23% 0.11% 0.28%
Risk-based capital ratios
Tier 1 capital.................. 9.60% 9.26% 9.41% 11.60% 12.82% 16.16% 12.67%
Total capital................... 10.41% 10.07% 10.13% 12.42% 13.77% 17.41% 13.92%
Leverage capital ratio............ 6.96% 6.78% 7.10% 8.14% 8.99% 10.10% 7.68%
Total equity to total assets...... 6.87% 7.42% 7.04% 7.88% 7.96% 9.52% 7.19%
</TABLE>
- ---------------------
(1) All per share figures have been adjusted to reflect a two-for-one stock
split on April 13, 1995.
(2) Net income per share is computed using the weighted average outstanding
shares.
(3) Net interest margin is calculated as tax-equivalent net interst income
divided by average earning assets and represents the Corporation's net
yield on it earning assets.
10
<PAGE>
RISK FACTORS
Prospective purchasers of the Capital Securities should carefully
review the information contained elsewhere in this Prospectus and should
particularly consider the following matters.
Ranking of Obligations Under the Guarantee and the Junior Subordinated Debt
Securities
The obligations of the Corporation under the Guarantee issued by the
Corporation for the benefit of the holders of Capital Securities and under the
Junior Subordinated Debt Securities are unsecured and rank subordinate and
junior in right of payment to all Senior Debt (which, as defined, includes all
outstanding subordinated debt of the Corporation). At June 30, 1997, the
aggregate outstanding Senior Debt of the Corporation was approximately $900,000.
The obligations of the Corporation under the Guarantee also rank subordinate and
junior in right of payment to creditors of the Bank and the Corporation's other
subsidiaries. See "Status of the Corporation as a Bank Holding Company." Upon
the issuance of the Junior Subordinated Debt Securities, the Corporation will
not have any indebtedness that ranks pari passu with or junior to its
obligations under the Guarantee and the Junior Subordinated Debt Securities.
None of the Indenture, the Guarantee or the Declaration places any limitation on
the amount of secured or unsecured debt, including Senior Debt, that may be
incurred by the Corporation or any subsidiary. See "Description of Junior
Subordinated Debt Securities--Subordination" and "Description of
Guarantee-Status of the Guarantee."
The ability of the Trust to pay amounts due on the Capital Securities
is solely dependent upon the Corporation making payments on the Junior
Subordinated Debt Securities as and when required.
Status of the Corporation as a Bank Holding Company
The Corporation is a legal entity separate and distinct from the Bank,
although the principal source of the Corporation's cash revenues is dividends
from the Bank. The right of the Corporation to participate in the distribution
of assets of any subsidiary, including the Bank, upon the latter's liquidation,
reorganization or otherwise (and thus the ability of the holders of Capital
Securities to benefit indirectly from any such distribution) will be subject to
the prior claims of such subsidiary's creditors, which will take priority except
to the extent that the Corporation may itself be a creditor of such subsidiary
with a recognized claim. Accordingly, the Junior Subordinated Debt Securities
will be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debt Securities
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debt Securities. Because the Corporation is a holding company with
limited assets and liabilities, a substantial portion of the consolidated
liabilities of the Corporation are liabilities of its subsidiaries. The
Guarantee will constitute an unsecured obligation of the Corporation and will
rank subordinate and junior in right of payment to all Senior Debt in the same
manner as the Junior Subordinated Debt Securities.
As a holding company, the Corporation conducts its operations
principally through its subsidiaries and, therefore, its principal source of
cash is receipt of dividends from the Bank. However, there are legal limitations
on the source and amount of dividends that a Virginia-chartered, Federal Reserve
member bank such as the Bank is permitted to pay. A Virginia-chartered bank may
pay dividends only from net undivided profits. Additionally, a dividend may not
be paid if it would impair the paid-in capital of the bank. In addition, prior
approval of the Federal Reserve is required if the total of all dividends
declared by a member bank in any calendar year will exceed the sum of that
bank's net profits for that year and its retained net profits for the preceding
two calendar years, less any required transfers to either surplus or any fund
for retirement of any preferred stock. At June 30, 1997, the Bank could have
paid approximately $3.7 million in dividends to the Corporation without prior
Federal Reserve approval. The payment of dividends by the Bank may also be
affected by other factors, such as requirements for the maintenance of adequate
capital. In addition, the Federal Reserve is authorized to determine, under
certain
11
<PAGE>
circumstances relating to the financial condition of a member bank, whether the
payment of dividends would be an unsafe or unsound banking practice and to
prohibit payment thereof.
Option to Extend Interest Payment Date; Tax Consequences; Market Price
Consequences
So long as no Debenture Event of Default (as defined herein) has
occurred and is continuing, the Corporation has the right under the Indenture to
defer the payment of interest on the Junior Subordinated Debt Securities at any
time or from time to time for a period not exceeding 20 consecutive quarterly
periods with respect to each Extension Period, provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. As a consequence of any such deferral, quarterly
Distributions on the Capital Securities by the Trust will also be deferred (and
the amount of Distributions to which holders of the Capital Securities are
entitled will accumulate additional Distributions thereon at __% per annum
thereof, compounded quarterly from the relevant payment date for such
Distributions during any such Extension Period). During any Extension Period,
the Corporation may not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Corporation's capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any, on, or repay,
repurchase or redeem any debt securities of the Corporation (including Other
Debentures) that rank pari passu with or junior in interest to, the Junior
Subordinated Debt Securities or (iii) make any guarantee payments with respect
to any guarantee by the Corporation of the debt securities of any subsidiary of
the Corporation (including Other Guarantees) if such guarantee ranks pari passu
with or junior in interest to the Junior Subordinated Debt Securities (other
than (a) dividends or distributions in Common Stock of the Corporation, (b) 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, (c)
payments under the Guarantee, (d) purchases or acquisitions of shares of the
Corporation's Common Stock in connection with the satisfaction by the
Corporation of its obligations under any employee benefit plan or any other
contractual obligation of the Corporation (other than a contractual obligation
ranking pari passu with or junior to the Junior Subordinated Debt Securities),
(e) as a result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of the Corporation's capital stock or (f) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged). Prior to the termination of any
Extension Period, the Corporation may further extend such Extension Period,
provided, however, that such extension does not cause such Extension Period to
exceed 20 consecutive quarterly periods or to extend beyond the Stated Maturity.
Upon the termination of any Extension Period and the payment of all interest
then accrued and unpaid on the Junior Subordinated Debt Securities (together
with interest thereon accrued at __% per annum, compounded quarterly, to the
extent permitted by applicable law), and subject to the foregoing limitations,
the Corporation may elect to begin a new Extension Period. There is no
limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "Description of Capital Securities--Distributions" and
"Description of Junior Subordinated Debt Securities--Option to Extend Interest
Payment Date."
If an Extension Period occurs, for United States federal income tax
purposes, a holder of Capital Securities will continue to include income (in the
form of original issue discount) in respect of its pro rata share of the Junior
Subordinated Debt Securities held by the Trust as long as the Junior
Subordinated Debt Securities remain outstanding. As a result, during an
Extension Period a holder of Capital Securities will include such income in
gross income for United States federal income tax purposes in advance of the
receipt of cash, and will not receive the cash related to such income from the
Trust if the holder disposes of the Capital Securities prior to the record date
for the payment of distributions thereafter. See "Certain United States Federal
Income Tax Consequences--Interest Income and Original Issue Discount" and "Sales
or Redemption of the Capital Securities."
12
<PAGE>
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debt Securities in the future, the market
price of the Capital Securities is likely to be affected. A holder that disposes
of its Capital Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to hold its
Capital Securities. In addition, as a result of the existence of the
Corporation's right to defer interest payments on the Junior Subordinated Debt
Securities, the market price of the Capital Securities (which represent
beneficial ownership interests in the Trust holding the Junior Subordinated Debt
Securities as its sole assets) may be more volatile than the market prices of
other securities that are not subject to such deferrals.
Tax Event, Investment Company Event or Capital Treatment Event Redemption
Upon the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event, the Company has the right
to redeem the Junior Subordinated Debt Securities in whole, but not in part, at
any time within 90 days following the occurrence of such Tax Event, Investment
Company Event or Capital Treatment Event and thereby cause a mandatory
redemption of the Capital Securities and Common Securities. The ability of the
Corporation to exercise its rights to redeem the Junior Subordinated Debt
Securities prior to the stated maturity may be subject to prior regulatory
approval by the Federal Reserve, if then required under applicable Federal
Reserve capital guidelines or policies. See "Description of Junior Subordinated
"Optional Redemption" and "Description of Capital Securities - Mandatory
Redemption" and "Description of Capital Securities Liquidation of the Trust and
Distribution of Junior Subordinated Debt Securities."
A "Tax Event" means the receipt by the Trust of an opinion of counsel
to the Corporation experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Capital Securities, there is more than an insubstantial risk
that (i) the Trust is, or will be within 90 days of the delivery of such
opinion, subject to United States federal income tax with respect to income
received or accrued on the Junior Subordinated Debt Securities (ii) interest
payable by the Corporation on the Junior Subordinated Debt Securities is not, or
within 90 days of the delivery of such opinion will not be, deductible by the
Corporation, 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 delivery of the opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
"Investment Company Event" means the receipt by the Trust of an opinion
of counsel to the Corporation experienced in such matters to the effect that, as
a result of the occurrence of a change in law or regulation or a written change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that 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 (the "Investment Company
Act"), which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Capital Securities.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, which amendment or change is effective or such pronouncement,
action or decision is announced on or after the date of issuance of the Capital
Securities, there is more than an insubstantial risk that the Corporation will
not be entitled to treat an amount equal to the Liquidation Amount of the
Capital Securities
13
<PAGE>
as "Tier I Capital" (or the then equivalent thereof) for purposes of the
risk-based capital adequacy guidelines of the Federal Reserve, as then in effect
and applicable to the Corporation. See "Description of Junior Subordinated Debt
Securities --Optional Redemption," "Description of Capital Securities-Mandatory
Redemption" and "Description of Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debt Securities."
Liquidation of the Trust and Distribution of Junior Subordinated Debt Securities
The Corporation, as the holder of the outstanding Common Securities,
will have the right at any time to terminate the Trust and cause the Junior
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities. Under current United States federal income tax law, a distribution
of Junior Subordinated Debt Securities upon the dissolution of the Trust would
not be a taxable event to holders of the Capital Securities. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution of the Trust,
the distribution of the Junior Subordinated Debt Securities may constitute a
taxable event to holders of Capital Securities. See "Certain United States
Federal Income Tax Consequences--Distribution of the Junior Subordinated Debt
Securities to Holders of Capital Securities."
There can be no assurance as to the market prices for Capital
Securities or Junior Subordinated Debt Securities that may be distributed in
exchange for Capital Securities if a liquidation of the Trust occurs.
Accordingly, the Capital Securities or the Junior Subordinated Debt Securities
may trade at a discount to the price that the investor paid to purchase the
Capital Securities offered hereby. Because holders of Capital Securities may
receive Junior Subordinated Debt Securities on termination of the Trust,
prospective purchasers of Capital Securities are also making an investment
decision with regard to the Junior Subordinated Debt Securities and should
carefully review all the information regarding the Junior Subordinated Debt
Securities contained herein. See "Description of Capital Securities--Liquidation
of the Trust and Distribution of the Junior Subordinated Debt Securities" and
"Description of Junior Subordinated Debt Securities--General."
Rights Under the Guarantee
The Guarantee guarantees to the holders of the Trust Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated and
unpaid Distributions required to be paid on the Trust Securities, to the extent
that the Trust has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to any Trust Securities called for redemption, to
the extent that the Trust has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding-up or liquidation of
the Trust (unless the Junior Subordinated Debt Securities are distributed to
holders of the Trust Securities or all of the Capital Securities are redeemed),
the lesser of (a) the aggregate of the Liquidation Amount and all accumulated
and unpaid Distributions to the date of payment, to the extent that the Trust
has funds on hand available therefor at such time, and (b) the amount of assets
of the Trust remaining available for distribution to holders of the Trust
Securities after the satisfaction of liabilities to creditors of the Trust as
required by applicable law.
The holders of not less than a majority in aggregate 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 Guarantee Trustee (as
defined herein) in respect of the Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Guarantee. Any holder
of the Trust Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Corporation were to default on its obligation to pay amounts
payable under the Junior Subordinated Debt Securities, the Trust would lack
funds for the payment of Distributions or amounts payable on redemption of the
Capital Securities or otherwise, and, in such event, holders of the Capital
Securities would not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have
14
<PAGE>
occurred and be continuing, and such event is attributable to the failure of the
Corporation to pay principal of or interest on the Junior Subordinated Debt
Securities on the applicable payment date, then a holder of Capital Securities
may institute a Direct Action. Notwithstanding any payments made to a holder of
Capital Securities by the Corporation in connection with a Direct Action, the
Corporation shall remain obligated to pay the principal of and interest on the
Junior Subordinated Debt Securities, and the Corporation 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 Corporation to
such holder in any Direct Action. Except as described herein, holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debt Securities or assert directly any
other rights in respect of the Junior Subordinated Debt Securities. See
"Description of Junior Subordinated Debt Securities--Enforcement of Certain
Rights by Holders of Capital Securities," "Description of Junior Subordinated
Debt Securities--Debenture Events of Default" and "Description of Guarantee."
The Declaration provides that each holder of Capital Securities by acceptance
thereof agrees to the provisions of the Guarantee and the Indenture. Wilmington
Trust Company will act as Guarantee Trustee under the Guarantee Agreement and
will hold the Guarantee for the benefit of the holders of the Capital
Securities. Wilmington Trust Company will also act as Property Trustee under the
Declaration and as Debenture Trustee under the Indenture.
Limited Voting Rights
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, the dissolution,
winding-up or liquidation of the Trust, and the exercise of the Trust's rights
as holder of Junior Subordinated Debt Securities. The right to vote to appoint,
remove or replace the Property Trustee, the Delaware Trustee or the
Administrative Trustees is vested exclusively in the holder of the Common
Securities except, with respect to the Property Trustee and the Delaware
Trustee, upon the occurrence of certain events described herein. The Property
Trustee, the Administrative Trustees and the Corporation may amend the
Declaration without the consent of holders of Capital Securities to ensure that
the Trust will not be classified for United States Federal income tax purposes
as an association taxable as a corporation or, as other than a grantor trust,
even if such action adversely affects the interests of such holders. See
"Description of Capital Securities--Removal of Highlands Capital Trust I
Trustees" and "Voting Rights; Amendment of the Declaration."
Regulatory Capital Requirements
The Corporation and the Bank are subject to regulatory capital
guidelines. At June 30, 1997, the Bank was in compliance with applicable
regulatory capital requirements. The Corporation, at that date, had a total
capital to risk-weighted assets ratio of 10.41% and a Tier I Capital to
risk-weighted assets ratio of 9.60%, both above the minimum requirements of 8.0%
and 4.0%, respectively. The Corporation's leverage ratio at that date was 6.96%.
Although the minimum leverage ratio requirement is 3.0%, most bank
holding companies, including the Corporation, are expected to maintain an
additional cushion of at least 100 to 200 basis points above the minimum.
However, the Federal Reserve may assign a specific capital ratio to an
individual bank holding company, including the Corporation, based on its
assessment of asset quality, earnings performance, interest-rate risk and
liquidity. As of the date of this Prospectus, the Federal Reserve has not
advised the Corporation of a specific leverage ratio requirement.
There can be no assurance that either the Corporation or the Bank will
continue to be able to meet their respective minimum capital ratios. In the
event that the Corporation or the Bank falls below the minimum capital
requirements described above, agencies may take regulatory action including, in
the case of the Bank,
15
<PAGE>
"prompt corrective action." Such actions could impair the Corporation's ability
to make principal and interest payments on the Junior Subordinated Debt
Securities.
Absence of Public Market
There is no existing market for the Capital Securities and there can be
no assurance as to the liquidity of any markets that may develop for the Capital
Securities, the ability of the holders to sell their Capital Securities or at
what price holders of the Capital Securities will be able to sell their Capital
Securities. Future trading prices of the Capital Securities will depend on many
factors including, among other things, prevailing interest rates, the
Corporation's operating results and the market for similar securities. The
Underwriter has informed the Trust and the Corporation that it intends to make a
market in the Capital Securities offered hereby; however, the Underwriter is not
obligated to do so and any such market making activity may be terminated at any
time without notice to the holders of the Capital Securities.
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Securities will be
invested by the Trust in the Junior Subordinated Debt Securities. The
Corporation intends to apply the net proceeds from the sale of the Junior
Subordinated Debt Securities to its general funds to be used for general
corporate purposes, including, from time to time, the making of advances to the
Bank to support its continued growth. A portion of such net proceeds could be
used in connection with one or more future acquisitions. From time to time, the
Corporation investigates and holds discussions and negotiations in connection
with possible transactions with other banks. As of the date of this Prospectus,
the Corporation has not entered into any agreements or understandings with
respect to any potential acquisitions or any other material transactions of the
type referred to above, and no discussions or negotiations are taking place with
respect thereto. Pending any such application by the Corporation, the net
proceeds may be invested in interest-bearing securities.
HIGHLANDS CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) the original Declaration of Trust executed by the Corporation,
as Depositor, Wilmington Trust Company, as Delaware Trustee, and the
Administrative Trustees named therein, which original Declaration of trust will
be amended and restated and executed by the Corporation, as Depositor,
Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, and the Administrative Trustees named therein (the
"Declaration"), and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on October 3, 1997. The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of the Trust Securities to acquire the Junior
Subordinated Debt Securities and (iii) engaging in only those other activities
necessary or incidental thereto. Accordingly, the Junior Subordinated Debt
Securities will be the sole assets of the Trust, and payments under the Junior
Subordinated Debt Securities will be the sole revenues of the Trust. All of the
Common Securities will be owned directly or indirectly by the Corporation. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Capital Securities, except that upon the occurrence and
continuance of any Debenture Event of Default (or an event that, with notice or
the passage of time, would become such an Event of Default) or an Event of
Default under the Declaration, the rights of the Corporation as holder of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Capital Securities. See "Description of Capital
Securities--Subordination of Common Securities." The Corporation will acquire
Common Securities in an aggregate Liquidation Amount equal to approximately 3%
of the total capital of the Trust. The Trust has a term of 40 years, but may
terminate earlier as provided in
16
<PAGE>
the Declaration. The Trust's business and affairs are conducted by its trustees,
each appointed by the Corporation as holder of the Common Securities. The
trustees for the Trust will be Wilmington Trust Company, as the Property
Trustee, Wilmington Trust Company, as the Delaware Trustee, and individual
trustees as Administrative Trustees who are employees or officers of or
affiliated with the Corporation (collectively, the "Trustees"). Wilmington Trust
Company, as Property Trustee, will act as sole indenture trustee under the
Declaration. Wilmington Trust Company will also act as trustee under the
Guarantee Agreement and the Indenture. See "Description of Junior Subordinated
Debt Securities" and "Description of Guarantee." The holder of the Common
Securities, or the holders of a majority in Liquidation Amount of the Capital
Securities if an Event of Default under the Declaration resulting from a
Debenture Event of Default has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and/or Delaware Trustee. In no
event will the holders of the Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights are
vested exclusively in the holder of the Common Securities. The duties and
obligations of each Trustee are governed by the Declaration. Pursuant to the
expense provisions under the Indenture, the Corporation, as obligor on the
Junior Subordinated Debt Securities, will pay all fees and expenses related to
the Trust and the offering of the Capital Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the Trust. See
"Description of Capital Securities--Expenses and Taxes." The address and
telephone number of the principal executive office of the Trust is c/o:
Highlands Bankshares, Inc.
340 West Main St.,
Abingdon, VA 24210
Attention: Samuel L. Neese
(540) 628-9181
17
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following consolidated summary sets forth selected financial data
for the Corporation and its subsidiaries for the periods and at the dates
indicated. The following summary is qualified in its entirety by the detailed
information and the financial statements included in the documents incorporated
herein by reference. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
Six Months Ended June 30 Years Ended December 31
------------------------ --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement data: (Dollars in thousands, except per share data)
Gross interest income.................. $ 8,814 $ 6,828 $ 14,596 $ 11,585 $ 8,425 $ 6,433 $ 5,581
Gross interest expense................. 4,824 3,696 7,822 6,161 3,985 3,064 2,718
Net interest income.................... 3,990 3,132 6,774 5,424 4,440 3,369 2,863
Provision for possible loan losses..... 390 135 374 143 120 150 304
Net interest income after
provision for loan losses............ 3,600 2,997 6,400 5,281 4,320 3,219 2,559
Non-interest income.................... 354 313 660 488 425 395 402
Non-interest expense................... 2,470 2,159 4,439 3,541 3,004 2,264 1,873
Income before income taxes............. 1,484 1,151 2,621 2,228 1,741 1,350 1,088
Income taxes........................... 510 377 857 779 581 442 382
Net income............................. 974 774 1,764 1,449 1,160 908 706
Per Share Data (1):
Net income (2)......................... $ 0.79 $ 0.64 $ 1.45 $ 1.19 $ 0.96 $ 0.98 $ 0.78
Cash dividends......................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Book value at period end............... 12.82 10.98 11.97 10.52 8.43 8.33 6.16
Tangible book value at period end...... 12.82 10.98 11.97 10.52 8.43 8.33 6.16
Period-End Balance Sheet Data:
Total assets........................... $229,066 $180,161 $207,739 $162,543 $128,749 $105,520 $ 78,024
Total loans (net of unearned income)... 173,830 130,390 154,951 113,743 93,738 67,212 49,213
Total deposits......................... 206,420 163,141 189,719 147,327 117,314 94,853 71,697
Long-term debt......................... 2,739 1,000 1,858 -0- -0- -0- -0-
Shareholders' equity................... 15,748 13,371 14,617 12,812 10,243 10,042 5,610
Performance Ratios
Return on average assets............... 0.87% 0.90% 0.97% 1.00% 1.00% 1.02% 1.06%
Return on average
shareholders' equity................. 12.62% 11.42% 13.01% 12.45% 11.38% 14.77% 13.52%
Average shareholders' equity to
average total assets................. 6.73% 7.66% 7.46% 8.05% 8.75% 7.64% 8.58%
Net interest margin (3)................ 2.99% 3.05% 3.18% 3.18% 3.32% 3.28% 4.21%
Earnings to fixed charges
Excluding interest on deposits(4).... 67.83x 285.12x 97.60x 111.35x 318.11x - -
Including interest on deposits....... 1.31x 1.31x 1.34x 1.37x 1.44x 1.44x 1.40x
Asset Quality Ratios
Net charge-offs to average loans....... 0.09% 0.13% 0.14% 0.07% 0.08% 0.01% 0.10%
Allowance to period-end loans.......... 0.75% 0.67% 0.69% 0.80% 0.89% 1.16% 1.26%
Allowance to performing loans.......... 318.91% 147.67% 108.28% 133.53% 394.33% 1,015.58% 477.89%
Nonaccrual loans to loans.............. 0.22% 0.05% 0.06% 0.22% -0-% 0.12% 0.15%
Nonperforming assets to loans and
foreclosed properties................ 0.05% 0.19% 0.01% 0.60% 0.23% 0.11% 0.28%
Risk-based capital ratios
Tier 1 capital....................... 9.60% 9.26% 9.41% 11.60% 12.82% 16.16% 12.67%
Total capital........................ 10.41% 10.07% 10.13% 12.42% 13.77% 17.41% 13.92%
Leverage capital ratio................. 6.96% 6.78% 7.10% 8.14% 8.99% 10.10% 7.68%
Total equity to total assets........... 6.87% 7.42% 7.04% 7.88% 7.96% 9.52% 7.19%
</TABLE>
(1) All per share figures have been adjusted to reflect a two-for-one stock
split on April 13, 1995.
(2) Net income per share is computed using the weighted average outstanding
shares.
(3) Net interest margin is calculated as tax-equivalent net interst income
divided by average earning assets and represents the Corporation's net
yield on it earning assets.
(4) The Corporation had no fixed charges other than interest on deposits in
1992 and 1993.
18
<PAGE>
THE CORPORATION
The following discussion includes selected financial and other data for
the Corporation and its subsidiaries and is qualified in its entirety by the
detailed information, and should be read in conjunction with the financial
statements and other information, included in the documents incorporated herein
by reference. See "Incorporation of Certain Documents by Reference."
Highlands Bankshares, Inc., a Virginia corporation (the "Corporation"),
is a bank holding company that was formed in 1995 and is headquartered in
Abingdon, Virginia. The Corporation's only subsidiary is Highlands Union Bank
(the "Bank"), which opened for business in 1985. Currently the Bank operates
five offices in southwestern Virginia (three in Abingdon and two in Bristol,
Virginia). In addition, the Bank recently purchased an operations center in
Abingdon and plans to open a sixth office in Marion, Virginia in Smith County in
November, 1997. All of the Bank's offices are owned, with no liens, are free
standing brick structures and have ATMs. The new operations center,
approximately half of which is currently leased to third parties, has 18,000
square feet and is a steel reinforced concrete building.
From December 31, 1991 through December 31, 1996 the Corporation's
assets, loans, deposits and net income increased at compound annual growth rates
of: 28.9%; 33.1%; 29.4% and 29.9%, respectively. In the prior five year period,
1986 through 1991, the Corporation's assets, loans, deposits and net income
increased at compound annual growth rates of: 29.9%; 39.8%; 31.3% and 32.7%
respectively. At June 30, 1997 total assets of the Corporation were $229.1
million, total deposits $206.4 million, and stockholders' equity $15.8 million.
Net income for the six months ended June 30, 1997 increased 25.8% to $974,000,
up from $774,000 in the first six months of 1996, while earnings per share
increased 23.4% from the comparable fiscal of 1996 to $.79.
The business strategy of the Corporation is to provide its customers
with the financial sophistication and breadth of products of a regional bank
while maintaining the quick response and services of a community bank.
Washington County, including the City of Abingdon, had a population of
approximately 45,000 in 1990 and 1980, while Bristol, Virginia and Bristol,
Tennessee, with a common border, had populations of approximately 20,000 each in
1990 and 1980. The Corporation's growth has been accomplished by hiring
experienced bank officers, particularly loan and credit officers, from large
state-wide banks and achieving significant gains in market share of deposits and
loans. Over the last five years the Corporation's market share in Washington
County, as measured by deposits, steadily increased to approximately 21% at June
30, 1996, which was the second highest of nine commercial banks operating in
Washington County. Management believes it will be the largest commercial bank,
as measured by deposits, as of June 30, 1997, in Washington County. Similarly,
in Bristol, Virginia the Corporation has achieved approximately a 19% market
share, as measured by deposits, which is third in size among seven commercial
banks operating there. Total deposits of the Corporation in Bristol, Virginia
were approximately $68 million at June 30, 1997. The Corporation's second
Bristol office, which opened in 1995, reached $31 million in deposits and
approximately $34 million in loans within the first eighteen months of opening,
due primarily to hiring experienced, local loan officers from larger regional
banks.
Management believes that there are, and will be, additional
opportunities to acquire branches, to expand services through the addition of
sophisticated bank personnel and, perhaps, to acquire other financial
institutions, as well as expansion into contiguous markets across state lines
such as Johnson City, Kingsport and Bristol, Tennessee (an area referred to as
Tri-Cities) and northern North Carolina. Sullivan County, Tennessee, including
Kingsport, had total bank deposits of approximately $1.2 billion at June 30,
1996 compared with $556.0 million for Washington County, Virginia and $358.0
million for Bristol, Virginia at the same date. Washington County, Tennessee,
including Johnson City, Jonesboro and Blountville had approximately $900.0
million in bank deposits as of June 30, 1996.
Despite its asset growth, the Corporation has experienced few problems
with non-performing assets or loan losses. At December 31, 1996, 1995 and 1994
non-performing loans totaled $96,000, $235,000 and $0, respectively, or, as a
percentage of loans outstanding, 0.06%, 0.20% and 0%, respectively. The ratio of
the
19
<PAGE>
provision for loan losses to net charge-offs was: 178.10%; 201.41% and 181.82%
in 1996, 1995 and 1994, respectively. The allowance for loan losses at December
31, 1996 was $1.1 million, or 11.2 times the level of non-performing assets.
The return on average assets has ranged over the last five years from
0.97% in 1996 to 1.06% in 1992, while the return on average equity has ranged
from 13.52% in 1992 to 11.38% in 1994 over the same period and was 13.01% in
1996. At June 30, 1997 the allowance for loan losses was $1.3 million, up 23.2%
from year-end 1996 and 49.1% from June 30, 1996.
The Corporation is a legal entity separate and distinct from the Bank
and its nonbanking subsidiaries. Accordingly, the right of the Corporation, and
thus the right of the Corporation's creditors, to participate in any
distribution of the assets or earnings of the Bank or any other subsidiary is
necessarily subject to the prior claims of creditors of the Bank or such
subsidiary, except to the extent that claims of the Corporation in its capacity
as a creditor may be recognized. The principal sources of the Corporation's
revenues are dividends from the Bank.
The Corporation is a bank holding company registered with the Board of
Governors of the Federal Reserve under the Bank Holding Company Act of 1956, as
amended (the "BHCA"). The Corporation's executive offices are located at 340
West Main Street, Abingdon, Virginia 24210. Its mailing address is P. O. Box
1128, Abingdon, Virginia 24210-1128, and its telephone number is (540) 628-9181.
20
<PAGE>
The following table sets forth average balances of total interest
earning assets and total interest bearing liabilities for the periods indicated,
showing the average distribution of assets, liabilities, stockholders' equity
and the related income, expense and corresponding weighted-average yields and
costs.
Average Balances, Interest Income and Expenses, and Average Yields and Rates
<TABLE>
<CAPTION>
Six months ended June 30 Year ended December 31
------------------------------- --------------------------------
1997 1996
------------------------------- --------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate(2) Balance(1) Expense Rate(2)
---------- ------- ------- ---------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Securities .................... $ 35,927 $ 1,202 6.69% $ 34,350 $ 2,802 6.06%
Loans(3) ...................... 164,169 7,593 9.20% 131,449 12,310 9.36%
Interest bearing deposits in
other banks .................. 4,836 123 5.09% 3,822 204 5.34%
-------- -------- -------- -------- -------- --------
Total interest earning
assets ...................... 204,932 8,918 8.66% 169,621 14,956 8.61%
Noninterest earning assets:
Cash and due from banks ....... 6,813 6,037
Premises and equipment ........ 5,276 4,326
Other assets .................. 1,207 1,080
Less: Allowance for
loan losses .................. (1,138) (920)
-------- --------
Total noninterest earning
assets
Total Assets ................ $217,090 $181,849
======== ========
Liabilities and Stockholders'
Equity
Interest Bearing Liabilities:
Interest bearing deposits:
Demand/MMDA accounts ......... $ 13,478 240 3.56% $ 12,566 452 3.60%
Savings ...................... 42,226 1,078 5.11% 36,073 1,843 5.11%
Certificates of deposit ...... 117,351 3,413 5.82% 100,686 5,419 5.38%
-------- -------- -------- -------- -------- --------
Total interest bearing
deposits ................... 173,055 4,731 5.47% 142,331 7,714 5.43%
FHLB advances and other
borrowings .................. 2,381 41 1,803 108
Bonds payable ................ 0 0 0
-------- -------- --------
Total interest bearing
liabilities ................ 174,984 144,134 7,822
Noninterest bearing liabilities:
Demand deposits ............... 26,070 22,607
Other liabilities ............. 372 1,548
Total liabilities ............ 26,435 24,155
Stockholders' equity ........... 15,212 13,560
Total liabilities and
stockholders' equity ......... $217,090 $181,849
======== ========
Interest spread (4) ............ 3.19% 3.18%
Net interest income/net
interest margin (5) ........... $ 3,183 3.11% $ 6,774 3.99%
======== ========
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------------------------------------
1995 1994
------------------------------- --------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate(2) Balance(1) Expense Rate(2)
---------- ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest Earning Assets:
Securities .................... $ 30,079 $ 1,793 5.96% $ 29,463 $ 1,584 5.34%
Loans(3) ...................... 102,216 9,590 9.38% 78,590 6,765 8.61%
Interest bearing deposits in
other banks .................. 3,686 202 5.48% 2,099 76 3.62%
-------- -------- -------- -------- -------- --------
Total interest earning
assets ...................... 135,981 11,585 8.52% 110,332 8,425 7.64%
Noninterest earning assets:
Cash and due from banks ....... 4,198 4,128
Premises and equipment ........ 3,362 2,271
Other assets .................. 1,099 912
Less: Allowance for
loan losses .................. (852) (140)
-------- --------
Total noninterest earning
assets
Total Assets ................ $143,788 $117,503
======== ========
Liabilities and Stockholders
Equity
Interest Bearing Liabilities:
Interest bearing deposits:
Demand/MMDA accounts ......... 11,294 411 3.64% 10,377 351 3.38%
Savings ...................... 28,003 1,401 5.00% 26,659 760 2.85%
Certificates of deposit ...... 73,918 4,274 5.78% 53,996 2,856 5.29%
-------- -------- -------- -------- -------- --------
Total interest bearing
deposits ................... 113,215 6,086 5.38% 91,032 3,967 4.36%
FHLB advances and other
borrowings .................. 1,198 75 390 18
Bonds payable ................ 0 0 0 0
-------- -------- -------- --------
Total interest bearing
liabilities ................ 114,413 6,161 91,422 3,985
Noninterest bearing liabilities:
Demand deposits ............... 17,441 15,039
Other liabilities ............. 296 845
--------
Total liabilities ............ 18,617 15,884
Stockholders equity ........... 11,638 10,197
Total liabilities and
stockholders equity ......... $143,788 $117,503
======== ========
Interest spread (4) ........... 3.14% 3.28%
Net interest income/net
interest margin (5) .......... $ 5,424 3.99% $ 4,440 4.02%
======== ========
</TABLE>
- ------------------
(1) Average balances are computed on monthly balances and Management believes
such balances are representative of the operations of the Corporation.
(2) Yield and rate percentages are all computed through the annualization of
interest income and expenses versus the average balances of their
respective accounts.
(3) Non-accrual loans are included in the average loan balances, and income on
such loans is recognized on a cash basis.
(4) Interest spread is the average yield earned on earning assets, less the
average rate incurred on interest bearing liabilities.
(5) Net interest margin is net interest income, expressed as a percentage of
average earning assets.
As the largest component of income, net interest income represents the
amount that interest and fees earned on loans and investments exceeds the
interest costs of funds used to support these earning assets. Net
21
<PAGE>
interest income is determined by the relative levels, rates and mix of earning
assets and interest-bearing liabilities.
For the six months ended June 30, 1997, net interest income was $3.6
million, compared to $3.0 million for the same period in 1996. Net interest
income for the year-ended December 31, 1996 increased 24.9%, or approximately
$1.4 million and over 1995. Average interest earning assets increased $34.1
million from 1995 to 1996 while average interest-bearing liabilities increased
$29.7 million. The yield on average interest-earning assets for the year ended
December 31, 1996 was 8.6% compared with 8.6% for the comparable 1995 period.
The 1996 yield on loans decreased by two basis points as compared to 1995 period
at 9.4%. The yield on average investments remained constant at 6.0% for December
31, 1996 and 1995. The yield on average interest-bearing liabilities increased
five basis points during 1996 to 5.4% as compared to 5.4% during 1995.
Net interest income for the year-ended December 31, 1995 increased
22.2%, approximately $980,000 over 1994. Average interest earning assets
increased $26.6 million from 1994 to 1995 while average interest-bearing
liabilities increased $22.2 million. The yield on average interest-earning
assets for the year-ended December 31, 1995 was 8.5% compared with 7.7% for the
comparable 1994 period. The 1995 yield on loans increased by 69 basis points as
compared to the 1994 period. The yield on average interest-bearing liabilities
increased to 6.0% as of December 31, 1995 from 5.3% for the comparable 1994
period. The yield on average interest-bearing liabilities increased 100 basis
points during 1995 to 5.4% as compared to 4.4% during 1994.
Interest Rate Sensitivity Analysis
Management evaluates interest sensitivity through the use of an
asset/liability management reporting gap model on a quarterly basis and then
formulates strategies regarding asset generation and pricing, funding sources
and pricing, and off-balance sheet commitments in order to decrease sensitivity
risk. These strategies are based on management's outlook regarding the interest
rate movements, the state of the regoinal and national economics and other
financial and business risk factors. In addition, the Corporation establishes
prices for deposits and loans based on local market conditions and manages its
securities portfolio with policies set by itself.
The following table presents the amounts of the Corporation's interest
sensitive assets and liabilities that mature or reprice in the periods
indicated.
22
<PAGE>
<TABLE>
<CAPTION>
June 30, 1997
Maturing
-----------------------------------------------------------
Within 4-12 1-5 Over
3 Months Months Years 5 Years Total
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Investment securities .............. $ 11,602 $ 16,500 $ 7,591 $ 3,447 $ 39,140
Loans .............................. 42,473 46,179 82,729 3,771 175,152
Other interest-earning assets ...... 139 - - - 139
-------- -------- -------- -------- --------
Total interest-earning assets ....... 54,214 62,679 90,320 7,218 214,431
-------- -------- -------- -------- --------
Interest-Bearing Liabilities:
Deposits
Demand and savings ................ 3,788 11,280 24,059 - 39,127
Time deposits, $100,000 and over... 8,135 17,456 8,562 - 34,153
Other time deposits ............... 35,091 33,994 37,097 - 106,182
Other interest-bearing
liabilities....................... 2,269 - - 1,858 4,127
-------- -------- -------- -------- --------
Total interest-bearing
liabilities......................... 49,283 62,730 69,718 1,858 183,589
-------- -------- -------- -------- --------
Period Gap ......................... $ 4,931 $ (51) $ 20,602 $ 5,360 $ 30,842
-------- -------- -------- -------- --------
Cumulative Gap ..................... $ 4,931 $ 4,880 $ 25,482 $ 54,901
-------- -------- -------- --------
Ratio cumulative gap to total
interest-earning assets............ 2.30% 2.28% 11.88% 25.60%
-------- -------- -------- --------
</TABLE>
The June 30, 1997 results of the rate sensitivity analysis show the
Corporation had $4.9 million more in assets than liabilities subject to
repricing within three months or less and was, therefore, in an asset-sensitive
position. The cumulative gap at the end of one year was a positive $4.9 million,
and therefore in an asset-sensitive position. Approximately $88.7 million, or
50.6% of the total loan portfolio, matures or reprices within one year or less.
An asset-sensitive institution's net interest margin and net interest income
generally will be impacted favorably by rising interest rates, while that of a
liability sensitive institution generally will be impacted favorably by
declining rates.
Loan Portfolio
The table below classifies loans, net of unearned income, by major
category and percentage distribution at the dates indicated:
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
---------------------------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994
------------------- ------------------- ------------------- ------------------- ------------------
Description Amount Percentage Amount Percentage Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 21,780 12.43% $ 17,102 13.03% $ 20,365 13.14% $ 12,699 11.16% $ 8,538 9.11%
Real Estate 102,323 58.43 85,842 65.39 101,491 65.50 76,516 67.27 62,903 67.11
Consumer 47,436 27.08 25,074 19.10 30,128 19.44 21,785 19.15 20,131 21.47
Other 3,612 2.06 3,258 2.48 2,967 1.92 2,743 2.41 2,166 2.31
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total $175,151 100.00% $131,276 100.00% $154,951 100.00% $113,743 100.00% $ 93,738 100.00%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
23
<PAGE>
Nonperforming Assets
Unless well secured and in the process of collection, the Corporation
places loans on non-accrual status after being delinquent greater than ninety
days, or earlier in situations in which the loans have developed inherent
problems that indicated payment of principal and interest may not be made in
full. Whenever the accrual of interest is stopped, previously accrued but
uncollected income is reversed. Thereafter, interest is recognized only as cash
is received. The loan is reinstated to an accrual basis after has been brought
current as to principal and interest under the contractual terms of the loan. As
of December 31, 1996, 1995 and 1994, non-accrual loans amounted to $96,000,
$235,000 and $0, respectively.
<TABLE>
<CAPTION>
June 30, December 31,
---------------------- -----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual loans $386 $ 60 $ 98 $246 $ - $ 77 $ 77
Loans contractually past due 90 days or
more and still accruing 437 194 563 434 212 - 65
Troubled debt restructuring - - - - - - -
---- ---- ---- ---- ---- ---- ----
Total nonperforming loans 823 254 661 680 212 77 132
Other real estate owned 37 - - - - - -
---- ---- ---- ---- ---- ---- ----
Total nonperforming assets $860 $254 $661 $680 $212 $ 77 $132
==== ==== ==== ==== ==== ==== ====
Nonperforming assets to period-end
total loans and other real estate 0.49% 0.19% 0.43% 0.60% 0.23% 0.11% 0.26%
</TABLE>
Summary of Loan Loss Experience
The allowance for loan losses is increased by the provision for loan
losses and reduced by loans charged off net of recoveries. The allowance for
loan losses is established and maintained at a level judged by management to be
adequate to cover any anticipated loan losses to be incurred in the collection
of outstanding loans. In determining the adequate level of the allowance for
loan losses, management considers the following factors: (a) loan loss
experience; (b) problem loans, including loans judged to exhibit potential
charge-off characteristics, loans on which interest is no longer being accrued,
loans which are past due and loans which have been classified in the most recent
regulatory examination; and (c) anticipated economic conditions and the
potential impact these conditions may have on individual classifications of
borrowers.
24
<PAGE>
<TABLE>
<CAPTION>
The following table presents the Corporation's loan loss experience for
the periods indicated:
Six Months Ended
June 30, Year Ended December 31,
--------------------- ------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at
beginning of period $ 1,072 $ 908 $ 908 $ 836 $ 782
Loans charged off:
Commercial 108 130 170 19 58
Real Estate -0- -0- -0- 122 -0-
Consumer 40 36 85 47 29
Other -0- -0- -0- -0- -0-
Total 148 166 255 188 87
Recoveries of loans previously charged off:
Commercial 4 1 32 -0- 11
Real Estate -0- -0- -0- 106 -0-
Consumer 3 8 13 11 10
Other -0- -0- -0- -0- -0-
-------- -------- -------- -------- --------
Total 7 9 45 117 21
-------- -------- -------- -------- --------
Net loans charged off 141 157 210 71 66
Provision for loan losses 390 135 374 143 120
-------- -------- -------- -------- --------
Allowance for loan losses end of period
$ 1,321 $ 886 $ 1,072 $ 908 $ 836
======== ======== ======== ======== ========
Average total loans (net of unearned
income) $164,169 $120,165 $131,449 $103,069 $ 79,400
Total loans (net of unearned income) at
period-end $175,151 $131,276 $154,951 $113,722 $ 93,738
Ratio of net charge-offs to average
loans 0.09% 0.63% 0.16% 0.07% 0.08%
Ratio of provision for loan losses to
average loans 0.24% 0.11% 0.29% 0.14% 0.15%
Ratio of provision for loan losses to
net charge-off 276.60% 85.99% 178.10% 201.41% 181.82%
Allowance for loan losses to period-end
loans 0.75% 0.68% 0.69% 0.88% 0.89%
</TABLE>
25
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation at June 30, 1997. See "Use of Proceeds." This table is based on, and
is qualified in its entirety by, the historical consolidated financial
statements of the Corporation, including the related notes thereto, which are
included in documents incorporated by reference herein, and should be red in
conjunction therewith.
June 30, 1997
(Dollars in Thousands)
Long-term debt $ 2,739
Capitalized lease obligations -0-
Shareholders' Equity
Common Stock, par value $2.50 per share, authorized
10,000,000 shares, shares outstanding - 1,228,462 3,071
Capital surplus 5,229
Retained earnings 7,368
Unrealized gains on securities available for sale,
net of income taxes 80
Total shareholders' equity 15,748
-------
Total capitalization $18,487
=======
Consolidated Capital Ratios
Equity to assets 6.87%
Tier 1 Capital 9.60%
Total Capital 10.41%
- -----------
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated into the
Corporation's consolidated financial statements, with the Capital Securities
treated as minority interest and shown in the Corporation's consolidated balance
sheet as "Corporation-Obligated Mandatorily Redeemable Capital Securities of
Subsidiary Trust." The financial statement footnotes of the Corporation will
reflect that the sole asset of the Trust will be the amount of the Junior
Subordinated Debt Securities maturing on _____ __, 2027. All future reports
filed by the Corporation under the Exchange Act will present information
regarding the Trust and any other similar trusts in the manner described above.
REGULATORY TREATMENT
As a registered bank holding company, the Corporation is required by
the Federal Reserve to maintain certain levels of capital for bank regulatory
purposes. The Corporation expects that the Capital Securities will be treated as
"Tier I Capital" of the Corporation for such purposes.
26
<PAGE>
DESCRIPTION OF CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Trustees on behalf of the
Trust will issue the Capital Securities and the Common Securities. The Capital
Securities will represent beneficial ownership interests in the Trust and the
holders thereof will be entitled to a preference in certain circumstances with
respect to Distributions and amounts payable on redemption of the Trust
Securities or liquidation of the Trust over the Common Securities, as well as
other benefits as described in the Declaration. See "Subordination of Common
Securities." The Declaration will be qualified under the Trust Indenture Act of
1939 (the "Trust Indenture Act"). This summary of certain provisions of the
Capital Securities, the Common Securities and the Declaration does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Declaration, including the definitions therein of
certain terms. The form of the Declaration is available upon request from the
Trustees.
General
The Capital Securities will be limited to $10 million aggregate
Liquidation Amount at any one time outstanding. The Capital Securities will rank
pari passu, and payments will be made thereon pro rata, with the Common
Securities except as described under "Subordination of Common Securities." Legal
title to the Junior Subordinated Debt Securities will be held by the Property
Trustee on behalf of the Trust in trust for the benefit of the holders of the
Capital Securities and Common Securities. The Guarantee Agreement executed by
the Corporation for the benefit of the holders of the Capital Securities (the
"Guarantee Agreement") will provide for the Guarantee on a subordinated basis
with respect to the Capital Securities but will not guarantee payment of
Distributions or amounts payable on redemption of the Capital Securities or on
liquidation of the Trust when the Trust does not have funds on hand available to
make such payments. See "Description of Guarantee."
Distributions
The Capital Securities represent beneficial ownership interests in the
Trust, and Distributions on each Capital Security will be payable at __% per
annum of the stated Liquidation Amount of $1,000, and will be payable quarterly
in arrears on the ___th day of __________, _____________,____________ and
___________ of each year to the holders of the Capital Securities at the close
of business on the Business Day (as defined herein) immediately preceding such
Distribution Date (each, a "record date"). Distributions on the Capital
Securities will be cumulative. Distributions will accumulate from the Issue
Date. The first Distribution Date for the Capital Securities will be _____ __,
1997. The amount of Distributions payable for any period will be computed on the
actual number of days elapsed in a year of twelve 30-day months. In the event
that any date on which Distributions are payable on the Capital Securities is
not a Business Day, payment of the Distributions payable on such date will be
made on the next succeeding day that is a Business Day (and without any
additional Distributions or other payments in respect to any such delay) with
the same force and effect as if made on the date such payment was originally
payable (each date on which Distributions are payable in accordance with the
foregoing. a "Distribution Date"). A "Business Day" shall mean any day other
than a Saturday or a Sunday, or a day on which banking institutions in Richmond,
Virginia are authorized or required by law or executive order to remain closed,
or a day on which the corporate trust office of the Property Trustee or the
Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debt Securities at any time or
from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity of the Junior Subordinated Debt Securities. As
a consequence of any such election, quarterly Distributions on the Capital
Securities by the Trust will be deferred during any such Extension Period.
Distributions to which holders of the Capital Securities
27
<PAGE>
are entitled will accumulate additional Distributions thereon at __% per annum
thereof, compounded quarterly from the relevant payment date for such
Distributions during any such Extension Period, to the extent permitted by
applicable law. The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the Corporation may
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Corporation's
capital stock (which includes common and preferred stock), (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including Other Debentures) that rank pari
passu with or junior in interest to the Junior Subordinated Debt Securities, or
(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in interest to the Junior Subordinated Debt Securities (other than (a) dividends
or distributions in Common Stock of the Corporation, (b) 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, (c) payments under the
Guarantee, (d) purchases or acquisitions of shares of the Corporation's Common
Stock in connection with the satisfaction by the Corporation of its obligations
under any employee benefit plan or any other contractual obligation of the
Corporation (other than a contractual obligation ranking pari passu with or
junior to the Junior Subordinated Debt Securities), (e) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock or (f) the purchase of
fractional interests in shares of the Corporation's stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Corporation may further extend such Extension Period, provided that such
extension does not cause such Extension Period to exceed 20 consecutive
quarterly periods or to extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. Upon the termination of any such Extension Period
and the payment of all amounts then accrued and unpaid on the Junior
Subordinated Debt Securities (together with interest thereon accrued at __% per
annum, compounded quarterly, to the extent permitted by applicable law), and
subject to the foregoing limitations, the Corporation may elect to begin a new
Extension Period. No interest or other amounts shall be due and payable during
an Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any such Extension Period at least three Business Days prior
to the earlier of (i) the date the Distributions on the Capital Securities would
have been payable except for the election to begin such Extension Period or (ii)
the date the Administrative Trustees are required to give notice to any
automated quotation system or to holders of such Capital Securities of the
record date or the date such Distributions are payable, but in any event not
less than three Business Days prior to such record date. The Debenture Trustee
shall give notice of the Corporation's election to begin or extend an Extension
Period to the holders of the Capital Securities. There is no limitation on the
number of times that the Corporation may elect to begin an Extension Period. See
"Description of Junior Subordinated Debt Securities--Option to Extend Interest
Payment Date" and "Certain United States Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
The Corporation has no current intention of exercising its right to
defer payments of interest on the Junior Subordinated Debt Securities.
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debt Securities in which the Trust will invest the proceeds from the issuance
and sale of the Trust Securities. See "Description of Junior Subordinated Debt
Securities--General." If the Corporation does not make interest payments on the
Junior Subordinated Debt Securities, the Property Trustee will not have funds
available to pay Distributions on the Capital Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantee."
28
<PAGE>
Mandatory Redemption
Upon the repayment or redemption, in whole or in part, of the Junior
Subordinated Debt Securities, whether at maturity or upon earlier redemption as
provided in the Junior Subordinated Indenture, the proceeds from such repayment
or redemption shall be applied by the Property Trustee to redeem a Like Amount
(as defined below) of the Trust Securities, upon not less than 30 nor more than
60 days' notice, at a redemption price (the "Redemption Price") equal to the
aggregate Liquidation Amount of such Capital Securities plus accumulated but
unpaid Distributions thereon to the date of redemption (the "Redemption Date")
and the related amount of the premium, if any, paid by the Corporation upon the
concurrent redemption of such Junior Subordinated Debt Securities. See
"Description of Junior Subordinated Debt Securities--Optional Redemption." If
less than all the Junior Subordinated Debt Securities are to be repaid or
redeemed on a Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption pro rata of the Capital
Securities and the Common Securities. The amount of premium, if any, paid by the
Corporation upon the redemption of all or any part of the Junior Subordinated
Debt Securities to be repaid or redeemed on a Redemption Date shall be allocated
to the redemption pro rata of the Capital Securities and the Common Securities.
The Corporation has the right to redeem the Junior Subordinated Debt
Securities (i) on or after _____, 2007, in whole at any time or in part from
time to time, or (ii) in whole, but not in part, at any time within 90 days
following the occurrence and during the continuation of a Tax Event, Investment
Company Event or Capital Treatment Event (each as defined below), in each case
subject to possible regulatory approval. A redemption of the Junior Subordinated
Debt Securities would cause a mandatory redemption of a Like Amount of the
Capital Securities and Common Securities at the Redemption Price.
The Redemption Price, in the case of a redemption under (i) above,
shall equal the following prices, expressed in percentages of the Liquidation
Amount (as defined below), together with accumulated Distributions to but
excluding the date fixed for redemption, if redeemed during the 12-month period
beginning ______:
Year Redemption Price
- ---- ----------------
2007 %
2008
2009
2010
2011
2012
2013
2014
2015
2016
and at 100% on or after _____, 2017.
The Redemption Price, in the case of a redemption on or after _____,
2007 following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under (i)
above. The Redemption Price, in the case of a redemption prior to _____, 2007
following a Tax Event, Investment Company Event or Capital Treatment Event as
described under (i) above, will equal for each Capital Security the Make-Whole
Amount for a corresponding $1,000 principal amount of Junior
29
<PAGE>
Subordinated Debt Securities together with accumulated Distributions to but
excluding the date fixed for redemption. The "Make-Whole Amount" will be equal
to the greater of (i) 100% of the principal amount of such Junior Subordinated
Debt Securities and (ii) as determined by a Quotation Agent (as defined below),
the sum of the present values of the principal amount and premium payable as
part of the Redemption Price with respect to an optional redemption of such
Junior Subordinated Debt Securities on ______ __, 2007, together with the
present values of scheduled payments of interest (not including the portion of
any such payments of interest accrued as of the Redemption Date) from the
Redemption Date to ______, 2007 (the "Remaining Life"), in each case discounted
to the Redemption Date on a quarterly basis (assuming a 360-day year consisting
of 30-day months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means, with respect to any Redemption Date,
the Treasury Rate plus (i) ___basis points if such Redemption Date occurs on or
before ________, 1998 or (ii) ___ basis points if such Redemption Date occurs
after ________, 1998.
"Treasury Rate" means (i) the yield, under the heading which represents
the average for the week immediately prior to the calculation date, 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.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in the City of Richmond, Virginia are
authorized or required by law or executive order to remain closed, or (c) a day
on which the Property Trustee's Corporate Trust Office or the Corporate Trust
Office of the Debenture Trustee is closed for business.
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount (as defined below)
equal to that portion of the principal amount of Junior Subordinated Debt
Securities to be contemporaneously redeemed in accordance with the Junior
Subordinated Indenture, allocated to the Common Securities and to the Capital
Securities based upon the relative Liquidation Amounts of such classes and (ii)
with respect to a distribution of Junior Subordinated Debt Securities to holders
of Trust Securities in connection with a dissolution or liquidation of the
Highlands Capital Trust I Trust, Junior Subordinated Debt Securities having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debt Securities are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Tax Event" means the receipt by the Trust of an opinion of counsel to
the Corporation experienced in such matters to the effect that, as a result of
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of the Capital Securities, there is more
30
<PAGE>
than an insubstantial risk that (i) the Trust is, or will be within 90 days of
the delivery of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debt
Securities, (ii) interest payable by the Corporation on the Junior Subordinated
Debt Securities is not, or within 90 days of the delivery of such opinion, will
not be, deductible by the Corporation, 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 delivery of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Event" means the receipt by the Trust of an opinion
of counsel to the Corporation experienced in such matters to the effect that, as
a result of the occurrence of a change in law or regulation or a written change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the Trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act, which change or prospective change becomes
effective or would become effective, as the case may be, on or after the date of
the issuance of the Capital Securities.
"Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws
or regulations, which amendment or change is effective or such pronouncement,
action or decision is announced on or after the date of issuance of the Capital
Securities, there is more than an insubstantial risk that the Corporation will
not be entitled to treat an amount equal to the Liquidation Amount of the
Capital Securities as "Tier I Capital" (or the then equivalent thereof) for
purposes of the risk-based capital adequacy guidelines of the Federal Reserve,
as then in effect and applicable to the Corporation.
Payment of Additional Sums. If a Tax Event described in clause (i) or
(iii) of the definition of Tax Event above has occurred and is continuing and
the Trust is the holder of all the Junior Subordinated Debt Securities, the
Corporation will pay Additional Sums (as defined below), if any, on the Junior
Subordinated Debt Securities.
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities of the Trust will not be
reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust has become subject as a result of a Tax Event.
Redemption Procedures
Trust Securities shall be redeemed, if at all, at the Redemption Price
with the proceeds from the contemporaneous repayment or redemption of the Junior
Subordinated Debt Securities. Redemptions of the Trust Securities shall be made
and the Redemption Price shall be payable on each Redemption Date (as defined
below) only to the extent that the Trust has funds on hand available for the
payment of such Redemption Price. See also "Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, Richmond, Virginia time, on the date fixed for
redemption (the "Redemption Date"), to the extent funds are available, with
respect to the Capital Securities held in global form, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the Redemption Price and
will give DTC irrevocable instructions and authority to pay the Redemption Price
to the holders of the Capital Securities. See "Form, Denomination, Book-Entry
Procedures and Transfer." With respect to the Capital Securities held in
certificated form, the Property Trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for the Capital Securities funds
31
<PAGE>
sufficient to pay the Redemption Price and will give such paying agent
irrevocable instructions and authority to pay the Redemption Price to the
holders thereof upon surrender of their certificates evidencing the Capital
Securities. See "Payment and Paying Agency." Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date shall be payable to the
holders of the Capital Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of the Capital Securities will cease, except the right of the holders of
the Capital Securities to receive the Redemption Price, but without interest on
such Redemption Price, and the Capital Securities will cease to be outstanding.
In the event that any date fixed for redemption of Capital Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day which is a Business Day (and without any
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 the event that payment of the Redemption
Price is improperly withheld or refused and not paid either by the Trust or by
the Corporation pursuant to the Guarantee as described under "Description of
Guarantee," Distributions on Capital Securities will continue to accrue at the
then applicable rate, from the Redemption Date originally established by the
Trust to the date such Redemption Price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation 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.
Notice of any redemption (other than at the Stated Maturity of the
Junior Subordinated Debt Securities) will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each holder of Trust Securities
at its registered address. Unless the Corporation defaults in payment of the
Redemption Price on, or in the repayment of, the Junior Subordinated Debt
Securities, on and after the Redemption Date, Distributions will cease to accrue
on the Trust Securities called for redemption.
Liquidation of the Trust and Distribution of Junior Subordinated Debt Securities
The Corporation, as the holder of the outstanding Common Securities,
will have the right at any time (including, without limitation, upon the
occurrence of a Tax Event or Capital Treatment Event) to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debt Securities to be distributed
to the holders of the Trust Securities upon liquidation of the Trust. Such right
to terminate is subject to prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve.
Upon liquidation of the Trust and certain other events, the Junior
Subordinated Debt Securities may be distributed to holders of the Capital
Securities. Under current United States federal income tax law, a distribution
of Junior Subordinated Debt Securities upon the dissolution of the Trust would
not be a taxable event to holders of the Capital Securities. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution of the Trust,
the distribution of the Junior Subordinated Debt Securities may constitute a
taxable event to holders of Capital Securities. See "Certain United States
Federal Income Tax Consequences--Distribution of Junior Subordinated Debt
Securities to Holders of Capital Securities."
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debt
Securities to the holders of the Trust Securities if the Corporation, as
Depositor, has given written direction to the Property Trustee to terminate the
Trust (which direction is optional and, except as described above, wholly within
the discretion of the Corporation, as Depositor); (iii) redemption of all of the
Trust Securities as described
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under "Mandatory Redemption" above; (iv) expiration of the term of the Trust;
and (v) the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If an early termination occurs as described in clause (i), (ii), (iv)
or (v) above, the Trust shall be liquidated by the Trustees as expeditiously as
the Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
holders of such Trust Securities a Like Amount of the Junior Subordinated Debt
Securities, unless such distribution would not be practical, in which event such
holders will be entitled to receive out of the assets of the Trust available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to, in the case of holders
of Capital Securities, the aggregate of the Liquidation Amount plus accumulated
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities shall be paid on a pro rata basis. The holder(s)
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
a Debenture Event of Default (or an event that, with notice or passage of time,
would become such an Event of Default) or an Event of Default under the
Declaration has occurred and is continuing, the Capital Securities shall have a
priority over the Common Securities with respect to any such distributions. See
"Subordination of Common Securities." If an early termination occurs as
described in clause (v) above, the Junior Subordinated Debt Securities will be
subject to optional redemption in whole (but not in part).
"Like Amount" means (i) with respect to a redemption of Capital
Securities, Capital Securities having a Liquidation Amount equal to that portion
of the principal amount of Junior Subordinated Debt Securities to be
contemporaneously redeemed in accordance with the Indenture, allocated to the
Common Securities and to the Capital Securities based upon the relative
Liquidation Amounts of such classes and the proceeds of which will be used to
pay the Redemption Price of the Capital Securities and (ii) with respect to a
distribution of Junior Subordinated Debt Securities to holders of Capital
Securities in connection with a dissolution or liquidation of the Trust, Junior
Subordinated Debt Securities having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Junior Subordinated
Debt Securities are distributed.
If the Corporation elects not to redeem the Junior Subordinated Debt
Securities prior to maturity and the Trust is not liquidated and the Junior
Subordinated Debt Securities are not distributed to holders of the Trust
Securities, the Capital Securities will remain outstanding until the repayment
of the Junior Subordinated Debt Securities at the Stated Maturity.
On and after the liquidation date is fixed for any distribution of
Junior Subordinated Debt Securities to holders of the Trust Securities, (i) the
Capital Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Capital Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debt Securities to be delivered upon such distribution with respect
to Capital Securities held by DTC or its nominee and (iii) any certificates
representing Capital Securities not held by DTC or its nominee will be deemed to
represent Junior Subordinated Debt Securities having a principal amount equal to
the Liquidation Amount of such Capital Securities and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
Capital Securities until such certificates are presented to the Administrative
Trustees or their agent for cancellation, whereupon the Corporation will issue
to such holder, and the Debenture Trustee will authenticate, a certificate
representing such Junior Subordinated Debt Securities.
There can be no assurance as to the market prices for the Capital
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for the Trust Securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Capital Securities that an investor may
purchase, or the Junior
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Subordinated Debt Securities that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Capital Securities offered hereby.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata to the
holders of Capital Securities and Common Securities based on the Liquidation
Amount of the Trust Securities, provided that, if on any Distribution Date or
Redemption Date any Debenture Event of Default (or an event that, with notice or
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration shall have occurred and be continuing, no payment of any
Distribution on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, 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 payment of the Redemption Price, the full amount of such Redemption
Price on all of the outstanding Capital Securities, 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 the
Redemption Price of, the Capital Securities then due and payable.
In the case of any Event of Default under the Declaration resulting
from a Debenture Event of Default, the Corporation as holder of the Common
Securities will be deemed to have waived any right to act with respect to any
such Event of Default under the Declaration until the effect of all such Events
of Default have been cured, waived or otherwise eliminated. Until all such
Events of Default under the Declaration have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Capital Securities and not on behalf of the Corporation as holder of the
Common Securities, and only the holders of the Capital Securities will have the
right to direct the Property Trustee to act on their behalf.
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under
the Declaration (an "Event of Default") (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see
"Description of Junior Subordinated Debt Securities--Debenture Events
of Default"); or
(ii) default by the Trust in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Trust in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in the Declaration
(other than a covenant or warranty, a default in the performance of
which or the breach of which is addressed in clause (ii) or (iii)
above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to
the defaulting Trustee or Trustees by the holders of at least 25% in
aggregate Liquidation Amount of the outstanding Capital Securities, a
written notice specifying such default or breach and
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requiring it to be remedied and stating that such notice is a "Notice
of Default" under the Declaration; or
(v) the occurrence of certain events of bankruptcy or
insolvency with respect to the Property Trustee and the failure by the
Corporation to appoint a successor Property Trustee within 60 days
thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation, as Depositor, unless such Event of
Default shall have been cured or waived. The Corporation, as Depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If a Debenture Event of Default (or an event that with notice or the
passage of time, would become such an Event of Default) or an Event of Default
under the Declaration has occurred and is continuing, the Capital Securities
shall have a preference over the Common Securities as described above. See
"Liquidation of the Trust and Distribution of Junior Subordinated Debt
Securities" and "Subordination of Common Securities."
Removal of Trustees
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of a Trustee and no appointment of
a successor trustee shall be effective until the acceptance of appointment by
the successor trustee in accordance with the provisions of the Declaration.
Co-trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust's
property may at the time be located, the Corporation, as the holder of the
Common Securities, and the Administrative Trustees shall have power to appoint
one or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such Trust's property, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Declaration. In case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment.
Merger or Consolidation of Trustees
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under the Declaration,
provided such person shall be otherwise qualified and eligible.
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Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise set forth in the Declaration. The Trust may, at
the request of the Corporation, as Depositor, with the consent of the
Administrative Trustees but without the consent of the holders of the Capital
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, a trust organized as such
under the laws of any State; provided, however, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect to
the Capital 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 the same as the
Capital Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Corporation expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Junior Subordinated Debt
Securities, (iii) the Successor Securities are listed or traded, or any
Successor Securities will be listed or traded upon notification of issuance, on
any national securities exchange or other organization on which the Capital
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Capital
Securities (including any Successor Securities) in any material respect, (v)
such successor entity has a purpose identical and limited to that of the Trust,
(vi) prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Corporation has received an opinion from 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, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940 (the "Investment Company Act") and (vii) the
Corporation or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other entity or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it, if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or the
successor entity to be classified as an association taxable as a corporation or
as other than a grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of the Declaration
Except as provided below and under "Description of
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Declaration, the holders of the Capital Securities will have no voting rights.
The Declaration may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities, (i) to cure any ambiguity, correct or
supplement any provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate or add to
any provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust or as other than an association taxable as a corporation at
all times that any Trust Securities are outstanding or to ensure that the Trust
will not be required to register as an
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"investment company" under the Investment Company Act; provided, however, that
in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any holder of Trust Securities, and any
amendments of the Declaration shall become effective when notice thereof is
given to the holders of the Trust Securities. The Declaration may be amended by
the Trustees and the Corporation with (i) the consent of holders representing
not less than a majority (based upon Liquidation Amounts) of the outstanding
Capital Securities, and (ii) receipt by the Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment will not cause the Trust to be
classified as an association taxable as a corporation or affect the Trust's
status as a grantor trust for United States federal income tax purposes or the
Trust's exemption from status as an "investment company" under the Investment
Company Act. In addition, without the consent of each holder of Trust
Securities, the Declaration may not be amended to (i) change the amount or
timing of any Distribution on the Trust Securities or otherwise adversely affect
the amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a holder of
Trust Securities to institute suit for the enforcement of any such payment on or
after such date.
So long as any Junior Subordinated Debt Securities are held by the
Trust, the Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debt Securities, (ii) waive any past default that is
waivable under Section 5.13 of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior Subordinated
Debt Securities shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Junior Subordinated Debt
Securities, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Capital Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debt Securities affected thereby, no such consent
shall be given by the Property Trustee without the prior consent of each holder
of the Capital Securities. The Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Capital Securities except
by subsequent vote of such holders. The Property Trustee shall notify each
holder of Capital Securities of any notice of default with respect to the Junior
Subordinated Debt Securities. In addition to obtaining the foregoing approvals
of such holders of the Capital Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an opinion of counsel experienced in such
matters to the effect that the Trust will not be classified as an association
taxable as a corporation for United States federal income tax purposes as a
result of such action and such action would not cause the Trust to be classified
as other than a grantor trust for United States federal income tax purposes.
Any required approval of holders of Capital Securities may be given at
a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of Capital Securities will be
required for the Trust to redeem and cancel the Capital Securities in accordance
with the Declaration.
Notwithstanding that holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Corporation, the Trustees or any
affiliate of the Corporation or any Trustees, shall, for purposes of such vote
or consent, be treated as if they were not outstanding.
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Expenses and Taxes
In the Indenture, the Corporation, as borrower, has agreed to pay all
debts and other obligations (other than with respect to payments of
Distributions, amounts payable upon redemption and the Liquidation Amount of the
Trust Securities) and all costs and expenses of the Trust (including costs and
expenses relating to the organization of the Trust, the fees and expenses of the
Trustees and the costs and expenses relating to the operation of the Trust) and
the offering of the Capital Securities, and to pay any and all taxes and all
costs and expenses with respect to the foregoing (other than United States
withholding taxes) to which the Trust might become subject. The foregoing
obligations of the Corporation under the Indenture are for the benefit of, and
shall be enforceable by, any person to whom any such debts, obligations, costs,
expenses and taxes are owed (a "Creditor") whether or not such Creditor has
received notice thereof. Any such Creditor may enforce such obligations of the
Corporation directly against the Corporation, and the Corporation has
irrevocably waived any right or remedy to require that any such Creditor take
any action against the Trust or any other person before proceeding against the
Corporation. The Corporation has also agreed in the Indenture to execute such
additional agreement(s) as may be necessary or desirable to give full effect to
the foregoing.
Form, Denomination, Book-Entry Procedures and Transfer
Capital Securities will be issued initially in blocks having a
Liquidation Amount of $100,000 (100 Capital Securities) and integral multiples
of $1,000 in excess thereof and may be transferred or exchanged in the manner
and at the offices described below.
The Capital Securities initially will be evidenced by certificates in
fully registered form (each, a "Certificate"). The Property Trustee will from
time to time register the transfer of any outstanding Certificate upon surrender
thereof at the office of the Property Trustee which is currently located at 1100
N. Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust
Administration (the "Property Trustee's Office"), duly endorsed by, or
accompanied by a written instrument or instruments of transfer in a form
satisfactory to the Property Trustee duly executed by the holder thereof, a duly
appointed legal representative or a duly authorized attorney. Such signature
must be guaranteed by a bank or trust company having a correspondent office in
New York City or by a broker or dealer that is a member of the National
Association of Securities Dealers, Inc. (the "NASD") or a member of a national
securities exchange. A new Certificate will be issued to the transferee upon any
such registration of transfer.
At the option of a holder, Certificates may be exchanged for other
Certificates representing a like number of Capital Securities, upon surrender to
the Property Trustee at the Property Trustee's Office of the Certificates to be
exchanged. The Corporation will thereupon execute, and the Property Trustee will
authenticate and deliver, one or more new Certificates representing such like
number of Capital Securities.
If any Certificate is mutilated, lost, stolen or destroyed, the
Corporation shall execute, and the Property Trustee shall authenticate and
deliver, in exchange and substitution for such mutilated Certificate, or in
replacement for such lost, stolen or destroyed Certificate, a new Certificate
representing the same number of Capital Securities represented by such
Certificate, but only upon receipt of evidence satisfactory to the Corporation
and to the Property Trustee of loss, theft or destruction of such Certificate
and security or indemnity, if requested, satisfactory to them. Holders
requesting replacement Certificates must also comply with such other reasonable
regulations as the Corporation or the Property Trustee may prescribe.
No service charge will be made for any registration of transfer or
exchange of Certificates, but the Corporation may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection therewith, other than exchanges not involving any transfer. In the
case of the replacement of mutilated, lost, stolen or destroyed Certificates,
the Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith and any
other
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expenses (including the fees and expenses of the Property Trustee) connected
therewith.
Possible Exchange for Book-Entry Capital Securities.
Following the issuance of the Capital Securities, the Corporation will
make the Capital Securities available in book-entry form ("Book-Entry Capital
Securities"). Holders may (but are not required to) exchange Certificates for
Book-Entry Capital Securities, which will be represented by a beneficial
interest in a Global Security (as defined below), by causing the Certificates to
be delivered to Depository Trust Corporation ("DTC"), in proper form for deposit
into DTC's book-entry system, on or after the Initial Exchange Date (as defined
below). Certificates received by DTC for exchange during the period commencing
on a date designated by the Corporation (the "Initial Exchange Date") and ending
on the ___ day after the Initial Exchange Date (the "Initial Exchange Period")
will be exchanged for Book-Entry Capital Securities by the close of business on
the Business Day on which they are received by DTC (if received by DTC by its
then applicable cut-off time for same-day credit) or on the following Business
Day (if received by DTC by its then applicable cut-off time for next-day
credit).
After the last day of the Initial Exchange Period, DTC will not be
required to accept delivery of Certificates in exchange for Book-Entry Capital
Securities, but DTC may permit such Certificates to be so exchanged on a
case-by-case basis. It is anticipated that after the Initial Exchange Period,
Certificates delivered to DTC in good order and in proper form for deposit will
be accepted by DTC for exchange for Book-Entry Capital Securities generally
within three to four Business Days after delivery to DTC. However, there can be
no assurance that such Certificates will be accepted for exchange or, if
accepted, that such exchange will occur within such time period. Certificates
surrendered at any time for exchange for Book-Entry Capital Securities may not
be delivered for settlement or transfer until such exchange has been effected.
Accordingly, persons purchasing Capital Securities in secondary market trading
after the Initial Exchange Date may wish to make specific arrangements with
brokers or DTC's participants if they wish to purchase only Book-Entry Capital
Securities and not Certificates.
The Corporation will notify DTC, the Property Trustee and each holder
of a Certificate by first-class mail that exchanges of Certificates for
Book-Entry Capital Securities will commence on the Initial Exchange Date, which
will be approximately ____ Business Days after the date on which the Corporation
notifies DTC that it has elected to permit such exchanges. The Initial Exchange
Date will not be later than ___ days after _____________.
In order to be exchanged for Book-Entry Capital Securities, a
Certificate must be delivered to DTC, in proper form for deposit, by a
Participant. Accordingly, holders of Capital Securities that are not
Participants must deliver their Certificates, in proper form for deposit, to a
Participant, either directly or through a brokerage firm that maintains an
account with a Participant, in order to have their Certificates exchanged for
Book-Entry Capital Securities. Holders of Capital Securities that desire to
exchange their Certificates for Book-Entry Capital Securities should contact
their broker or a Participant to obtain information on procedures for submitting
their Certificates to DTC, including the proper form for submission and (during
the Initial Exchange Period) the cut-off times for same-day and next-day
exchange. A Certificate that is held on behalf of a beneficial owner in nominee
or "street name" may be automatically exchanged for Book-Entry Capital
Securities by the broker or other entity that is the registered holder of such
Capital Securities, without any action of or consent by the beneficial owner of
the Capital Securities.
Book-Entry System.
Any Book-Entry Capital Securities will be represented by a single
global security (a "Global Security"), which will be deposited with, or on
behalf of, DTC, and registered in the name of a nominee of DTC.
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Certificates that have been exchanged for Book-Entry Capital Securities may not
be re-exchanged for Certificates, except under the limited circumstances
described in "Description of Capital Securities--Form, Denomination, Book-Entry
Procedures and Transfer - Exchange of Book-Entry Capital Securities for
Certificated Capital Securities." Unless and until it is exchanged in whole or
in part for Certificates, the Global Security may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC.
The Capital Securities (including beneficial interests in the Global
Capital Securities) will be subject to certain restrictions on transfer and will
bear a restrictive legend substantially similar to that described under "Notice
to Investors." In addition, transfer of beneficial interests in the Global
Capital Securities will be subject to the applicable rules and procedures of DTC
and its direct or indirect participants which may change from time to time.
Depositary Procedures
DTC has advised the Trust and the Corporation as follows: DTC is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
to accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Underwriter), banks, trust companies, clearing corporations and
certain other organizations. Indirect access to DTC's system is also available
to other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants with portions of the principal
amount of the Global Capital Securities and (ii) ownership of such interests in
the Global Capital Securities will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests
therein directly through DTC, if they are Participants in DTC, or indirectly
through organizations which are Participants in such system. All interests in a
Global Capital Security will be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical delivery
in certificated form of certain securities, such as the Capital Securities, that
they own. Consequently, the ability to transfer beneficial interests in a Global
Capital Security to such persons will be limited to that extent. Because DTC can
act only on behalf of Participants, which in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having beneficial
interests in a Global Capital Security to pledge such interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests. For certain other restrictions on the transferability
of the Capital Securities, see "Exchange of Book-Entry Capital Securities for
Certificated Capital Securities."
Except as described below, owners of beneficial interests in the Global
Capital Securities will not be entitled to have Capital Securities registered in
their names, will not receive or be entitled to receive
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physical delivery of Capital Securities in certificated form and will not be
considered the registered owners or holders thereof under the Declaration for
any purpose.
Payments in respect of the Global Capital Security registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC or its
nominee as the registered holder under the Declaration by wire transfer in
immediately available funds on each Distribution Date. Under the terms of the
Declaration, the Property Trustee will treat the persons in whose names the
Capital Securities, including the Global Capital Securities, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to, or payments made on account of, beneficial ownership interests in
the Global Capital Securities, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Capital Securities, or (ii)
any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the
Corporation that its current practice, upon receipt of any payment in respect of
securities such as the Capital Securities, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in Liquidation Amount of beneficial
interests in the Global Capital Security, as shown on the records of DTC, unless
DTC has reason to believe it will not receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Capital Securities represented by Global Capital Securities held
through such Participants will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Property
Trustee or the Trust. Neither the Trust nor the Property Trustee will be liable
for any delay by DTC or any of its Participants in identifying the beneficial
owners of the Capital Securities, and the Trust and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
Interests in the Global Capital Securities will trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such interests
will therefore settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any
action permitted to be taken by a holder of Capital Securities (including,
without limitation, the presentation of Capital Securities for exchange as
described below) only at the direction of one or more Participants to whose
account with DTC interests in the Global Capital Securities are credited and
only in respect of such portion of the aggregate Liquidation Amount of the
Capital Securities represented by the Global Capital Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Declaration, DTC reserves the right to exchange
the Global Capital Securities for legended Capital Securities in certificated
form and to distribute such Capital Securities to its Participants.
So long as DTC or its nominee is the registered owner of the Global
Capital Securities, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Capital Securities represented by the Global
Capital Security for all purposes under the Declaration.
Neither DTC nor its nominee will consent or vote with respect to the
Capital Securities. Under its usual procedures, DTC would mail an omnibus proxy
to the Trust as soon as possible after the record date. The omnibus proxy
assigns the consenting or voting rights of DTC or its nominee to those
Participants to whose accounts the Capital Securities are credited on the record
date (identified in a listing attached to the omnibus proxy).
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The information in this section concerning DTC and its book-entry
system has been obtained from sources that the Trust and the Corporation believe
to be reliable, but neither the Trust nor the Corporation takes responsibility
for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Capital Securities among Participants in
DTC, it is under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trust nor the Property Trustee will have any responsibility for the performance
by DTC or its Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is no
longer willing or able to properly discharge its responsibilities with respect
to the Capital Securities and the Corporation is unable to locate a qualified
successor, or (y) has ceased to be a "clearing agency" registered under the
Exchange Act; (ii) the Trust at its sole option elects to terminate the
book-entry system through DTC; or (iii) there shall have occurred and be
continuing a Debenture Event of Default. In addition, beneficial interests in a
Global Capital Security may be exchanged by or on behalf of DTC for certificated
Capital Securities upon request by DTC, but only upon at least 20 days prior
written notice given to the Property Trustee in accordance with DTC's customary
procedures. In all cases, certificated Capital Securities delivered in exchange
for any Global Capital Security or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of DTC (in accordance with its customary procedures) and will bear
the restrictive legend referred to in "Notice to Investors," unless the Property
Trustee (based on an opinion of counsel) determines otherwise in compliance with
applicable law.
Payment and Paying Agency
Payments in respect of the Capital Securities held in global form shall
be made to DTC, which shall credit the relevant accounts at DTC on the
applicable Distribution Dates or in respect of the Capital Securities that are
not held by DTC, such payments shall be made by check mailed to the address of
the holder entitled thereto as such address shall appear on the register. The
paying agent (the "Paying Agent") shall initially be the Property Trustee and
any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee,
the Administrative Trustees and the Corporation. In the event that the Property
Trustee shall no longer be the Paying Agent, the Administrative Trustees shall
appoint a successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Corporation) to act as Paying Agent.
Wilmington Trust Company has informed the Trust that so long as it
serves as paying agent for the Capital Securities, it anticipates that
information regarding Distributions on the Capital Securities, including payment
date, record date and redemption information, will be made available through
Wilmington Trust Company at 1100 N. Market Street, Wilmington, Delaware,
Attention: Corporate Trust Administration.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Capital Securities.
Registration of transfers of the Capital Securities will be effected
without charge by or on behalf of the Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any
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transfer or exchange. The Trust will not be required to register or cause to be
registered the transfer or exchange of the Capital Securities after they have
been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the Declaration and, during the existence of an Event
of Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any holder of Trust
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in the
Declaration or is unsure of the application of any provision of the Declaration,
and the matter is not one on which holders of the Capital Securities or the
Common Securities are entitled under the Declaration to vote, then the Property
Trustee shall take such action as is directed by the Corporation and, if not so
directed, shall take such action as it deems advisable and in the best interests
of the holders of the Trust Securities and will have no liability except for its
own bad faith, negligence or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes or as other than a grantor trust
for United States federal income tax purposes, and so that the Junior
Subordinated Debt Securities will be treated as indebtedness of the Corporation
for United States federal income tax purposes. In this connection, the
Corporation and the Administrative Trustees are authorized to take any action,
not inconsistent with applicable law, the certificate of trust of the Trust or
the Declaration, that the Corporation and the Administrative Trustees determine
in their discretion to be necessary or desirable for such purposes, as long as
such action does not materially adversely affect the interests of the holders of
the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any
of its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Subordinated Debt Securities are to be issued as a separate
series under a Junior Subordinated Indenture, as supplemented from time to time
(as so supplemented, the "Indenture"), between the Corporation and Wilmington
Trust Company, as trustee (the "Debenture Trustee"). The Indenture will be
qualified under the Trust Indenture Act. This summary of certain terms and
provisions of the Junior Subordinated Debt Securities and the Indenture does not
purport to be complete, and where reference is made to particular provisions of
the Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act.
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General
Concurrently with the issuance of the Trust Securities, the Trust will
invest the proceeds thereof in Junior Subordinated Debt Securities issued by the
Corporation. The Junior Subordinated Debt Securities will bear interest at __%
per annum of the principal amount thereof, payable quarterly in arrears on the
__th day of _____, _____, _____ and _____ of each year (each, an "Interest
Payment Date"), commencing ____ __, 1997, to the person in whose name each
Junior Subordinated Debt Security is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. It is anticipated that, until the liquidation of the Trust, each
Junior Subordinated Debt Security will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any period will be computed on the basis of the
actual number of days elapsed in a year of twelve 30-day months. In the event
that any date on which interest is payable on the Junior Subordinated Debt
Securities is not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay), with the same force
and effect as if made on the date such payment was originally payable. Accrued
interest that is not paid on the applicable Interest Payment Date will bear
additional interest on the amount thereof (to the extent permitted by law) at
__% per annum thereof, compounded quarterly from the relevant Interest Payment
Date. The term "interest" as used herein shall include quarterly payments,
interest on quarterly interest payments not paid on the applicable Interest
Payment Date and Additional Sums, as applicable.
The Junior Subordinated Debt Securities will be issued as a series of
Junior Subordinated Debt Securities under the Indenture. Unless previously
redeemed or repurchased, the Junior Subordinated Debt Securities will mature on
_____ __, 2027. See "Optional Redemption."
The Junior Subordinated Debt Securities will be unsecured and will rank
junior and be subordinate in right of payment to all Senior Debt. Because the
Corporation is a bank holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary, including the Bank,
upon such subsidiary's liquidation or reorganization or otherwise (and thus the
ability of holders of the Capital Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of such subsidiary,
except to the extent that the Corporation may itself be recognized as a creditor
of such subsidiary. Accordingly, the Junior Subordinated Debt Securities will be
subordinated to all Senior Debt and effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debt Securities should look only to the assets of the Corporation
for payments on the Junior Subordinated Debt Securities. The Indenture does not
limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture or any existing
or other indenture that the Corporation may enter into in the future or
otherwise. See "Subordination."
The Junior Subordinated Debt Securities will rank pari passu with all
Other Debentures issued under the Indenture and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Debt of the Corporation. See
"Subordination." As a holding company, the Corporation conducts its operations
principally through the Bank and, therefore, its principal source of cash, other
than its investing and financing activities, is receipt of dividends from the
Bank. The Corporation is a legal entity separate and distinct from the Bank and
its other subsidiaries. See "Risk Factors--Ranking of Obligations Under the
Guarantee and the Junior Subordinated Debt Securities" and "-Status of the
Corporation as a Bank Holding Company." The Bank is subject to certain
restrictions imposed by federal law on any extensions of credit to, and certain
other transactions with, the Corporation and certain other affiliates, and on
investments in stock or other securities thereof. Such restrictions prevent the
Corporation and such other affiliates from borrowing from the Bank unless the
loans are secured by various types of collateral. In addition, payment of
dividends to the Corporation by the Bank is subject to ongoing review by banking
regulators and is subject to various statutory limitations and in certain
circumstances requires approval by banking regulatory
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authorities. The Other Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of the
Corporation's Board of Directors or a committee thereof.
Denominations, Registration and Transfer
The Junior Subordinated Debt Securities will be represented by one or
more global certificates registered in the name of Cede & Co. as the nominee of
DTC if, and only if, distributed to the holders of the Trust Securities. Until
such time, the Junior Subordinated Debt Securities will be held in the name of
the Property Trustee in trust for the benefit of the holders of the Trust
Securities. Should the Junior Subordinated Debt Securities be distributed to
holders of the Trust Securities, beneficial interests in the Junior Subordinated
Debt Securities will be shown on, and transfers thereof will be effected only
through, records maintained by Participants in DTC. Except as described below,
Junior Subordinated Debt Securities in certificated form will not be issued in
exchange for the global certificates.
A global security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than Cede & Co. only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a "clearing agency" registered
under the Exchange Act, at a time when DTC is required to be so registered to
act as such depositary, (ii) the Corporation in its sole discretion determines
that such global security shall be so exchangeable, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. Any global security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for certificates registered in such names as DTC shall direct. It is expected
that such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security.
Payments on Junior Subordinated Debt Securities represented by a global
security will be made to DTC, as the depositary for the Junior Subordinated Debt
Securities. In the event Junior Subordinated Debt Securities are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Debt Securities will be registrable, and Junior Subordinated
Debt Securities will be exchangeable for Junior Subordinated Debt Securities of
other denominations of a like aggregate principal amount, at the corporate
office of the Debenture Trustee in Wilmington, Delaware, or at the offices of
any paying agent or transfer agent appointed by the Corporation, provided that
payment of interest may be made at the option of the Corporation by check mailed
to the address of the persons entitled thereto or by wire transfer.
For a description of DTC and the terms of the depositary arrangements
relating to payments, transfers, voting rights, redemptions and other notices
and other matters, see "Description of Capital Securities--Form, Denomination,
Book-Entry Procedures and Transfer." If the Junior Subordinated Debt Securities
are distributed to the holders of the Trust Securities upon the termination of
the Trust, the form, denomination, book-entry and transfer procedures with
respect to the Capital Securities as described under "Description of Capital
Securities--Form, Denomination, Book-Entry Procedures and Transfer," shall apply
to the Junior Subordinated Debt Securities mutatis mutandis.
Payment and Paying Agents
Payment of principal of and any interest on Junior Subordinated Debt
Securities will be made at the office of the Debenture Trustee in Wilmington,
Delaware or at the office of such Paying Agent or Paying Agents as the
Corporation may designate from time to time, except that at the option of the
Corporation payment of any interest may be made (except in the case of Junior
Subordinated Debt Securities in global form), (i) by check mailed to the address
of the person entitled thereto as such address shall appear in the register for
Junior Subordinated Debt Securities or (ii) by wire transfer to an account
specified by the person entitled thereto as
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specified in such register, provided that proper transfer instructions have been
received by the relevant Record Date. Payment of any interest on any Junior
Subordinated Debt Security will be made to the person in whose name such Junior
Subordinated Debt Security is registered at the close of business on the Record
Date for such interest, except in the case of defaulted interest. The
Corporation may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent; however the Corporation will at all times be
required to maintain a Paying Agent in each Place of Payment for the Junior
Subordinated Debt Securities.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of or
interest on any Junior Subordinated Debt Security and remaining unclaimed for
two years after such principal or interest has become due and payable shall, at
the request of the Corporation, be repaid to the Corporation and the holder of
such Junior Subordinated Debt Security shall thereafter look, as a general
unsecured creditor, only to the Corporation for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debt Securities at any time or
from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each Extension Period, provided, that no Extension Period may
extend beyond the Stated Maturity of the Junior Subordinated Debt Securities. At
the end of an Extension Period, the Corporation must pay all interest then
accrued and unpaid on the Junior Subordinated Debt Securities (together with
interest thereon accrued at __% per annum, compounded quarterly from the
relevant Interest Payment Date, to the extent permitted by applicable law).
During an Extension Period and for so long as the Junior Subordinated Debt
Securities remain outstanding, interest will continue to accrue and holders of
Junior Subordinated Debt Securities (and holders of the Capital Securities while
Capital Securities are outstanding) will be required to accrue interest income
(in the form of OID) for United States federal income tax purposes. See "Certain
United States Federal Income Tax Consequences-Interest Income and Original Issue
Discount."
During any Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including any Other Debentures) that rank pari
passu with or junior in interest to the Junior Subordinated Debt Securities or
(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including any Other Guarantees) if such guarantee ranks pari passu with or
junior in interest to the Junior Subordinated Debt Securities (other than (a)
dividends or distributions in Common Stock of the Corporation, (b) 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, (c)
payments under the Guarantee, (d) purchases or acquisitions of shares of the
Corporation's Common Stock in connection with the satisfaction by the
Corporation of its obligations under any employee benefit plan or any other
contractual obligation of the Corporation (other than a contractual obligation
ranking pari passu with or junior to the Junior Subordinated Debt Securities),
(e) as a result of a reclassification of the Corporation's capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of the Corporation's capital stock or (f) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged). Prior to the termination of any
Extension Period the Corporation may further extend such Extension Period,
provided, however, that such extension does not cause such Extension Period to
exceed 20 consecutive quarterly periods or to extend beyond the Stated Maturity
of the Junior Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all interest then accrued and unpaid on the
Junior Subordinated Debt Securities (together with interest thereon accrued at
__%
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per annum, compounded quarterly, to the extent permitted by applicable law), and
subject to the foregoing limitations, the Corporation may elect to begin a new
Extension Period. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Corporation must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at least three
Business Days prior to the earlier of (i) the date the Distributions on the
Capital Securities would have been payable except for the election to begin or
extend such Extension Period or (ii) the date the Administrative Trustees are
required to give notice to any automated quotation system or to holders of
Capital Securities of the record date or the date such Distributions are
payable, but in any event not less than three Business Days prior to such record
date. The Debenture Trustee shall give notice of the Corporation's election to
begin or extend a new Extension Period to the holders of the Capital Securities.
There is no limitation on the number of times that the Corporation may elect to
begin an Extension Period.
Optional Redemption
The Junior Subordinated Debt Securities are redeemable prior to
maturity at the option of the Corporation (i) on or after _____, 2007, in whole
at any time or in part from time to time, or (ii) in whole, but not in part, at
any time within 90 days following the occurrence and during the continuation of
a Tax Event, Investment Company Event or Capital Treatment Event (each as
defined under "Description of Capital Securities - Mandatory Redemption"), in
each case at the redemption price described below. The proceeds of any such
redemption will be used by the Trust to redeem the Capital Securities.
The Federal Reserve's risk-based capital guidelines, which are subject
to change, currently provide that redemptions of permanent equity or other
capital instruments before stated maturity could have a significant impact on a
bank holding company's overall capital structure and that any organization
considering such a redemption should consult with the Federal Reserve before
redeeming any equity or capital instrument prior to maturity if such redemption
could have a material effect on the level or composition of the organization's
capital base (unless the equity or capital instrument were redeemed with the
proceeds of, or replaced by, a like amount of a similar or higher quality
capital instrument and the Federal Reserve considers the organization's capital
position to be fully adequate after the redemption).
The redemption of the Junior Subordinated Debt Securities by the
Corporation prior to their Stated Maturity would constitute the redemption of
capital instruments under the Federal Reserve's current risk-based capital
guidelines and may be subject to the prior approval of the Federal Reserve. The
redemption of the Junior Subordinated Debt Securities also could be subject to
the additional prior approval of the Federal Reserve under its current
risk-based capital guidelines.
The Redemption Price for Junior Subordinated Debt Securities in the
case of a redemption under (i) above shall equal the following prices, expressed
in percentages of the principal amount, together with accrued interest to but
excluding the date fixed for redemption. If redeemed during the 12-month period
beginning ______________:
Year Redemption Price
- ---- ----------------
2007 %
2008
2009
2010
2011
2012
2013
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2014
2015
2016
and at 100% on or after _____, 2017.
The Redemption Price in the case of a redemption on or after _______,
2007 following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under (i)
above. The Redemption Price for Junior Subordinated Debt Securities, in the case
of a redemption prior to _______, 2007 following a Tax Event, Investment Company
Event or Capital Treatment Event as described under (ii) above, will equal the
Make-Whole Amount (as defined under "Description of Capital Securities -
Mandatory Redemption"), together with accrued interest to but excluding the date
fixed for redemption.
Additional Sums
The Corporation has covenanted in the Junior Subordinated Indenture
that, if and for so long as (i) the Trust is the holder of all Junior
Subordinated Debt Securities and (ii) the Trust is required to pay any
additional taxes, duties or other governmental charges as a result of a Tax
Event, the Company will pay as additional sums on the Junior Subordinated Debt
Securities such amounts as may be required so that the Distributions payable by
the Trust will not be reduced as a result of any such additional taxes, duties
or other governmental charges. See "Description of Capital Securities -
Mandatory Redemption."
Interest
The Junior Subordinated Debt Securities shall bear interest at __% per
annum, from the original date of issuance, payable quarterly in arrears on the
__th day of _____, _____, _____ and _____of each year, commencing _____ __,
1997, to the person in whose name such Junior Subordinated Debt Security is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding, such Interest Payment Date. The term "interest" as
used herein, as such term relates to the Junior Subordinated Debt Securities,
includes any compounded interest or Additional Sums or any Additional
Distributions payable unless otherwise stated. In the event the Junior
Subordinated Debt Securities are not held solely in book-entry only form, the
Corporation will select relevant record dates, which shall be 15 days prior to
the relevant Interest Payment Date.
The amount of interest payable for any period will be computed on the
basis of the actual number of days elapsed in a year of twelve 30-day months. In
the event that any date on which interest is payable on the Junior Subordinated
Debt -Securities is not a Business Day, then payment of the interest payable -on
- -such date will -be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) with the
same force and effect as if made on such date.
Additional Sums
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debt Securities such amounts as
shall be required so that the Distributions payable by the Trust shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges. The Corporation has covenanted in the Indenture that, if and so long as
(i) the Trust is the holder of all Junior Subordinated Debt Securities and (ii)
a Tax Event in respect of the Trust has occurred and is continuing, it will pay
Additional Sums (as defined under "Description of Capital Securities-Mandatory
Redemption") in respect of such Trust Securities to the Trust.
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Restrictions on Certain Payments
The Corporation will also covenant that it will not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Corporation (including Other Debentures) that rank pari passu
with or junior in interest to the Junior Subordinated Debt Securities or (iii)
make any guarantee payments with respect to any guarantee by the Corporation of
the debt securities of any subsidiary of the Corporation (including under Other
Guarantees) if such guarantee ranks pari passu with or junior in interest to the
Junior Subordinated Debt Securities (other than (a) dividends or distributions
in Common Stock of the Corporation, (b) 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, (c) payments under the
Guarantee, (d) purchases or acquisitions of shares of the Corporation's Common
Stock in connection with the satisfaction by the Corporation of its obligations
under any employee benefit plan or any other contractual obligation of the
Corporation (other than a contractual obligation ranking pari passu with or
junior in interest to the Junior Subordinated Debt Securities), (e) as a result
of a reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock or (f) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged), if at such time (i) there shall have occurred a
Debenture Event of Default, (ii) the Corporation shall be in default with
respect to its payment of any obligations under the Guarantee or (iii) the
Corporation shall have given notice of its election of an Extension Period as
provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
Modification of Indenture
From time to time the Corporation and the Debenture Trustee may,
without the consent of the holders of Junior Subordinated Debt Securities,
amend, waive or supplement the Indenture for specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies (provided
that any such action does not materially adversely affect the interest of the
holders of Junior Subordinated Debt Securities or the holders of the Capital
Securities so long as they remain outstanding) and maintaining the qualification
of the Indenture under the Trust Indenture Act. The Indenture contains
provisions permitting the Corporation and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of
outstanding Junior Subordinated Debt Securities, to modify the Indenture in a
manner affecting the rights of the holders of Junior Subordinated Debt
Securities; provided, however, that no such modification may, without the
consent of the holder of each outstanding Junior Subordinated Debt Security so
affected, change the Stated Maturity, or reduce the principal amount of the
Junior Subordinated Debt Securities, or reduce the rate or extend the time of
payment of interest thereon or reduce the percentage of principal amount of
Junior Subordinated Debt Securities, or have certain other effects as set forth
in the Indenture.
In addition, the Corporation and the Debenture Trustee may execute,
without the consent of any holder of Junior Subordinated Debt Securities, any
supplemental Indenture for the purpose of creating any Other Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debt Securities that has occurred
and is continuing constitutes a "Debenture Event of Default":
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(i) failure for 30 days to pay any interest on the Junior
Subordinated Debt Securities when due (subject to the deferral of any
due date in the case of an Extension Period); or
(ii) failure to pay any principal on the Junior Subordinated
Debt Securities when due, whether at maturity, upon redemption, by
declaration of acceleration or otherwise; or
(iii) failure to observe or perform in any material respect
certain other covenants contained in the Indenture for 90 days after
written notice to the Corporation from the Debenture Trustee or the
holders of at least 25% in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities, or
(iv) certain events in bankruptcy, insolvency or reorganization
of the Corporation; or
(v) the voluntary or involuntary dissolution, winding-up or
termination of the Trust, except in connection with the distribution of
the Junior Subordinated Debt Securities to the holder of Trust
Securities in liquidation of the Trust, the redemption of all of the
Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debt
Securities may declare the principal due and payable immediately upon a
Debenture Event of Default and, should the Debenture Trustee or such holders of
Junior Subordinated Debt Securities fail to make such declaration, the holders
of at least 25% in aggregate Liquidation Amount of the Capital Securities shall
have such right. The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debt Securities may annul such declaration and
waive the default if the default (other than the nonpayment of the principal of
the Junior Subordinated Debt Securities which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee. Should the holders of Junior
Subordinated Debt 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.
The holders of a majority in aggregate outstanding principal amount of
the Junior Subordinated Debt Securities affected thereby may, on behalf of the
holders of all the Junior Subordinated Debt Securities, waive any past default,
except a default in the payment of principal of or interest (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
Debenture Trustee) on the Junior Subordinated Debt Securities or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Junior
Subordinated Debt Security. Should the holders of such Junior Subordinated Debt
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. The Corporation is required to file annually with the Debenture
Trustee a certificate as to whether or not the Corporation is in compliance with
all the conditions and covenants applicable to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the Junior Subordinated Debt Securities, and any other amounts
payable under the Indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Junior Subordinated Debt
Securities.
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Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Corporation to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, a holder of Capital Securities may institute
a Direct Action. The Corporation may not amend the Indenture to remove the
foregoing right to bring a Direct Action without the prior written consent of
the holders of all of the Capital Securities. Notwithstanding any payments made
to a holder of Capital Securities by the Corporation in connection with a Direct
Action, the Corporation shall remain obligated to pay the principal of and
interest on the Junior Subordinated Debt Securities, and the Corporation 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 Corporation to such holder in any Direct Action.
The holders of the Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Junior Subordinated Debt Securities unless there
shall have been an Event of Default under the Declaration. See "Description of
Capital Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Corporation shall not consolidate with
or merge with or into any other person or convey, transfer or lease its
properties and assets substantially as an entirety to any person, and no person
shall consolidate with or merge with or into the Corporation or convey, transfer
or lease its properties and assets substantially as an entirety to the
Corporation, unless (i) in case the Corporation consolidates with or merges with
or into another person or conveys or transfers its properties and assets
substantially as an entirety to any person, the successor person is organized
under the laws of the United States or any state or the District of Columbia,
and such successor person expressly assumes the Corporation's obligations on the
Junior Subordinated Debt Securities issued under the Indenture; (ii) immediately
after giving effect thereto, no Debenture Event of Default, and no event which,
after notice or lapse of time or both, would become a Debenture Event of
Default, shall have occurred and be continuing; (iii) if at the time any Capital
Securities are outstanding, such transaction is permitted under the Declaration
and the Guarantee and does not give rise to any breach or violation of the
Declaration or the Guarantee; and (iv) certain other conditions as prescribed in
the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debt Securities protection in the event of a highly
leveraged or other transaction involving the Corporation that may adversely
affect holders of the Junior Subordinated Debt Securities.
Subordination
In the Indenture, the Corporation has covenanted and agreed that any
Junior Subordinated Debt Securities issued thereunder shall be subordinate and
junior in right of payment to all Senior Debt to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the benefit
of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of and interest, if any, on
such Senior Debt before the holders of Junior Subordinated Debt Securities, or
the Property Trustee on behalf of the holders, will be entitled to receive or
retain any payment or distribution in respect thereof.
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In the event of the acceleration of the maturity of the Junior
Subordinated Debt Securities, the holders of all Senior Debt outstanding at the
time of such acceleration will first be entitled to receive payment in full of
all amounts due thereon (including any amounts due upon acceleration) before the
holders of the Junior Subordinates Debt Securities will be entitled to receive
or retain any payment in respect of the principal of or interest, if any, on the
Junior Subordinated Debt Securities.
In the event that the Corporation shall default in the payment of any
principal of or interest, if any, on any, Senior Debt when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, unless and until such default
shall have been cured or waived or shall have ceased to exist or all Senior Debt
shall have been paid, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made for
principal or interest, if any, on the Junior Subordinated Debt Securities, or in
respect of any redemption, repayment, retirement, purchase or other acquisition
of any of the Junior Subordinated Debt Securities.
"Senior Debt" means (a) the principal of, and premium, if any, and
interest on all indebtedness of the Corporation for money borrowed, whether
outstanding on the date of execution of the Indenture or thereafter created,
assumed or incurred, (b) all obligations to make payment pursuant to the terms
of financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity futures contracts and commodity
options contracts, and (iii) similar financial instruments; except, in the case
of both (a) and (b) above, such indebtedness and obligations that are expressly
stated to rank junior in right of payment to, or pari passu in right of payment
with, the Junior Subordinated Debt Securities, (c) and indebtedness or
obligations of others of the kind described in both (a) and (b) above for the
payment of which the Corporation is responsible or liable as guarantor or
otherwise, and (d) any deferrals, renewals or extensions of any such Senior
Debt; provided, however, that Senior Debt shall not be deemed to include (i) any
debt of the Corporation which, when incurred and without respect to any election
under Section 1111 (b) of the United States Bankruptcy Code of 1978, was without
recourse to the Corporation, (ii) any debt of the Corporation to any of its
subsidiaries, (iii) debt to any employee of the Corporation, (iv) debt which by
its terms is subordinated to trade accounts payable or accrued liabilities
arising in the ordinary course of business to the extent that payments made to
the holders of such debt by the holders of the Junior Subordinated Debt
Securities as a result of the subordination provisions of the Indenture would be
greater than such payments otherwise would have been as a result of any
obligation of such holders of such debt to pay amounts over to the obligees on
such trade accounts payable or accrued liabilities arising in the ordinary
course of business as a result of subordination provisions to which such debt is
subject, (v) trade accounts payable or accrued liabilities arising in the
ordinary course of business and (vi) any other debt securities issued pursuant
to the Indenture.
The Indenture places no limitation on the amount of Senior Debt that
may be incurred by the Corporation. The Corporation expects from time to time to
incur additional indebtedness constituting Senior Debt. At June 30, 1997 the
aggregate outstanding Senior Debt of the Corporation was approximately
$900,000 on an unconsolidated basis. The Indenture also places no limitation on
the indebtedness of the Corporation's subsidiaries, which rank senior in right
of payment to the Junior Subordinated Debt Securities.
Governing Law
The Indenture and the Junior Subordinated Debt Securities will be
governed by and construed in accordance with the laws of the State of Virginia.
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Information Concerning the Debenture Trustee
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debt Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF GUARANTEE
The Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Trust Securities for the
benefit of the holders from time to time of such Trust Securities. Wilmington
Trust Company will act as trustee (the "Guarantee Trustee") under the Guarantee
Agreement. The Guarantee Agreement will be qualified under the Trust Indenture
Act. This summary of certain provisions of the Guarantee does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of the Guarantee, including the definitions therein of certain
terms, and the Trust Indenture Act. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Securities.
General
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
herein) to the holders of the Trust Securities, as and when due, regardless of
any defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Trust Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accrued and
unpaid Distributions required to be paid on the Trust Securities, to the extent
that the Trust has funds on hand available therefor at such time, (ii) the
Redemption Price with respect to Trust Securities called for redemption, to the
extent that the Trust has funds on hand available therefor at such time, and
(iii) upon a voluntary or involuntary dissolution, winding up or liquidation of
the Trust (other than in connection with the distribution of Junior Subordinated
Debt Securities to the holders of the Trust Securities or the redemption of all
of the Capital Securities) the lesser of (a) the Liquidation Distribution, to
the extent the Trust has funds available therefor and (b) the amount of assets
of the Trust remaining available for distribution to holders of the Trust
Securities upon liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as required by applicable law. The Corporation's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Corporation to the holders of the Trust Securities or by
causing the Trust to pay such amounts to such holders.
The Guarantee will be an irrevocable guarantee on a subordinated basis
of the Trust's obligations under the Trust Securities, although it will apply
only to the extent that the Trust has funds sufficient to make such payments,
and is not a guarantee of collection. If the Corporation does not make interest
payments on the Junior Subordinated Debt Securities held by the Trust, the Trust
will not be able to pay Distributions on the Capital Securities and will not
have funds legally available therefor.
The Guarantee will rank subordinate and junior in right of payment to
all Senior Debt. See "Status of the Guarantee." As a holding company, the
Corporation conducts its operations principally through its subsidiaries and,
therefore, its principal source of cash is receipt of dividends from the Bank.
However, there are legal limitations on the source and amount of dividends that
a Virginia-chartered, Federal Reserve member bank such as the Bank is permitted
to pay. A Virginia-chartered bank may pay dividends only from net undivided
profits. Additionally, a dividend may not be paid if it would impair the paid-in
capital of the bank. In
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addition, prior approval of the Federal Reserve is required if the total of all
dividends declared by a member bank in any calendar year will exceed the sum of
that bank's net profits for that year and its retained net profits for the
preceding two calendar years, less any required transfers to either surplus or
any fund for the retirement of any preferred stock. At June 30, 1997, the Bank
could have paid approximately $3.7 million in dividends to the Corporation
without prior Federal Reserve approval. The payment of dividends by the Bank may
also be affected by other factors, such as requirements for the maintenance of
adequate capital. In addition, the Federal Reserve is authorized to determine,
under certain circumstances relating to the financial condition of a member
bank, whether the payment of dividends would be an unsafe or unsound banking
practice and to prohibit payment thereof. See "the Corporation." The Guarantee
does not limit the incurrence or issuance of other secured or unsecured debt of
the Corporation, including Senior Debt, whether under the Indenture, any other
indenture that the Corporation may enter into in the future or otherwise.
Taken together, the Corporation's obligations under the Guarantee, the
Declaration, the Junior Subordinated Debt Securities and the Indenture,
including the Corporation's obligation to pay the costs, expenses and other
liabilities of the Trust (other than the Trust's obligations to the holders of
the Trust Securities under the Trust Securities), provide, in the aggregate, a
full, irrevocable and unconditional guarantee of all of the Trust's obligations
under the Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Capital Securities. See "Relationship Among the
Capital Securities, the Junior Subordinated Debt Securities and the Guarantee."
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Debt in the same manner as Junior Subordinated Debt Securities.
The Guarantee will rank pari passu with all Other Guarantees issued by
the Corporation. The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will be held for the benefit of the holders of the Trust Securities.
The Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Trust or upon distribution to the holders
of the Trust Securities of the Junior Subordinated Debt Securities. The
Guarantee does not place a limitation on the amount of additional Senior Debt
that may be incurred by the Corporation. The Corporation expects from time to
time to incur additional indebtedness constituting Senior Debt.
Amendments and Assignment
Except with respect to any changes that do not materially adversely
affect the rights of holders of the Trust Securities (in which case no vote will
be required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Capital Securities. The manner of obtaining any such approval will
be as set forth under "Description of Capital Securities--Voting Rights;
Amendment of the Declaration." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the holders
of the Capital Securities then outstanding.
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Events of Default
An event of default under the Guarantee will occur upon the failure of
the Corporation to perform any of its payment or other obligations thereunder;
provided, however, that except with respect to a default in payment of any
Guarantee Payment, the Corporation shall have received notice of default and
shall not have cured such default within 60 days after receipt of such notice;
and provided, further, that no event of default under the Guarantee shall occur
unless an Event of Default under the Declaration or a Debenture Event of Default
shall have occurred. The holders of not less than a majority in aggregate
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
Guarantee Trustee in respect of the Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Guarantee.
Any holder of the Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Corporation in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of the Trust Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the Trust Securities, upon full payment
of the amounts payable upon liquidation of the Trust or upon distribution of
Junior Subordinated Debt Securities to the holders of the Trust Securities. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Trust Securities must restore payment of
any sums paid under the Trust Securities or the Guarantee.
Governing Law
The Guarantee will be governed by and construed in accordance with the
laws of the State of Virginia.
RELATIONSHIP AMONG THE CAPITAL SECURITIES,
THE JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Capital
Securities (to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to
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the extent set forth under "Description of Guarantee." Taken together, the
Corporation's obligations under the Junior Subordinated Debt Securities, the
Indenture, the Declaration and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Capital Securities. If and to the extent that the
Corporation does not make payments on the Junior Subordinated Debt Securities,
the Trust will not pay Distributions or other amounts due on the Capital
Securities. The Guarantee does not cover payment of Distributions when the Trust
does not have sufficient funds to pay such Distributions. In such event, the
remedy of a holder of Capital Securities is to institute a Direct Action. The
obligations of the Corporation under the Guarantee are subordinate and junior in
right of payment to all Senior Debt.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
the Junior Subordinated Debt Securities, such payments will be sufficient to
cover Distributions and other payments due on the Capital Securities, primarily
because (i) the aggregate principal amount or Redemption Price of the Junior
Subordinated Debt Securities will be equal to the sum of the aggregate
Liquidation Amount or Redemption Price, as applicable, of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Debt Securities will match the Distribution rate and Distribution
and other payment dates for the Capital Securities; (iii) the Corporation shall
pay for all costs, expenses and liabilities of the Trust except the Trust's
obligations to holders of Trust Securities under such Trust Securities; and (iv)
the Declaration further provides that the Trust will not engage in any activity
that is not consistent with the limited purposes thereof.
Notwithstanding anything to the contrary in the Indenture, the
Corporation has the right to set off any payment it is otherwise required to
make thereunder with and to the extent the Corporation has theretofore made, or
is concurrently on the date of such payment making, any payment under the
Guarantee used to satisfy the related payment of indebtedness under the
Indenture.
Enforcement Rights of Holders of Capital Securities
A holder of any Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
Trust or any other person or entity.
A default or event of default under any Senior Debt would not
constitute a default or Event of Default under the Declaration. However, in the
event of payment defaults under, or acceleration of, Senior Debt, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debt Securities until such Senior Debt has
been paid in full or any payment default thereunder has been cured or waived.
Failure to make required payments on Junior Subordinated Debt Securities would
constitute an Event of Default under the Declaration.
Limited Purpose of the Trust
The Capital Securities evidence a beneficial interest in the Trust, and
the Trust exists for the sole purpose of issuing the Capital Securities and
Common Securities, investing the proceeds of the Trust Securities in Junior
Subordinated Debt Securities and engaging in other activities necessary or
incidental thereto.
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Rights Upon Termination
Upon any voluntary or involuntary termination, winding-up or
liquidation of the Trust involving the liquidation of the Junior Subordinated
Debt Securities, after satisfaction of the liabilities of creditors of the Trust
as required by applicable law, the holders of the Trust Securities will be
entitled to receive, out of assets held by the Trust, the Liquidation
Distribution in cash. See "Description of Capital Securities--Liquidation of the
Trust and Distribution of Junior Subordinated Debt Securities." Upon any
voluntary or involuntary liquidation or bankruptcy of the Corporation, the
Property Trustee, as holder of the Junior Subordinated Debt Securities, would be
a subordinated creditor of the Corporation, subordinated in right of payment to
all Senior Debt as set forth in the Indenture, but entitled to receive payment
in full of principal and interest, before any stockholders of the Corporation
receive payments or distributions. Since the Corporation is the guarantor under
the Guarantee and has agreed to pay for all costs, expenses and liabilities of
the Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Capital Securities and a holder of
Junior Subordinated Debt Securities relative to other creditors and to
stockholders of the Corporation in the event of liquidation or bankruptcy of the
Corporation are expected to be substantially the same.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal
income tax consequences of the purchase, ownership and disposition of Capital
Securities. Unless otherwise stated, this summary addresses only the tax
consequences to a "U.S. Holder" (as defined below) that acquires Capital
Securities on their original issue at their original offering price and does not
address the tax consequences to persons that may be subject to special treatment
under United States federal income tax law, such as banks, insurance companies,
thrift institutions, regulated investment companies, real estate investment
trusts, tax-exempt organizations, dealers in securities or currencies, persons
that hold Capital Securities as part of a position in a "straddle" or as part of
a "hedging", "conversion" or other integrated investment transaction for United
States federal income tax purposes, persons whose functional currency is not the
United States dollar or persons that do not hold Capital Securities as capital
assets. For purposes of this summary, a U.S. Holder is a Securityholder (as
defined below) who or that is (i) an individual citizen or resident of the
United States, (ii) a domestic corporation or partnership organized under the
laws of the United States or any State thereof or the District of Columbia or
(iii) an estate or trust the income of which is subject to United States federal
income taxation regardless of source.
The statements of law or legal conclusions set forth in this summary
constitute the opinion of Williams Mullen Christian & Dobbins, tax counsel to
the Corporation and the Trust. This summary is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, Internal Revenue
Service rulings and pronouncements and judicial decisions now in effect, all of
which are subject to change at any time. Such changes may be applied
retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a beneficial owner of the Capital Securities. The authorities on which
this summary is based are subject to various interpretations, and it is
therefore possible that the United States federal income tax treatment of the
purchase, ownership and disposition of the Capital Securities may differ from
the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX
ADVISORS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CAPITAL
SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
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Classification of the Junior Subordinated Debt Securities and the Trust
Under current law and assuming compliance with the terms of the Trust
Agreement, the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes. Moreover, the Trust
should be classified as a grantor trust, and if not so classified will be
classified as a partnership, for United States federal income tax purposes. As a
result, each beneficial owner of Capital Securities (a "Securityholder") that is
a U.S. Holder will be required to include in its gross income its pro rata share
of the interest income, including OID, paid or accrued with respect to the
Junior Subordinated Debt Securities, whether or not cash is actually distributed
to the Securityholders. See "Interest Income and Original Issue Discount,"
below. The Junior Subordinated Debt Securities will be classified as
indebtedness of the Corporation for United States federal income tax purposes.
Interest Income and Original Issue Discount
Under applicable Treasury regulations (the "Regulations"), a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Corporation
believes that the likelihood of its exercising its option to defer payments of
interest is remote. Based on the foregoing, the Corporation believes that the
Junior Subordinated Debt Securities will not be considered to be issued with OID
at the time of their original issuance.
Because the discount at which the Junior Subordinated Debt Securities
are being issued is less than 1/4 of 1 percent of the Junior Subordinated Debt
Securities stated redemption price at maturity times the number of complete
years to maturity of the Junior Subordinated Debt Securities, such discount will
constitute de minimis OID and will not be required to be taken into account on a
current basis. The following discussion assumes that unless and until the
Corporation exercises its option to defer interest on the Junior Subordinated
Debt Securities, the Junior Subordinated Debt Securities will not be treated as
issued with OID other than de minimis OID.
Under the Regulations, if the Corporation exercised its option to defer
any payment of interest, the Junior Subordinated Debt Securities would be
treated as reissued with OID, and, thereafter, all stated interest on the Junior
Subordinated Debentures would be treated as OID as long as the Junior
Subordinated Debt Securities remained outstanding. In such event, all of a U.S.
Holder's taxable interest income with respect to the Junior Subordinated Debt
Securities would be accounted for as OID on an economic accrual basis regardless
of such U.S. Holder's method of tax accounting, and actual distributions of
stated interest would not be reported separately as taxable income.
Consequently, a U.S. Holder would be required to include OID in gross income
even though the Corporation would not make any actual cash payments during an
Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take the
position that the Junior Subordinated Debt Securities were issued with OID at
the time of their original issuance.
Because income on the Capital Securities will constitute interest or
OID, corporate U.S. Holders will not be entitled to the dividends-received
deduction with respect to any income recognized with respect to the Capital
Securities. If any Special Interest or Additional Distributions are paid on the
Capital Securities it is possible that such Special Interest or Additional
Distributions might constitute OID (whether or not an Extension Period has
occurred).
Subsequent uses of the term "interest" in this summary shall include
income in the form of OID.
58
<PAGE>
Distribution of the Junior Subordinated Debt Securities to Holders of Capital
Securities
Under current law, a distribution by the Trust of the Junior
Subordinated Debt Securities, as described under the caption "Description of
Capital Securities--Liquidation of the Trust and Distribution of Junior
Subordinated Debt Securities," will be nontaxable and will result in a U.S.
Holder receiving directly its pro rata share of the Junior Subordinated Debt
Securities previously held indirectly through the Trust, with a holding period
and aggregate adjusted tax basis equal to the holding period and aggregate
adjusted tax basis such U.S. Holder had in its Capital Securities immediately
before such distribution. If, however, the liquidation of the Trust were to
occur because the Trust were subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debt
Securities, the distribution of Junior Subordinated Debt Securities to U.S.
Holders by the Trust would be a taxable event to the Trust and each U.S. Holder,
and each U.S. Holder would recognize gain or loss as if the U.S. Holder had
exchanged its Capital Securities for the Junior Subordinated Debt Securities it
received upon the liquidation of the Trust. A U.S. Holder will include interest
in respect of the Junior Subordinated Debt Securities received from the Trust in
the manner described above under "Interest Income and Original Issue Discount."
Sales or Redemption of the Capital Securities
Gain or loss will be recognized by a U.S. Holder on a sale, exchange,
or other disposition of the Capital Securities (including a redemption for cash)
in an amount equal to the difference between the amount realized and the U.S.
Holder's adjusted tax basis in the Capital Securities sold or so redeemed.
Assuming that the Corporation does not exercise its option to defer payment of
interest on the Junior Subordinated Debt Securities, a U.S. Holder's adjusted
tax basis in the Capital Securities generally will be its initial purchase
price. If the Junior Subordinated Debentures are deemed to be issued with OID
(as a result of the Corporation's deferral of any interest payment), a U.S.
Holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price, increased by OID previously included in such U.S.
Holder's gross income to the date of disposition and decreased by distributions
or other payments received on the Capital Securities other than payments of
stated interest that are not treated as OID. Gain or loss recognized by a U.S.
Holder on the Capital Securities generally will be taxable as capital gain or
loss (except to the extent any amount realized is treated as a payment of
accrued interest with respect to such U.S. Holder's pro rata share of the Junior
Subordinated Debt Securities required to be included in income) and generally
will be long-term capital gain or loss if the Capital Securities have been held
for more than one year.
Should the Corporation exercise its option to defer any payment of
interest on the Junior Subordinated Debt Securities, the Capital Securities may
trade at a price that does not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debt Securities. In
the event of such a deferral, a Securityholder that disposes of its Capital
Securities between record dates for payments of Distributions (and consequently
does not receive a Distribution from the Trust for the period prior to such
disposition) will nevertheless be required to include in income as ordinary
income accrued but unpaid interest on the Junior Subordinated Debt Securities
through the date of disposition and to add such amount to its adjusted tax basis
in its Capital Securities disposed of Such U.S. Holder will recognize a capital
loss on the disposition of its Capital Securities to the extent the selling
price (which may not fully reflect the value of accrued but unpaid interest) is
less than the U.S. Holder's adjusted tax basis in the Capital Securities (which
will include accrued but unpaid interest). Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
59
<PAGE>
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a nonresident alien individual, a foreign
partnership or a nonresident fiduciary of a foreign estate or trust.
Under current United States federal income tax law, and subject to the
discussion of backup withholding below: (i) payments by the Trust or-any of its
paying agents to any Secuityholder who or that is a United States Alien Holder
will not be subject to United States federal withholding tax; provided that (a)
the Securityholder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Corporation entitled
to vote, (b) the Securityholder is not a controlled foreign corporation that is
related to the Corporation through stock ownership and (c) either (A) the
Securityholder certifies to the Trust or its agent, under penalties of perjury,
that it is not a United States holder and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution"), and holds the Capital Security in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such
statement has been received from the Securityholder by it or by a Financial
Institution holding such security for the Securityholder and furnishes the Trust
or its agent with a copy thereof, and (ii) a United States Alien Holder of a
Capital Security will not be subject to United States federal withholding tax on
any gain realized upon the sale or other disposition of a Capital Security.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Proposed
Regulations also would require, in the case of Capital Securities held by a
foreign partnership, that (x) the certification described in clause (i)(c) above
be provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for payments
made after December 31, 1997. There can be no assurance that the Proposed
Regulations will be adopted or as to the provisions that they will include if
and when adopted in temporary or final form.
Information Reporting to Securityholders
Generally, income on the Capital Securities will be reported to
Securityholders on Forms 1099, which forms should be mailed to Securityholders
by January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Capital Securities
may be subject to a "backup" withholding tax of 31% unless the Securityholder
complies with certain certification requirements. Any withheld amounts will be
allowed as a credit against the Securityholder's United States federal income
tax, provided the required information is furnished to the Internal Revenue
Service on a timely basis.
UNDERWRITING
The Underwriter, McKinnon & Company, Inc., 555 Main Street, Norfolk,
Virginia, as agreed, subject to the terms and conditions contained in an
Underwriting Agreement with the Trust and the Corporation, to sell, as selling
agent, on a best efforts basis, up to $10.0 million of Capital Securities. The
Underwriter is not obligated to purchase the Capital Securities if they are not
sold to the public.
60
<PAGE>
The Underwriter has informed the Trust and the Corporation that it
proposes to sell the Capital Securities as selling agent for the Trust, subject
to prior sale, when, as and if issued by the Trust, in part to the public at the
public offering price set forth on the cover page of this Prospectus and, in
part, through certain selected dealers, who are members of the National
Association of Securities Dealers, Inc., to customers of such selected dealers
at such public offering price, for which each selected dealer will receive a
commission of $_______, for each $1,000 of Capital Securities that it sells. The
Underwriter reserves the right to reject any order for the purchase of Capital
Securities through it in whole or in part.
The public offering is not contingent upon the occurrence of any event
or the sale of a minimum or maximum number of Capital Securities. Funds received
by the Underwriter from investors in the public offering will be deposited with
and held by the Escrow Agent in a non-interest bearing account until the closing
of the public offering. Closing is expected to occur on or about __________,
1997.
As the proceeds of the sale of the Capital Securities will ultimately
be used to purchase the Junior Subordinated Debt Securities, the Underwriting
Agreement provides that the Corporation will pay as compensation ("Underwriter's
Compensation") an amount directly to the Underwriter for its arranging the
investment therein of such proceeds $___ per Capital Security (or up to $_____
in the aggregate) for the account of the Underwriter.
The Underwriting Agreement provides that Corporation and the Trust will
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act or contribute to payments the Underwriter may be
required to make in respect thereof.
The Capital Securities are a new issue of securities with no
established trading market. The Corporation and the Trust do not intend to apply
for listing of the Capital Securities on any securities exchange. The
Corporation and the Trust have been advised by the Underwriter that it may make
a market in the Capital Securities. The Underwriter, however, is not obligated
to make a market in the Capital Securities and may discontinue any market making
at any time without notice. Neither the Corporation nor the Trust can provide
any assurance that a secondary market for the Capital Securities will develop.
Because the National Association of Securities Dealers, Inc. ("NASD")
may view the Capital Securities offered hereby as interests in a direct
participation program, the offering is being made in compliance with Rule 2810
of the NASD's Conduct Rules. Offers and sales of the Capital Securities will be
made only to (i) "qualified institutional buyers," as defined in Rule 144A under
the Securities Act of 1933, as amended, (the "Act"); (ii) institutional
"accredited Investors," as defined in Rule 501(a)-(1)-(3) of Regulation D under
the Act; or (iii) individual investors for whom an investment in
non-convertible, non-investment grade preferred securities is appropriate. The
Underwriter may not confirm sales to any accounts over which it exercises
discretionary authority without the prior written approval of the transaction by
the customer.
The Underwriter provides or has provided investment banking services to
the Corporation from time to time in the ordinary course of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Declaration and the formation of the Trust
will be passed upon by Richards, Layton & Finger, special Delaware counsel to
the Corporation and the Trust. The validity of the Guarantee and the Junior
Subordinated Debt Securities, as well as certain matters relating to United
States federal income tax considerations, will be
61
<PAGE>
passed upon for the Corporation by Williams Mullen Christian & Dobbins. Williams
Mullen Christian & Dobbins will rely on the opinion of Richards, Layton & Finger
as to matters of Delaware law.
ACCOUNTANTS
The consolidated financial statements of Highlands Bankshares, Inc. and
subsidiaries as of December 31, 1996 and 1995 and for each of the years in the
three year period ended December 31, 1996, included in the Corporation's 1996
Annual Report to Shareholders incorporated by reference into this Prospectus,
have been incorporated by reference herein in reliance upon the report of Brown,
Edwards & Company, L.L.P., independent auditors, included in the Corporation's
1996 Form 10-K and incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
62
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
No dealer, salesperson or other person has been
authorized to give any information or to make any
representations in connection with the offer made
hereby except as contained in this Prospectus and, if
given or made, no such information or representations $10,000,000
should be relied upon as having been authorized by the HIGHLANDS CAPITAL TRUST I
Corporation, the Trust, the Underwriter or any of their 10,000
respective agents. Neither the delivery of this Prospectus Capital Securities
nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the (Liquidation Amount $1,000
information set forth herein or in the affairs of the per Capital Security)
Corporation or the Trust since the date hereof. This
Prospectus does not constitute an offer to sell, or a Fully and Unconditionally Guaranteed,
solicitation of an offer to buy, the Capital Securities as described herein, by
by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do HIGHLANDS BANKSHARES, INC.
so or to any person to whom it is unlawful to make such
offer or solicitation.
--------------
TABLE OF CONTENTS
Page
----
Notice to Investors..................................1 McKinnon & Company, Inc.
Certain ERISA Considerations.........................1
Available Information................................3
Incorporation of Certain
Documents by Reference.............................4
Summary..............................................5
Risk Factors.........................................11 Prospectus
Use of Proceeds......................................16
Highlands Capital Trust I............................16 Dated , 1997
Selected Historical Financial
Information........................................18
The Corporation......................................19
Capitalization.......................................26
Accounting Treatment.................................26
Regulatory Treatment.................................26
Description of Capital Securities....................27
Description of Junior Subordinated
Debt Securities....................................43
Description of Guarantee.............................53
Relationship Among the Capital
Securities, the Junior Subordinated
Debt Securities and the Guarantee..................55
Certain United States Federal
Income Tax Consequences............................57
Underwriting.........................................60
Validity of Securities...............................61
Accountants..........................................62
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
Item 14. Other Expenses of Issuance and Distribution
<S> <C>
Securities and Exchange Commission Registration Fee $ 3,030 *
National Association of Securities Dealers Examination Fee $ 1,500 *
Printing Expenses $ 1,000
Accounting Fees and Expenses $ 4,000
Legal Fees and Expenses $ 50,000
Blue Sky Fees and Expenses $ 1,000
Miscellaneous Expenses $ 5,000
--------
Total $ 65,530
========
</TABLE>
- ---------------
* Represents actual expenses. All other expenses are estimates.
Item 15. Indemnification of Directors and Officers
Article 10 of Chapter 9 of Title 13.1 of the Code of Virginia, 1950,
as amended (the "Code"), permits a Virginia corporation to indemnify any
director or officer for reasonable expenses incurred in any legal proceeding in
advance of final disposition of the proceeding, if the director or officer
furnishes the corporation a written statement of his good faith belief that he
has met the standard of conduct prescribed by the Code, and a determination is
made by the board of directors that such standard has been met. In a proceeding
by or in the right of the corporation, no indemnification shall be made in
respect of any matter as to which an officer or director is adjudged to be
liable to the corporation, unless the court in which the proceeding took place
determines that, despite such liability, such person is reasonably entitled to
indemnification in view of all the relevant circumstances. In any other
proceeding, no indemnification shall be made if the director or officer is
adjudged liable to the corporation on the basis that personal benefit was
improperly received by him. Corporations are given the power to make any other
or further indemnity, including advance of expenses, to any director or officer
that may be authorized by the articles of incorporation or any bylaw made by the
shareholders, or any resolution adopted, before or after the event, by the
shareholders, except an indemnity against willful misconduct or a knowing
violation of the criminal law. Unless limited by its articles of incorporation,
indemnification of a director or officer is mandatory when he entirely prevails
in the defense of any proceeding to which he is a party because he is or was a
director or officer.
The Articles of Incorporation of the Corporation contain provisions
indemnifying the directors and officers of the Corporation against expenses and
liabilities incurred in legal proceedings and authorizing the Board of Directors
to advance and reimburse expenses to the fullest extent permitted by Virginia
law.
Under the Amended and Restated Declaration of Trust, the Corporation,
as depositor of the Trust, has agreed (i) to indemnify and hold harmless each
Administrative Trustee and any employee or agent of the Trust or its Affiliates
from and against any loss, damage, liability, tax, penalty, expense or claim of
any kind or nature whatsoever incurred by such person by reason of the creation,
operation or termination of the Trust or any act or omission performed or
omitted by such person in good faith on behalf of the Trust and in a manner such
person reasonably believes to be within the scope of authority conferred on such
person by the Declaration, except that no person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such person by
reason of negligence or willful misconduct with respect to such acts or
omissions, and (ii) to advance expenses
II-1
<PAGE>
(including legal fees) incurred by such person in defending any claim, demand,
action, suite or proceeding, from time to time, prior to the final disposition
of such claim, demand, action, suit or proceeding.
Item 16. Exhibits
The following exhibits are filed on behalf of the Registrant as part
of this Registration Statement:
1.1 Form of Underwriting Agreement for offering of Capital Securities
4.1 Certificate of Trust of Highlands Capital Trust I
4.2 Form of Amended and Restated Declaration of Trust for Highlands
Capital Trust I
4.3 Form of Junior Subordinated Indenture between Highlands Bankshares,
Inc. and Wilmington Trust Company, as Trustee
4.4 Form of Capital Security (included in Exhibit 4.2 above)
4.5 Form of Junior Subordinated Debt Security (included in Exhibit 4.3
above)
4.6 Form of Guarantee Agreement with respect to Trust Securities issued
by Highlands Capital Trust I
4.7 Form of Escrow Agreement among McKinnon & Company, Inc., Highlands
Capital Trust I, Highlands Bankshares, Inc. and Wilmington Trust
Company
5.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C.
5.2 Opinion of Richards, Layton & Finger
8.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C. as to tax
matters
12.1 Calculation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Brown, Edwards & Company, L.L.P.
23.2 Consent of Williams, Mullen, Christian & Dobbins, P.C. (included in
Exhibit 5.1 above)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2
above)
24.1 Powers of Attorney (included on signature page)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of Wilmington Trust Company, as Trustee under the Junior
Subordinated Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Property Trustee under
the Amended and Restated Declaration of Trust of Highlands Capital
Trust I
25.3 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Guarantee Trustee under
the Guarantee Agreement for the benefit of holders of Trust
Securities of Highlands Capital Trust I
- ----------------------
* To be filed by amendment.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of a Registrant pursuant to the foregoing provisions, or otherwise, each of the
Registrants has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of a Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, such Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Each of the undersigned Registrants hereby undertakes to deliver or
cause to be delivered with the Prospectus, to each person to whom the Prospectus
is sent or given, the latest annual report, to security holders
II-2
<PAGE>
that is incorporated by reference in the Prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the Prospectus, to
deliver, or cause to be delivered to each person to whom the Prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the Prospectus to provide such interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Abington, Commonwealth of Virginia, on October 2, 1997.
HIGHLANDS BANKSHARES, INC.
By: /s/ Samuel L. Neese
----------------------------------
Samuel L. Neese
Executive Vice President and
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints Samuel L. Neese as attorney and
agent for the undersigned, with full power of substitution, for and in the name,
place and stead of the undersigned, to sign and file with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, any and all
amendments and exhibits to the Registration Statement and any and all
applications, instruments and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of securities covered
hereby with full power and authority to do and perform any and all acts and
things whatsoever requisite or desirable.
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Samuel L. Neese Executive Vice President October 8, 1997
------------------------------------ and Chief Executive Officer
Samuel L. Neese (Principal Executive Officer)
/s/ James T. Riffe Chief Financial Officer October 8, 1997
------------------------------------ (Principal Financial Officer)
James T. Riffe
/s/ Robert M. Little, Jr. Secretary and October 8, 1997
------------------------------------ Chief Accounting Officer
Robert M. Little, Jr. (Principal Accounting Officer)
<PAGE>
/s/ James D. Morefield Chairman of the Board October 8, 1997
------------------------------------
James D. Morefield
Director October _, 1997
------------------------------------
William E. Chaffin
/s/ Clydes B. Kiser Director October 8, 1997
------------------------------------
Clydes B. Kiser
/s/ Verne D. Kendrick Director October 8, 1997
------------------------------------
Verne D. Kendrick
/s/ J. Carter Lambert Director October 8, 1997
------------------------------------
J. Carter Lambert
Director October _, 1997
------------------------------------
James D. Moore, Jr.
/s/ Charles P. Olinger Director October 8, 1997
------------------------------------
Charles P. Olinger
/s/ William J. Singleton Director October 8, 1997
------------------------------------
William J. Singleton
/s/ H. Ramsey White, Jr. Director October 8, 1997
------------------------------------
H. Ramsey White, Jr.
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Abington, Commonwealth of Virginia, on October 2, 1997.
HIGHLANDS CAPITAL TRUST I
By: Highland Bankshares, Inc.,
as Depositor
By: /s/ Samuel L. Neese
----------------------------
Samuel L. Neese
Executive Vice President and
Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
1.1 Form of Underwriting Agreement for offering of Capital Securities
4.1 Certificate of Trust of Highlands Capital Trust I
4.2 Form of Amended and Restated Declaration of Trust for Highlands
Capital Trust I
4.3 Form of Junior Subordinated Indenture between Highlands
Bankshares, Inc. and Wilmington Trust Company, as Trustee
4.4 Form of Capital Security (included in Exhibit 4.2 above)
4.5 Form of Junior Subordinated Debt Security (included in
Exhibit 4.3 above)
4.6 Form of Guarantee Agreement with respect to Trust Securities
issued by Highlands Capital Trust I
4.7 Form of Escrow Agreement among McKinnon & Company, Inc.,
Highlands Capital Trust I, Highlands Bankshares, Inc. and
Wilmington Trust Company
5.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C.
5.2 Opinion of Richards, Layton & Finger
8.1 Opinion of Williams, Mullen, Christian & Dobbins, P.C. as to tax
matters
12.1 Calculation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Brown, Edwards & Company, L.L.P.
23.2 Consent of Williams, Mullen, Christian & Dobbins, P.C. (included
in Exhibit 5.1 above)
23.3 Consent of Richards, Layton & Finger (included in Exhibit 5.2
above)
24.1 Powers of Attorney (included on signature page)
25.1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Trustee under the
Junior Subordinated Indenture
25.2 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Property Trustee
under the Amended and Restated Declaration of Trust of Highlands
Capital Trust I
25.3 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of Wilmington Trust Company, as Guarantee Trustee
under the Guarantee Agreement for the benefit of holders of Trust
Securities of Highlands Capital Trust I
- -----------------------
* To be filed by amendment.
Exhibit 1.1
FORM OF UNDERWRITING AGREEMENT
for offering of
___% Capital Securities
HIGHLANDS CAPITAL TRUST I
(a Delaware Trust)
____% Capital Securities (the "Capital Securities")
(Liquidation Amount of $1,000 per Capital Security)
UNDERWRITING AGREEMENT
---------------
_________, 1997
McKinnon & Company, Inc.
555 Main Street
First Virginia Building, 16th Floor
Norfolk, Virginia 23510
Dear Sirs:
Highlands Capital Trust I (the "Trust"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. (S)(S) 3801 et
seq.), and Highlands Bankshares, Inc., a Virginia corporation (the "Company"
and, together with the Trust, the "Offerors"), confirm their agreement (the
"Agreement") with McKinnon & Company, Inc. (the "Underwriter") with respect to
the sale by the Trust of _____% Capital Securities (liquidation amount of $1,000
per preferred security) of the Trust (the "Capital Securities") set forth in
Schedule A. The Capital Securities will be guaranteed on a subordinated basis by
the Company, to the extent set forth in the Prospectus (as defined herein), with
respect to distributions and payments upon liquidation, redemption and otherwise
(the "Capital Securities Guarantee") pursuant to the Guarantee Agreement, dated
as of ________, 1997, and as may be amended, (the "Guarantee Agreement"),
between the Company and Wilmington Trust Company, as trustee (the "Guarantee
Trustee"), and will be entitled to the benefits of certain backup undertakings
described in the Prospectus (as defined herein) with respect to the Company's
agreement pursuant to the Indenture (as defined herein) to pay all expenses
relating to administration of the Trust (other than payment obligations with
respect to the Capital Securities). The Capital Securities and the related
Capital Securities Guarantee are referred to herein as the "Securities."
The Offerors have filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-2 (No. ______) and a
related preliminary prospectus for the
<PAGE>
registration under the Securities Act of 1933, as amended (the "1933 Act") of
(i) the Capital Securities, (ii) the Capital Securities Guarantee, and (iii) the
Junior Subordinated Debt Securities (as defined below) to be issued and sold to
the Trust by the Company, have filed such amendments thereto, if any, and such
amended preliminary prospectuses as may have been required to the date hereof,
and will file such additional amendments thereto and such amended prospectuses
as may hereafter be required. Such registration statement (as amended) and the
prospectus constituting a part thereof (including, in each case, all documents
incorporated or deemed to be incorporated by reference therein pursuant to Item
__ of Form S-2 under the 1933 Act and the information, if any, deemed to be part
thereof pursuant to Rule 430A(b) of the rules and regulations of the Commission
under the 1933 Act (the "1933 Act Regulations")), as from time to time amended
or supplemented pursuant to the 1933 Act, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), or otherwise, are hereinafter referred to as the
"Registration Statement" and the "Prospectus," respectively, except that, if any
revised prospectus shall be provided to the Underwriter by the Offerors for use
in connection with the offering of the Capital Securities which differs from the
Prospectus on file at the Commission at the time the Registration Statement
became effective (whether or not such revised prospectus is required to be filed
by the Offerors pursuant to Rule 424(b) of the 1933 Act Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriter for such use. All references in this
Agreement to financial statements and schedules and other information that is
"contained," "included" or "stated" in the Registration Statement or the
Prospectus (and all other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information that
are or are deemed to be incorporated by reference in the Registration Statement
or the Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement or the Prospectus shall
be deemed to mean and include the filing of any document under the 1934 Act that
is or is deemed to be incorporated by reference in the Registration Statement or
the Prospectus, as the case may be.
The Offerors understand that the Underwriter proposes to make a public
offering of the Capital Securities as soon as the Underwriter deems advisable
after this Agreement has been executed and delivered and the Declaration (as
defined herein), the Indenture (as defined herein) and the Capital Securities
Guarantee have been qualified under the Trust Indenture Act of 1939, as amended
(the "1939 Act"). The entire proceeds to the Trust from the sale of the Capital
Securities will be combined with the entire proceeds from the sale by the Trust
to the Company of its common securities (the "Common Securities"), as guaranteed
on a subordinated basis by the Company, to the extent set forth in the
Prospectus, with respect to distributions and payments upon liquidation and
redemption thereof (the "Common Securities Guarantee" and together with the
Capital Securities Guarantee, the "Guarantees") pursuant to the Guarantee
Agreement between the Company and Guarantee Trustee, as Trustee, and will be
used by the Trust to purchase the $______ aggregate principal amount of ____%
Junior Subordinated Debt Securities due _______________ (the "Junior
Subordinated Debt Securities") issued by the Company under the Indenture (as
defined herein). The Capital Securities and the Common Securities will be issued
pursuant to the Amended and Restated Declaration of Trust of the Trust, dated as
of ______, 1997 (the "Declaration"), among the Company, as Sponsor, Samuel L.
Neese and James T. Riffe, as trustees (the "Administrative Trustees"), and
Wilmington Trust Company, as property trustee (the "Property Trustee" and,
together with the Administrative Trustees, the
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"Trustees"), and the holders from time to time of undivided beneficial interests
in the assets of the Trust. The Junior Subordinated Debt Securities will be
issued pursuant to an indenture, dated as of _________, 1997, between the
Company and Wilmington Trust Company, as trustee (the "Indenture Trustee"),
together with any amendments or supplements thereto, the "Indenture"), between
the Company and the Indenture Trustee.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Offerors jointly and severally represent and warrant to the
Underwriter as of the date hereof and as of the Closing Time (as hereinafter
defined) as follows:
(i) At the time the Registration Statement became effective and
as of the date hereof, the Registration Statement complied in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations and
the 1939 Act and the rules and regulations of the Commission under the 1939 Act
(the "1939 Act Regulations"), and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus, dated
the date hereof (unless the term "Prospectus" refers to a prospectus that has
been provided to the Underwriter by the Trust for use in connection with the
offering of the Securities and that differs from the Prospectus on file at the
Commission at the time the Registration Statement became effective, in which
case, at the time it is first provided to the Underwriter for such use) and at
Closing Time referred to in Section 2 hereof, does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, the Offerors make no
representations or warranties as to (A) that part of the Registration Statement
which constitutes the Statements of Eligibility and Qualification (Forms T-1)
under the 1939 Act of the Indenture Trustee, the Property Trustee or the
Guarantee Trustee or (B) the information contained in or omitted from the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto in reliance upon and in conformity with information furnished in writing
to the Offerors by or on behalf of the Underwriter specifically for use in the
Registration Statement and the Prospectus.
(ii) The documents incorporated or deemed to be incorporated by
reference in the Registration Statement or Prospectus, at the time they were or
hereafter are filed with the Commission complied and will comply in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the Commission under the 1934 Act (the "1934 Act Regulations").
(iii) To the best knowledge of the Offerors, Brown, Edwards &
Company, L.L.P., the accountants who certified the financial statements and
supporting schedules included in or incorporated by reference into the
Registration Statement, are independent public accountants as required by the
1933 Act and the 1933 Act Regulations.
(iv) The Trust has been duly created and is validly existing and
in good standing as a business trust under the Delaware Act with the power and
authority to own property and to
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conduct its business as described in the Registration Statement and Prospectus
and to enter into and perform its obligations under this Agreement, the Capital
Securities, the Common Securities and the Declaration; the Trust is not a party
to or otherwise bound by any agreement other than those described in the
Prospectus; the Trust is and will be classified for United States federal income
tax purposes as a grantor trust and not as an association taxable as a
corporation; and the Trust is and will be treated as a consolidated subsidiary
of the Company pursuant to generally accepted accounting principles.
(v) The Common Securities have been duly authorized by the
Trust pursuant to the Declaration and, when issued and delivered by the Trust to
the Company against payment therefor as described in the Registration Statement
and Prospectus, will be validly issued and, subject to the terms of the
Declaration, fully paid and non-assessable undivided beneficial interests in the
assets of the Trust and will conform to all statements relating thereto
contained in the Prospectus; the issuance of the Common Securities is not
subject to preemptive or other similar rights.
(vi) This Agreement has been duly authorized, executed and
delivered by each of the Offerors.
(vii) The Declaration has been duly authorized by the Company, as
Sponsor, and will have been duly executed and delivered by the Company and the
Trustees, and assuming due authorization, execution and delivery of the
Declaration by the Property Trustee, the Declaration is and will be a valid and
binding obligation of the Company, the Trust and the Administrative Trustees,
enforceable against the Company and the Administrative Trustees in accordance
with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or
other similar laws affecting the rights of creditors now or hereafter in effect,
and to equitable principles that may limit the right to specific enforcement of
remedies, and further subject to 12 U.S.C. 1818(b)(6)(D) (or any successor
statute) and any bank regulatory powers now or hereafter in effect and to the
application of principles of public policy (collectively, the "Permitted
Exceptions") and will conform to all statements relating thereto in the
Prospectus; and the Declaration has been duly qualified under the 1939 Act.
(viii) The Guarantee Agreement has been duly authorized by the
Company and, when validly executed and delivered by the Company, assuming due
authorization, execution and delivery of the Guarantee Agreement by the
Guarantee Trustee, will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms except to
the extent that enforcement thereof may be limited by the Permitted Exceptions,
and each of the Guarantees and the Guarantee Agreement will conform to all
statements relating thereto contained in the Prospectus; and the trust pursuant
to the Guarantee Agreement will have been duly qualified under the 1939 Act.
(ix) The Capital Securities have been duly authorized by the
Trust pursuant to the Declaration and, when issued and delivered pursuant to
this Agreement and payment of the consideration therefor set forth in Schedule B
hereto, will be validly issued and, subject to the
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terms of the Declaration, fully paid and non-assessable undivided beneficial
interests in the Trust, will be entitled to the benefits of the Declaration and
will conform to all statements relating thereto contained in the Prospectus; the
issuance of the Capital Securities is not subject to preemptive or other similar
rights; and, subject to the terms of the Declaration, holders of Capital
Securities will be entitled to the same limitation of personal liability under
Delaware law as extended to stockholders of private corporations for profit.
(x) Each of the Administrative Trustees of the Trust is an
employee of the Company and has been duly authorized by the Company to execute
and deliver the Declaration; the Declaration has been duly executed and
delivered by the Administrative Trustees and is a valid and binding obligation
of each Administrative Trustee, enforceable against such Administrative Trustee
in accordance with its terms except to the extent that enforcement thereof may
be limited by the Permitted Exceptions.
(xi) None of the Offerors is, and upon the issuance and sale of
the Capital Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus none will be, an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "1940 Act").
(xii) No authorization, approval, consent or order of any court
or governmental authority or agency is necessary in connection with the issuance
and sale of the Common Securities or the offering of the Capital Securities, the
Junior Subordinated Debt Securities or the Guarantees hereunder, except such as
may be required under the 1933 Act or the 1933 Act Regulations or state
securities laws and the qualification of the Declaration, the Capital Securities
Guarantee Agreement and the Indenture under the 1939 Act.
(b) The Company represents and warrants to the Underwriter as of the
date hereof and as of the Closing Time (as hereinafter defined) as follows:
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings or business affairs of the Trust or
the Company and its subsidiaries, considered as one enterprise, whether or not
arising in the ordinary course of business.
(ii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Virginia with corporate power to own, lease and operate its properties and to
conduct its business as described in the Prospectus, to enter into and perform
its obligations under this Agreement, the Declaration, as Sponsor, the Indenture
and each of the Guarantees and to purchase, own, and hold the Common Securities
issued by the Trust; the Company is duly registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended; and the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which the character or location of its properties or the
nature or the conduct of its business requires such qualification,
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<PAGE>
except for any failures to be so qualified or in good standing which, taken as a
whole, are not material to the Company and its subsidiaries, considered as one
enterprise.
(iii) Highlands Union Bank (the "Principal Subsidiary Bank") is
a banking association formed under the laws of Virginia and authorized
thereunder to transact business; all of the issued and outstanding capital stock
of the Principal Subsidiary Bank has been duly authorized and validly issued, is
fully paid and non-assessable; and the capital stock of the Principal Subsidiary
Bank owned by the Company, directly or through subsidiaries, is owned free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(iv) The Indenture has been duly authorized by the Company
and, when validly executed and delivered by the Company, will constitute a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms except to the extent that enforcement thereof may be
limited by the Permitted Exceptions; the Indenture will conform to all
statements relating thereto contained in the Prospectus; and the Indenture has
been duly qualified under the 1939 Act.
(v) The Junior Subordinated Debt Securities have been duly
authorized by the Company and have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and delivered against
payment therefor as described in the Prospectus, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms except to the extent that enforcement thereof may be
limited by the Permitted Exceptions, will be in the form contemplated by, and
subject to the Permitted Exceptions entitled to the benefits of, the Indenture
and will conform to all statements relating thereto in the Prospectus.
(vi) The Company's obligations under the Guarantees are
subordinate and junior in right of payment to all liabilities of the Company and
are pari passu with _______________.
(vii) The Junior Subordinated Debt Securities are subordinated
and junior in right of payment to all "Senior Debt" (as defined in the
Indenture) of the Company.
(viii) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein and compliance by
the Company with its obligations hereunder will not conflict with or constitute
a breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or the
Principal Subsidiary Bank pursuant to, any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company or the Principal
Subsidiary Bank is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or the Principal Subsidiary
Bank is subject (except for conflicts, breaches and defaults which would not,
individually or in the aggregate, be materially adverse to the Company and its
subsidiaries taken as a whole or materially adverse to the transactions
contemplated by this Agreement), nor will such action result in any material
violation of the
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<PAGE>
provisions of the articles of incorporation or by-laws of the Company, or any
applicable law, administrative regulation or administrative or court decree.
(c) Each certificate signed by any officer of the Company and
delivered to the Underwriter shall be deemed to be a representation and warranty
by the Company to the Underwriter as to the matters covered thereby.
(d) The Trust represents and warrants to the Underwriter as of the
date hereof and as of the Closing Time (as hereinafter defined) as follows:
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the a
condition, financial or otherwise, or in the earnings or business affairs of the
Trust, whether or not arising in the ordinary course of business, and (B) there
have been no transactions entered into by the Trust, other than in the ordinary
course of business, which are material with respect to the Trust.
(ii) Except as disclosed in the Prospectus, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the best
knowledge of the Trust, threatened, against or affecting the Trust that is
required to be disclosed in the Prospectus, other than actions, suits or
proceedings which are not reasonably expected, individually or in the aggregate,
to have a material adverse effect on the condition, financial or otherwise, or
in the earnings or business affairs of the Trust, whether or not arising in the
ordinary course of business; and there are no transactions, contracts or
documents of the Trust that are required to be filed as exhibits to the
Registration Statement by the 1933 Act or by the 1933 Act Regulations that have
not been so filed.
(iii) The Trust possesses adequate certificates, authorities or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies to conduct the business now operated by it, and the Trust has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding would materially and
adversely affect the condition, financial or otherwise, or in the earnings or
business affairs of the Trust.
(iv) The execution, delivery and performance of this
Agreement, the Declaration, the Guarantee Agreement and the Guarantees, the
issuance and sale of the Capital Securities and the Common Securities, and the
consummation of the transactions contemplated herein and therein and compliance
by the Trust with its obligations hereunder and thereunder have been duly
authorized by all necessary action (corporate or otherwise) on the part of the
Trust and do not and will not result in any violation of the Declaration or
Certificate of Trust and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Trust under (A) any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which the Trust
is a party or by which it may be bound or to which any of its properties may be
subject or (B) any existing applicable law, rule,
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regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, or any regulatory body or
administrative agency or other governmental body having jurisdiction over the
Trust, or any of its properties (except for conflicts, breaches, violations or
defaults which would not, individually or in the aggregate, be materially
adverse to the Trust, or materially adverse to the transactions contemplated by
this Agreement).
(e) Each certificate signed by any Trustee of the Trust and
delivered to the Underwriter or counsel for the Underwriter shall be deemed to
be a representation and warranty by the Trust to the Underwriter as to the
matters covered thereby.
SECTION 2. SALE AND DELIVERY; CLOSING.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Trust
agrees to issue and sell the Capital Securities through the Underwriter, as
agent for the Trust, to the public and the Underwriter agrees to use its best
efforts to sell the Capital Securities as agent for the Trust, at the price per
share set forth on Schedule B (the "Public Offering Price"). The Company agrees
to pay the Underwriter a commission for Capital Securities sold through the
Underwriter in the public offering as set forth on Schedule B (the "Selling
Commission"). The Underwriter may reject any offer to purchase the Capital
Securities made through the Underwriter in whole or in part, and any such
rejection shall not be deemed a breach of the Underwriter's agreement contained
herein.
(b) It is understood that, after the Registration Statement becomes
effective, you propose to sell the Capital Securities to the public as agent for
the Trust upon the terms and conditions set forth in the Prospectus. The escrow
procedures established by the Underwriter shall comply with Commission Rule
15c2-4 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All subscribers to whom the Underwriter directly sells Capital
Securities shall be instructed to make their check for payment of the Capital
Securities payable to "Highlands Capital Trust I Escrow Account." In addition,
the Underwriter shall comply with Rule 15c2-4. The Underwriter shall transmit
all funds that it receives from subscribers to Wilmington Trust Company, the
escrow agent (the "Escrow Agent") by noon of the next business day following
receipt thereof. Only broker/dealers who are either (i) members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") that are
registered with the NASD and maintain net capital pursuant to Rule 15c3-1
promulgated under the Exchange Act of not less than $25,000 or (ii) dealers with
their principal places of business located outside the United States, its
territories and its possessions and not registered as brokers or dealers under
the Exchange Act, who have agreed not to make any sales within the United
States, its territories or its possessions or to persons who are nationals
thereof or residents therein shall be designated selected dealers by the
Underwriter. The Underwriter shall require all selected dealers to comply with
Rule 15c2-4.
(c) The Underwriter shall direct the Escrow Agent to make payment
for the Capital Securities sold hereunder by wire transfer or certified or bank
cashier's check drawn to the order of the Trust in next day funds. Such payment
is to be made at the offices of __________, at 10:00 a.m. local time, on or
about _____, 1997, or at such other time, date and place as you and the Trust
shall agree upon, such time and date being herein referred to as the "Closing
Time." The certificates for the Capital Securities will be delivered in such
denominations and in such registrations as the Underwriter requests
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in writing not later than the third (3rd) full business day prior to the Closing
Time, and will be made available for inspection by the Underwriter at least
twenty-four (24) hours prior to the Closing Time. Such certificates will be
delivered to the Escrow Agent by 12:00 p.m. on the day prior to the Closing
Time, along with addressed labels to be used to mail the certificates to the
purchasers thereof. The Trust shall direct the Escrow Agent to deliver (i)
payment of the portion of the Selling Commission due to the Underwriter by wire
transfer or certified or bank cashier's check drawn to the order of the
Underwriter in next day funds, to the Underwriter at the Closing Time and (ii)
payment of the portion of the Selling Commission due to each selected dealer by
wire transfer or certified or bank cashier's check drawn to the order of such
selected dealer in next day funds, to each selected dealer at the Closing Time.
SECTION 3. COVENANTS OF THE OFFERORS. Each of the Offerors jointly
and severally covenants with the Underwriter as follows:
(a) The Offerors will notify the Underwriter promptly, and confirm
the notice in writing, (i) of the effectiveness of the Registration Statement
and any amendment thereto (including any post-effective amendment), (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
The Offerors will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment.
(b) The Offerors will give the Underwriter notice of their intention
to file or prepare (i) any amendment to the Registration Statement (including
any post-effective amendment), (ii) any amendment or supplement to the
Prospectus (including any revised prospectus which the Offerors propose for use
by the Underwriter in connection with the offering of the Capital Securities
which differs from the prospectus on file at the Commission at the time the
Registration Statement became effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations), or
(iii) any document that would as a result thereof be incorporated by reference
in the Prospectus whether pursuant to the 1933 Act, the 1934 Act or otherwise,
will furnish the Underwriter with copies of any such amendment, supplement or
other document within a reasonable amount of time prior to such proposed filing
or use, as the case may be, and will not file any such amendment, supplement or
other document or use any such prospectus to which the Underwriter or counsel
for the Underwriter shall reasonably object. Subject to the foregoing, the
Offerors will file the Prospectus pursuant to Rule 424(b) and Rule 430A under
the Act not later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement.
(c) The Offerors will deliver to the Underwriter as many signed
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference therein) as
the Underwriter may reasonably request and will also deliver
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to the Underwriter a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for the Underwriter.
(d) The Offerors will furnish to the Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the 1933
Act, such number of copies of the Prospectus (as amended or supplemented) as the
Underwriter may reasonably request for the purposes contemplated by the 1933 Act
or the respective applicable rules and regulations of the Commission thereunder.
(e) If at any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of the Capital Securities, any event
shall occur as a result of which the Prospectus as then amended or supplemented
will include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading or if it shall be
necessary to amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Offerors will,
subject to paragraph (b) above, promptly prepare and file with the Commission
such amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance and the Offerors will furnish to the
Underwriter a reasonable number of copies of such amendment or supplement.
(f) The Offerors will endeavor, in cooperation with the Underwriter,
to qualify the Capital Securities (and the Capital Securities Guarantee) and the
Junior Subordinated Debt Securities for offering and sale under the applicable
securities laws of such states and the other jurisdictions of the United States
as the Underwriter may designate; provided, however, that none of the Offerors
shall be obligated to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified.
(g) The Company will make generally available to its security
holders and to the Underwriter as soon as practicable, but not later than 90
days after the close of the period covered thereby, an earnings statement (which
need not be audited) of the Company and its subsidiaries, covering an applicable
period beginning not later than the first day of the Company's fiscal quarter
next following the "Effective Date" (as defined in Rule 158(c) under the Act) of
the Registration Statement, which will satisfy the provisions of Section 11(a)
of the 1933 Act.
SECTION 4. PAYMENT OF EXPENSES. The Company will pay all expenses
incident to the performance of each Offerors' obligations under this Agreement,
and will pay: (i) the printing and filing of the Registration Statement as
originally filed and of each amendment thereto, (ii) the preparation, issuance
and delivery of the certificates for the Capital Securities, (iii) the fees and
disbursements of the Company's and the Trust's counsel and accountants and
counsel to the Underwriter, (iv) the qualification of the Capital Securities,
the Capital Securities Guarantee and the Junior Subordinated Debt Securities
under securities laws in accordance with the provisions of Section 3(f) hereof,
including fees and expenses incurred in connection with the preparation of any
blue sky survey, (v) the printing and delivery to
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the Underwriter of copies of the Registration Statement as originally filed and
of each amendment thereto, of each preliminary prospectus, and of the Prospectus
and any amendments or supplements thereto, (vi) the printing and delivery to the
Underwriter of copies of any blue sky survey, (vii) the fee of the National
Association of Securities Dealers, Inc., if applicable, (viii) the fees and
expenses of the Indenture Trustee, including the fees and disbursements of
counsel for the Indenture Trustee in connection with the Indenture and the
Junior Subordinated Debt Securities, (ix) the fees and expenses of the Property
Trustee, and the Guarantee Trustee, including the fees and disbursements of
counsel for the Property Trustee in connection with the Declaration and the
Certificate of Trust; (x) the cost and charges of any transfer agent or
registrar, and (xi) the cost of qualifying the Capital Securities with DTC.
If this Agreement is terminated by the Underwriter in accordance with
the provisions of Section 5 or Section 9 hereof, the Company shall reimburse the
Underwriter for all of its reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriter.
SECTION 5. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations
of the Underwriter hereunder are subject to the accuracy of the representations
and warranties of the Offerors herein contained or in certificates of officers
of the Company, to the performance by the Offerors of their obligations
hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof, or with the consent of the Underwriter, at a
later time and date, not later, however, than 5:30 P.M. on the first business
day following the date hereof, or at such later time and date as may be approved
by the Underwriter; and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act or proceedings therefor initiated or threatened by the Commission. The
Prospectus shall have been filed with the Commission pursuant to Rule 424(b)
within the applicable time period prescribed for such filing by the 1933
Regulations and in accordance with Section 3(b) and prior to Closing Time the
Offerors shall have provided evidence satisfactory to the Underwriter of such
timely filing.
(b) At Closing Time the Underwriter shall have received:
(1) The favorable opinion of Williams, Mullen, Christian & Dobbins,
P.C., counsel for the Company, dated as of the Closing Time, to the following
effect:
(i) The Company is a duly organized and validly existing
corporation in good standing under the laws of the State of Virginia, has the
corporate power and authority to own its properties, conduct its business as
described in the Prospectus and perform its obligations under this Agreement,
and is duly registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended; the Principal Subsidiary Bank is a banking association
formed under the laws of Virginia and authorized thereunder to transact
business.
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(ii) Except for those jurisdictions specifically enumerated in
such opinion, neither the Company nor the Principal Subsidiary Bank is required
to be qualified or licensed to do business as a foreign corporation in any
jurisdiction.
(iii) All the outstanding shares of capital stock of the
Principal Subsidiary Bank have been duly and validly authorized and issued and
are fully paid and non-assessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the Principal Subsidiary
Bank are owned, directly or indirectly, by the Company free and clear of any
perfected security interest and, to the best knowledge of such counsel, any
other security interests, claims, liens or encumbrances.
(iv) To the best knowledge of such counsel, there is no
pending threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries, of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Prospectus, and there is no
franchise, contract, or other document of a character required to be described
in the Registration Statement or Prospectus, or to be filed as an exhibit, which
is not described or filed as required.
(v) The Registration Statement has become effective under the
1933 Act; to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or threatened; the Registration Statement,
the Prospectus and each amendment thereof or supplement thereto (other than the
financial statements and other financial and statistical information contained
therein or incorporated by reference therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the 1933 Act and the 1933 Act Regulations and the
1934 Act and the 1934 Act Regulations.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company.
(vii) No authorization, approval, consent or order of any court
or governmental authority or agency is required in connection with the offering,
issuance or sale of the Capital Securities, the Capital Securities Guarantee and
the Junior Subordinated Debt Securities through the Underwriter, except (a) such
as may be required under the 1933 Act and the 1933 Act Regulations and such as
may be required under the blue sky or insurance laws of any jurisdiction, and
(b)the qualification of the Declaration, the Guarantee Agreement and the
Indenture under the 1939 Act.
(viii) The Declaration has been duly authorized, executed and
delivered by the Company and the Administrative Trustees and has been duly
qualified under the 1939 Act.
(ix) The Guarantee Agreement has been duly authorized,
executed and delivered by the Company, and assuming it is duly authorized,
executed and delivered by the Guarantee Trustee, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that enforcement thereof may be
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limited by the Permitted Exceptions; and the Guarantee Agreement has been duly
qualified under the 1939 Act.
(x) The Indenture has been duly executed and delivered by the
Company and, assuming due authorization, execution, and delivery thereof by the
Indenture Trustee, is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by the Permitted Exceptions; the Indenture
has been duly qualified under the 1939 Act; and the Indenture conforms to the
description thereof in the Prospectus.
(xi) The Junior Subordinated Debt Securities have been duly
authorized and executed by the Company and, when authenticated by the Trustee in
the manner provided in the Indenture and delivered against payment therefor,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the extent that
enforcement thereof may be limited by the Permitted Exceptions; and the Junior
Subordinated Debt Securities conform to the description thereof in the
Prospectus.
(xii) Neither the Company nor the Trust is, and upon the
issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus neither will be, an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving certain matters of Delaware law upon the opinion of Richards, Layton &
Finger, special Delaware counsel to the Offerers, which shall be delivered in
accordance with Section 5(b)(2)hereto; and (B) as to matters of fact, to the
extent deemed proper, on the representations and warranties of the Offerors
contained herein or in the Declaration, the Indenture and the Guarantee
Agreement of even date herewith, between the Company and the Trust covering the
Common Securities and on certificates of responsible officers of the Company and
its subsidiaries and public officials.
(2) The favorable opinion of Richards, Layton & Finger, Special
Delaware counsel to the Offerors, in form and substance satisfactory to the
Underwriter, to the effect that:
(i) The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Act; all filings
required under the laws of the State of Delaware with respect to the formation
and valid existence of the Trust as a business trust have been made; the Trust
has all necessary power and authority to own property and to conduct its
business as described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under this Agreement, the Capital
Securities and the Common Securities; the Trust is duly qualified and in good
standing as a foreign company in any other jurisdiction in which such
qualification is necessary, except to the extent that the failure to so qualify
or be in good standing would not have a material adverse effect on the Trust;
and the Trust is not a party to or otherwise bound by any agreement other than
those described in the Prospectus.
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(ii) Assuming due authorization, execution and delivery by the
Company and the Trustees, the Declaration is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by the Permitted Exceptions.
(iii) The Common Securities have been duly authorized by the
Declaration and are validly issued and (subject to the terms of the Declaration)
fully paid and non-assessable beneficial interests in the assets of the Trust,
and the issuance of the Common Securities is not subject to preemptive or other
similar rights.
(iv) The Capital Securities have been duly authorized by the
Declaration and are validly issued and, subject to the terms of the Declaration,
when delivered to and paid for by the Underwriter pursuant to this Agreement,
will be validly issued, fully paid and non-assessable beneficial interests in
the assets of the Trust; the holders of the Capital Securities will, subject to
the terms of the Declaration, be entitled to the same limitation of personal
liability under Delaware law as is extended to stockholders of private
corporations for profit; and the issuance of the Capital Securities is not
subject to preemptive or other similar rights.
(v) The Common Securities, the Capital Securities and the
Declaration conform in all material respects to all statements relating thereto
contained in the Prospectus.
(vi) All of the issued and outstanding Common Securities of
the Trust are directly owned by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equitable right.
(vii) This Agreement has been duly authorized, executed and
delivered by the Trust.
(viii) The execution, delivery and performance of this
Agreement, the Declaration, the Capital Securities and the Common Securities;
the consummation of the transactions contemplated herein and therein; and the
compliance by the Trust with its obligations hereunder and thereunder do not and
will not result in any violation of the Declaration or Certificate of Trust, and
do not and will not conflict with, or result in, a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Trust under (A) any contract, indenture, mortgage, loan agreement, note, lease
or any other agreement or instrument known to such counsel to which the Trust is
a party or by which it may be bound or to which any of its properties may be
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a material adverse effect on the condition,
financial or otherwise, or in the earnings or business affairs of the Trust, (B)
any existing applicable law, rule or regulation (other than the securities or
blue sky laws of the various states, as to which such counsel need express no
opinion) or (C) any judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, or any regulatory body or
administrative agency or other governmental body having jurisdiction over the
Trust or any of its properties.
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(3) The favorable opinion, dated as of Closing Time, of Richards,
Layton & Finger, counsel to Wilmington Trust Company, as Property Trustee under
the Declaration, Guarantee Trustee under the Capital Securities Guarantee
Agreement, and Indenture Trustee under the Indenture, in form and substance
satisfactory to the Underwriter, to the effect that:
(i) Wilmington Trust Company is a Delaware banking
corporation with trust powers, duly organized, validly existing and in good
standing under the laws of the State of Delaware with all necessary power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of the Declaration.
(ii) The execution, delivery and performance by the Indenture
Trustee of the Indenture and the execution, delivery and performance by the
Property Trustee of the Declaration and the execution, delivery and performance
by the Guarantee Trustee of the Guarantee Agreement have been duly authorized by
all necessary corporate action on the part of the Indenture Trustee, the
Property Trustee and the Guarantee Trustee, respectively. The Indenture, the
Declaration and the Guarantee Agreement have been duly executed and delivered by
the Indenture Trustee, the Property Trustee and the Guarantee Trustee,
respectively, and constitute the legal, valid and binding obligations of the
Indenture Trustee, the Property Trustee and the Guarantee Trustee, respectively,
enforceable against the Indenture Trustee, the Property Trustee and the
Guarantee Trustee, respectively, in accordance with their terms, except as
enforcement thereof may be limited by the Permitted Exceptions.
(iii) The execution, delivery and performance of the Indenture,
the, Declaration and the Guarantee Agreement by the Indenture Trustee, Property
Trustee and the Guarantee Trustee, respectively, does not conflict with or
constitute a breach of the Certificate of Incorporation or Bylaws of the
Indenture Trustee, Property Trustee and the Guarantee Trustee, respectively.
(iv) No consent, approval or authorization of, or registration
with or notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by the Indenture Trustee, the Property
Trustee and the Guarantee Trustee of the Indenture, the Declaration and the
Guarantee Agreement, respectively.
(4) The favorable opinion of Williams, Mullen, Christian & Dobbins,
P.C., tax counsel to the Company and the Trust, as to certain Federal tax
matters set forth in the Prospectus under "United States Income Taxation."
(5) Williams, Mullen, Christian & Dobbins, P.C. shall also provide a
written statement that nothing has come to their attention that has caused them
to believe that the Registration Statement (except for financial statements and
schedules and other financial or statistical data included or incorporated by
reference, therein, as to which counsel need make no statement), at the time it
became effective or as of the date of their respective opinions, 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 (except for
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financial statements and schedules and other financial or statistical data
included or incorporated by reference therein, as to which counsel need make no
statement), as at the date hereof or at Closing Time, included an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(6) At Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings or business affairs of the
Trust or the Company and its subsidiaries, considered as one enterprise, whether
or not arising in the ordinary course of business, and the Underwriter shall
have received a certificate of the President or a ____ Vice President of the
Company and of the chief financial or chief accounting officer of the Company
and a certificate of the Trustee of the Trust, and dated as of Closing Time, to
the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1 hereof are true and correct with the
same force and effect as though expressly made at and as of Closing Time, (iii)
the Trust and the Company have complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing Time,
and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or threatened by the Commission.
(7) At the Closing Time, Brown, Edwards & Company, L.L.P. shall have
furnished to the Underwriter a letter or letters (which may refer to letters
previously delivered to the Underwriter), dated as of the Closing Time, in form
and substance satisfactory to the Underwriter, confirming that the response, if
any, to Item 10 of the Registration Statement is correct insofar as it relates
to them and stating in effect that:
(i) They are independent accountants within the meaning of
the 1933 Act and the 1934 Act and the1933 Act Regulations and the 1934 Act
Regulations.
(ii) In their opinion, the consolidated financial statements
of the Company and its subsidiaries audited by them and included or incorporated
by reference in the Registration Statement and Prospectus comply as to form in
all material respects with the applicable accounting requirements of the 1933
Act and the 1933 Act Regulations with respect to registration statements on Form
S-2 and the 1934 Act and the 1934 Act Regulations.
(iii) On the basis of procedures (but not in accordance with
generally accepted auditing standards) consisting of:
(a) Reading the minutes of the meetings of the
shareholders, the board of directors, executive committee and audit committee of
the Company and the boards of directors and executive committees of its
subsidiaries as set forth in the minute books through a specified date not more
than five business days prior to the date of delivery of such letter;
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(b) Performing the procedures specified by the
American Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim Financial Information,
on the unaudited condensed consolidated interim financial statements of the
Company and its consolidated subsidiaries included or incorporated by reference
in the Registration Statement and Prospectus and reading the unaudited interim
financial data, if any, for the period from the date of the latest balance sheet
included or incorporated by reference in the Registration Statement and
Prospectus to the date of the latest available interim financial data; and
(c) Making inquiries of certain officials of the
Company who have responsibility for financial and accounting matters regarding
the specific items for which representations are requested below; nothing has
come to their attention as a result of the foregoing procedures that caused them
to believe that:
(1) the unaudited condensed consolidated
interim financial statements, included or incorporated by reference in the
Registration Statement and Prospectus, do not comply as to form in all material
respects with the applicable accounting requirements of the 1934 Act and the
1934 Act Regulations thereunder;
(2) any material modifications should be made
to the unaudited condensed consolidated interim financial statements, included
or incorporated by reference in the Registration Statement and Prospectus, for
them to be in conformity with generally accepted accounting principles;
(3)(i) at the date of the latest available interim
financial data and at the specified date not more than five business days prior
to the date of the delivery of such letter, there was any change in the capital
stock or the long-term debt (other than scheduled repayments of such debt) or
any decreases in shareholders' equity of the Company and the subsidiaries on a
consolidated basis as compared with the amounts shown in the latest balance
sheet included or incorporated by reference in the Registration Statement and
the Prospectus or (ii) for the period from the date of the latest available
financial data to a specified date not more than five business days prior to the
delivery of such letter, there was any change in the capital stock or the
long-term debt (other than scheduled repayments of such debt) or any decreases
in shareholders' equity of the Company and the subsidiaries on a consolidated
basis, except in all instances for changes or decreases which the Registration
Statement and Prospectus discloses have occurred or may occur, or Brown, Edwards
& Company, L.L.P. shall state any specific changes or decreases.
(iv) The letter shall also state that Brown, Edwards &
Company, L.L.P. has carried out certain other specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information which are included or incorporated by reference in the
Registration Statement and Prospectus and which are specified by the Underwriter
and agreed to by Brown, Edwards & Company, L.L.P., and has found such amounts,
percentages and financial information to be in agreement with the relevant
accounting, financial and other records of the Company and its subsidiaries
identified in such letter.
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<PAGE>
In addition, at the time this Agreement is executed, Brown, Edwards &
Company, L.L.P., shall have furnished to the Underwriter a letter dated the date
of this Agreement, in form and substance satisfactory to the Underwriter, to the
effect set forth in this subsection 8.
(8) At Closing Time, the National Association of Securities Dealers,
Inc. ("NASD") shall have confirmed in writing that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
If any condition specified in this Section shall not have been
fulfilled in all material respects when and as required to be fulfilled, this
Agreement may be terminated by the Underwriter by notice to the Offerors, in
writing or by telephone or telegraph confirmed in writing, at any time at or
prior to Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 4 hereof, and except that
Sections 1, 7, and 8 shall survive any such termination and will remain in full
force and effect.
SECTION 6. [INTENTIONALLY OMITTED]
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Offerors jointly and severally agree to indemnify and hold
harmless the Underwriter and each of its partners, officers, directors, and
employees and each person, if any, who controls the Underwriter within the
meaning of the 1933 Act or the 1934 Act against any losses, claims, damages or
liabilities, and any action in respect thereof (including, but not limited to,
any loss, claim, damage, liability or action relating to purchases and sales of
the Capital Securities), joint or several, which arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material fact
contained in (A) the Registration Statement, or any amendment or supplement
thereto, including information deemed to be part of the Registration Statement
pursuant to Rule 430A(b) of the 1933 Act Regulations, if applicable, (B) the
Prospectus and any amendment or supplement thereto, or (C) any application or
other document, any amendment or supplement thereto, executed by the Offerors or
based upon information furnished by or on behalf of the Offerors filed in any
jurisdiction in order to qualify the Capital Securities under the securities or
blue sky laws thereof (each, an "Application") or (ii) the omission or alleged
omission to state in the Registration Statement, or any amendment or supplement
thereto, the Prospectus or any amendment or supplement thereto, or any
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse as incurred the
Underwriter and each such controlling person for any legal and other expenses
incurred in investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that neither of the Offerors
shall be liable to the Underwriter in any such case to the extent that any such
loss, claim, damage or liability arises out of, or is based upon, any untrue
statement or alleged untrue statement made in the Prospectus, including any
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Offerors by or on behalf of the
Underwriter specifically for inclusion and actually included therein; and
provided further that, as to any Prospectus that has been amended or
supplemented as provided herein, this indemnity agreement shall not inure to the
benefit of the
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Underwriter, on account of any loss, claim, damage, liability or action arising
out of the sale of Capital Securities to any person by the Underwriter if (A)
the Underwriter failed to send or give a copy of the final Prospectus as so
amended or supplemented to that person at or prior to the confirmation of the
sale of such Capital Securities to such person in any case where such delivery
is required by the 1933 Act, and (B) the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact in any preliminary Prospectus was corrected in an amendment or supplement
thereto (but only if the sale to such person occurred after the Offerors
provided the Underwriter and the Underwriter received copies of such amendment
or supplement for distribution). This indemnity agreement will be in addition to
any liability which the Offerors may otherwise have.
(b) The Underwriter will indemnify and hold harmless the Company,
the Trust, the Trustees and each of the Company's directors, each of its
officers and each person, if any, who controls the Company or the Trust within
the meaning of the 1933 Act or the 1934 Act, to the same extent as the foregoing
indemnity from the Offerors to the Underwriter, but only with reference to
written information relating to such underwriter furnished to the Offerors by
the Underwriter and specifically included in the Prospectus. This indemnity
shall be in addition to any liability which such Underwriter may otherwise have.
The Offerors acknowledge that the statements set forth under the heading
"Underwriting" in the Prospectus constitute the only information furnished in
writing by the Underwriter for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify such indemnifying party or
parties of the commencement thereof; but the omission so to notify the
indemnifying party or parties will not relieve it or them from any liability
which it or they may have to any indemnified party otherwise than under
subsection (a) or (b) of this Section 7 or to the extent that the indemnifying
party was not adversely affected by such omission. In case any such action is
brought against an indemnified party and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties against
which a claim is to be made will be entitled to participate therein and, to the
extent that it or they may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 7 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with
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such action the indemnifying party shall not be liable for the expenses of more
than one separate counsel (in addition to local counsel) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by the lead
Underwriter in the case of paragraph (a) of this Section 7, representing the
indemnified parties under such paragraph (a) who are parties to such action or
actions), or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the consent of the indemnifying party, which will not be unreasonably
withheld, unless such indemnified party waived its rights under this Section 7
in writing in which case the indemnified party may effect such a settlement
without such consent.
(d) The Company agrees to indemnify the Trust against all losses,
claims, damages or liabilities due from the Trust under Section 7(a) hereof.
(e) If the indemnification provided for in the preceding paragraphs
of this Section 7 is unavailable or insufficient to hold harmless an indemnified
party under paragraph (a) or (b) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then the
Offerors or the Underwriter shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) to which the Offerors and
the Underwriter may be subject in such proportion so that the Underwriter is
responsible for that portion represented by the percentage that the total
discounts and/or commissions received by the Underwriter bears to the sum of
such discounts and/or commissions and the purchase price of the Capital
Securities specified in Schedule B hereto and the Offerors are responsible for
the balance; provided, however, that (y) in no case shall the Underwriter be
responsible for any amount in excess of the total discounts and/or commissions
received by it with respect to the Capital Securities sold under this Agreement
and (z) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person who controls the Underwriter within the meaning of the
1933 Act shall have the same rights to contribution as the Underwriter, and each
person who controls either of the Offerors within the meaning of either the 1933
Act or the 1934 Exchange Act, each officer or trustee of the Offerors who shall
have signed the Registration Statement and each director or trustee of the
Offerors shall have the same rights to contribution as the Offerors, subject in
each case to clause (y) of this paragraph (e). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this paragraph
(e), notify such party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other obligation it or
they may have hereunder or otherwise than under this paragraph (d).
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
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Agreement, or contained in certificates of officers or Trustees of the Offerors
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or
controlling person, or by or on behalf of the Offerors and shall survive
delivery of the Capital Securities to the purchasers therefor.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Underwriter may terminate this Agreement, by notice to the
Offerors, at any time at or prior to Closing Time (i) if there has been, since
the date of this Agreement or since the respective dates as of which information
is given in the Registration Statement, any material adverse change in the
condition, financial or otherwise, or in the earnings or business affairs of the
Trust or the Company and its subsidiaries, considered as one enterprise, whether
or not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the financial markets in the United States or
elsewhere or any outbreak of hostilities or escalation thereof or other calamity
or crisis or any change or development involving a prospective change in
national or international political, financial or economic conditions, in each
case the effect of which is such as to make it, in the judgment of the
Underwriter, impracticable to market the Capital Securities or to enforce
contracts for the sale of the Capital Securities, or (iii) if trading in any
securities of the Company or the Trust has been suspended or materially limited
by the Commission or the applicable exchange, or if trading generally on the New
York Stock Exchange, the American Stock Exchange or on the NASDAQ National
Market, has been suspended, limited or restricted or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices for securities have
been required, by said exchanges or such system or by order of the Commission,
the NASD or any governmental authority, or (iv) if a banking moratorium has been
declared by either Federal, New York, Virginia or Delaware authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and except that Sections 1, 7, and 8 shall survive
any such termination and will remain in full force and effect.
SECTION 10. [INTENTIONALLY OMITTED]
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to McKinnon & Company, 555 Main Street, First
Virginia Building, 16th Floor, Norfolk, Virginia 23510, Attention: William J.
McKinnon. Notices to the Trust and the Company shall be directed to them at
Highlands Bankshares, Inc., 340 West Main Street, Abingdon, Virginia 24210
Attention: Samuel L. Neese.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the Underwriter and the Trust, the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriter and the Trust and the Company and their respective successors and
the controlling persons and officers, directors and trustees referred to in
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<PAGE>
Sections 6 and 7 and their heirs and legal Underwriter, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriter and the
Trust and the Company and their respective successors, and said controlling
persons and officers, directors and trustees and their heirs and legal
Underwriter, and for the benefit of no other person, firm or corporation. No
purchaser of Capital Securities from the Underwriter shall be deemed to be a
successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. This Agreement shall be governed
by and construed in accordance with the laws of the State of Virginia applicable
to agreements made and to be performed in said State. Except as otherwise set
forth herein, specified times of day refer to City of Richmond time.
SECTION 14. COUNTERPARTS. This Agreement may be executed by any one
or more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such respective counterparts shall together
constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Trust a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriter and the Trust and the Company in accordance with its
terms.
Very truly yours,
HIGHLAND BANKSHARES, INC.
By: ______________________________
Title:
HIGHLANDS CAPITAL TRUST I
By: ______________________________
Title: Trustee
By: ______________________________
Title: Trustee
-22-
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
McKINNON & COMPANY, INC.
By:_____________________________
William J. McKinnon, Jr.
President
-23-
<PAGE>
SCHEDULE A
Name of Underwriter Number of Capital Securities
------------------- ----------------------------
Total
-24-
<PAGE>
SCHEDULE B
Underwriting Agreement dated ____________, 199_
Registration Statement No. 333-
Underwriter:
Address of Underwriter:
Title, Purchase Price and Description of Securities:
Title:
1. The initial public offering price per security for the Capital
Securities, determined as provided in said Section 2, shall be
_____________.
2. The compensation per Capital Securities to be paid by the Company
to the Underwriter in respect of its commitments hereunder shall be
________.
-25-
Exhibit 4.1
CERTIFICATE OF TRUST OF
HIGHLANDS CAPITAL TRUST I
THIS Certificate of Highlands Capital Trust I (the "Trust"), dated
October 3, 1997, is being duly executed and filed by Wilmington Trust Company, a
Delaware banking corporation, as trustee, to form a business trust under the
Delaware Business Trust Act (12 Del. C. ss. 3801 et. seq.).
1. Name. The name of the business trust formed hereby is Highlands
Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective
upon filing.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust,
have executed this Certificate of Trust as of the date first above written.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ James P. Lawler
----------------------------
Name: James P. Lawler
Title: Vice President
Exhibit 4.2
EXECUTION COPY
================================================================================
AMENDED AND RESTATED
DECLARATION OF TRUST
between
HIGHLANDS BANKSHARES, INC., as Depositor,
WILMINGTON TRUST COMPANY,
as Property Trustee,
WILMINGTON TRUST COMPANY,
as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of CLOSING DATE
HIGHLANDS CAPITAL TRUST I
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I -- Defined Terms.....................................................2
SECTION 1.01. Definitions...................................................2
ARTICLE II -- Continuation of the Trust.......................................14
SECTION 2.01. Name.........................................................14
SECTION 2.02. Office of the Delaware Trustee; Principal Place
of Business..................................................14
SECTION 2.03. Organizational Expenses......................................14
SECTION 2.04. Issuance of the Capital Securities...........................14
SECTION 2.05. Issuance of the Common Securities; Subscription and
Purchase of Junior Subordinated Debt Securities..............15
SECTION 2.06. Declaration of Trust.........................................15
SECTION 2.07. Authorization to Enter into Certain Transactions.............16
SECTION 2.08. Assets of Trust..............................................20
SECTION 2.09. Title to Trust Property......................................20
ARTICLE III -- Payment Account................................................21
SECTION 3.01. Payment Account..............................................21
ARTICLE IV -- Distributions; Redemption.......................................21
SECTION 4.01. Distributions................................................21
SECTION 4.02. Redemption...................................................22
SECTION 4.03. Subordination of Common Securities...........................25
SECTION 4.04. Payment Procedures...........................................26
SECTION 4.05. Tax Returns and Reports......................................26
SECTION 4.06. Payment of Taxes; Duties of the Trust........................26
SECTION 4.07. Payments Under Indenture.....................................27
ARTICLE V -- Trust Securities Certificates....................................27
SECTION 5.01. Initial Ownership............................................27
SECTION 5.02. Trust Securities Certificates................................27
SECTION 5.03. Execution and Delivery of Trust Securities Certificates......28
SECTION 5.04. Global Capital Security......................................28
SECTION 5.05. Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Capital
Securities Certificates......................................30
SECTION 5.06. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates......................................32
SECTION 5.07. Persons Deemed Securityholders...............................32
SECTION 5.08. Access to List of Securityholders' Names and Addresses.......33
SECTION 5.09. Maintenance of Office or Agency; Transfer Agent..............33
SECTION 5.10. Appointment of Paying Agent..................................33
SECTION 5.11. Ownership of Common Securities by Depositor..................34
SECTION 5.12. Notices to Clearing Agency...................................34
SECTION 5.13. Rights of Securityholders....................................34
ARTICLE VI -- Acts of Securityholders; Meetings; Voting.......................37
SECTION 6.01. Limitations on Capital Securityholder's Voting Rights........37
SECTION 6.02. Notice of Meeting............................................38
SECTION 6.03. Meetings of Securityholders..................................38
SECTION 6.04. Voting Rights................................................39
SECTION 6.05. Proxies......................................................39
SECTION 6.06. Securityholder Action by Written Consent.....................39
SECTION 6.07. Record Date for Voting and Other Purposes....................40
SECTION 6.08. Acts of Securityholders......................................40
SECTION 6.09. Inspection of Records........................................41
ARTICLE VII -- Representations and Warranties.................................41
SECTION 7.01. Representations and Warranties of the Property
Trustee and the Delaware Trustee.............................41
SECTION 7.02. Representations and Warranties of Depositor..................43
ARTICLE VIII -- The Trustees..................................................43
<PAGE>
SECTION 8.01. Certain Duties and Responsibilities..........................43
SECTION 8.02. Events of Default Notices; Deferral of Interest
Payment Notices..............................................45
SECTION 8.03. Certain Rights of Property Trustee...........................45
SECTION 8.04. Not Responsible for Recitals.................................48
SECTION 8.05. May Hold Securities..........................................48
SECTION 8.06. Compensation, Indemnity, Fees................................48
SECTION 8.07. Corporate Property Trustee Required; Eligibility
of Trustees..................................................50
SECTION 8.08. Conflicting Interests........................................51
SECTION 8.09. Co-Trustees and Separate Trustee.............................51
SECTION 8.10. Resignation and Removal; Appointment of Successor............53
SECTION 8.11. Acceptance of Appointment by Successor.......................54
SECTION 8.12. Merger, Conversion, Consolidation or Succession
to Business..................................................55
SECTION 8.13. Preferential Collection of Claims Against Depositor
or Trust.....................................................56
SECTION 8.14. Reports by Property Trustee..................................56
SECTION 8.15. Reports to the Property Trustee..............................57
SECTION 8.16. Evidence of Compliance with Conditions Precedent.............57
SECTION 8.17. Number of Trustees...........................................57
SECTION 8.18. Delegation of Power..........................................58
ARTICLE IX -- Termination, Liquidation and Merger.............................58
SECTION 9.01. Termination Upon Expiration Date; Termination
Upon Special Event...........................................58
SECTION 9.02. Early Termination............................................58
SECTION 9.03. Termination..................................................59
SECTION 9.04. Liquidation..................................................59
SECTION 9.05. Mergers, Consolidations, Amalgamations or
Replacements of the Trust....................................61
ARTICLE X -- Miscellaneous Provisions.........................................62
SECTION 10.01. Limitation of Rights of Securityholders.....................62
SECTION 10.02. Liability of the Depositor..................................62
SECTION 10.03. Amendment...................................................63
SECTION 10.04. Separability................................................64
SECTION 10.05. Governing Law...............................................64
SECTION 10.06. Payments Due on Non-Business Day............................64
SECTION 10.07. Successors..................................................65
SECTION 10.08. Headings....................................................65
SECTION 10.09. Reports, Notices and Demands................................65
SECTION 10.10. Agreement Not to Petition...................................66
SECTION 10.11. Trust Indenture Act; Conflict with Trust
Indenture Act...............................................66
SECTION 10.12. Acceptance of Terms of Declaration of Trust,
Guarantee and Indenture.....................................67
SECTION 10.13. Execution in Counterparts...................................67
2
<PAGE>
HIGHLANDS CAPITAL TRUST I
Certain Sections of this Declaration of Trust relating to Sections 310
through 318 of the Trust Indenture Act of 1939:
Trust Indenture Declaration of
Act Section Trust Section
- --------------- --------------
ss.310 (a)(1)......................................... 8.07
(a)(2)......................................... 8.07
(a)(3)......................................... 8.09
(a)(4)......................................... 2.07(a)(ii)
(b)............................................ 8.08
ss.311 (a)............................................ 8.13
(b)............................................ 8.13
ss.312 (a)............................................ 5.08
(b)............................................ 5.08
(c)............................................ 5.08
ss.313 (a)............................................ 8.14(a)
(a)(4)......................................... 8.14(b)
(b)(1)......................................... 8.14(a)
(b)(2)......................................... 8.14(b)
(c)............................................ 10.09
(d)............................................ 8.14(c)
ss.314 (a)............................................ 8.15
(b)............................................ Not Applicable
(c)(1)......................................... 8.16
(c)(2)......................................... 8.16
(c)(3)......................................... Not Applicable
(d)............................................ Not Applicable
(e)............................................ 1.01, 8.16
ss.315 (a)............................................ 8.01(a), 8.03(a)
(b)............................................ 8.02
(c)............................................ 8.01(a)
(d)............................................ 8.01, 8.03
(e)............................................ Not Applicable
ss.316 (a)............................................ Not Applicable
(a)(1)(A)...................................... Not Applicable
(a)(1)(B)...................................... Not Applicable
(a)(2)......................................... Not Applicable
(b)............................................ 5.13
(c)............................................ 6.07
ss.317 (a)(1)......................................... Not Applicable
(a)(2)......................................... Not Applicable
(b)............................................ 5.10
ss.318 (a)............................................ 10.11
- -----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Declaration of Trust.
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST,
dated as of CLOSING DATE, between (i) HIGHLANDS
BANKSHARES, INC., a Virginia corporation (including
any successors or assigns, the "Depositor"), (ii)
WILMINGTON TRUST COMPANY, a Delaware corporation, as
property trustee (in such capacity, the "Property
Trustee" and, in its separate corporate capacity and
not in its capacity as Property Trustee, the "Trust
Company"), (iii) WILMINGTON TRUST COMPANY, a Delaware
corporation, as Delaware trustee (the "Delaware
Trustee"), (iv) ____________________, an individual,
____________________, an individual, and
____________________, an individual, each of whose
address is c/o Highlands Bankshares, Inc. (each an
"Administrative Trustee" and, collectively, the
"Administrative Trustees") (the Property Trustee, the
Delaware Trustee and the Administrative Trustees are
referred to collectively herein as the "Trustees")
and (v) the several Holders, as hereafter defined.
W I T N E S S E T H :
WHEREAS the Depositor, the Delaware Trustee and the Administrative
Trustees have heretofore duly declared and established a business trust pursuant
to the Delaware Business Trust Act by entering into a certain Declaration of
Trust, dated as of ____________ (the "Original Declaration of Trust"), and by
the execution and filing by the Delaware Trustee and the Administrative Trustees
with the Secretary of State of the State of Delaware of the Certificate of
Trust, filed on ____________ (the "Certificate of Trust"); and attached as
Exhibit A; and
WHEREAS the Depositor, the Delaware Trustee and the Administrative
Trustees desire to amend and restate the original Declaration of Trust in its
entirety as set forth herein to provide for, among other things (i) the issuance
and sale of the Common Securities by the Trust to the Depositor, (ii) the
issuance and sale of the Capital Securities (the "Capital Securities") by the
Trust pursuant to the Underwriting Agreement, as hereafter defined, (iii) the
acquisition by the Trust from the Depositor of all of the right, title and
interest in the Junior Subordinated Debt Securities, as hereafter defined, and
(iv) the appointment of Wilmington Trust Company, a Delaware corporation (in
such capacity, the "Property Trustee" and, in its separate corporate capacity
and not in its capacity as Property Trustee, the "Trust Company");
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the
<PAGE>
benefit of the Securityholders, as hereafter defined, hereby amends and restates
the Original Declaration of Trust in its entirety and agrees as follows:
ARTICLE I
Defined Terms
Section 1.01. Definitions. For all purposes of this Declaration
of Trust, except as otherwise expressly provided or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Declaration of Trust; and
(d) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Declaration of Trust as a whole and not
to any particular Article, Section or other subdivision; and
"Act" has the meaning specified in Section 6.08.
"Additional Distribution" has the meaning specified in Section
4.01(c).
"Adjusted Treasury Rate" means, with respect to any Redemption
Date, the Treasury Rate plus (i) ___% if such Redemption Date occurs on or
before __________, ____, or (ii) ___% if such Redemption Date occurs after
__________, ____.
"Administrative Action" has the meaning specified in the
definition of "Tax Event" in this Section 1.01.
"Administrative Trustee" means each of ____________________,
_____________________ and ____________________, solely in such Person's capacity
as Administrative Trustee of the Trust continued hereunder and not in such
Person's individual capacity, or such Administrative Trustee's successor in
interest in such capacity, or any successor trustee appointed as herein
provided.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or
2
<PAGE>
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.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Capital Security or beneficial interest therein,
the rules and procedures of the depositary for such Capital Security, in each
case to the extent applicable to such transaction and as in effect from time to
time.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction
in the premises adjudging such Person a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjudication or composition of or in respect of such
Person under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of such Person or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(b) the institution by such Person of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or similar official) of such Person or
of any substantial part of its property or the making by it of an
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due
and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by such Person in furtherance of any such action.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated, and to be in full
3
<PAGE>
force and effect on the date of such certification and delivered to the
Trustees.
"Business Day" means a day other than (a) a Saturday or Sunday,
(b) a day on which banking institutions in the City of Richmond, Virginia are
authorized or required by law or executive order to remain closed or (c) a day
on which the Property Trustee's Corporate Trust Office or the Corporate Trust
Office of the Debenture Trustee is closed for business.
"Capital Securities" means each of the Capital Securities to be
issued on the date hereof, each representing an undivided beneficial interest in
the assets of the Trust, having a Liquidation Amount of $1,000 per Capital
Security and having the rights provided therefor in this Declaration of Trust,
including the right to receive Distributions and a Liquidation Distribution as
provided herein.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
B.
"Capital Securityholder" means a Person in whose name a Capital
Security or Capital Securities is registered in the Securities Register; and any
such Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act.
"Capital Treatment Event" has the meaning specified in Section
1.01 of the Indenture.
"Cede" has the meaning specified in Section 5.02(b).
"Certificate of Trust" has the meaning specified in the preamble
to this Declaration of Trust.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934. The
Depository Trust Company shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" has the meaning specified in the Underwriting
Agreement.
"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
4
<PAGE>
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, each representing
an undivided beneficial interest in the assets of the Trust, having a
Liquidation Amount of $1,000 and having the rights provided therefor in this
Declaration of Trust, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Comparable Treasury Issue" means with respect to any Redemption
Date the United States Treasury security selected by the Quotation 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 that is within a
period from three months before to three months after __________, 20__, 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 of such Reference Treasury Dealer Quotations, or (B) if
the Debenture Trustee obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Corporate Trust Office" means the principal office of the
Property Trustee located in ________________ which, at the time of the execution
of this Declaration of Trust, is located at ________________________________.
"Debenture Event of Default" means an "Event of Default" as
defined in the Indenture.
"Debenture Trustee" means Wilmington Trust Company, a Delaware
corporation and any successor.
"Declaration of Trust" means this Amended and Restated Declaration
of Trust, as the same may be modified, amended or supplemented in accordance
with the applicable provisions hereof, including all exhibits hereto, including,
for all purposes of this Amended and Restated Declaration of Trust, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this Amended and Restated Declaration of Trust and any modification, amendment
or supplement of either, respectively.
5
<PAGE>
"Definitive Capital Securities Certificate" means Capital
Securities Certificates issued in certificated, fully registered form.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. ss.ss. 3801, et seq., as it may be amended from time
to time.
"Delaware Trustee" means the corporation identified as the
"Delaware Trustee" in the preamble to this Declaration of Trust solely in its
capacity as Delaware Trustee of the Trust continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this
Declaration of Trust.
"Determination Date" has the meaning specified in Section 4.01(a).
"Distribution Date" has the meaning specified in Section 4.01(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"Early Termination Event" has the meaning specified in Section
9.02.
"Escrow Agent" means _________________________________.
"Event of Default" means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a
period of 30 days; or
(c) default by the Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in this
Declaration of Trust (other than a covenant or warranty, a default in
the performance or breach of which
6
<PAGE>
is addressed in clause (b) or (c) above), and continuation of such
default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the defaulting Trustee or Trustees
by the Holders of at least 25% in aggregate Liquidation Amount of the
Outstanding Capital Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a
successor Property Trustee within 60 days thereof.
"Expiration Date" has the meaning specified in Section 9.01.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Global Capital Securities" means a beneficial interest in the
Capital Securities, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 5.11.
"Global Capital Securities Certificate" means a certificate
evidencing ownership of Global Capital Securities, substantially in the form
attached as Exhibit B.
"Guarantee" means the Guarantee Agreement executed and delivered
by the Depositor and Wilmington Trust Company, as trustee, contemporaneously
with the execution and delivery of this Declaration of Trust, for the benefit of
the Holders of the Trust Securities, as amended from time to time.
"Holder" or "Securityholder" means a Person in whose name a Trust
Security or Trust Securities is registered in the Securities Register; any such
Person shall be deemed to be a beneficial owner of such Trust Securities within
the meaning of the Delaware Business Trust Act; provided, however, that in
determining whether the Holders of the requisite amount of Capital Securities
have voted on any matter provided for in this Declaration of Trust, then for the
purpose of any such determination, so long as Definitive Capital Securities
Certificates have not been issued, the term Securityholders or Holders as used
herein shall refer to the Owners.
"Indenture" means the Junior Subordinated Indenture, dated as of
CLOSING DATE, between the Depositor and the Debenture Trustee, as trustee, (as
amended or supplemented from time to time) relating to the issuance of the
Junior Subordinated Debt Securities.
7
<PAGE>
"Investment Company Event" has the meaning specified in Section
1.01 of the Indenture.
"Junior Subordinated Debt Securities" means $____________ in
aggregate principal amount of the Depositor's Junior Subordinated Debt
Securities due ____________, issued pursuant to the Indenture.
"Junior Subordinated Debt Securities Redemption Date" means, with
respect to any Junior Subordinated Debt Securities to be redeemed under the
Indenture, the date fixed for redemption under the Indenture or pursuant to an
Officers' Certificate in accordance with the terms of the Indenture.
"Letter of Representations" means the agreement between the Trust,
the Property Trustee and The Depository Trust Company ("DTC"), as the initial
Clearing Agency, dated as of the Closing Date.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed
of trust, adverse ownership interest, hypothecation, assignment, security
interest or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to that portion
of the principal amount of Junior Subordinated Debt Securities to be
contemporaneously redeemed in accordance with the Indenture allocated to the
Trust Securities based upon their relative Liquidation Amounts and the proceeds
of which will be used to pay the Redemption Price of such Trust Securities, and
(b) with respect to a distribution of Junior Subordinated Debt Securities to
Holders in connection with a dissolution or liquidation of the Trust, Junior
Subordinated Debt Securities having a principal amount equal to the Liquidation
Amount of the Trust Securities of the Holder to whom such Junior Subordinated
Debt Securities are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debt Securities are to be distributed to Holders of Trust Securities in
connection with a termination and liquidation of the Trust pursuant to Section
9.04(a).
"Liquidation Distribution" has the meaning specified in Section
9.04(d).
"1940 Act" means the Investment Company Act of 1940.
8
<PAGE>
"Officers' Certificate" means a certificate signed by the Chairman
and Chief Executive Officer, President or a Vice President, and by the
Treasurer, an Associate Treasurer, an Assistant Treasurer, the Controller, the
Secretary or an Assistant Secretary, of the Depositor, and delivered to the
appropriate Trustee. One of the officers signing an Officers' Certificate given
pursuant to Section 8.16 shall be the principal executive, financial or
accounting officer of the Depositor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration of Trust shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Trust, the Property Trustee or the Depositor, but not an
employee of any thereof, and which opinion shall be reasonably acceptable to the
Property Trustee.
"Original Declaration of Trust" has the meaning specified in the
preamble to this Declaration of Trust.
"Other Capital Securities" means Capital Securities that are not
Global Capital Securities.
"Outstanding", with respect to Capital Securities, means, as of
the date of determination, all Capital Securities theretofore executed and
delivered under this Declaration of Trust, except;
(a) Capital Securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b) Capital Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent for the benefit of the Holders of such
Capital Securities; provided
9
<PAGE>
that, if such Capital Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Declaration of Trust;
and
(c) Capital Securities that have been paid or in exchange for or
in lieu of which other Capital Securities have been executed and
delivered pursuant to Sections 5.02, 5.04, 5.05, 5.11 and 5.13;
provided, however, that in determining whether the Holders of the
requisite Liquidation Amount of the Outstanding Capital Securities have
given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Capital Securities owned by the Depositor, any
Trustee or any Affiliate of the Depositor or any Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in
determining whether any Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or
waiver, only Capital Securities that a Responsible Officer of such
Trustee actually knows to be so owned shall be so disregarded and (b)
the foregoing shall not apply at any time when all of the outstanding
Capital Securities are owned by the Depositor, one or more of the
Trustees and/or any such Affiliate. Capital Securities so owned that
have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Administrative Trustees
the pledgee's right so to act with respect to such Capital Securities
and that the pledgee is not the Depositor or any Affiliate of the
Depositor.
"Owner" means each Person who is the beneficial owner of a Global
Capital Security as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the Owner, then as reflected in the records
of a Person maintaining an account with such Clearing Agency (directly or
indirectly), in accordance with the rules of such Clearing Agency.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.10 and shall initially be the Trust Company.
"Payment Account" means a segregated corporate trust account,
without interest, maintained by the Property Trustee with the Trust Company in
its trust department for the benefit of the Securityholders in which all amounts
paid in respect of the Junior Subordinated Debt Securities will be held and from
which the Property Trustee shall make payments to the Securityholders in
accordance with Sections 4.01 and 4.02.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation, unincorporated
organization or government or any agency or political subdivision thereof.
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"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Declaration of
Trust solely in its capacity as Property Trustee of the Trust continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
"Purchasers" means ___________________________________.
"Quotation Agent" means Wilmington Trust Company, a Delaware
corporation, and its successors; provided, however, that if the foregoing shall
cease to be a primary U.S. Government securities dealer (a "Primary Treasury
Dealer"), the Depositor shall substitute therefor another Primary Treasury
Dealer.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Declaration
of Trust, provided, however, that each Junior Subordinated Debt Securities
Redemption Date and the Stated Maturity of the Junior Subordinated Debt
Securities shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means:
(a) in the case of a redemption, other than as provided in
Paragraph (b) below, the following prices expressed in percentages of the
Liquidation Amount, together with accumulated Distributions to but excluding the
date fixed for redemption, if redeemed during the 12-month period beginning
__________:
Year Redemption Price
____ ________
____ ________
____ ________
____ ________
____ ________
and 100% on or after __________, 20__.
(b) in the case of a redemption prior to __________, 20__
following a Tax Event, Investment Company Event or Capital Treatment Event, an
amount for each Capital Security equal to the Make-Whole Amount for a
corresponding $1,000 principal amount of Junior Subordinated Debentures,
together with accumulated distributions to but excluding the date fixed for
redemption. The "Make-Whole Amount" will be equal to the greater of (i) 100%
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of the principal amount of such Junior Subordinated Debentures, and (ii) as
determined by a Quotation Agent, THE SUM OF THE PRESENT VALUES OF THE PRINCIPAL
AMOUNT AND PREMIUM PAYABLE AS PART OF THE Redemption Price with respect to an
optional redemption of such Junior Subordinated Debentures on __________, 20__,
together with the present values of scheduled payments of interest (not
including the portion of any such payments of interest accrued as of the
Redemption Date) from the Redemption Date to __________, 20__ (the "Remaining
Life"), in each case 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. The Redemption Price in the case of a redemption on or after ___________,
20__ following a Tax Event, Investment Company Event or Capital Treatment Event
shall equal the Redemption Price then applicable to a redemption under Paragraph
(a) above.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii)
any other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Depositor.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Debenture 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 Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
Richmond, Virginia time, on the third Business Day preceding such Redemption
Date.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Responsible Officer" means, when used with respect to the
Property Trustee, any officer assigned to the Corporate Trust Office, including
any managing director, vice president, assistant vice president, assistant
treasurer, assistant secretary or any other officer of the Property Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration for
this Declaration of Trust, and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 5.05.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Trust Securities is registered in the Securities Register; any such
Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business
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Trust Act; provided, however, that in determining whether the Holders of the
requisite amount of Capital Securities have voted on any matter provided for in
this Declaration of Trust, then for the purpose of any such determination, so
long as Definitive Capital Securities Certificates have not been issued, the
term Securityholders or Holders as used herein shall refer to the Owners.
"Stated Maturity" has the meaning specified in Section 1.01 of the
Indenture.
"Tax Event" has the meaning specified in Section 1.01 of the
Indenture.
"Transfer Agent" means the Trust Company as set forth in the
preamble to this Declaration of Trust.
"Treasury Rate" means (i) the yield, under the heading that
represents the average for the week immediately prior to the calculation date,
appearing in the most recently published statistical release designated "H.15
(519)" or any successor publication that is published weekly by the Board of
Governors of the Federal Reserve System and that 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 Highlands Capital Trust I.
"Trust Company" has the meaning specified in the preamble to this
Declaration of Trust.
"Trust Indenture Act" has the meaning specified in Section 1.01 of
the Indenture.
"Trust Property" means (a) the Junior Subordinated Debt
Securities, (b) the rights of the Property Trustee under the Guarantee, (c) any
cash or deposit in, or owing to, the Payment Account and (d) all proceeds and
rights in respect of the foregoing.
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"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Capital Securities Certificates.
"Trust Security" means any one of the Common Securities or the
Capital Securities.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriter" shall mean McKinnon & Company, Inc., a ____________
corporation.
"Underwriting Agreement" means the Underwriting Agreement, dated
as of ____________, between the Trust, the Depositor and the Underwriter.
ARTICLE II
Continuation of the Trust
SECTION 2.01. Name. The Trust continued hereby shall be known as
"Highlands Capital Trust I", as such name may be modified from time to time by
the Administrative Trustees following written notice to the Holders and the
other Trustees, in which name the Trustees may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
SECTION 2.02. Office of the Delaware Trustee; Principal Place of
Business. The address of the Delaware Trustee in the State of Delaware is
Wilmington Trust Company, 1100 N. Market Street, Attention: Corporate Trust
Administration, Wilmington, Delaware 19890, or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice to the
Securityholders and the Depositor. The principal executive office of the Trust
is in care of Highlands Bankshares, Inc., _________________________.
SECTION 2.03. Organizational Expenses. The Depositor, as
borrower on the Junior Subordinated Debt Securities, shall pay all expenses of
the Trust as they arise or shall, upon request of any Trustee, promptly
reimburse such Trustee for any such expenses paid by such Trustee. The Depositor
shall make no claim upon the Trust Property for the payment of such expenses.
SECTION 2.04. Issuance of the Capital Securities. The Capital
Securities to be issued will be limited to $____________ aggregate Liquidation
Amount outstanding at any one time.
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On ____________, the Depositor, on behalf of the Trust, and
pursuant to the original Declaration of Trust, and the Underwriter executed and
delivered the Underwriting Agreement. Contemporaneously with the execution and
delivery of this Declaration of Trust, an Administrative Trustee, on behalf of
the Trust, shall execute or cause to be executed in accordance with Section 5.02
and delivered to the Escrow Agent, a Definitive Capital Securities Certificate,
registered in the names of the Purchasers, in an aggregate amount of Capital
Securities having an aggregate Liquidation Amount of $____________ against
receipt of the aggregate purchase price of such Capital Securities equal to
______% of the Liquidation Amount multiplied by the number of Capital Securities
being purchased, which amount the Administrative Trustee shall promptly deliver
to the Property Trustee.
SECTION 2.05. Issuance of the Common Securities; Subscription and
Purchase of Junior Subordinated Debt Securities. Contemporaneously with the
execution and delivery of this Declaration of Trust, an Administrative Trustee,
on behalf of the Trust, shall execute or cause to be executed in accordance with
Section 5.02(a) and delivered to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of _____ Common
Securities having an aggregate Liquidation Amount of $____________ against
payment by the Depositor of $____________ to the Trust. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall subscribe to
and purchase from the Depositor Junior Subordinated Debt Securities, registered
in the name of the Property Trustee and held for the benefit of the Holders of
the Capital Securities having an aggregate principal amount equal to
$____________, and, in satisfaction of the purchase price for such Junior
Subordinated Debt Securities, the Trust shall deliver to the Depositor the sum
of $____________.
SECTION 2.06. Declaration of Trust. The exclusive purposes and
functions of the Trust are to (a) issue and sell Trust Securities, (b) use the
proceeds from the sale of Trust Securities to acquire the Junior Subordinated
Debt Securities, (c) receive payments to be made with respect to the Junior
Subordinated Debt Securities, and (d) engage in only those other activities
necessary or incidental thereto such as registering the transfer of the Capital
Securities. The Depositor hereby appoints the Trustees as trustees of the Trust,
to have all the rights, powers and duties to the extent set forth herein, and
the Trustees hereby accept such appointment. The Property Trustee hereby
declares that it will hold the Trust Property in trust upon and subject to the
conditions set forth herein for the benefit of the Trust and the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of
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the Property Trustee or the Administrative Trustees set forth herein. The
Delaware Trustee shall be one of the Trustees of the Trust for the sole and
limited purpose of fulfilling the requirements of Section 3807 of the Delaware
Business Trust Act.
SECTION 2.07. Authorization to Enter into Certain Transactions.
(a) The Trustees shall conduct the affairs of the Trust in accordance with the
terms of this Declaration of Trust. Subject to the limitations set forth in
paragraph (b) of this Section and in accordance with the following provisions
(i) and (ii), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Declaration of Trust, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee shall have
the power and authority to act on behalf of the Trust with respect to
the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Underwriting
Agreement, the Letter of Representations and such other agreements
as may be necessary or desirable in connection with the purposes
and function of the Trust;
(C) assisting in the registration of the Capital Securities
under the Securities Act, and under state securities or blue sky
laws, and the qualification of this Declaration of Trust as a
trust indenture under the Trust Indenture Act;
(D) assisting in the listing, if any, of the Capital
Securities upon such securities exchange or exchanges as shall be
determined by the Depositor and the registration of the Capital
Securities under the Securities Exchange Act of 1934 (the
"Exchange Act"), and the preparation and filing of all periodic
and other reports and other documents pursuant to the foregoing;
(E) the sending of notices (other than notices of default)
and other information regarding the Trust Securities and the
Junior Subordinated Debt Securities to the Securityholders in
accordance with this Declaration of Trust;
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(F) the appointment of a Paying Agent, Transfer Agent and
Securities Registrar in accordance with this Declaration of Trust;
(G) registering transfer of the Trust Securities in
accordance with this Declaration of Trust;
(H) to the extent provided in this Declaration of Trust,
the winding up of the affairs and liquidation of the Trust and the
preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of Delaware;
(I) unless otherwise determined by the Depositor, the
Property Trustee or the Administrative Trustees or as otherwise
required by the Delaware Business Trust Act or the Trust Indenture
Act, to execute on behalf of the Trust (either acting alone or
together with any or all of the Administrative Trustees) any
documents that the Administrative Trustees have the power to
execute pursuant to this Declaration of Trust; and
(J) the taking of any action incidental to the foregoing as
the Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Declaration of Trust
for the benefit of the Securityholders (without consideration of
the effect of any such action on any particular Securityholders).
(ii) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with respect to
the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Junior Subordinated Debt Securities;
(C) the collection of interest, principal and any other
payments made in respect of the Junior Subordinated Debt
Securities in the Payment Account;
(D) the distribution of amounts owed to the Securityholders
in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Junior Subordinated Debt Securities;
(F) the sending of notices of default and other information
regarding the Trust Securities and the Junior Subordinated Debt
Securities to the
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Securityholders in accordance with this Declaration of Trust;
(G) the distribution of the Trust Property in accordance
with the terms of this Declaration of Trust;
(H) to the extent provided in this Declaration of Trust,
the winding up of the affairs of and liquidation of the Trust and
the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of Delaware;
(I) after an Event of Default (other than an Event of
Default pursuant to paragraph (b), (c), (d) or (e) of the
definition of such term if such Event of Default is by or with
respect to the Property Trustee) the taking of any action
incidental to the foregoing as the Property Trustee may from time
to time determine is necessary or advisable to give effect to the
terms of this Declaration of Trust and protect and conserve the
Trust Property for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder); and
(J) except as otherwise provided in this Section
2.07(a)(ii), the Property Trustee shall have none of the duties,
liabilities, powers or authority of the Administrative Trustees
set forth in Section 2.07(a)(i).
(b) So long as this Declaration of Trust remains in effect, the
Trust (or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transactions except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this Declaration of
Trust, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or
otherwise dispose of any of the Trust Property or interests therein, including
to Securityholders, except as expressly provided herein, (iii) intentionally
take any action that would cause the Trust to fail or cease to qualify as a
"grantor trust" or as other than an association taxable as a corporation for
United States federal income tax purposes, (iv) incur any indebtedness for
borrowed money or issue any other debt, (v) take or consent to any action that
would result in the placement of a Lien on any of the Trust Property, (vi)
invest any proceeds received by the Trust from holding the Junior Subordinated
Debt Securities, but shall distribute all such proceeds to Holders pursuant to
the terms of this Declaration of Trust and of the Trust Securities, (vii)
acquire any assets other than the Trust Property, (viii) possess any power or
otherwise act in such a way as to vary the Trust Property, (ix) possess any
power or otherwise act in such a way as to vary the terms of the Trust
Securities in any way whatsoever (except to the extent
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expressly authorized in this Declaration of Trust or by the terms of the Trust
Securities), (x) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the Trust Securities, or
(xi) other than as provided in this Declaration of Trust or by the terms of the
Trust Securities, so long as any Junior Subordinated Debt Securities are held by
the Property Trustee, (A) direct the time, method and place of exercising any
trust or power conferred upon the Debenture Trustee with respect to the Junior
Subordinated Debt Securities, (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 Junior Subordinated Debt Securities shall be due and
payable, or (D) consent to any amendment, modification, or termination of the
Indenture or the Junior Subordinated Debt Securities where such consent shall be
required unless the Trust shall have received an Opinion of Counsel of a
independent law firm to the effect that such amendment, modification or
termination will not cause more than an insubstantial risk that the Trust will
be deemed an Investment Company required to be registered under the 1940 Act,
that the Trust will not be classified as a grantor trust or will be classified
as an association taxable as a corporation for United States federal income tax
purposes or that the Junior Subordinated Debt Securities will not be classified
as indebtedness for such purposes. The Administrative Trustees shall defend all
claims and demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the Securityholders in
their capacity as Securityholders.
(c) In connection with the issuance and sale of the Trust
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Declaration of Trust are hereby ratified and confirmed in all respects):
(i) the preparation by the Trust of a prospectus relating to the
Trust Securities and the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Trust Securities,
including any amendments thereto;
(ii) the determination of the states in which to take appropriate
action to qualify or register for sale all or part of the Trust
Securities and the determination of any and all such acts, other than
actions that must be taken by or on behalf of the Trust, and the advice
to the Trustees of actions they must take on behalf of the Trust, and
the preparation for execution and filing of any documents to be
executed and filed by the Trust or on behalf of the Trust,
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as the Depositor deems necessary or advisable in order to comply with
the applicable laws of any such states;
(iii) the preparation for filing by the Trust with the Commission
and the execution on behalf of the Trust of a registration statement on
Form 8-A relating to the registration of the Trust Securities under
Section 12(b) or 12(g) of the Exchange Act, including any amendments
thereto;
(iv) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Trust Securities and such other agreements as may be necessary or
desirable in connection with the consummation of the transactions
contemplated thereby, all in its capacity as Depositor and on behalf of
the Trust; and
(v) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, each
Administrative Trustee is authorized and directed to conduct the affairs of the
Trust and to operate the Trust so that the Trust will not (i) be deemed to be an
"investment company" required to be registered under the 1940 Act, or (ii) fail
to be classified as a grantor trust or as other than an association taxable as a
corporation for United States federal income tax purposes and so that the Junior
Subordinated Debt Securities will be treated as indebtedness of the Depositor
for United States federal income tax purposes. In this connection, the Depositor
and each of the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this Declaration
of Trust, that each of the Depositor and each Administrative Trustee determines
in its discretion to be necessary or desirable for such purposes, as long as
such action does not adversely affect in any material respect the interests of
the Holders of the Trust Securities.
SECTION 2.08. Assets of Trust. The assets of the Trust shall
consist solely of the Trust Property.
SECTION 2.09. Title to Trust Property. Legal title to all Trust
Property shall be vested at all times in the Property Trustee (in its capacity
as such) and shall be held and administered by the Property Trustee for the
benefit of the Trust and the Securityholders in accordance with this Declaration
of Trust.
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ARTICLE III
Payment Account
SECTION 3.01. Payment Account. (a) On or prior to the Closing
Date, the Property Trustee shall establish the Payment Account. The Property
Trustee and any agent of the Property Trustee shall have exclusive control and
sole right of withdrawal with respect to the Payment Account for the purpose of
making deposits in and withdrawals from the Payment Account in accordance with
this Declaration of Trust. All moneys and other property deposited or held from
time to time in the Payment Account shall be held by the Property Trustee in the
Payment Account for the exclusive benefit of the Securityholders and for
distribution as herein provided, including (and subject to) any priority of
payments provided for herein or by applicable law.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Junior Subordinated Debt
Securities. Amounts held in the Payment Account shall not be invested by the
Property Trustee pending distribution thereof.
ARTICLE IV
Distributions; Redemption
SECTION 4.01. Distributions. (a) Distributions on the Trust
Securities shall be cumulative and will accumulate whether or not there are
funds of the Trust available for the payment of Distributions. Distributions
shall accrue from CLOSING DATE, and, except in the event (and to the extent)
that the Depositor exercises its right to defer the payment of interest on the
Junior Subordinated Debt Securities pursuant to the Indenture, shall be payable
quarterly in arrears on the ____ day of ________, ________, ________ and
________ of each year, commencing on ____________. If any date on which a
Distribution is otherwise payable is not a Business Day, then the payment of
such Distribution shall be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay), in
each case with the same force and effect as if made on such date (each date on
which distributions are payable in accordance with this Section 4.01(a), a
"Distribution Date"). Accrued Distributions that are not paid on the applicable
Distribution Date will bear interest on the amount thereof (to the extent
permitted by law) at a fixed annual rate equal to _____%, compounded quarterly
from the relevant Distribution Date in accordance with Section 2.02 of the
Indenture.
(b) The Trust Securities represent undivided beneficial ownership
interests in the Trust Property, and,
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assuming payments of interest on the Junior Subordinated Debt Securities are
made when due (and before giving effect to Additional Distributions, defined
below, if applicable), Distributions on the Trust Securities shall be payable at
a fixed annual rate equal to _____% of the Liquidation Amount of the Trust
Securities in accordance with Section 2.02 of the Indenture. The amount of
Distributions payable for any period shall be computed on the basis of the
actual number of days elapsed in a year of twelve 30-day months; except that the
amount of interest payable for any partial period shall be computed on the basis
of the actual number of days elapsed in a 360-day year. The amount of
Distributions payable for any period shall include the Additional Distributions,
if any.
(c) So long as no Debenture Event of Default has occurred and is
continuing, the Depositor has the right under the Indenture to defer the payment
of interest on the Junior Subordinated Debt Securities at any time and from time
to time for a period not exceeding 20 consecutive quarterly periods (an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debt Securities. As a consequence of
any such deferral, quarterly Distributions on the Trust Securities by the Trust
will also be deferred during any Extension Period (and the amount of
Distributions to which Holders are entitled will accumulate additional
Distributions thereon at a fixed annual rate equal to _____% thereof, compounded
quarterly from the relevant payment date for such Distributions during any such
Extension Period, to the extent permitted by applicable law, but not exceeding
the interest rate then accruing on the Junior Subordinated Debt Securities (each
such increase in Distribution, as described in this Section 4.01(c), an
"Additional Distribution"). No interest or other amounts shall be due and
payable during an Extension Period except at the end thereof.
(d) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on-hand and
available in the Payment Account for the payment of such Distributions.
(e) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders of record as they appear on
the Securities Register for the Trust Securities at the close of the Business
Day next preceding each ____ day of ________, ________, ________ and ________.
SECTION 4.02. Redemption. (a) On each Junior Subordinated Debt
Securities Redemption Date and on the Stated Maturity of the Junior Subordinated
Debt Securities, the Trust will be required to redeem a Like Amount of Trust
Securities at the applicable Redemption Price.
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(b) Other than on the Stated Maturity, notice of redemption shall
be given by the Property Trustee by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the Redemption Date to each
Holder of Trust Securities to be redeemed, at such Holder's address appearing in
the Security Register. All notices of redemption shall identify the Trust
Securities to be redeemed (including CUSIP numbers) and shall state:
(i) the Redemption Date;
(ii) the applicable Redemption Price, or, if the Redemption
Price cannot be calculated prior to the time the notice is
required to be sent, the estimate of the Redemption Price provided
pursuant to the Indenture together with a statement that it is an
estimate and that the actual Redemption Price will be calculated
on the third Business Day prior to the Redemption Date (and, if an
estimate is provided, a further notice shall be sent of the actual
Redemption Price on the date, or as soon as practicable
thereafter, that notice of such actual Redemption Price is
received pursuant to the Indenture);
(iii) the CUSIP number or CUSIP numbers of the Capital
Securities affected;
(iv) if less than all the Outstanding Trust Securities are to
be redeemed, the identification and the total Liquidation Amount
of the particular Trust Securities to be redeemed; and
(v) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be
redeemed and that Distributions thereon will cease to accrue on
and after such date.
The Trust in issuing the Trust Securities may use "CUSIP", and/or
"private placement" numbers (if then generally in use), and, if so, the Property
Trustee shall indicate the "CUSIP" or "private placement" numbers of the Trust
Securities in notices of redemption and related materials as a convenience to
Securityholders; provided that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the Trust
Securities or as contained in any notice of redemption and related material. The
Depositor shall promptly notify the Property Trustee of any change in such
numbers.
(c) The Trust Securities redeemed on each Redemption Date shall
be redeemed at the applicable Redemption Price with the proceeds from the
contemporaneous redemption of Junior Subordinated Debt Securities. Redemptions
of the Trust Securities shall be made and the applicable Redemption Price
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shall be payable on each Redemption Date only to the extent that the Trust has
funds then on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Trust Securities, then, by 12:00 noon, Richmond, Virginia time,
on the Redemption Date, subject to Section 4.02(c), the Property Trustee will,
so long as the Capital Securities are in book-entry-only form, irrevocably
deposit with the Clearing Agency for the Capital Securities funds sufficient to
pay the applicable Redemption Price and will give such Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof. With respect to Capital Securities held in certificated form,
the Property Trustee, subject to Section 4.02(c), will irrevocably deposit with
the Paying Agent funds sufficient to pay the applicable Redemption Price and
will give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof upon surrender of their Capital
Securities Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Securities Register on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of Securityholders
holding Trust Securities so called for redemption will cease, except the right
of such Securityholders to receive the applicable Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest,
and such Capital Securities will cease to be outstanding. In the event that any
date on which any applicable Redemption Price is payable is not a Business Day,
then payment of the applicable 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. In the event that payment of the applicable Redemption
Price in respect of any Trust Securities called for redemption is improperly
withheld or refused and not paid either by the Trust or by the Depositor
pursuant to the Guarantee, Distributions on such Trust Securities will continue
to accrue, at the then applicable rate, from the Redemption Date originally
established by the Trust for such Trust Securities to the date such applicable
Redemption Price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the applicable
Redemption Price.
(e) Payment of the applicable Redemption Price on, and any
distributions of Junior Subordinated Debt Securities to Holders of, the Trust
Securities shall be made to the Holders
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thereof as they appear on the Securities Register on the relevant record date,
and, with respect to Trust Securities held in certificated form, upon surrender
of such certificated Trust Securities to the Paying Agent.
(f) Subject to Section 4.03(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Trust Securities. The
particular Trust Securities to be redeemed shall be selected on a pro rata basis
(based upon Liquidation Amounts) not more than 60 days prior to the Redemption
Date by the Property Trustee from the Outstanding Trust Securities not
previously called for redemption, by such method as the Property Trustee shall
deem fair and appropriate and which may provide for the selection for redemption
of portions (equal to $1,000 or a multiple of $1,000 in excess thereof, provided
that the unredeemed portion of any Trust Security shall not be less than
$100,000) of the Liquidation Amount of Trust Securities of a denomination larger
than $1,000. The Property Trustee shall promptly notify the Securities Registrar
in writing of the Trust Securities selected for redemption and, in the case of
any Trust Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Declaration of Trust, unless
the context otherwise requires, all provisions relating to the redemption of
Trust Securities shall relate, in the case of any Trust Securities redeemed or
to be redeemed only in part, to the portion of the Liquidation Amount of Trust
Securities that has been or is to be redeemed.
SECTION 4.03. Subordination of Common Securities. (a) Payment of
Distributions (including Additional Distributions, if applicable) on, and the
Redemption Price of the Trust Securities, as applicable, shall be made subject
to Section 4.02(f), pro rata to the Holders of the Trust Securities based on the
Liquidation Amount of the Trust Securities; provided, however, that if on any
Distribution Date or Redemption Date any Debenture Event of Default (or other
event that, with notice or the passage of time or both, would become such an
Event of Default) or an Event of Default shall have occurred and be continuing,
no payment of any Distribution (including Additional Distributions, if
applicable) on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions (including Additional Distributions, if
applicable) on all outstanding Capital Securities for all Distribution Dates
occurring on or prior thereto, or, in the case of payment of the applicable
Redemption Price the full amount of such Redemption Price on all outstanding
Capital Securities, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional
Distributions, if
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applicable) on, or the Redemption Price of, Capital Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default
resulting from any Debenture Event of Default, the Holder of Common Securities
will be deemed to have waived any right to act with respect to any such Event of
Default under this Declaration of Trust until all such Events of Default with
respect to the Capital Securities have been cured, waived or otherwise
eliminated. Until all such Events of Default under this Declaration of Trust
with respect to the Capital Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Capital Securities and not on behalf of the Holder of the Common Securities,
and only the Holders of the Capital Securities will have the right to direct the
Property Trustee to act on their behalf.
SECTION 4.04. Payment Procedures. In the event Definitive
Capital Securities Certificates are issued, payments of Distributions (including
Additional Distributions, if applicable) in respect of the Capital Securities
shall be made by check mailed to the address of the Person entitled thereto at
such address as shall appear on the Securities Register. If the Capital
Securities are held by a Clearing Agency, such Distributions shall be made to
the Clearing Agency in immediately available funds, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Common Securityholder.
SECTION 4.05. Tax Returns and Reports. The Administrative
Trustees shall prepare (or cause to be prepared), at the Depositor's expense,
and file all United States federal, state and local tax and information returns
and reports required to be filed by or in respect of the Trust. In this regard,
the Administrative Trustees shall (a) prepare and file (or cause to be prepared
and filed) the appropriate Internal Revenue Service forms required to be filed
in respect of the Trust in each taxable year of the Trust and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder all
Internal Revenue Service forms required to be provided by the Trust. The
Administrative Trustees shall provide the Depositor and the Property Trustee
with a copy of all such returns and reports promptly after such filing or
furnishing. The Administrative Trustees shall comply with United States federal
withholding and backup withholding tax laws and information reporting
requirements with respect to any payments to Securityholders.
SECTION 4.06. Payment of Taxes; Duties of the Trust. Pursuant to
Section 10.06 of the Indenture, the Depositor, as borrower on the Junior
Subordinated Debt Securities, has agreed to, and it shall, promptly pay any
taxes, duties or governmental
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charges of whatever nature (other than United States withholding taxes) imposed
on the Trust by the United States or any other taxing authority.
SECTION 4.07. Payments Under Indenture. Any amount payable
hereunder to any Holder (and any Owner with respect thereto) shall be reduced by
the amount of any corresponding payment such Holder (and Owner) has directly
received pursuant to Section 5.08 of the Indenture or Section 5.13 of this
Declaration of Trust.
ARTICLE V
Trust Securities Certificates
SECTION 5.01. Initial Ownership. Upon the formation of the Trust
and until the issuance of the Trust Securities, and at any time during which no
Trust Securities are outstanding, the Depositor shall be the sole beneficial
owner of the Trust.
SECTION 5.02. Trust Securities Certificates. (a) The Capital
Securities Certificates shall be issued only in minimum denominations of
$100,000 Liquidation Amount (100 Capital Securities) and multiples of $1,000 in
excess thereof, and the Common Securities Certificates shall be issued in
denominations of $1,000 Liquidation Amount and multiples thereof. The Trust
Securities Certificates shall be executed on behalf of the Trust by the manual
or facsimile signature of at least one Administrative Trustee. Trust Securities
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefits of
this Declaration of Trust, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the delivery of such Trust
Securities Certificates or did not hold such offices at the date of delivery of
such Trust Securities Certificates. A transferee of a Trust Securities
Certificate shall become a Securityholder, and shall be entitled to the rights
and subject to the obligations of a Securityholder hereunder, upon due
registration of such Trust Securities Certificate in such transferee's name
pursuant to Sections 5.04, 5.05 and 5.06.
(b) Upon their original issuance, Capital Securities Certificates
representing Other Capital Securities shall be issued in definitive form and may
not be represented by the Global Security.
(c) A single Common Securities Certificate representing the
Common Securities shall be issued to the Depositor in the form of a definitive
Common Securities Certificate.
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SECTION 5.03. Execution and Delivery of Trust Securities
Certificates. At the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.04 and 2.05, to be executed on behalf of the Trust and delivered to
the Property Trustee and upon such delivery the Property Trustee shall
countersign such Trust Securities Certificates and make available for delivery
such Trust Securities Certificates upon the written order of the Depositor,
signed by its chairman of the board, president, any executive vice president or
any vice president, treasurer or assistant treasurer or controller without
further corporate action by the Depositor, in authorized denominations.
SECTION 5.04. Global Capital Security. (a) Any Global Capital
Security issued under this Declaration of Trust shall be registered in the name
of Cede as nominee of the Clearing Agency and delivered to its custodian
therefor, and such Global Capital Security shall constitute a single Capital
Security for all purposes of this Declaration of Trust.
(b) Notwithstanding any other provision in this Declaration of
Trust, the Global Capital Security may not be exchanged in whole or in part for
Capital Securities registered, and no transfer of the Global Capital Security in
whole or in part may be registered, in the name of any Person other than the
Clearing Agency for such Global Capital Security, Cede, or other nominee thereof
unless (i) such Clearing Agency advises the Property Trustee in writing that
such Clearing Agency is no longer willing or able to properly discharge its
responsibilities as Clearing Agency with respect to such Global Capital
Security, and the Depositor is unable to locate a qualified successor, (ii) the
Trust at its sole option advises DTC in writing that it elects to terminate the
book-entry system through the Clearing Agency, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. In addition, beneficial
interests in a Global Capital Security may be exchanged by or on behalf of DTC
for certificated Capital Securities upon request by DTC, but only upon at least
20 days prior written notice given to the Property Trustee in accordance with
the Applicable Procedures.
(c) If a Global Capital Security is to be exchanged for Other
Capital Securities or canceled in whole, it shall be surrendered by or on behalf
of the Clearing Agency or its nominee to the Securities Registrar for exchange
or cancellation as provided in this Article V. If a Global Capital Security is
to be exchanged for Other Capital Securities or canceled in part, or if an Other
Capital Security is to be exchanged in whole or in part for a beneficial
interest in the Global Capital Security, then either (i) such Global Capital
Security shall be so surrendered for exchange or cancellation as provided in
this Article V or (ii) the aggregate Liquidation Amount thereof shall be
reduced, subject to Section 5.02, or increased by an amount equal to the portion
thereof to be so exchanged or canceled, or
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equal to the aggregate Liquidation Amount of such Other Capital Security to be
so exchanged for a beneficial interest therein, as the case may be, by means of
an appropriate adjustment made on the records of the Securities Registrar,
whereupon the Property Trustee, in accordance with the Applicable Procedures,
shall instruct the Clearing Agency or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of the Global Capital Security by the Clearing Agency and Clearing Agency
Participants, accompanied by registration instructions executed by an
Administrative Trustee on behalf of the Trust, the Property Trustee shall,
subject to this Article V, countersign and make available for delivery any
executed Capital Securities delivered to it issuable in exchange for such Global
Capital Security (or any portion thereof) in accordance with the instructions of
the Clearing Agency. The Property Trustee shall not be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.
(d) The Clearing Agency or its nominee, as the registered owner
of the Global Capital Security, shall be considered the Holder of the Capital
Securities represented by the Global Capital Security for all purposes under
this Declaration of Trust and the Capital Securities, and owners of beneficial
interests in the Global Capital Security shall hold such interests pursuant to
the Applicable Procedures and, except as otherwise provided herein, shall not be
entitled to have any of the individual Capital Securities represented by the
Global Capital Security registered in their names, shall not receive or be
entitled to receive physical delivery of any such Capital Securities in
definitive form and shall not be considered the Holders thereof under this
Declaration of Trust. Accordingly, any such owner's beneficial interest in the
Global Capital Security shall he shown only on, and the transfer of such
interest shall be effected only through, records maintained by the Clearing
Agency or its nominee. The Securities Registrar and the Trustees shall be
entitled to deal with the Clearing Agency for all purposes of this Declaration
of Trust relating to the Global Capital Securities (including the payment of the
Liquidation Amount of and Distributions on the Global Capital Securities and the
giving of instructions or directions to Owners of Global Capital Securities) as
the sole Holder of Global Capital Securities and shall have no obligations to
the Owners thereof. Neither the Property Trustee nor the Securities Registrar
shall have any liability in respect of any transfers effected by the Clearing
Agency.
(e) The rights of Owners of beneficial interests in the Global
Capital Security shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such owners and
the Clearing Agency. Neither the Clearing Agency nor its nominee will consent or
vote with respect to the Capital Securities. Under its usual procedures, the
Clearing Agency or its nominee would mail an
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Omnibus Proxy to the Trust as soon as possible after the relevant record date.
The Omnibus Proxy assigns the consenting or voting rights of the Clearing Agency
or its nominee to those Clearing Agency Participants, identified in a listing
attached to such Omnibus Proxy, to whose accounts the Capital Securities are
credited on such record date.
SECTION 5.05. Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Capital Securities Certificates. (a) The
Property Trustee shall keep or cause to be kept at its Corporate Trust Office a
register or registers for the purpose of registering Capital Securities
Certificates and Common Securities Certificates and transfers and exchanges of
Capital Securities Certificates and Common Securities Certificates in which the
registrar and transfer agent with respect to the Capital Securities (the
"Securities Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Capital Securities Certificates
and Common Securities Certificates (subject to Section 5.11 in the case of
Common Securities Certificates) and registration of transfers and exchanges of
Capital Securities Certificates and Common Securities Certificates as herein
provided. Such register is herein sometimes referred to as the "Securities
Register." The Property Trustee is hereby appointed "Securities Registrar" for
the purpose of registering Capital Securities and transfers of Capital
Securities as herein provided. The provisions of Sections 8.01, 8.03 and 8.06
shall apply to the Property Trustee also in its role as Securities Registrar.
Upon surrender for registration of transfer of any Capital
Security at the offices or agencies of the Property Trustee designated for that
purpose, the Administrative Trustees shall execute, and the Property Trustee
shall countersign and make available for delivery, in the name of the designated
transferee or transferees, one or more new Capital Securities of any authorized
denominations of like tenor and aggregate liquidation amount and bearing such
restrictive legends as may be required by this Declaration of Trust.
At the option of the Holder, Capital Securities may be exchanged
for other Capital Securities of any authorized denominations, of like tenor and
aggregate Liquidation Amount and bearing such restrictive legends as may be
required by this Declaration of Trust, upon surrender of the Capital Securities
to be exchanged at such office or agency. Whenever any securities are so
surrendered for exchange, an Administrative Trustee shall execute and the
Property Trustee shall countersign and make available for delivery the Capital
Securities that the Holder making the exchange is entitled to receive.
All Capital Securities issued upon any transfer or exchange of
Capital Securities shall be the valid obligations of the Trust, entitled to the
same benefits under this Declaration
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of Trust as the Capital Securities surrendered upon such transfer or exchange.
Every Capital Security presented or surrendered for transfer or
exchange shall (if so required by the Property Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Property Trustee and the Securities Registrar, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or
exchange of Capital Securities, but the Property Trustee or the Securities
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Capital Securities.
Neither the Trust nor the Property Trustee shall be required,
pursuant to the provisions of this Section, (i) to issue, register the transfer
of or exchange any Capital Security during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of Capital
Securities pursuant to Article IV and ending at the close of business on the day
of such mailing of the notice of redemption, or (ii) to register the transfer of
or exchange any Capital Security so selected for redemption in whole or in part,
except, in the case of any such Capital Security to be redeemed in part, any
portion thereof not to be redeemed.
The Capital Securities will be issued initially only in blocks
having a Liquidation Amount of not less than $100,000 and multiples of $1,000 in
excess thereof.
(b) Certain Transfers and Exchanges. Subject to Section 5.04(c),
but notwithstanding any other provision of this Declaration of Trust, transfers
and exchanges of Capital Securities and beneficial interests in a Global Capital
Security shall be made only in accordance with this Section 5.05(b) and Section
5.04(c).
(i) Non-Global Capital Security to Global Capital Security. If
the Holder of an Other Capital Security (other than the Global Capital
Security) wishes at any time to transfer all or any portion of such
Other Capital Security to a Person who wishes to take delivery thereof
in the form of a beneficial interest in the Global Capital Security,
such transfer may be effected only in accordance with the provisions of
this Clause (b)(i) and subject to the Applicable Procedures. Upon
receipt by the Securities Registrar of (A) such Other Capital Security
as provided in Section 5.05(a) and instructions satisfactory to the
Securities Registrar directing that a beneficial interest in the Global
Capital Security in a specified liquidation amount not greater than the
liquidation amount of such Other
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Capital Security be credited to a specified Clearing Agency
Participant's account and (B) a Capital Securities Certificate duly
executed by such Holder or such Holder's attorney duly authorized in
writing, then the Securities Registrar shall cancel such Other Capital
Security (and issue a new Other Capital Security in respect of any
untransferred portion thereof) as provided in Section 5.01(a) and
increase the aggregate liquidation amount of the Global Capital
Security by the specified liquidation amount as provided in Section
5.04(c).
(ii) Non-Global Capital Security to Non-Global Capital Security.
A Capital Security that is not a Global Capital Security may be
transferred, in whole or in part, to a Person who takes delivery in the
form of another Capital Security that is not a Global Capital Security
as provided in Section 5.05(a).
(iii) Exchanges Between Global Capital Security and Non-Global
Capital Security. A beneficial interest in the Global Capital Security
may be exchanged for a Capital Security that is not a Global Capital
Security as provided in Section 5.04.
SECTION 5.06. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates. Provided Definitive Capital Securities Certificates are
issued, if (a) any mutilated Trust Securities Certificate shall be surrendered
to the Securities Registrar, or if the Securities Registrar shall receive
evidence to its satisfaction of the destruction, loss or theft of any Trust
Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees, or any one of them, on behalf of the
Trust shall execute and make available for delivery, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a
new Trust Securities Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Securities Certificate under this
Section, the Administrative Trustees or the Securities Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust Securities
Certificate issued pursuant to this Section shall constitute conclusive evidence
of an undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
SECTION 5.07. Persons Deemed Securityholders. The Trustees or
the Securities Registrar shall treat the Person in whose name any Trust
Securities are issued as the owner of such
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Trust Securities for the purpose of receiving Distributions and for all other
purposes whatsoever, and neither the Trustees nor the Securities Registrar shall
be bound by any notice to the contrary.
SECTION 5.08. Access to List of Securityholders' Names and
Addresses. Each Owner of Trust Securities acknowledges that the Depositor, the
Property Trustee, the Delaware Trustee or the Administrative Trustees may from
time to time make reasonable use of information consisting of such Owner's name
and address, including the furnishing of a list of such names and addresses as
contemplated hereunder, and each Owner shall be deemed to have agreed not to
hold the Depositor, the Property Trustee or the Administrative Trustees
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 5.09. Maintenance of Office or Agency; Transfer Agent.
The Administrative Trustees shall maintain an office or offices or agency or
agencies where Definitive Capital Securities Certificates, if issued, may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustees in respect of the Trust Securities may be
served. The Administrative Trustees initially designate Wilmington Trust
Company, 1100 N. Market Street, Attention: Corporate Trust Administration,
Wilmington, Delaware 19890, as its corporate trust office for such purposes. The
Administrative Trustees shall give prompt written notice to the Depositor and to
the Securityholders of any change in the location of the Securities Register or
any such office or agency. The Trust Company shall act as initial transfer agent
for the Trust Securities.
SECTION 5.10. Appointment of Paying Agent. The Paying Agent
shall make Distributions to Securityholders from the Payment Account and shall
report the amounts of such Distributions to the Property Trustee and the
Administrative Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making the
distributions referred to above. The Administrative Trustees may revoke such
power and remove any Paying Agent if such Administrative Trustees determine in
their sole discretion that such Paying Agent shall have failed to perform its
obligations under this Declaration of Trust in any material respect. The Paying
Agent shall initially be the Trust Company, and any co-paying agent chosen by
the Trust Company and acceptable to the Administrative Trustees and the
Depositor. Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative Trustees, the
Property Trustee and the Depositor. In the event that the Trust Company shall no
longer be the Paying Agent or a successor Paying Agent shall resign or its
authority to act be revoked, the Administrative Trustees shall appoint a
successor that is acceptable to the Property Trustee and the Depositor to act as
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Paying Agent (which shall be a bank or trust company). The Administrative
Trustees shall cause such successor Paying Agent or any additional Paying Agent
appointed by the Administrative Trustees to execute and deliver to the Trustees
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Trustees that, as Paying Agent, such successor Paying Agent
or additional Paying Agent will hold all sums, if any, held by it for payment to
the Securityholders in trust for the benefit of the Securityholders entitled
thereto until such sums shall be paid to such Securityholders. The Paying Agent
shall return all unclaimed funds to the Property Trustee and, upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its possession to
the Property Trustee. The provisions of Sections 8.01, 8.03 and 8.06 herein
shall apply to the Trust Company also in its role as Paying Agent, for so long
as the Trust Company shall act as Paying Agent and to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Declaration of
Trust to the Paying Agent shall include any co-paying agent, unless the context
requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor. The
Depositor shall acquire and retain beneficial and record ownership of the Common
Securities. To the fullest extent permitted by law, other than a transfer in
connection with a consolidation or merger of the Depositor into another
corporation, or any conveyance, transfer or lease by the Depositor of its
properties and assets substantially as an entirety to any Person, pursuant to
Section 8.01 of the Indenture, any attempted transfer of the Common Securities
shall be void. The Administrative Trustees shall cause each Common Securities
Certificate issued to the Depositor to contain a legend stating "THIS
CERTIFICATE IS NOT TRANSFERABLE".
SECTION 5.12. Notices to Clearing Agency. To the extent that a
notice or other communication to the Owners is required under this Declaration
of Trust, for so long as Capital Securities are represented by a Global
Securities Certificate, the Trustees shall give all such notices and
communications specified herein to be given to Owners to the Clearing Agency,
and shall have no obligations to give duplicates thereof to the Owners.
SECTION 5.13. Rights of Securityholders. (a) The legal title to
the Trust Property is vested exclusively in the Property Trustee (in its
capacity as such) in accordance with Section 2.09, and the Securityholders shall
not have any right or title therein other than the undivided beneficial
ownership interest in the assets of the Trust conferred by their Trust
Securities, and they shall have no right to call for any partition or division
of property, profits or rights of the Trust, except as described below. The
Trust Securities shall be personal property giving only the rights specifically
set forth therein and in this Declaration of Trust. The Trust Securities
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shall have no preemptive or singular rights and, when issued and delivered to
Securityholders against payment of the purchase price therefor will be fully
paid and nonassessable. The Holders, in their capacities as such, shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
(b) For so long as any Capital Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails, or the Holders
of not less than 25% in principal amount of the outstanding Junior Subordinated
Debt Securities fail, to declare the principal amount of all of the Junior
Subordinated Debt Securities to be immediately due and payable, the Holders of
at least 25% in Liquidation Amount of the Capital Securities then Outstanding
shall have such right by a notice in writing to the Depositor and the Debenture
Trustee with a copy to the Property Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Junior Subordinated
Debt Securities shall become immediately due and payable; provided that the
payment of principal and interest on such Junior Subordinated Debt Securities
shall remain subordinated to the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect
to the Junior Subordinated Debt Securities has been made and before a judgment
or decree for payment of the money due has been obtained by the Debenture
Trustee as provided in the Indenture, the holders of a majority in principal
amount of the outstanding Junior Subordinated Debt Securities, by written notice
to the Property Trustee, the Depositor and the Debenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture)) on all of the
Junior Subordinated Debt Securities,
(B) the principal of any Junior Subordinated Debt Securities
that have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Junior
Subordinated Debt Securities, and
(C) all sums paid or advanced by the Debenture Trustee under
the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee, its agents
and counsel; and
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(ii) all Events of Default with respect to the Junior Subordinated
Debt Securities, other than the nonpayment of the principal of the
Junior Subordinated Debt Securities that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.13 of
the Indenture.
If such holders of the Junior Subordinated Debt Securities fail to
annul any such declaration and waive such default, the Holders of Capital
Securities representing a majority in aggregate Liquidation Amount of all the
Outstanding Capital Securities shall also have the right to rescind and annul
such declaration and its consequences by written notice to the Depositor, the
Property Trustee and the Debenture Trustee, subject to the satisfaction of the
conditions set forth in Clause (i) and (ii) of this Section 5.13(b).
Should the holders of a majority in aggregate principal amount of
the outstanding Junior Subordinated Debt Securities fail to take such actions,
the Holders of a majority in aggregate Liquidation Amount of the Capital
Securities may, on behalf of the Holders of all the Capital Securities, waive
any past default under the Indenture, except a default in the payment of
principal or interest (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 Debenture Trustee) or a default in
respect of a covenant or provision that, under the Indenture, cannot be modified
or amended without the consent of the holder of each outstanding Junior
Subordinated Debt Security. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of the
Capital Securities all or part of which is represented by Global Capital
Securities, a record date shall be established for determining Holders of
Outstanding Capital Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided that, unless such
declaration of acceleration, or rescission and annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day that is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90 day period, a new
written notice of declaration of acceleration, or rescission and
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annulment thereof, as the case may be, that is identical to a written notice
that has been canceled pursuant to the proviso to the preceding sentence, in
which event a new record date shall be established pursuant to the provisions of
this Section 5.13(b).
(c) For so long as any Capital Securities remain Outstanding, to
the fullest extent permitted by law and subject to the terms of this Declaration
of Trust and the Indenture, upon a Debenture Event of Default specified in
Section 5.01(1) or 5.01(2) of the Indenture, any Holder of Capital Securities
shall have the right to institute a proceeding directly against the Depositor,
pursuant to Section 5.08 of the Indenture, for enforcement of payment to such
Holder of the principal amount of or interest (including any Additional
Interest) on Junior Subordinated Debt Securities having a principal amount equal
to the aggregate Liquidation Amount of the Capital Securities held by such
Holder (a "Direct Action"). Except as set forth in Sections 5.13(b) and 5.13(c)
hereof, the Holders of Capital Securities shall have no right to exercise
directly any right or remedy available to the Holders of, or in respect of, the
Junior Subordinated Debt Securities.
(d) A Securityholder may institute a legal proceeding directly
against the Guarantor under the Guarantee to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust or any
person or entity.
ARTICLE VI
Acts of Securityholders; Meetings; Voting
SECTION 6.01. Limitations on Capital Securityholder's Voting
Rights. (a) Except as provided in this Declaration of Trust and in the Indenture
and as otherwise required by law, no Holder of Capital Securities shall have any
right to vote or in any manner otherwise control the administration, operation
and management of the Trust or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Trust Securities
Certificates, be construed so as to constitute the Capital Securityholders from
time to time as partners or members of an association. Unless a Debenture Event
of Default shall have occurred and be continuing, any Trustee may be removed at
any time by the vote of the Common Securityholder. The right to vote to appoint,
remove or replace the Administrative Trustees is vested exclusively in the
Depositor as the Holder of the Common Securities.
(b) So long as any Junior Subordinated Debt Securities are held
by the Property Trustee, the Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Property Trustee with
respect to such Junior Subordinated Debt Securities, (ii) waive any past
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default that is waivable under Section 5.13 of the Indenture, (iii) exercise any
right to rescind or annul a declaration that the principal of all the Junior
Subordinated Debt Securities shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debt Securities, where such consent shall be required, without, in
each case, obtaining the prior approval of the Holders of at least a majority in
aggregate Liquidation Amount of all Outstanding Capital Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debt Securities affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each Holder of Capital Securities. The Trustees shall not revoke any action
previously authorized or approved by a vote of the Holders of Capital
Securities, except by a subsequent vote of the Holders of Capital Securities.
The Property Trustee shall notify all Holders of the Capital Securities of any
notice of default received from the Debenture Trustee with respect to the Junior
Subordinated Debt Securities. In addition to obtaining the foregoing approvals
of the Holders of the Capital Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes as a result of such action and that such action would not
cause the Trust to be classified as other than a grantor trust.
(c) If any proposed amendment to the Declaration of Trust
provides for, or the Trustees otherwise propose to effect, (i) any action that
would adversely affect in any material respect the interests, powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration of Trust or otherwise, or (ii) the dissolution,
winding-up or termination of the Trust, other than pursuant to the terms of this
Declaration of Trust, then the Holders of Outstanding Trust Securities as a
class will be entitled to vote on such amendment or proposal.
SECTION 6.02. Notice of Meeting. Notice of all meetings of the
Securityholders, stating the time, place and purpose of the meeting, shall be
given by the Property Trustee pursuant to Section 10.09 to each Securityholder
of record, at his registered address, at least 15 days and not more than 90 days
before the meeting. At any such meeting, any business properly before the
meeting may be so considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.
SECTION 6.03. Meetings of Securityholders. No annual meeting of
Securityholders is required to be held. The Administrative Trustees, however,
shall call a meeting of Securityholders to vote on any matter upon the written
request of
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the Securityholders of record of 25% of the Securities (based upon their
Liquidation Amount) and the Administrative Trustees or the Property Trustee may,
at any time in their discretion, call a meeting of Securityholders to vote on
any matters as to which Securityholders are entitled to vote.
Securityholders of record of 50% of the Outstanding Securities
(based upon their Liquidation Amount), present in person or represented by
proxy, shall constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Securityholders of record present, in person or by proxy, holding more than a
majority of the Securities (based upon their Liquidation Amount) held by the
Securityholders of record present, either in person or by proxy, at such meeting
shall constitute the action of the Securityholders, unless this Declaration of
Trust requires a greater number of affirmative votes.
SECTION 6.04. Voting Rights. Securityholders shall be entitled
to one vote for each $1,000 of Liquidation Amount represented by their
Outstanding Trust Securities in respect of any matter as to which such
Securityholders are entitled to vote.
SECTION 6.05. Proxies. At any meeting of Securityholders, any
Securityholder entitled to vote thereat may vote by proxy; provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. Proxies may be solicited in the name of
the Property Trustee or one or more officers of the Property Trustee. Only
Securityholders of record shall be entitled to vote. When Trust Securities are
held jointly by several persons, any one of them may vote at any meeting in
person or by proxy in respect of such Trust Securities, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Trust Securities. A proxy purporting to
be executed by or on behalf of a Securityholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. No proxy shall be valid more than three years
after its date of execution.
SECTION 6.06. Securityholder Action by Written Consent. Any
action that may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding
Securities (based upon their Liquidation Amount) entitled to vote in respect of
such action (or such larger proportion thereof as shall be required by
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any express provision of this Declaration of Trust) shall consent to the action
in writing.
SECTION 6.07. Record Date for Voting and Other Purposes. For the
purposes of determining the Securityholders who are entitled to notice of and to
vote at any meeting or by written consent, or to participate in any Distribution
in respect of which a record date is not otherwise provided for in this
Declaration of Trust, or for the purpose of any other action, the Administrative
Trustees may from time to time fix a date, not more than 90 days prior to the
date of any meeting of Securityholders or the payment of a Distribution or other
action, as the case may be, as a record date for the determination of the
identity of the Securityholders of record for such purposes.
SECTION 6.08. Acts of Securityholders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Declaration of Trust to be given, made or taken by
Securityholders or Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Securityholders or
Owners in person or by an agent duly appointed in writing; and, except as
otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
Owners 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 Declaration of Trust and (subject to Section 8.01) conclusive in
favor of the Trustees, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be provided by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that any Trustee receiving the same deems sufficient.
The ownership of Trust Securities shall be proved by the
Securities Registrar.
Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Securityholder of any Trust Security shall bind every
future Securityholder of the same Trust
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Security and the Securityholder of every Trust Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustees or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Trust Security.
Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the Liquidation Amount of
such Trust Security or by one or more duly appointed agents each of which may do
so pursuant to such appointment with regard to all or any part of such
Liquidation Amount.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Holder may institute a legal proceeding directly against the
Depositor under the Guarantee to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee (as defined
in the Guarantee), the Trust, any Trustee or any person or entity.
SECTION 6.09. Inspection of Records. Upon reasonable notice to
the Administrative Trustees and the Property Trustee, the records of the Trust
shall be open to inspection by Securityholders during normal business hours for
any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII
Representations and Warranties
SECTION 7.01. Representations and Warranties of the Property
Trustee and the Delaware Trustee. The Property Trustee and the Delaware Trustee,
each severally on behalf of and as to itself, hereby represents and warrants for
the benefit of the Depositor and the Securityholders that:
(a) The Property Trustee is a corporation with trust powers, duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms
of this Declaration of Trust.
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(b) the execution, delivery and performance by the Property
Trustee of this Declaration of Trust have been duly authorized by all
necessary corporate action on the part of the Property Trustee; and
this Declaration of Trust has been duly executed and delivered by the
Property Trustee, and constitutes a legal, valid and binding obligation
of the Property Trustee, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of this Declaration
of Trust by the Property Trustee does not conflict with or constitute a
breach of the certificate of incorporation or by-laws of the Property
Trustee.
(d) At the Closing Date, the Property Trustee has not knowingly
created any liens or encumbrances on such Trust Securities.
(e) No consent, approval or authorization of, or registration
with or notice to, any state or federal authority is required for the
execution, delivery or performance by the Property Trustee of this
Declaration of Trust.
(f) The Delaware Trustee is duly organized, validly existing and
in good standing under the laws of the State of Delaware, with trust
power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, this Declaration of Trust.
(g) The execution, delivery and performance by the Delaware
Trustee of this Declaration of Trust have been duly authorized by all
necessary corporate action on the part of the Delaware Trustee; and
this Declaration of Trust has been duly executed and delivered by the
Delaware Trustee, and 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' right 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).
(h) The execution, delivery and performance or this Declaration
of Trust by the Delaware Trustee do not conflict with or constitute a
breach of the certificate of incorporation or by-laws of the Delaware
Trustee.
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(i) 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 Delaware Trustee of
this Declaration of Trust.
(j) The Delaware Trustee is an entity that has its principal
place of business in the State of Delaware.
SECTION 7.02. Representations and Warranties of Depositor. The
Depositor hereby represents and warrants for the benefit of the Securityholders
that the Trust Securities Certificates issued at the Closing Date on behalf of
the Trust have been duly authorized and will have been duly and validly
executed, issued and delivered by an Administrative Trustee pursuant to the
terms and provisions of, and in accordance with the requirements of, this
Declaration of Trust, and the Securityholders will be, as of each such date,
entitled to the benefits of this Declaration of Trust.
ARTICLE VIII
The Trustees
SECTION 8.01. Certain Duties and Responsibilities. (a) The
duties and responsibilities of the Trustees shall be as provided by this
Declaration of Trust and, in the case of the Property Trustee, by the Trust
Indenture Act; provided, however, that the Property Trustee shall not be subject
to the provisions of the Trust Indenture Act until such time as this Declaration
of Trust becomes qualified under the Trust Indenture Act. Notwithstanding the
foregoing, no provisions of this Declaration of Trust shall require the Trustees
to expend or risk their own funds or otherwise incur any financial liability in
the performance of any of their duties hereunder, or in the exercise of any of
their rights or powers, if they shall have reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it against such risk or
liability is not reasonably assured to it. Whether or not herein expressly so
provided, every provision of this Declaration of Trust relating to the conduct
or affecting the liability of, or affording protection to, the Trustees shall be
subject to the provisions of this Article. Nothing in this Declaration of Trust
shall be construed to release an Administrative Trustee from liability for his
own grossly negligent action, his own grossly negligent failure to act, or his
own willful misconduct. To the extent that, at law or in equity, an
Administrative Trustee has duties (including fiduciary duties) and liabilities
relating to the Trust or to the Securityholders, such Administrative Trustee
shall not be liable to the Trust or to any Securityholder for such Trustee's
good faith reliance on the provisions of this Declaration of Trust. The
provisions of this Declaration of Trust, to the extent that they restrict the
duties and
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liabilities of the Administrative Trustees otherwise existing at law or in
equity, are agreed by the Depositor and the Securityholders to replace such
other duties and liabilities of the Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent
in respect of the Trust Securities shall be made only from the revenue and
proceeds from the Trust Property and only to the extent that there shall be
sufficient revenue or proceeds from the Trust Property to enable the Property
Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Securityholder, by its acceptance of a Trust Security, agrees that it will
look solely to the revenue and proceeds from the Trust Property to the extent
legally available for distribution to it as herein provided and that the
Trustees are not personally liable to it for any amount distributable in respect
of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.01(b) does not limit the liability of the Trustees
expressly set forth elsewhere in this Declaration of Trust or, in the case of
the Property Trustee, in the Trust Indenture Act, if applicable.
(c) No provision of this Declaration of Trust shall be construed
to relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error
of judgment made in good faith by an authorized officer of the
Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to
the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any trust
or power conferred upon the Property Trustee under this
Declaration of Trust;
(iii) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Junior
Subordinated Debt Securities and the Payment Account shall be to
deal with such Property in a similar manner as the Property
Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the
Property Trustee under this Declaration of Trust and the Trust
Indenture Act;
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(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise
agree with the Depositor; and money held by the Property Trustee
need not be segregated from other funds held by it, except in
relation to the Payment Account maintained by the Property Trustee
pursuant to Section 3.01 and except to the extent otherwise
required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Declaration of
Trust nor shall the Property Trustee be liable for the default or
misconduct of the Administrative Trustees or the Depositor.
SECTION 8.02. Events of Default Notices; Deferral of Interest
Payment Notices. Within five Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property Trustee, the
Property Trustee shall transmit, in the manner and to the extent provided in
Section 10.09, notice of such Event of Default to the Securityholders, the
Administrative Trustees and the Depositor, unless such Event of Default shall
have been cured or waived. The Depositor and the Administrative Trustees are
required to file annually with the Property Trustee a certificate as to whether
or not they are in compliance with all the conditions and covenants applicable
to them under the Declaration.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the Junior
Subordinated Debt Securities pursuant to the Indenture, the Administrative
Trustee shall transmit, in the manner and to the extent provided in Section
10.09, notice of such exercise to the Securityholders and the Property Trustee,
unless such exercise shall have been revoked.
SECTION 8.03. Certain Rights of Property Trustee. Subject to the
provisions of Section 8.01:
(a) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting in good faith upon any
resolution, opinion of Counsel, certificate, written representation of
a Holder or transferee, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration of
Trust the Property Trustee is required to decide between alternative
courses of action or (ii) in
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construing any of the provisions of this Declaration of Trust the
Property Trustee finds the same ambiguous or inconsistent with any
other provisions contained herein or (iii) the Property Trustee is
unsure of the application of any provision of this Declaration of
Trust, then, except as to any matter as to which the Securityholders
are entitled to vote under the terms of this Declaration of Trust, the
Property Trustee shall deliver a notice to the Depositor requesting
written instructions of the Depositor as to the course of action to be
taken, and the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall be instructed in
writing to take, or to refrain from taking, by the Depositor; provided,
however, that if the Property Trustee does not receive such
instructions of the Depositor within ten Business Days after it has
delivered such notice, or such reasonably shorter period of time set
forth in such notice (which, to the extent practicable, shall not be
less than two Business Days), it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this
Declaration of Trust as it shall deem advisable and in the best
interests of the Securityholders, in which event the Property Trustee
shall have no liability except for its own bad faith, negligence or
willful misconduct;
(c) any direction or act of the Depositor or the Administrative
Trustee contemplated by this Declaration of Trust shall be sufficiently
evidenced by an Officers' Certificate;
(d) whenever in the administration of this Declaration of Trust,
the Property Trustee shall deem it desirable that a matter be
established before undertaking, 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 Depositor
or the Administrative Trustees (which Officers' Certificate will be
evidence only for purposes of determining entitlement to
indemnification of the Property Trustee from the Depositor but not with
respect to any liability to Securityholders);
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any re-recording, re-filing or re-registration
thereof;
(f) the Property Trustee may consult with counsel of its
selection (which counsel may be counsel to the Depositor or any of its
Affiliates, and may include any of its employees), and the advice of
such counsel shall be full and
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complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon, and, in accordance with such advice, such counsel may be
counsel to the Depositor or any of its Affiliates, and may include any
of its employees; the Property Trustee shall have the right at any time
to seek instructions concerning the administration of this Declaration
of Trust from any court of competent jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration of Trust
at the request or direction of any of the Securityholders pursuant to
this Declaration of Trust, unless such Securityholders shall have
offered to the Property Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities that might be incurred
by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to
do so by one or more Securityholders, but the Property Trustee may make
such further inquiry or investigation into such facts or matters as it
may see fit;
(i) the Property Trustee may execute any of its trusts or powers
hereunder or perform any of its duties hereunder either directly or by
or through its agents or attorneys, and the Property Trustee shall not
be responsible for any misconduct or negligence on the part of, or for
the supervision of, any such agent or attorney appointed by it with due
care hereunder;
(j) whenever in the administration of this Declaration of Trust
the Property Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other
action hereunder, the Property Trustee (i) may request instructions
from the Holders of the Trust Securities, which instructions may only
be given by the Holders of the same proportion in Liquidation Amount of
the Trust Securities as would be entitled to direct the Property
Trustee under the terms of the Trust Securities in respect of such
remedy, right or action, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received,
and (iii) shall be fully protected in acting in accordance with such
instructions;
(k) except as otherwise expressly provided by this Declaration of
Trust, the Property Trustee shall not be
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under any obligation to take any action that is discretionary under the
provisions of this Declaration of Trust;
(l) when the Property Trustee incurs expenses or renders services
in connection with a Bankruptcy Event, such expenses (including the
fees and expenses of its counsel) and the compensation for such
services are intended to constitute expenses of administration under
any bankruptcy law or law relating to creditors' rights generally; and
(m) the Property Trustee shall not be charged with knowledge of
an Event of Default unless a Responsible Officer of the Property
Trustee obtains actual knowledge of such event or the Property Trustee
receives written notice of such event from Securityholders holding at
least 25% of the Outstanding Trust Securities (based upon Liquidation
Amount).
No provision of this Declaration of Trust 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 8.04. Not Responsible for Recitals. The recitals
contained herein and in the Trust Securities Certificates shall be taken as the
statements of Trust, and the Trustees do not assume any responsibility for their
correctness. The Trustees shall not be accountable for the use or application by
the Depositor of the proceeds of the Junior Subordinated Debt Securities.
SECTION 8.05. May Hold Securities. Except as provided in the
definition of the term "Outstanding" in Article I, any Trustee or any other
agent of any Trustee or the Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and, subject to Sections 8.08
and 8.13, may otherwise deal with the Trust with the same rights that it would
have if it were not a Trustee or such other agent.
SECTION 8.06. Compensation, Indemnity, Fees. Pursuant to Section
10.06 of the Indenture, the Depositor, as borrower on the Junior Subordinated
Debt Securities, agrees:
(a) to pay to the Trustees from time to time such compensation as
shall from time to time be agreed to in writing by the Depositor and
the respective Trustees for all services rendered by them hereunder
(which compensation
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shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) to the fullest extent permitted by applicable law and except
as otherwise expressly provided herein, to reimburse the Trustees upon
request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of
this Declaration of Trust (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 (i) to the
negligence or willful misconduct of the Property Trustee, or (ii) to
the gross negligence or willful misconduct of any of the other
Trustees;
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless each Trustee and any employee or agent of
the Trust or its Affiliates (each referred to herein as an "Indemnified
Person") from and against any loss, damage, liability, tax, penalty,
expense or claim of any kind or nature whatsoever incurred by such
Indemnified Person by reason of the creation, operation or termination
of the Trust or 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
authority conferred on such Indemnified Person by this Declaration of
Trust, except that (i) the Property Trustee shall not be entitled to be
indemnified in respect of any loss, damage or claim incurred by the
Property Trustee by reason of negligence or willful misconduct with
respect to such acts or omissions, and (ii) no other Indemnified Person
shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of gross negligence
or willful misconduct with respect to such acts or omissions; and
(d) to the fullest extent permitted by applicable law, to advance
expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding, from time to
time, prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Depositor of (i) a written
affirmation by or on behalf of the Indemnified Person of its or his
good faith belief that it or he has met the standard of conduct set
forth in this Section 8.06 and (ii) an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be determined
that the Indemnified Person is not entitled to be indemnified as
authorized in the preceding subsection.
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The provisions of this Section 8.06 shall survive the termination
of this Declaration of Trust or the earlier resignation or removal of any
Trustee.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.06.
The Depositor and any Trustee (in the case of the Property
Trustee, subject to Section 8.08 hereof) may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and none of the
Trust, the Holders, the Depositor or any such Trustee shall have any rights by
virtue of this Declaration of Trust in and to such independent ventures or the
income or profits derived therefrom, and the pursuit of any such venture, even
if competitive with the business of the Trust, shall not be deemed wrongful or
improper. Neither the Depositor, nor any 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 the Depositor or any 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 Trustee may
engage or be interested in any financial or other transaction with the Depositor
or any Affiliate of the Depositor, or may act as depository for, trustee or
agent for, or act on any committee or body of holders of, securities or other
obligations of the Depositor or its Affiliates.
SECTION 8.07. Corporate Property Trustee Required; Eligibility of
Trustees. (a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
a national or state chartered bank or trust company and eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50 million. If any such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Property Trustee with respect to the Trust Securities shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereafter specified in this
Article; provided, however, that the Property Trustee need not qualify under the
Trust Indenture Act until such time as this Declaration of Trust is qualified
under the Trust Indenture Act.
(b) There shall at all times be one or more Administrative
Trustees hereunder. Each Administrative Trustee
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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 persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee. The Delaware
Trustee shall either be (i) a natural person who is at least 21 years of age and
a resident of the State of Delaware or (ii) a legal entity with its principal
place of business in the State of Delaware, and that otherwise meets the
requirements of applicable Delaware law, that shall act through one or more
persons authorized to bind such entity.
SECTION 8.08. Conflicting Interests. If the Property Trustee has
or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Property 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 Declaration of Trust.
SECTION 8.09. Co-Trustees and Separate Trustee. Unless an Event
of Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Depositor and the Administrative Trustees, by agreed action of the majority
of such Trustees, shall have power to appoint, and upon the written request of
the Administrative Trustees, the Depositor shall for such purpose join with the
Administrative Trustees in the execution, delivery, and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Property Trustee either to act as co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to the extent
required by law to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions of
this Section. If the Depositor does not join in such appointment within 15 days
after the receipt by it of a request so to do, or in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make such appointment. Any co-trustee or separate trustee appointed
pursuant to this Section shall either be (i) a natural person who is at least 21
years of age and a resident of the United States or (ii) a legal entity with its
principal place of business in the United States that shall act through one or
more persons authorized to bind such entity.
Should any written instrument from the Depositor be required by
any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments
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shall, on request, be executed, acknowledged and delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms, namely:
(a) The Trust Securities shall be executed and made available for
delivery, and all rights, powers, duties, and obligations hereunder in respect
of the custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified hereunder shall
be exercised solely by such Trustees and not by such co-trustee or separate
trustee.
(b) The rights, powers, duties and obligations hereby conferred
or imposed upon the Property Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed by the
Property Trustee or by the Property Trustee and such co-trustee or separate
trustee jointly, as shall be provided in the instrument appointing such
co-trustee or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the Property
Trustee shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and performed by
such co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept the
resignation of or remove any co-trustee or separate trustee appointed under this
Section, and, in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the concurrence of
the Depositor. Upon the written request of the Property Trustee, the Depositor
shall join with the Property Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee so
resigned or removed may be appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property Trustee or
any other trustee hereunder.
(e) The Property Trustee shall not be required to supervise any
co-trustee or separate trustee, nor shall it be liable by reason of any act of a
co-trustee or separate trustee or any employees or agents of a co-trustee or
separate trustee.
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(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, a Relevant Trustee
may resign at any time by giving written notice thereof to the Securityholders.
If the instrument of acceptance by the successor Trustee required by Section
8.11 shall not have been delivered to the Relevant Trustee within 30 days after
the giving of such notice of resignation or removal, the Relevant Trustee may
petition, at the expense of the Trust, any court of competent jurisdiction for
the appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by Act of the Holders of a majority in Liquidation
Amount of the Outstanding Capital Securities, delivered to the Relevant Trustee
(in its individual capacity and on behalf of the Trust). An Administrative
Trustee may be removed by Act of the Common Securityholder at any time.
If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees and the retiring Trustee shall comply with the applicable requirements
of Section 8.11. If the Property Trustee or the Delaware Trustee shall resign,
be removed or become incapable of continuing to act as the Property Trustee or
the Delaware Trustee, as the case may be, at a time when a Debenture Event of
Default shall have occurred and be continuing, the Capital Securityholders, by
Act of the Capital Securityholders of a majority in Liquidation Amount of the
Capital Securities then outstanding delivered to the retiring Relevant Trustee,
shall promptly appoint a successor Relevant Trustee or Trustees, and such
successor Trustee shall comply with the applicable requirements of Section 8.11.
If an Administrative Trustee shall resign, be removed or become incapable of
acting as Administrative Trustee, at a time when a Debenture Event of Default
shall have occurred and be continuing, the Common Securityholder, by Act of the
Common Securityholder
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delivered to such Administrative Trustee, shall promptly appoint a successor
Administrative Trustee or Administrative Trustees and such successor
Administrative Trustee or Trustees shall comply with the applicable requirements
of Section 8.11. If no successor Relevant Trustee shall have been so appointed
by the Common Securityholder or the Capital Securityholders and accepted
appointment in the manner required by Section 8.11, any Securityholder who has
been a Securityholder of Trust Securities 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 Relevant Trustee.
The Property Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.08 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
Notwithstanding the foregoing or any other provision of this
Declaration of Trust, in the event any Administrative Trustee or a Delaware
Trustee who is a natural person dies, or becomes, in the opinion of the
Depositor, incompetent or incapacitated, or, in the case of an Administrative
Trustee, ceases to be an employee of the Depositor, the vacancy created by such
death, incompetence, incapacity or ceasing to be an employee of the Depositor
may be filled by (a) the unanimous act of remaining Administrative Trustees if
there are at least two of them or (b) otherwise by the Depositor (with the
successor in each case being a Person who satisfies the eligibility requirement
for Administrative Trustees or Delaware Trustee, as the case may be, set forth
in Section 8.07).
SECTION 8.11. Acceptance of Appointment by Successor. In the
case of the appointment hereunder of a successor Trustee, such successor Trustee
so appointed shall execute, acknowledge and deliver to the Trust and to the
retiring Trustee any 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 the rights, powers, trusts and duties of the retiring Trustee, but,
on the request of the Depositor or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee, and, if the Property Trustee is the resigning Trustee, the
Property Trustee shall duly assign, transfer and deliver to the successor
Property Trustee all Trust Property and money held by such retiring Property
Trustee hereunder.
In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each
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successor Relevant Trustee with respect to the Trust Securities shall execute
and deliver an amendment hereto wherein each successor Relevant Trustee shall
accept such appointment and which (a) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Relevant Trustee all the rights, powers, trusts and duties of the
retiring Relevant Trustee with respect to the Trust Securities and the Trust and
(b) shall add to or change any of the provisions of this Declaration of Trust as
shall be necessary to provide for or facilitate the administration of the Trust
by more than one Relevant Trustee, it being understood that nothing herein or in
such amendment shall constitute such Relevant Trustees co-trustees of the same
trust and that each such Relevant Trustee shall be Trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Relevant Trustee; and, upon the execution and delivery of such
amendment, the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein, and each such successor
Relevant Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Relevant
Trustee; but, on request of the Trust or any successor Relevant Trustee, such
retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant Trustee all Trust Property, all proceeds thereof and money
held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Trust.
Upon written request of any such successor Relevant Trustee, the
Trust shall execute any and all instruments for more fully and certainly vesting
in and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless,
at the time of such acceptance, such successor Relevant Trustee shall be
qualified and eligible under this Article.
SECTION 8.12. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Relevant Trustee
shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
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SECTION 8.13. Preferential Collection of Claims Against Depositor
or Trust. 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
Trust 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 Trust 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 Trust 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 agents 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 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.
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 Trust 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.
SECTION 8.14. Reports by Property Trustee. Upon qualification of
this Declaration of Trust under the Trust Indenture Act,
(a) Not later than the last calendar day in February of each year
commencing with the last calendar day in February of ____, the Property Trustee
shall transmit to all Securityholders
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in accordance with Section 10.09, and to the Depositor, a brief report dated as
of the prior December 31 with respect to:
(i) its eligibility under Section 8.07 or, in lieu thereof,
if to the best of its knowledge it has continued to be eligible
under such Section, a written statement to such effect; and
(ii) any change in the property and funds in its possession
as Property Trustee since the date of its last report and any
action taken by the Property Trustee in the performance of its
duties hereunder that it has not previously reported and that in
its opinion materially affects the Trust Securities.
(b) In addition, the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Declaration of Trust as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to the Holders, be filed with the Commission and with the
Depositor.
SECTION 8.15. Reports to the Property Trustee. Upon
qualification of this Indenture under the Trust Indenture Act, the Depositor and
the Administrative Trustees on behalf of the Trust shall provide to the Property
Trustee such documents, reports and information as required by Section 314 of
the Trust Indenture Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 8.16. Evidence of Compliance with Conditions Precedent.
Upon qualification of this Indenture under the Trust Indenture Act, each of the
Depositor and the Administrative Trustees on behalf of the Trust shall provide
to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Declaration of Trust that relate to any
of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers'
Certificate.
SECTION 8.17. Number of Trustees. (a) The number of Trustees
shall be ________; provided that the Holder of all of the Common Securities by
written instrument may increase or decrease the number of Administrative
Trustees. The Property Trustee and the Delaware Trustee may be the same Person.
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(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 8.17(a), or
if the number of Trustees is increased pursuant to Section 8.17(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in accordance
with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Declaration of Trust.
SECTION 8.18. Delegation of Power. (a) Any Administrative
Trustee may, by power of attorney consistent with applicable law, delegate to
any other natural person over the age of 21 his or her power for the purpose of
executing any documents contemplated in Section 2.07(a), including any
registration statement or amendment thereto filed with the Commission, or making
any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of this Declaration of Trust, as
set forth herein.
ARTICLE IX
Termination, Liquidation and Merger
SECTION 9.01. Termination Upon Expiration Date; Termination Upon
Special Event. Unless earlier terminated, the Trust shall automatically
terminate on ____________ (the "Expiration Date"), following the distribution of
the Trust Property in accordance with Section 9.04.
SECTION 9.02. Early Termination. The first to occur of any of
the following events is an "Early Termination Event":
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor or the Holder of the
Common Securities;
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(b) the written direction to the Property Trustee from the
Depositor, as borrower with respect to the Junior Subordinated Debt
Securities, at any time (which direction is optional and wholly within
the discretion of the Depositor, subject to receipt of prior approval
of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve (including upon the
occurrence and continuation of a Tax Event or a Capital Treatment Event
in respect of the Trust)) to terminate the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, distribute a Like Amount of the Junior Subordinated
Debt Securities to Securityholders;
(c) the redemption of all of the Trust Securities in connection
with the redemption of all of the Junior Subordinated Debt Securities
(including upon the occurrence and continuation of a Tax Event or a
Capital Treatment Event pursuant to Section 11.07(b) of the Indenture);
and
(d) the entry of an order for dissolution of the Trust by a court
of competent jurisdiction.
SECTION 9.03. Termination. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the payment of
any expenses owed by the Trust, (b) the distribution by the Property Trustee to
Securityholders upon the liquidation of the Trust pursuant to Section 9.04, or
upon the redemption of all of the Trust Securities pursuant to Section 4.02, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Securities, and (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
SECTION 9.04. Liquidation. (a) If an Early Termination Event
specified in clause (a), (b) or (d) of Section 9.02 occurs or upon the
Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously
as the Trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to each
Securityholder a Like Amount of Junior Subordinated Debt Securities, subject to
Section 9.04(d). Notice of liquidation shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not later than 30 nor more than 90
days prior to the Liquidation Date to each Holder at such Holder's address
appearing in the Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date (which, in the case of any
liquidation following the occurrence of a Special Event, shall not be
more than 90 days following such occurrence);
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(ii) state that, from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Junior Subordinated Debt Securities; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for Junior
Subordinated Debt Securities, or, if Section 9.04(d) applies, receive a
Liquidation Distribution, as the Administrative Trustees or the
Property Trustee shall deem appropriate.
(b) Except where Section 9.02(c) or 9.04(d) applies, in order to
effect the liquidation of the Trust and distribution of the Junior Subordinated
Debt Securities to Securityholders, the Property Trustee shall establish a
record date for such distribution (which shall be not more than 45 days prior to
the Liquidation Date) and, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish such procedures as it
shall deem appropriate to effect the distribution of Junior Subordinated Debt
Securities in exchange for the outstanding Trust Securities Certificates.
(c) Except where Section 9.02(c) or 9.04(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Junior Subordinated
Debt Securities will be issued to Holders, upon surrender of such certificates
to the Administrative Trustees or their agent for exchange, (iii) any Trust
Securities Certificates not so surrendered for exchange will be deemed to
represent a Like Amount of Junior Subordinated Debt Securities accruing interest
at the rate provided for in the Junior Subordinated Debt Securities from the
last Distribution Date on which a Distribution was made on such Trust Securities
Certificates until such certificates are so surrendered (or until such
certificates are so surrendered, no payments of interest or principal will be
made to the Holders of Trust Securities Certificates with respect to such Junior
Subordinated Debt Securities) and (iv) all rights of Securityholders holding
Trust Securities will cease, except the right of such Securityholders to receive
Junior Subordinated Debt Securities upon surrender of Trust Securities
Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 9.04, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Junior
Subordinated Debt Securities in the manner provided herein is determined by the
Property Trustee not to be practical, the Trust Property shall be liquidated,
and the Trust shall be dissolved, wound-up or terminated, by the Property
Trustee in such manner as the Property Trustee determines. In such event, on the
date of the dissolution, winding-up or other termination of the Trust,
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Securityholders will be entitled to receive out of the assets of the Trust
available for distribution to Securityholders after satisfaction of liabilities
to creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding up or termination, the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, subject to the next succeeding sentence, the amounts payable
by the Trust on the Trust Securities shall be paid on a pro rata basis (based
upon Liquidation Amounts). Holders of the Common Securities will be entitled to
receive Liquidation Distributions upon any such dissolution, winding-up or
termination pro rata (determined as aforesaid) with Holders of Capital
Securities, except that, if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities, and no payments shall be made with respect to the Common Securities
until Holders of Capital Securities have been paid in full. Any such
determination and liquidation by the Property Trustee shall be conclusive upon
the Securityholders and the Property Trustee shall have no liability in
connection therewith.
SECTION 9.05. Mergers, Consolidations, Amalgamations or
Replacements of the Trust. The Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other Person, except
pursuant to this Section 9.05. At the request of the Depositor, with the consent
of the Administrative Trustees and without the consent of the Holders of the
Capital Securities, the Property Trustee or the Delaware Trustee, the Trust may
merge with or into, consolidate, amalgamate, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to a
trust organized as such under the laws of any State; provided, however, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Capital 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
the same as the Capital Securities rank in priority with respect to
Distributions and payments upon liquidation, redemption and otherwise, (ii) the
Depositor expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the Junior
Subordinated Debt Securities, (iii) the Successor Securities (if Capital
Securities) are listed or traded, or any Successor Securities will be listed or
traded upon notification of issuance, on any national securities exchange or
other organization on which the Capital Securities are then listed or traded, if
any, (iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the
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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 and limited to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Depositor has received an Opinion of Counsel
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders of the Capital Securities (including any Successor
Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (viii) the Depositor or any permitted
successor or assignee owns all of the common securities of such successor entity
and guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of Holders of 100% in
Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity to be classified as an association
taxable as a corporation or as other than a grantor trust for United States
federal income tax purposes.
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Limitation of Rights of Securityholders. The
death, incapacity, liquidation, dissolution, termination or bankruptcy of any
Person having an interest, beneficial or otherwise, in Trust Securities shall
not operate to terminate this Declaration of Trust, or entitle the legal
representatives or heirs of such person, or any Securityholder for such person,
to claim an accounting, take any action or bring any proceeding in any court for
a partition or winding-up of the arrangements contemplated hereby, or otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.
SECTION 10.02. Liability of the Depositor. The Depositor, as
borrower with respect to the Junior Subordinated Debt Securities, shall be
liable for all the debts and obligations of the Trust (other than with respect
to payments of
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principal, interest, or premium, if any, on the Trust Securities) to the extent
not satisfied out of the Trust's assets.
SECTION 10.03. Amendment. (a) This Declaration of Trust may be
amended from time to time by the Property Trustee, the Administrative Trustees
and the Depositor, without the consent of any Securityholders (i) to cure any
ambiguity, correct or supplement any provision herein that may be inconsistent
with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Declaration of Trust that shall not be
inconsistent with the other provisions of this Declaration of Trust; or (ii) to
modify, eliminate or add to any provisions of this Declaration of Trust to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust or as other than an
association taxable as a corporation at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
investment company under the 1940 Act; provided, however, that in the case of
clause (i), such action shall not adversely affect in any material respect the
interests of any Securityholder, and any amendments of this Declaration of Trust
shall become effective when notice thereof is given to the Securityholders.
(b) Except as provided in Section 10.02(c), any provision of this
Declaration of Trust may be amended by the Trustees and the Depositor with (i)
the consent of Securityholders representing not less than a majority (based upon
Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt
by the Trustees of an Opinion of Counsel to the effect that such amendment or
the exercise of any power granted to the Trustees in accordance with such
amendment will not affect the Trust's status as a grantor trust or as other than
an association taxable as a corporation for United States federal income tax
purposes or the Trust's exemption from the status of an investment company under
the 1940 Act.
(c) In addition to and notwithstanding any other provision in
this Declaration of Trust, without the consent of each affected Securityholder
(such consent being obtained in accordance with Section 6.03 or 6.08), this
Declaration of Trust may not be amended to (i) change the amount or timing of
any Distribution on the Trust Securities or otherwise adversely affect the
amount of any Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a Securityholder
to institute suit for the enforcement of any such payment on or after such date.
Notwithstanding any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section 6.03 or
6.08), this paragraph (c) of this Section 10.02 may not be amended.
(d) Notwithstanding any other provisions of this Declaration of
Trust, no Trustee shall enter into or consent to
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any amendment to this Declaration of Trust that would cause the Trust to fail or
cease to qualify for the exemption from status of an investment company under
the 1940 Act or fail or cease to be classified as a grantor trust or as other
than an association taxable as a corporation for United States federal income
tax purposes.
(e) Notwithstanding anything in this Declaration of Trust to the
contrary, without the consent of the Depositor this Declaration of Trust may not
be amended in a manner that imposes any additional obligation on the Depositor.
(f) Notwithstanding any other provision of this Declaration of
Trust, no amendment to this Declaration of Trust may be made if, as a result of
such amendment, it would cause the Trust to fail to be classified as a grantor
trust or as other than an association taxable as a corporation for United States
federal income tax purposes.
(g) In the event that any amendment to this Declaration of Trust
is made, the Administrative Trustees shall promptly provide to the Depositor a
copy of such amendment.
(h) Neither the Property Trustee nor the Delaware Trustee shall
be required to enter into any amendment to this Declaration of Trust that
affects its own rights, duties or immunities under this Declaration of Trust or
would otherwise expose the Property Trustee to any liability or be contrary to
applicable law. The Property Trustee shall be entitled to receive an Officers'
Certificate stating that any amendment to this Declaration of Trust is in
compliance with this Declaration of Trust.
SECTION 10.04. Separability. In case any provision in this
Declaration of Trust or in the Trust Securities Certificates shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.05. Governing Law. This Declaration of Trust and the
rights and obligations of each of the Securityholders, the Trust and the
Trustees with respect to this Declaration of Trust and the Trust Securities
shall be construed in accordance with and governed by the laws of the State of
Delaware without regard to its conflict of laws principles. The provisions of
Sections 3540 and 3561 of Title 12 of the Delaware Code shall not apply to this
Trust.
SECTION 10.06. Payments Due on Non-Business Day. If the date
fixed for any payment on any Trust Security shall be a day that is not a
Business Day, then such payment need not be made on such date but may be made on
the next succeeding day that is a Business Day (except as otherwise provided in
Section 4.02(d)), with the same force and effect as though made
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on the date fixed for such payment, and no interest shall accrue thereon for the
period after such date.
SECTION 10.07. Successors. This Declaration of Trust shall be
binding upon and shall inure to the benefit of any successor to the Depositor,
the Trust or the Relevant Trustee, including any successor by operation of law.
Except in connection with a consolidation, merger or sale involving the
Depositor that is permitted under Article VI of the Indenture and pursuant to
which the assignee agrees in writing to perform the Depositor's obligations
hereunder, the Depositor shall not assign its obligations hereunder.
SECTION 10.08. Headings. The Article and Section headings are
for convenience only and shall not affect the construction of this Declaration
of Trust.
SECTION 10.09. Reports, Notices and Demands. Any report, notice,
demand or other communication that, by any provision of this Declaration of
Trust, is required or permitted to be given or served to or upon any
Securityholder or the Depositor may be given or served in writing by deposit
thereof, first class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a Capital
Securityholder, to such Capital Securityholder as such Securityholder's name and
address may appear on the Securities Register, and (b) in the case of the Common
Securityholder or the Depositor, to Highlands Bankshares, Inc., ____________
_____________________________________________, facsimile no.: (___) ________.
Any notice to Capital Securityholders may also be given to such owners as have,
within two years preceding the giving of such notice, filed their names and
addresses with the Property Trustee for that purpose. Such notice, demand or
other communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication that by any provision of
this Declaration of Trust is required or permitted to be given or served to or
upon the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (a) with respect to the Property Trustee to Wilmington
Trust Company, 1100 N. Market Street, Attention: Corporate Trust Administration,
Wilmington, Delaware 19890, facsimile no.: (302) 651-8882; (b) with respect to
the Delaware Trustee to Wilmington Trust Company, 1100 N. Market Street,
Attention: Corporate Trust Administration, Wilmington, Delaware 19890, facsimile
no.: (302) 651-8882; and (c) with respect to the Administrative Trustees, to
them at the address above for notices to the Depositor, marked "Attention:
Administrative Trustees of Highlands Capital Trust I". Such notice, demand or
other communication to or upon the Trust or the Property Trustee shall be deemed
to have been sufficiently given or made only upon
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actual receipt of the writing by the Trust or the Property Trustee.
SECTION 10.10. Agreement Not to Petition. Each of the Trustees
and the Depositor agree for the benefit of the Securityholders that, until at
least one year and one day after the Trust has been terminated in accordance
with Article IX, they shall not file, or join in the filing of, a petition
against the Trust under any bankruptcy, insolvency, reorganization or other
similar law (including, without limitation, the United States Bankruptcy Code)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Trust under any Bankruptcy Laws. In the event the
Depositor takes action in violation of this Section 10.10, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the
Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.10 shall survive the
termination of this Declaration of Trust.
SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture
Act. This Declaration of Trust will be qualified under the Trust Indenture Act.
By its terms, this Declaration of Trust incorporates certain provisions of the
Trust Indenture Act.
(a) This Declaration of Trust is subject to the provisions of the
Trust Indenture Act that are required to be part of this Declaration of Trust
and shall, to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof that is required to be included in this Declaration of
Trust by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Declaration of Trust 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 Declaration of
Trust as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this
Declaration of Trust shall not affect the nature of the Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
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SECTION 10.12. Acceptance of Terms of Declaration of Trust,
Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY
INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER,
WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL OF THE TERMS AND PROVISIONS OF
THIS DECLARATION OF TRUST AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND
OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE
AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS DECLARATION OF TRUST SHALL BE BINDING, OPERATIVE AND
EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
SECTION 10.13. Execution in Counterparts. 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.
WITNESS the following signatures:
HIGHLANDS BANKSHARES, INC.,
as Depositor
By: ______________________________
Name: ____________________________
Title: ___________________________
WILMINGTON TRUST COMPANY
(as Delaware Trustee and not in its
individual capacity)
By: ______________________________
Name: ____________________________
Title: ___________________________
__________________________________
________________, as
Administrative Trustee
__________________________________
________________, as
Administrative Trustee
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__________________________________
________________, as
Administrative Trustee
68
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
HIGHLANDS CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Highlands Capital Trust I (the "Trust"),
dated as of ____________, is being duly executed and filed by Wilmington Trust
Company, a _______________ corporation, as trustee, ____________________, an
individual, as trustee, ____________________, an individual, as trustee, and
____________________, an individual, as trustee, to form a business trust under
the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is Highlands
Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee
of the Trust with a principal place of business in the State of Delaware are as
follows: Wilmington Trust Company, 1100 N. Market Street, Attention: Corporate
Trust Administration, Wilmington, Delaware 19890.
3. Effective Date. This Certificate of Trust shall be effective
upon filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust,
have executed this Certificate of Trust as of the date first written above.
WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as trustee
By: __________________________
Name: ________________________
Title: _______________________
______________________________
___________________,
as Trustee
<PAGE>
______________________________
___________________,
as Trustee
______________________________
___________________,
as Trustee
2
<PAGE>
EXHIBIT B
IF THE CAPITAL SECURITIES CERTIFICATE IS TO BE A GLOBAL SECURITIES
CERTIFICATE, INSERT--[This Capital Securities Certificate is a Global Capital
Securities Certificate within the meaning of the Declaration of Trust hereafter
referred to and is registered in the name of The Depository Trust Company (the
"Depositary") or a nominee of the Depositary. This Capital Securities
Certificate is exchangeable for Capital Securities Certificates registered in
the name of a person other than the Depositary or its nominee only in the
limited circumstances described in the Declaration of Trust, and no transfer of
this Capital Securities Certificate (other than a transfer of this Capital
Securities Certificate as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in the limited circumstances
described in the Declaration of Trust.
Unless this Capital Securities Certificate is presented by an
authorized representative of The Depository Trust Company (55 Water Street, New
York) to Highlands Capital Trust I or its agent for registration of transfer,
exchange or payment, and any Capital Securities Certificate issued is registered
in the name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment hereon is made to
Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]
The Capital Securities are issued initially only in blocks having a
Liquidation Amount of not less than $100,000 and multiples of $1,000 in excess
thereof.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), NO ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN
THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN, MAY ACQUIRE OR HOLD THIS CAPITAL SECURITIES CERTIFICATE OR ANY INTEREST
HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF
AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR
HOLDING. ANY PURCHASER OR HOLDER OF THIS CAPITAL SECURITIES CERTIFICATE OR ANY
INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
HEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT
PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN, OR
(B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60,
91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING.
<PAGE>
Liquidation Amount of
Certificate Number Capital Securities
CUSIP NO. [ ]
Certificate Evidencing Capital Securities
of
Highlands Capital Trust I
Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Highlands Capital Trust I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that __________
(the "Holder") is the registered owner of ____________ ( ) Capital Securities of
the Trust in an aggregate liquidation amount of $ ________________, representing
an undivided beneficial interest in the assets of Trust and designated Highlands
Capital Trust I Capital Trust 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 Section 5.05 of the Declaration of Trust (as defined below). The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Capital Securities are set forth in, and this certificate and
the Capital Securities presented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Declaration of
Trust of the Trust, dated as of CLOSING DATE, as the same may be amended from
time to time (the "Declaration of Trust"), between Highlands Bankshares, Inc.,
as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust
Company, as Delaware Trustee, and the Administrative Trustees named therein,
including the designation of the terms of Capital Securities as set forth
therein. The Holder is entitled to the benefits of the Guarantee Agreement
entered into by Highlands Bankshares, Inc., a Virginia corporation, and
Wilmington Trust Company, as Guarantee Trustee, dated as of CLOSING DATE (the
"Guarantee"), to the extent provided therein. The Trust will furnish a copy of
the Declaration of Trust and the Guarantee to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
Terms used but not defined herein have the meanings set forth in the
Declaration of Trust. The Declaration of Trust and this Capital Security shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to conflicts of laws principles thereof.
2
<PAGE>
Upon receipt of this certificate, the Holder is bound by the
Declaration of Trust and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this Certificate this ____ day of _____________.
HIGHLANDS CAPITAL TRUST I
by _______________________________
Name: _________________________
Title: ________________________
COUNTERSIGNED AND REGISTERED:
WILMINGTON TRUST COMPANY, as
Property Trustee
by _______________________________
Authorized Signatory
Dated:
3
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date: _____________
Signature ______________________________________________________________________
(Sign exactly as your name appears on the other side of
this Capital Security Certificate)
The signature(s) should be guaranteed by an eligible
guarantor institution (banks, stockbrokers, savings
and loan associations and credit unions with
membership in an approved signature guarantee
medallion program), pursuant to SEC Rule 17Ad-15.
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
Liquidation Amount of
Certificate Number Common Securities
Certificate Evidencing Common Securities
of
Highlands Capital Trust I
Common Securities
(Liquidation Amount $1,000 per Common Security)
Highlands Capital Trust I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that Highlands
Bankshares, Inc. (the "Holder") is the registered owner of
____________________________ ( ) common securities of the Trust representing
beneficial interests of the Trust and designated the Common Securities
(Liquidation Amount $1,000 per Common Security) (the "Common Securities").
Except as provided in Section 5.11 of the Declaration of Trust (as defined
below) the Common Securities are not transferable and any attempted transfer
hereof shall be void. The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities are set
forth in, and this certificate and the Common Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Declaration of Trust of the Trust, dated as of CLOSING
DATE, as the same may be amended from time to time (the "Declaration of Trust"),
between Highlands Bankshares, Inc., as Depositor, Wilmington Trust Company, as
Property Trustee, Wilmington Trust Company as Delaware Trustee, and the
Administrative Trustees named therein, including the designation of the terms of
the Common Securities as set forth therein. The Trust will furnish a copy of the
Declaration of Trust to the Holder without charge upon written request to the
Trust at its principal place of business or registered office.
Terms used but not defined herein have the meanings set forth in the
Declaration of Trust. The Declaration of Trust and this Common Security shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to conflicts of laws principles thereof.
Upon receipt of this certificate, the Holder is bound by the
Declaration of Trust and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this _____ day of _________________.
HIGHLANDS CAPITAL TRUST I
by ______________________
Name: ___________________
Title: __________________
COUNTERSIGNED AND REGISTERED:
WILMINGTON TRUST COMPANY, as
Property Trustee
by ______________________
Authorized Signatory
Dated:
2
Exhibit 4.3
EXECUTION COPY
HIGHLANDS BANKSHARES, INC.
to
WILMINGTON TRUST COMPANY
Trustee
_____________________________
JUNIOR SUBORDINATED INDENTURE
Dated as of CLOSING DATE
<PAGE>
TABLE OF CONTENTS
ARTICLE I -- Definitions and Other Provisions of General Application..........1
SECTION 1.01. Definitions..................................................1
SECTION 1.02. Compliance Certificate and Opinions.........................12
SECTION 1.03. Forms of Documents Delivered to Trustee.....................12
SECTION 1.04. Acts of Holders.............................................13
SECTION 1.05. Notices to Trustee and Company..............................14
SECTION 1.06. Notice to Holders: Waiver...................................14
SECTION 1.07. Conflict with Trust Indenture Act...........................15
SECTION 1.08. Effect of Headings and Table of Contents....................15
SECTION 1.09. Successors and Assigns......................................15
SECTION 1.10. Separability Clause.........................................15
SECTION 1.11. Benefits of Indenture.......................................15
SECTION 1.12. Governing Law...............................................15
SECTION 1.13. Non-Business Day............................................16
ARTICLE II -- Security Forms.................................................16
SECTION 2.01. Forms Generally.............................................16
SECTION 2.02. Form of Face of Security....................................17
SECTION 2.03. Form of Reverse of Security.................................21
SECTION 2.04. Additional Provisions Required in Global Security...........26
SECTION 2.05. Form of Trustee's Certificate of Authentication.............26
ARTICLE III -- The Securities................................................27
SECTION 3.01. Title and Terms.............................................27
SECTION 3.02. Denominations...............................................29
SECTION 3.03. Execution, Authentication, Delivery and Dating..............30
SECTION 3.04. Temporary Securities........................................31
SECTION 3.05. Global Securities...........................................32
SECTION 3.06. Registration, Transfer and Exchange Generally:
Certain Transfers and Exchanges; Restricted
Securities Legends..........................................33
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities............37
SECTION 3.08. Payment of Interest; Interest Rights Preserved..............38
SECTION 3.09. Persons Deemed Owners.......................................40
SECTION 3.10. Cancellation................................................40
SECTION 3.11. Computation of Interest.....................................40
SECTION 3.12. Deferrals of Interest Payment Dates.........................41
SECTION 3.13. CUSIP Numbers...............................................42
ARTICLE IV -- Satisfaction and Discharge.....................................42
SECTION 4.01. Satisfaction and Discharge of Indenture.....................42
SECTION 4.02. Application of Trust Money..................................44
ARTICLE V -- Remedies........................................................44
SECTION 5.01. Events of Default...........................................44
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment...................................................46
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee......................................47
SECTION 5.04. Trustee May File Proofs of Claim............................48
SECTION 5.05. Trustee May Enforce Claim Without Possession
of Securities...............................................49
SECTION 5.06. Application of Money Collected..............................49
SECTION 5.07. Limitation on Suits.........................................50
SECTION 5.08. Unconditional Right of Holders to Receive
Principal and Interest......................................51
SECTION 5.09. Restoration of Rights and Remedies..........................51
SECTION 5.10. Rights and Remedies Cumulate................................51
SECTION 5.11. Delay or Omission Not Waiver................................52
SECTION 5.12. Control by Holders..........................................52
<PAGE>
SECTION 5.13. Waiver of Past Defaults.....................................53
SECTION 5.14. Undertaking for Costs.......................................53
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.....................54
ARTICLE VI -- The Trustee....................................................54
SECTION 6.01. Certain Duties and Responsibilities.........................54
SECTION 6.02. Notice of Defaults..........................................55
SECTION 6.03. Certain Rights of Trustee...................................55
SECTION 6.04. Not Responsible for Recitals or Issuance
of Securities...............................................57
SECTION 6.05. May Hold Securities.........................................57
SECTION 6.06. Money Held in Trust.........................................57
SECTION 6.07. Compensation and Reimbursement..............................57
SECTION 6.08. Disqualification; Conflicting Interests.....................58
SECTION 6.09. Corporate Trustee Required; Eligibility.....................59
SECTION 6.10. Resignation and Removal, Appointment of Successor...........59
SECTION 6.11. Acceptance of Appointment Successor.........................61
SECTION 6.12. Merger, Conversion, Consolidation or Succession
to Business.................................................62
SECTION 6.13. Preferential Collection of Claims Against Company...........62
SECTION 6.14. Appointment of Authenticating Agent.........................63
SECTION 6.15. Trustee's Rights and Obligations............................64
ARTICLE VII -- Holder's Lists and Reports by Trustee and Company.............65
SECTION 7.01. Company to Furnish Trustee Names and Addresses
of Holders..................................................65
SECTION 7.02. Preservation of Information, Communications
to Holders..................................................65
SECTION 7.03. Reports by Trustee..........................................65
SECTION 7.04. Reports by Company..........................................66
ARTICLE VIII -- Consolidation, Merger, Conveyance, Transfer or Lease.........66
SECTION 8.01. Company May Consolidate Only on Certain Terms...............66
SECTION 8.02. Successor Company Substituted...............................67
ARTICLE IX -- Supplemental Indentures........................................68
SECTION 9.01. Supplemental Indentures without Consent of Holders..........68
SECTION 9.02. Supplemental Indentures with Consent of Holders.............69
SECTION 9.03. Execution of Supplemental Indentures........................71
SECTION 9.04. Effect of Supplemental Indentures...........................71
SECTION 9.05. Conformity with Trust Indenture Act.........................71
SECTION 9.06. Reference in Securities to Supplemental Indentures..........72
ARTICLE X -- Covenants.......................................................72
SECTION 10.01. Payment of Principal and Interest..........................72
SECTION 10.02. Maintenance of Office or Agency............................72
SECTION 10.03. Money for Security Payments to be Held in Trust............72
SECTION 10.04. Statement as to Compliance.................................74
SECTION 10.05. Waiver of Certain Covenants................................74
SECTION 10.06. Payment of the Trusts' Costs and Expenses..................75
SECTION 10.07. Additional Covenants.......................................75
SECTION 10.08. Information Returns........................................76
SECTION 10.09. Statement by Officers as to Default........................76
SECTION 10.10. Delivery of Certain Information............................77
ARTICLE XI -- Redemption or Prepayment of Securities.........................77
SECTION 11.01. Applicability of This Article..............................77
SECTION 11.02. Election To Redeem: Notice to Trustee......................77
SECTION 11.03. Selection of Securities to be Redeemed.....................78
SECTION 11.04. Notice of Redemption.......................................78
SECTION 11.05. Deposit of Redemption Price................................79
SECTION 11.06. Payment of Securities Called for Redemption................80
SECTION 11.07. Company's Right of Redemption..............................80
ii
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ARTICLE XII -- Sinking Funds.................................................81
SECTION 12.01. Applicability of Article...................................81
SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities......81
SECTION 12.03. Redemption of Securities Sinking Fund......................81
ARTICLE XIII -- Subordination of Securities..................................83
SECTION 13.01. Securities Subordinate to Senior Debt......................83
SECTION 13.02. Payment Over of Proceeds upon Dissolution..................83
SECTION 13.03. Prior Payment to Senior Debt Upon Acceleration
of Securities..............................................85
SECTION 13.04. No Payment When Senior Debt in Default.....................86
SECTION 13.05. Payment Permitted If No Default............................86
SECTION 13.06. Subrogation to Rights of Holders of Senior Debt............87
SECTION 13.07. Provisions Solely to Define Relative Rights................87
SECTION 13.08. Trustee to Effectuate Subordination........................88
SECTION 13.09. No Waiver of Subordination Provisions......................88
SECTION 13.10. Notice to Trustee..........................................88
SECTION 13.11. Reliance on Judicial Order or Certificate of
Liquidating Agent..........................................88
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt...........89
SECTION 13.13. Rights of Trustee as Holder of Senior Debt:
Preservation of Trustee's Rights...........................89
SECTION 13.14. Article Applicable to Paying Agents........................89
SECTION 13.15. Certain Conversions or Exchanges Deemed Payment............89
iii
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HIGHLANDS BANKSHARES, INC.
Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Sections 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of CLOSING DATE.
Indenture
Trust Indenture Act Section Section
ss.310(a)(1), (2) and (5)...................................... 6.09
ss.310(a)(3)................................................... Not Applicable
ss.310(a)(4)................................................... Not Applicable
ss.310(b)...................................................... 6.08, 6.10
ss.310(c)...................................................... Not Applicable
ss.311(a)...................................................... 6.13
ss.311(b)...................................................... 6.13
ss.311(c)...................................................... Not Applicable
ss.312(a)...................................................... 7.01, 7.02(a)
ss.312(b)...................................................... 7.02(b)
ss.312(c)...................................................... 7.02(c)
ss.313(a)...................................................... 7.03(a)
ss.313(b)...................................................... 7.03(b)
ss.313(c)...................................................... 7.03(a), 7.03(b)
ss.313(d)...................................................... 7.03(c)
ss.314(a)(1), (2) and (3)...................................... 7.04
ss.314(a)(4)................................................... 10.04
ss.314(b)...................................................... Not Applicable
ss.314(c)(1)................................................... 1.02
ss.314(c)(2)................................................... 1.02
ss.314(c)(3)................................................... Not Applicable
ss.314(d)...................................................... Not Applicable
ss.314(e)...................................................... 1.02
ss.314(f)...................................................... Not Applicable
ss.315(a)...................................................... 6.01(a)
ss.315(b)...................................................... 6.02, 7.03(a)
ss.315(c)...................................................... 6.01(b)
ss.315(d)...................................................... 6.01(c)
ss.315(d)(1)................................................... 6.01(c)(1)
ss.315(d)(2)................................................... 6.01(c)(2)
ss.315(d)(3)................................................... 6.01(c)(3)
ss.315(e)...................................................... 5.14
ss.316(a)...................................................... 5.12
ss.316(a)(1)(A)................................................ 5.12
ss.316(a)(1)(B)................................................ 5.13
ss.316(a)(2)................................................... Not Applicable
ss.316(b)...................................................... 5.08
ss.316(c)...................................................... 1.04(f)
ss.317(a)(1)................................................... 5.03
ss.317(a)(2)................................................... 5.04
ss.317(b)...................................................... 10.03
ss.318(a)...................................................... 1.07
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Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of
CLOSING DATE, between HIGHLANDS BANKSHARES, INC., a
bank holding company established under the laws of
the Commonwealth of Virginia (hereafter called the
"Company") having its principal office at _______
_________________________________________________,
and WILMINGTON TRUST COMPANY, a Delaware corporation,
as Trustee (hereafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereafter called the "Securities") of
substantially the tenor hereafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "Highlands
Capital Trust" and, collectively, the "Highlands Capital Trusts") of preferred
trust interests in such Highlands Capital Trusts (the "Capital Securities") and
common interests in such Highlands Capital Trusts (the "Common Securities" and,
collectively with the Capital Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.
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 covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
Definitions and Other Provisions of General Application
SECTION 1.01. Definitions. For all purposes of this Indenture, except
as otherwise 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.
(2) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein.
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally
<PAGE>
accepted accounting principles, and the term "generally accepted accounting
principles" with respect to any computation required or permitted hereunder
shall mean such accounting principles that are generally accepted at the date or
time of such computation; provided, that when two or more principles are so
generally accepted, it shall mean that set of principles consistent with those
in use by the Company.
(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) Unless otherwise specified herein, any reference to an "Article" or
Section" refers to an Article or a Section, as the case may be, of this
Indenture.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and that shall accrue at the rate
per annum specified or determined as specified in any Officers' Certificate
delivered pursuant to Section 3.01.
"Additional Sums" has the meaning specified in Section 10.06.
"Administrative Action" has the meaning specified in the definition of
"Tax Event" in this Section 1.01.
"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.
"Agent Member" means any member of, or participant in, the Depositary.
"Amended and Restated Declaration of Trust" for each series of
Securities has the meaning specified in the Officers' Certificate for such
series delivered pursuant to Section 3.01.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
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"Board of Directors" means either the board of directors of the Company
or any committee of that board duly authorized to act hereunder.
"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, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in the City of Richmond, Virginia are
authorized or required by law or executive order to remain closed, or (iii) a
day on which the Corporate Trust Office of the Trustee, or, with respect to the
Securities of a series issued to a Highlands Capital Trust, the Corporate Trust
Office of the Property Trustee under the related Trust Agreement, is closed for
business.
"Calculation Agent" means Wilmington Trust Company and its respective
successors.
"Capital Securities" has the meaning specified in the first recital of
this Indenture.
"Capital Treatment Event" means 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 rules or regulations
thereunder) of the United States or any political subdivision thereof or therein
or any rules, guidelines or policies of the Federal Reserve or (b) any official
or administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement, action or decision is announced on or after the original
Issue Date of the Capital Securities, the Company will not be entitled to treat
the Capital Securities as "Tier I Capital" (or the equivalent thereof) for
purposes of the risk-based capital adequacy guidelines of the Federal Reserve,
as then in effect and applicable to the Company; provided, however, that the
distribution of the Securities in connection with the liquidation of a Highlands
Capital Trust by the Company shall not in and of itself constitute a Capital
Treatment Event.
"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
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<PAGE>
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 on such date.
"Common Securities" has the meaning specified in the first recital of
this Indenture.
"Common Stock" means the common stock, $_____ par value, of the
Company.
"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 Guarantee" means the guarantee by the Company of the
distributions on the Trust Securities of a Highlands Capital Trust to the extent
of the Guarantee Agreement.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman, Chief
Executive Officer, President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of
the Company, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office as of the date of this Indenture is located at 1100 N. Market
Street, Attention: Corporate Trust Administration, Wilmington, Delaware 19890.
"Corporation" includes a corporation, association, company, joint-stock
company or business trust.
"Declaration of Trust" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01.
"Defaulted Interest" has the meaning specified in Section 3.08.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.01 with respect to such series (or any successor thereto (a "Successor
Depositary")).
"Determination Date" has the meaning specified in Section 2.02.
"Discount Security" means any security that provides for an amount less
than the principal amount thereof to be due and
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<PAGE>
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 5.02.
"Dollar" means the currency of the United States of America that, as at
the time of payment, is legal tender for the payment of public and private
debts.
"DTC" means The Depository Trust Company.
"Event of Default", unless otherwise specified in the supplemental
indenture creating a series of Securities, has the meaning specified in Article
V.
"Extension Period" has the meaning specified in Section 3.12.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Foreign Currency" means any currency issued by the government of one
or more countries other than the United States of America or by any recognized
confederation or association of such governments.
"Global Security" means a Security in the form prescribed in Section
2.04 evidencing all or part of a series of Securities, issued to the Depositary
or its nominee for such series, and registered in the name of such Depositary or
its nominee.
"Guarantee Agreement" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Highlands Capital Trust" has the meaning specified in the first
recital of this Indenture.
"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
and shall include the terms of each particular series of Securities established
as contemplated by Section 3.01.
"Institutional Accredited Investor" means an accredited investor within
the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act.
"Interest Payment Date" means as to each series of Securities the
Stated Maturity of an installment of interest on such Securities.
"Interest Rate" means the rate of interest specified or determined as
specified in each Security as being the rate of interest payable on such
Security.
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<PAGE>
"Investment Company Event" means the receipt by a Highlands Capital
Trust of an Opinion of Counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
such Highlands Capital Trust is or will be considered an "investment company"
that is required to be registered under the 1940 Act, which change or
prospective change becomes effective or would become effective, as the case may
be, on or after the date of the issuance of the Capital Securities of such
Highlands Capital Trust.
"Junior Subordinated Payment" has the meaning specified in Section
13.02.
"Lien" means any mortgage, pledge, lien, security interest or other
encumbrance.
"Liquidation Amount" has the meaning specified in Section 1.01 of the
Trust Agreement.
"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 as the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"1940 Act" means the Investment Company Act of 1940.
"Officers' Certificate" means a certificate signed by the Chairman and
Chief Executive Officer, President, or Vice President, and by the Treasurer, the
Controller, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Other Debentures" means, with respect to any series of Securities, all
junior subordinated debt securities to be issued by the Company pursuant to this
Indenture, other than such series of Securities, with substantially similar
subordination terms, and that will be issued and sold (if at all) to any
Highlands Capital Trust established by the Company (if any), and will be
unsecured and subordinate and junior in right of payment to the extent and in
the manner set forth in this Indenture to all Senior Debt of the Company.
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<PAGE>
"Other Guarantees" means, with respect to any series of Securities, all
guarantees (if any) to be issued by the Company with respect to Capital
Securities (if any) to be issued by any Highlands Capital Trust to be
established by the Company (if any), other than the guarantee related to such
series of Securities.
"Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent in
trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or that have been paid
pursuant to Section 3.07, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands
such Securities are valid, binding and legal obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that a Responsible Officer actually knows to
be so owned shall be so disregarded. Securities so owned that have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor. Upon the
written request of the Trustee, the Company shall furnish the Trustee promptly
an Officers' Certificate listing and identifying all Securities, if any, known
by the Company to be owned or held by or for the account of the Company, or any
other obligor on the Securities or any Affiliate of the Company or such obligor,
and, subject to the provisions of Section 6.01, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Securities not listed therein are outstanding
for the purpose of any such determination.
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<PAGE>
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of or interest on any Securities on behalf of the
Company.
"Person" means any individual, Corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of and interest on the Securities of
such series are payable pursuant to Sections 3.01 and 3.08.
"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 3.07 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Proceeding" has the meaning specified in Section 13.02.
"Property Trustee" means, in respect of any Highlands Capital Trust,
the commercial bank or trust company identified as the "Property Trustee" in the
related Trust Agreement, solely in its capacity as Property Trustee of such
Highlands Capital Trust under each Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as therein provided.
"Redemption Date", when used with respect to any Security of a series
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.
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.01 with respect to Securities of a series, the date that
is the Business Day next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee, means any
officer assigned to the Corporate Trust Office, including any managing director,
vice president, assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and having
direct responsibility for the administration of this Indenture, and also, with
respect to a
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<PAGE>
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Restricted Security" means each Security required pursuant to Section
3.06(c) to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate substantially
in the form set forth in Exhibit A to this Indenture.
"Restricted Securities Legend" means a legend substantially in the form
of the legend required in the form of Security set forth in Section 2.02 to be
placed on a Restricted Security.
"Securities" has the meaning specified in the first recital of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Certificate" means a certificate evidencing ownership of
Securities.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.06.
"Senior Debt" with respect to any series of Securities means (a) the
principal of, and premium, if any, and interest on all indebtedness of the
Company for money borrowed, whether outstanding on the date of execution of this
Indenture or thereafter created, assumed or incurred, (b) all obligations to
make payment pursuant to the terms of financial instruments, such as (i)
securities contracts and foreign currency exchange contracts, (ii) derivative
instruments, such as swap agreements (including interest rate and foreign
exchange note swap agreements), cap agreements, floor agreements, collar
agreements, interest rate agreements, foreign exchange agreements, options,
commodity futures contracts and commodity options contracts, and (iii) similar
financial instruments; except, in the case of both (a) and (b) above, such
indebtedness and obligations that are expressly stated to rank junior in right
of payment to, or pari passu in right of payment with, the Securities, (c) any
indebtedness or obligations of others of the kind described in both (a) and (b)
above for the payment of which the Company is responsible or liable as guarantor
or otherwise, and (d) any deferrals, renewals or extensions of any such Senior
Debt; provided, however, that Senior Debt shall not be deemed to include (a) any
debt of the Company that, when incurred and without respect to any election
under Section 1111(b) of the U.S. Bankruptcy Code of 1978, as amended, was
without recourse to the Company; (b) any debt of the Company to any of its
Subsidiaries; (c) debt to any employee of the Company; (d) debt that by its
terms is subordinated to trade accounts payable or accrued
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<PAGE>
liabilities arising in the ordinary course of business to the extent that
payments made to the holders of such debt by the Holders as a result of the
subordination provisions of this Indenture would be greater than such payments
otherwise would have been as a result of any obligation of such holders of such
debt to pay amounts over to the obligees on such trade accounts payable or
accrued liabilities arising in the ordinary course of business as a result of
the subordination provisions to which such debt is subject; (e) trade accounts
payable or accrued liabilities arising in the ordinary course of business; and
(f) any other debt securities issued pursuant to this Indenture.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.08.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case of
such principal, as such date may be shortened or extended as provided pursuant
to the terms of such Security and this Indenture.
"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 purposes of this definition, "voting stock" means stock that
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.
"Successor Security" of any particular Security means every Security
issued after, and 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 3.07 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.
"Successor Trustee" has the meaning specified in the definition of
"Trustee" in this Section 1.01.
"Tax Event" means the receipt by the Trust or the Company of an opinion
of an independent tax counsel to the Company experienced in such matters to the
effect that, as a result of (a) any amendment to or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any judicial decision or official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
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<PAGE>
announcement of intent to adopt such procedures or regulations (an
"Administrative Action") or (c) any amendment to or change in the administrative
position or interpretation of any Administrative Action or judicial decision
that differs from the theretofore generally accepted position, in each case, by
any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment or change is made known,
which amendment or change is effective or such Administrative Action or decision
is announced, in each case, on or after the Original Issue Date of the
applicable series of Securities or the issue date of the applicable Capital
Securities issued by the affected Highlands Capital Trust, there is more than an
insubstantial risk that (x) if the Securities are held by or on behalf of the
affected Highlands Capital Trust, (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 interest accrued or received on the Securities or subject to more
than a de minimis amount of other taxes, duties or other governmental charges as
determined by such counsel, or (ii) any portion of interest payable by the
Company to the affected Highlands Capital Trust on the Securities is not, or
within 90 days of the date of such opinion will not be, deductible by the
Company in whole or in part for United States federal income tax purposes or (y)
with respect to Securities that are no longer held by or on behalf of the
affected Highlands Capital Trust, any portion of interest payable by the Company
on the Securities is not, or within 90 days of the date of such opinion will not
be, deductible by the Company in whole or in part for United States federal
income tax purposes.
"Trust Agreement" with respect to each series of Securities means the
Declaration of Trust with respect to such series, as amended by the Amended and
Restated Declaration of Trust with respect to such series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb), as in effect on the date of this Indenture, except as
provided in Sections 1.07 and 9.05.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee (a "Successor Trustee")
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Trustee" shall mean or include each Person who is then a Trustee
hereunder and, if at any time there is more than one such Person, "Trustee" as
used with respect to the Securities of any series shall mean the Trustee with
respect to Securities of that series.
"Vice President", when used with respect to the Company, means any duly
appointed vice president, whether or not
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designated by a number or a word or words added before or after the title "vice
president".
SECTION 1.02. Compliance Certificate 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 an
Officers' Certificate stating that all conditions precedent (including covenants
compliance with which constitutes a condition precedent), if any, provided for
in this Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent (including covenants compliance with which constitute a
condition precedent), if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided regarding conditions or covenants waived by the Holders
pursuant to Section 10.05) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. Forms 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 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 give an opinion as to such
matters in one or several documents.
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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 representation
with respect to 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 1.04. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given to 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 is or are delivered to the Trustee, 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 6.01) 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 the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
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(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done 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.
(f) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to take any action
under this Indenture by vote or consent. Except as otherwise provided herein,
such record date shall be the later of 30 days prior to the first solicitation
of such consent or vote or the date of the most recent list of Security Holders
furnished to the Trustee pursuant to Section 7.01 prior to such solicitation. If
a record date is fixed, those persons who were Security Holders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to take such action by vote or consent or to revoke any vote or consent
previously given, whether or not such persons continue to be Holders after such
record date, provided, however, that unless such vote or consent is obtained
from the Holders (or their duly designated proxies) of the requisite principal
amount of Outstanding Securities prior to the date that is the 120th day after
such record date, any such vote or consent previously given shall automatically
and without further action by any Holder be canceled and of no further effect.
SECTION 1.05. Notices to Trustee and 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,
or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose (except as otherwise provided in Section
5.01 hereof) hereunder 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.
SECTION 1.06. Notice to Holders: Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein
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expressly provided) if in writing and mailed, first class postage prepaid, to
each Holder affected by such event, at the address of such Holder as it appears
in the Securities Register, not later than the latest date, and not earlier than
the earliest date, 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. In case, by reason of
the suspension of or irregularities in regular mail service or for any other
reason, it shall be impossible or impracticable to mail notice of any event to
Holders when such notice is required to be given pursuant to any provision of
this Indenture or of the relevant Securities, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice. 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.
SECTION 1.07. Conflict with Trust Indenture Act. If any provision of
this Indenture limits, qualifies or conflicts with the duties imposed by any of
Section 310 to 317, inclusive, of the Trust Indenture Act through operation of
Section 318(c) thereof, such imposed duties shall control.
SECTION 1.08. 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 1.09. Successors and Assigns. All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. Separability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent and their successors and assigns, the holders
of Senior Debt and the Holders of the Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture and the Securities shall
be governed by and construed in accordance with
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the laws of the Commonwealth of Virginia, without regard to principles of
conflicts of laws.
SECTION 1.13. Non-Business Day. 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 the
Securities) payment of interest or principal need not be made on such date, but
may be made on the next succeeding Business Day (and no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, until such next succeeding Business Day)
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity, as the case may be.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities of each series and the
Trustee's certificate of authentication shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with 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 applicable tax
laws or 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. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.03 with respect to
the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
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Securities distributed to holders of book-entry Capital Securities
shall be distributed in the form of one or more Global Securities registered in
the name of a Depositary or its nominee, and deposited with the Securities
Registrar, as custodian for such Depositary, or held by such Depositary for
credit by the Depositary to the respective accounts of the beneficial owners of
the Securities represented thereby (or such other accounts they may direct).
Securities distributed to holders of Capital Securities other than book-entry
Capital Securities shall not be issued in the form of a Global Security or any
other form intended to facilitate book-entry trading in beneficial interests in
such Securities.
SECTION 2.02. Form of Face of Security.
[If this Security is a Restricted Security, insert--THIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY
PRIOR TO THE DATE THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH HIGHLANDS BANKSHARES, INC. (THE "COMPANY") OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) (THE "RESALE RESTRICTIONS TERMINATION DATE") ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH
MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTIONS TERMINATION DATE.]
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HIGHLANDS BANKSHARES, INC.
(Title of Security)
CUSIP No.
$
HIGHLANDS BANKSHARES, INC., a corporation organized and existing under
the laws of the Commonwealth of Virginia (hereafter called the "Company", which
term includes any successor corporation under the Indenture hereafter referred
to), for value received, hereby promises to pay to _________________________, or
its registered assigns, the principal sum of ____________________ Dollars on
(the "Stated Maturity"). The Company further promises to pay interest on such
principal sum from _______________, or from the most recent interest payment
date (each such date, an "Interest Payment Date") on which interest has been
paid or duly provided for, [monthly] [quarterly] (semi-annually] [annually] [if
applicable, insert--(subject to deferral as set forth herein)], in arrears on
[insert applicable Interest Payment Dates] of each year, commencing
_______________, at the annual rate of [__]%, until the principal hereof shall
have become due and payable, [if applicable, insert--plus Additional Interest,
if any,] until the principal hereof is paid or duly provided for or made
available for payment [if applicable, insert--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
annual rate of [__]% compounded [monthly] [quarterly] [semiannually] [annually]
as Additional Interest].
The amount of interest payable for any period shall be computed on the
basis of the actual number of days elapsed in a year of twelve 30-day months;
except that the amount of interest payable for any partial period shall be
computed on the basis of the actual number of days elapsed in a 360-day year. In
the event that any date on which interest is payable on this Security is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), [except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case] with the same force and effect
as if made on the date the payment was originally payable. A "Business Day"
shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which
banking institutions in the City of Richmond, Virginia are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office of the Trustee or the Corporate Trust Office of the
Property Trustee under the Trust Agreement hereafter referred to for Highlands
Capital Trust 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 this Security (or
one or more Predecessor Securities,
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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 [insert
definition of Regular Record 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 this Security (or 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 of this series 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 of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in such Indenture.
[If applicable, insert--So long as no Event of Default has occurred and
is continuing, 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 ____________ consecutive [monthly] [quarterly] [semi-annual] [annual]
interest payment periods with respect to each deferral period (each an
"Extension Period"), during which Extension Periods the Company shall have the
right to make partial payments of interest on any Interest Payment Date, and at
the end of which the Company shall pay all interest then accrued and unpaid on
the Securities (together with Additional Interest thereon to the extent
permitted by applicable law); provided, however, that no Extension Period may
extend beyond the Stated Maturity of this Security. During any such Extension
Period, the Company may not (i) declare or pay any dividends or distributions,
on or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common and preferred stock)
or (ii) make any payment of principal of, interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Company (including any
Other Debentures) that rank pari passu with or junior in interest to this
Security or (iii) make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any Subsidiary of the Company (including
Other Guarantees) if such guarantee ranks pari passu with or junior in interest
to this Security (other than (a) dividends or distributions in Common Stock of
the Company, (b) 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, (c) payments under the applicable Company Guarantee, (d)
purchases or acquisitions of shares of the Company's Common Stock in connection
with the satisfaction by the Company of its obligations under any employee
benefit plan or other contractual obligation of the Company (other than a
contractual obligation ranking pari passu with or junior to these Securities),
(e) as a result of a reclassification of the Company's capital stock or
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the exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock or (f) the purchase
of fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period, provided, however, that
such extension does not cause such Extension Period to exceed ____________
consecutive [monthly] [quarterly] [semi-annual] [annual] interest payment
periods or extend beyond the Stated Maturity of this Security. Upon the
termination of any such Extension Period and the payment of all accrued and
unpaid interest and any Additional Interest then due, and, subject to the
foregoing limitations, the Company may elect to begin a new Extension Period. No
interest shall be due and payable during an Extension Period except at the end
thereof. The Company shall give the Trustee notice of its election to begin any
Extension Period at least three Business Days prior to the Interest Payment
Date, [if applicable, insert--or, with respect to the Securities issued to a
Highlands Capital Trust, prior to the earlier of (i) the date the Distributions
on the Capital Securities would have been payable except for the election to
begin or extend such Extension Period or (ii) the date the Administrative
Trustees are required to give notice to any automated quotation system or to
holders of such Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than three Business Days
prior to such record date]. There is no limitation on the number of times the
Company may elect to begin an Extension Period.
Payment of the principal of and interest on this Security will be made
at the office or agency of the Trustee in the City of Wilmington, Delaware or at
the office of such Paying Agents in the United States as the Company may
designate from time to time, 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 [if applicable, -- provided, however, that at the option of the
Company payment of any interest may be made (except in the case of Securities in
Global form) (i) by check mailed to the address of the Person entitled thereto
as such address shall appear in the Securities 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 Securities
Register].
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Debt, 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 actions as may be
necessary or appropriate to
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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 Senior Debt,
whether ,now outstanding or hereafter incurred, and waives reliance by each such
holder upon such provisions.
Reference is hereby made to the further provisions of this Security set
forth 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, the Company has caused this instrument to be duly
executed under its corporate seal.
Date: HIGHLANDS BANKSHARES, INC.
[Seal]
by ________________________________
[Chairman and Chief Executive
Officer, President or
Vice President]
Attest:
_________________________
[Secretary or Assistant
Secretary]
SECTION 2.03. Form of Reverse of Security. This Security is one of a
duly authorized issue of securities of the Company (herein called the
"Securities"), issued and to be issued in one or more series under a Junior
Subordinated Indenture, dated as of ____________, as supplemented by an
Officers' Certificate dated as of ____________ (herein called the "Indenture"),
between the Company and Wilmington Trust Company, 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. This Security is one of the series designated on
the face hereof, [limited in aggregate principal amount to $_____________].
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All terms used in this Security that are defined in the Indenture [if
applicable, insert--and in the Amended and Restated Declaration of Trust of
[insert the applicable Highlands Capital Trust], dated as of [____________,] as
amended (the "Amended and Restated Declaration of Trust"), among Highlands
Bankshares, Inc., as Depositor, and the Trustees named therein,] shall have the
meanings assigned to them in the Indenture or, to the extent not defined in the
Indenture, the Amended and Restated Declaration of Trust, as the case may be.
[If applicable, insert--The Company has the right to redeem this
Security (i) on or after _____________, in whole at any time or in part from
time to time, or (ii) in whole (but not in part), at any time within 90 days
following the occurrence and during the continuation of a Tax Event, an
Investment Company Event or a Capital Treatment Event, in each case at the
Redemption Price described below, and subject to possible regulatory approval.]
[If applicable, insert--In the case of a redemption on or after
____________, the Redemption Price shall equal the following prices, expressed
in percentages of the principal amount hereof, together with accrued interest to
but excluding the date fixed for redemption, if redeemed during the 12-month
period beginning _______________:
Year Redemption Price
---- ----------------
and 100% on or after ____________, 20__
In the case of a redemption prior to __________, 20__ following a Tax Event, an
Investment Company Event or a Capital Treatment Event, the Redemption Price
shall equal the "Make-Whole Amount" (as hereafter defined) for a corresponding
$__________ principal amount hereof, together with accrued interest to but
excluding the date fixed for redemption, which Make-Whole Amount will be equal
to the greater of (i) 100% of the principal amount hereof, and (ii) as
determined by a Quotation Agent (as defined in the Declaration of Trust), the
sum of the present values of the principal amount hereof and the premium, if
any, payable as part of the Redemption Price with respect to an optional
redemption hereof on ____________, 20__, together with the present values of
scheduled payments of interest (not including the portion of any such payments
of interest accrued as of the Redemption Date) from the date fixed for
redemption to ____________, 20__, in each case discounted to the date fixed for
redemption on a semi-annual basis (assuming a 360-day year consisting of 30-day
months) at the Adjusted Treasury Rate (as defined in the Declaration of Trust).
The Redemption Price in the case of a redemption on or after ___________, 20__
following a Tax Event, an Investment Company Event or a Capital Treatment Event
shall equal the
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Redemption Price then applicable to a redemption under the first sentence of
this paragraph.]
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
[If the Security is not a Discount Security,--If an Event of Default
with respect to Securities of this series shall occur and be continuing, the
principal of this Security may be declared due and payable in the manner, with
the effect and subject to the conditions provided in the Indenture.]
[If the Security is a Discount Security,--If an Event of Default with
respect to Securities of this series shall occur and be continuing, an amount of
principal of this Security may be declared due and payable in the manner, with
the effect and subject to the conditions provided in the Indenture. Such amount
shall be equal to [--insert formula for determining the amount]. Upon payment
(i) of the amount of principal so declared due and payable and (ii) of interest
on any overdue principal and overdue interest (in each case to the extent that
the payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on this Security shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
[If the Security is not a Discount Security,--As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities of this
series may declare the principal amount of all the Securities of this series
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to be due and payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), provided, however, that, in the case of the
Securities of this series issued to a Highlands Capital Trust, if upon an Event
of Default, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities of this series fail to declare
the principal of all the Securities of this series to be immediately due and
payable, the holders of at least 25% in aggregate Liquidation Amount of the
corresponding series of Capital Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee with a copy to the
Property Trustee. The Holders of a majority in aggregate principal amount of the
Outstanding Securities of this series may annul such declaration and waive the
default by written notice to the Property Trustee, the Company and the Trustee
if the default (other than the nonpayment of the principal of these Securities
that has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Trustee. Should the
Holders of the Securities of this series 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. Upon any such declaration such
principal amount and the accrued interest (including any Additional Interest) on
all the Securities of this series shall become immediately due and payable,
provided that the payment of principal and interest (including any Additional
Interest) on such Securities shall remain subordinated to the extent provided in
Article XIV of the Indenture.]
[If the Security is a Discount Security,--As provided in and subject to
the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities of this series may
declare such portion of the principal amount as may be specified in the terms of
all the Securities of this series to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), provided
that, in the case of the Securities of this series issued to a Highlands Capital
Trust, if upon an Event of Default, the Trustee or the Holders of not less than
25% in aggregate principal amount of the Outstanding Securities of this series
fails to declare the principal of all the Securities of this series to be
immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the corresponding series of Capital Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee with a copy to the Property Trustee. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of this series may
annul such declaration and waive the default by written notice to the Property
Trustee, the Company and the Trustee if the default (other than the nonpayment
of the principal of these Securities
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that has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Trustee. Should the
Holders of the Securities of this series 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. Upon any such declaration such
principal amount and the accrued interest (including any Additional Interest) on
all the Securities of this series shall become immediately due and payable,
provided that the payment of principal and interest (including any Additional
Interest) on such Securities shall remain subordinated to the extent provided in
Article XIV of the Indenture.]
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 Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained pursuant to Section 10.02 of the
Indenture duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Securities Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing and thereupon
one or more new Securities of this series, 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 shall treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Securities of this series are issuable initially only in registered
form without coupons in blocks having aggregate principal amounts of not less
than $100,000 (100 Securities) and any multiple of $1,000 in excess thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of such series of a different authorized denomination, as
requested by the Holder surrendering the same.
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The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security intend that such Security constitute indebtedness and
agree to treat such Security as indebtedness for all United States Federal,
state and local tax purposes.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF.
SECTION 2.04. Additional Provisions Required in Global Security. Any
Global Security issued hereunder shall, in addition to the provisions contained
in Sections 2.02 and 2.03, bear a legend in substantially the following form:
"This Security is a Global Security within the meaning of the Indenture
hereafter referred to and is registered in the name of The Depository
Trust Company (the "Depositary") or a nominee of the Depositary. This
Security is exchangeable for Securities registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Indenture and no transfer of this
Security (other than a transfer of this Security as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may
be registered except in limited circumstances.
Unless this Security is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to Highlands
Bankshares, Inc. or its agent for registration of transfer, exchange or
payment, and any Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of
The Depository Trust Company and any payment hereon is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
CO., has an interest herein."
SECTION 2.05. Form of Trustee's Certificate of Authentication. This
is one of the Securities referred to in the within mentioned Indenture:
___________________________________
as Trustee
Dated:
By:________________________________
Authorized Signatory
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ARTICLE III
The Securities
SECTION 3.01. Title and Terms. The aggregate principal amount of
Securities that may be authenticated and delivered under this Indenture is
unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series that may be authenticated and made available
for delivery under this Indenture (except for Securities authenticated
and made available for delivery upon registration of, transfer of, or
in exchange for, or in lieu of, other Securities of the series pursuant
to Section 3.04, 3.06, 3.07, 9.06 or 11.06); provided, however, that
the authorized aggregate principal amount of such series may be
increased above such amount by a Board Resolution to such effect;
(c) the Stated Maturity or Maturities on which the principal of
the Securities of such series is payable or the method of determination
thereof;
(d) the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates and extent to
which Additional Interest, if any, shall be payable in respect of any
Securities of such series, the Interest Payment Dates on which such
interest shall be payable, the right, pursuant to Section 3.12 or as
otherwise set forth therein, of the Company to defer or extend an
Interest Payment Date, and the Regular Record Date for the interest
payable on any Interest Payment Date or the method by which any of the
foregoing shall be determined;
(e) the place or places where the principal of and interest on
the Securities of such series shall be payable, the place or places
where the Securities of such series may be presented for registration
of transfer or exchange, and the place or places where notices and
demands to or upon the Company in respect of the Securities of such
series may be made;
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(f) the period or periods within or the date or dates on which,
if any, the price or prices at which and the terms and conditions upon
which the Securities of such series may be redeemed, in whole or in
part, at the option of the Company;
(g) the obligation or the right, if any, of the Company to
redeem, repay or purchase the Securities of such series pursuant to any
sinking fund, amortization or analogous provisions, or at the option of
a Holder thereof, and the period or periods within which, the prices or
prices at which, the currency or currencies (including currency unit or
units) in which and the other terms and conditions upon which
Securities of the series shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligations;
(h) the denominations in which any Securities of such series
shall be issuable, if other than in blocks having aggregate principal
amounts of not less than $100,000 (100 Securities) and multiples of
$1,000 in excess thereof;
(i) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of and interest, if any,
on the Securities of the series shall be payable, or in which the
Securities of the series shall be denominated and the manner of
determining the equivalent thereof in Dollars for purposes of the
definition of the term "Outstanding";
(j) the additions, modifications or deletions, if any, in the
Events of Default or covenants of the Company set forth herein with
respect to the Securities of such series;
(k) if other than the principal amount thereof, the portion of
the principal amount of Securities of such series that shall be payable
upon declaration of acceleration of the Maturity thereof;
(l) the additions or changes, if any, to this Indenture with
respect to the Securities of such series as shall be necessary to
permit or facilitate the issuance of the Securities of such series in
bearer form, registrable or not registrable as to principal, and with
or without interest coupons;
(m) any index or indices used to determine the amount of payments
of principal on the Securities of such series or the manner in which
such amounts will be determined;
(n) the issuance of a temporary Global Security representing all
of the Securities of such series and exchange of such temporary Global
Security for definitive Securities of such series;
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(o) whether the Securities of the series shall be issued in whole
or in part in the form of one or more Global Securities and, in such
case, the Depositary for such Global Securities, which Depositary shall
be a clearing agency registered under the Securities Exchange Act of
1934;
(p) the appointment of any Paying Agent or Agents for the
Securities of such series;
(q) the terms of any right to convert or exchange Securities of
such series into any other securities or property of the Company, and
the additions or changes, if any, to this Indenture with respect to the
Securities of such series to permit or facilitate such conversion or
exchange;
(r) the transfer restrictions and legends required to be on the
Securities;
(s) the definitions of Amended and Restated Declaration of Trust,
Declaration of Trust and Guarantee Agreement for each series;
(t) the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of
Securities in right of payment, whether such other series of Securities
are Outstanding or not; and
(u) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officers' Certificate
or in any such indenture supplemental hereto.
Unless otherwise provided with respect to the Securities of any series,
at the option of the Company, interest on the Securities of any series that
bears interest may be paid (except in the case of Securities in Global form) (i)
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Securities 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 Securities Register.
SECTION 3.02. Denominations. The Securities of each series shall be
in registered form without coupons and shall be issuable initially in blocks
having aggregate principal amounts of not less than $100,000 (100 Securities)
and multiples of $1,000 in
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excess thereof, unless otherwise specified as contemplated by Section 3.01.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its corporate seal
reproduced or impressed thereon and 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. Securities
may be authenticated on original issuance from time to time and delivered
pursuant to such procedures acceptable to the Trustee ("Procedures") as may be
specified from time to time by Company Order. Procedures may authorize
authentication and delivery pursuant to oral instructions of the Company or a
duly authorized agent, which instructions shall be promptly confirmed in
writing. The Trustee shall authenticate and deliver such Securities in
accordance with such instructions and as provided in this Indenture.
Prior to the delivery of a Security in any such form to the Trustee for
authentication, the Company shall deliver to the Trustee the following:
(a) a Company Order requesting the Trustee's authentication and
delivery of all or a portion of the Securities of such series, and if
less than all, setting forth procedures for such authentication;
(b) the Board Resolution by or pursuant to which such form of
Security has been approved, and the Board Resolution, if any, by or
pursuant to which the terms of the Securities of such series have been
approved, and, if pursuant to a Board Resolution, an Officers'
Certificate describing the action taken;
(c) an Officers' Certificate dated the date such certificate is
delivered to the Trustee, stating that all conditions precedent
provided for in this Indenture relating to the authentication and
delivery of Securities in such form and with such terms have been
complied with; and
(d) an Opinion of Counsel or Opinions of Counsel substantially to
the effect that (i) the form of such
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Securities has been duly authorized and approved in conformity with the
provisions of this Indenture; (ii) the terms of such Securities have
been duly authorized and determined in conformity with the provisions
of this Indenture, or, if such terms are to be determined pursuant to
Procedures, when so determined such terms shall have been duly
authorized and determined in conformity with the provisions of this
Indenture; and (iii) Securities in such form when completed by
appropriate insertions and executed and delivered by the Company to the
Trustee for authentication in accordance with this Indenture,
authenticated and made available for delivery by the Trustee in
accordance with this Indenture within the authorization as to aggregate
principal amount established from time to time by the Board of
Directors and sold in the manner specified in such Opinion of Counsel,
will constitute valid and legally binding obligations of the Company
entitled to the benefits of this Indenture, subject to bankruptcy,
reorganization, insolvency, fraudulent transfer, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles, and except as enforcement
thereof may be limited by (A) requirements that a claim with respect to
any Securities denominated other than in Dollars (or a Foreign Currency
or currency unit judgment in respect of such claim) be converted into
Dollars at a rate of exchange prevailing on a date determined pursuant
to applicable law or (B) governmental authority to limit, delay or
prohibit the making of payments in Foreign Currencies or currency units
or payments outside the United States, and subject to such other
qualifications as such counsel shall conclude do not materially affect
the rights of Holders of such Securities.
The Trustee shall be entitled to receive the documents referred to in
clauses (b) and (d) above only at or prior to the first request of the Company
to the Trustee to authenticate Securities of such series.
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 the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and made
available for delivery hereunder.
SECTION 3.04. Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities that are
printed,
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lithographed, typewritten, mimeographed or otherwise produced, in any
denomination, substantially of the tenor of the definitive Securities of such
series 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 of any series are issued, the Company will
cause definitive Securities of such series 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 the office or agency of the Company designated for that purpose
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 make available for delivery in exchange therefor a like
principal amount of definitive Securities of the same series of authorized
denominations having the same original Issue Date and Stated Maturity and having
the same terms as such temporary Securities. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 3.05. Global Securities. (a) Each Global Security issued
under this Indenture shall be registered in the name of the Depositary
designated by the Company for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all purposes of
this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (i) such Depositary advises the Trustee in writing that
such Depositary is no longer willing or able to continue as a Depositary with
respect to such Global Security, and no successor depositary shall have been
appointed, or if at any time the Depositary ceases to be a "clearing agency"
registered under the Securities Exchange Act of 1934, as amended, at a time when
the Depositary is required to be so registered to act as such depositary, (ii)
the Company in its sole discretion determines that such Global Security shall be
so exchangeable, (iii) there shall have occurred and be continuing an Event of
Default or (iv) pursuant to the following sentence. All or any portion of a
Global Security may be exchanged for a Security that has a like aggregate
principal amount and is not a Global Security upon 20 days' prior request made
by the Depositary or its Agent Member to the Securities Registrar.
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(c) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Securities Registrar for exchange or
cancellation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, then either (i) such Global Security shall be so surrendered for
exchange or cancellation as provided in this Article III or (ii) the principal
amount thereof shall be reduced, subject to Section 3.06(b)(iv), or increased by
an amount equal to the portion thereof to be so exchanged or canceled, or equal
to the principal amount of such other Security to be so exchanged for a
beneficial interest therein, as the case may be, by means of an appropriate
adjustment made on the records of the Securities Registrar, whereupon the
Trustee shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security by the Depositary, accompanied by registration instructions
and, to the extent required by Section 3.06, a Restricted Securities
Certificate, the Trustee shall, subject to Section 3.05(b) and as otherwise
provided in this Article III, authenticate and make available for delivery any
Securities issuable in exchange for such Global Security (or any portion
thereof) in accordance with the instructions of the Depositary. The Trustee
shall not be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be fully protected in relying on, such
instructions.
(d) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interest pursuant to the rules and procedures of
the Depositary. Accordingly, any such owner's beneficial interests in a Global
Security shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members. Neither the Trustee nor the Securities Registrar shall have
any liability in respect of any transfers effected by the Depositary.
(e) The rights of the owners of beneficial interests in a Global
Security shall be exercised only through the Depositary and shall be limited to
those established by law and agreements between such owners and the Depositary
and/or its Agent Members.
SECTION 3.06. Registration, Transfer and Exchange Generally: Certain
Transfers and Exchanges: Restricted Securities Legends. (a) The Company shall
cause to be kept at the Corporate Trust Office of the Trustee a register in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of the Securities and of transfers of
Securities. Such register is herein sometimes referred to as
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the "Securities Register". The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering the Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office of the agent of the Company designated for that purpose, the Company
shall execute, and the Trustee shall authenticate and make available for
delivery, in the name of the designated transferee or transferees, one or more
new Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms and bearing such restrictive legends as may be
required by this Indenture.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms and bearing such restrictive legends as may be
required by this Indenture, 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 make available
for delivery, the Securities that the Holder making the exchange is entitled to
receive.
All Securities issued upon any 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 transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall
(if so required by the Company or the Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any 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 transfer or exchange of Securities.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (i) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of Securities pursuant to Article
XI and ending at the close of business on the day of mailing of notice of
redemption or (ii) to transfer or exchange any Security so selected for
redemption in whole or in part,
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except, in the case of any Security to be redeemed in part, any portion thereof
not to be redeemed.
(b) Certain Transfers and Exchanges. Notwithstanding any other
provision of this Indenture, transfers and exchanges of Securities and
beneficial interests in a Global Capital Security of the kinds specified in this
Section 3.06(b) shall be made only in accordance with this Section 3.06(b).
(i) Non-Global Security to Global Security. If the Holder
of a Security (other than a Global Security) wishes at any time to transfer all
or any portion of such Security to a Person who wishes to take delivery thereof
in the form of a beneficial interest in a Global Security, such transfer may be
effected only in accordance with the provisions of this clause (b)(i) and
subject to the rules and procedures of the Depositary. Upon receipt by the
Securities Registrar of (A) such Security as provided in Section 3.06(a) and
instructions satisfactory to the Securities Registrar directing that a
beneficial interest in the Global Security in a specified principal amount not
greater than the principal amount of such Security be credited to a specified
Agent Member's account and (B) a Securities Certificate duly executed by such
Holder or such Holder's attorney duly authorized in writing, then the Securities
Registrar shall cancel such Security (and issue a new Security in respect of the
untransferred portion thereof) as provided in Section 3.06(a) and increase the
aggregate principal amount of the Global Security by the specified principal
amount as provided in Section 3.05(c).
(ii) Non-Global Security to Non-Global Security. A Security
that is not a Global Security may be transferred, in whole or in part, to a
Person who takes delivery in the form of another Security that is not a Global
Security as provided in Section 3.06(a); provided, that if such Security to be
transferred in whole or in part is a Restricted Security, the Securities
Registrar shall have received a Restricted Securities Certificate duly executed
by the transferor Holder or such Holder's attorney duly authorized in writing.
(iii) Exchanges between Global Security and Non-Global
Security. A beneficial interest in a Global Security may be exchanged for a
Security that is not a Global Security as provided in Section 3.05.
(c) Restricted Securities Legend. (i) Except as set forth below,
all Securities shall bear a Restricted Securities Legend, substantially in the
following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS
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EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE
DATE THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH HIGHLANDS BANKSHARES, INC. (THE "COMPANY")
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTIONS TERMINATION
DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTIONS TERMINATION DATE.
(ii) Subject to the following clauses of this Section 3.06(c), a
Security (other than a Global Security) that does not bear a Restricted
Securities Legend may be issued in exchange for or in lieu of a
Restricted Security or any portion thereof that bears such legend if,
in the Company's judgment, placing such a legend upon such new Security
is not necessary to ensure compliance with the registration
requirements of the Securities Act, and the Trustee, at the written
direction of the Company in the form of an Officers' Certificate, shall
countersign and deliver such a new Security as provided in this Article
III.
(iii) Notwithstanding the foregoing provisions of this Section
3.06(c), a successor Security of a Security that does not bear a
Restricted Securities Legend shall not bear such form of legend unless
the Company has reasonable cause to believe that such successor
Security is a "restricted security" within the meaning of Rule 144
under the Securities Act, in which case the Trustee, at the written
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direction of the Company in the form of an Officers' Certificate, shall
countersign and deliver a new Security bearing a Restricted Securities
Legend in exchange for such successor Security as provided in this
Article III.
(iv) Upon any sale or transfer of a Restricted Security (including
any Restricted Security represented by a Global Security) pursuant to
an effective registration statement under the Securities Act or
pursuant to Rule 144 under the Securities Act after such registration
ceases to be effective: (A) in the case of any Restricted Security that
is a definitive Security, the Securities Registrar shall permit the
Holder thereof to exchange such Restricted Security for a definitive
Security that does not bear the Restricted Securities Legend and
rescind any restriction on the transfer of such Restricted Security;
and (B) in the case of any Restricted Security that is represented by a
Global Security, the Securities Registrar shall permit the Holder of
such Global Security to exchange such Global Security for another
Global Security that does not bear the Restricted Securities Legend.
(v) If Restricted Securities are being presented or surrendered
for transfer or exchange then there shall be (if so required by the
Trustee), (A) if such Restricted Securities are being delivered to the
Securities Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect; or (B) if such Restricted Securities are being transferred, (i)
a certification from the transferor in a form substantially similar to
that attached as Exhibit A, and (ii) if the Company or Securities
Registrar so requests, evidence reasonably satisfactory to them as to
the compliance with the restrictions set forth in the Restricted
Securities Legend.
(vi) If the Securities are issued pursuant to an effective
registration statement, no Restricted Securities Legend shall be
required.
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities. If
any mutilated Security is surrendered to the Trustee together with such security
or indemnity as may be required by the Company or the Trustee to hold each of
them harmless, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same issue and series of like
tenor and principal amount, having the same Original Issue Date and Stated
Maturity and bearing the same Interest Rate as such mutilated Security, and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or
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indemnity as may be required by them to hold each 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, upon its
request, the Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of the same issue and series
of like tenor and principal amount, having the same Original Issue Date and
Stated Maturity and bearing the same Interest Rate as such destroyed, lost or
stolen Security, 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 3.08. Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series that 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
in respect of Securities of such series, except that, unless otherwise provided
in the Securities of such series, interest payable on the Stated Maturity of a
Security shall be paid to the Person to whom principal is paid. The initial
payment of interest on any Security of any series that is issued between a
Regular Record Date and the related Interest Payment Date shall be payable as
provided in such Security or in the Board Resolution pursuant to Section 3.01
with respect to the related series of Securities.
Any interest on any Security that is payable, but is not timely paid or
duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted
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Interest"), shall forthwith cease to be payable to the registered 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 of such series in respect
of which interest is in default (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 payment of such Defaulted Interest which shall not be 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 of a
Security of such series at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such Special Record Date. The
Trustee may, in its discretion, in the name and at the expense of the Company,
cause a similar notice to be published at least once in a newspaper, customarily
published in the English language on each Business Day and of general
circulation in the Borough of Manhattan, the City of New York, but such
publication shall not be a condition precedent to the establishment of such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the Securities of
such series (or their respective Predecessor Securities) are registered 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 of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Company to the Trustee of the proposed
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payment pursuant to this Clause, such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon 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, that were carried by such other Security. Any interest on any Security
that is deferred or extended pursuant to Section 3.12 shall not constitute
Defaulted Interest for purposes of this Section 3.08.
SECTION 3.09. Persons Deemed Owners. The Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary. No holder of any
beneficial interest in any Global Security held on its behalf by a Depositary
shall have any rights under this Indenture with respect to such Global Security,
and such Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company or the Trustee from giving effect to any written certification, proxy,
or other authorization furnished by a Depositary or impair, as between the
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
SECTION 3.10. Cancellation. All Securities surrendered for payment,
redemption, transfer or exchange shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee, and any such Securities and Securities
surrendered directly to the Trustee for any such purpose shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and made available for
delivery hereunder that the Company may have acquired in any manner whatsoever,
and all Securities so delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities shall be delivered to the Company.
SECTION 3.11. Computation of Interest. Except as otherwise specified as
contemplated by Section 3.01 for Securities of any series, interest on the
Securities of each series for any period shall be computed on the basis of a
360-day year of twelve 30-day months, and interest on the Securities of each
series for any
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partial period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months.
SECTION 3.12. Deferrals of Interest Payment Dates. If specified as
contemplated by Section 3.01 with respect to the Securities of a particular
series, provided that no Event of Default has occurred and is continuing with
respect to such Securities, the Company shall have the right, at any time or
from time to time during the term of such series, to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.01 (each, an "Extension Period") during which
Extension Periods the Company shall have the right to make partial payments of
interest on any Interest Payment Date. No Extension Period shall end on a date
other than an Interest Payment Date. At the end of any such Extension Period the
Company shall pay all interest then accrued and unpaid on the Securities
(together with Additional Interest thereon, if any, at the rate specified for
the Securities of such series to the extent permitted by applicable law),
provided, however, that no Extension Period may extend beyond the Stated
Maturity of these Securities. During any such Extension Period, the Company
shall not (i) declare or pay dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Company's
capital stock (which includes common and preferred 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 (including Other Debentures) that rank
pari passu with or junior in interest to the Securities of such series or (iii)
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any Subsidiary of the Company (including Other Guarantees) if
such guarantee ranks pari passu with or junior in interest to the Securities of
such series (other than (a) dividends or distributions in common stock of the
Company, (b) 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,
(c) payments under the applicable Company Guarantee, (d) purchases or
acquisitions of shares of the Company's Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plan
or other contractual obligation of the Company (other than a contractual
obligation ranking pari passu with or junior to these Securities, (e) as a
result of a reclassification of the Company's capital stock or the exchange or
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, or (f) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). Prior to the termination of any such Extension Period,
the Company may further extend such Extension Period; provided, however, that no
Extension Period shall exceed the period or periods specified in
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such Securities or extend beyond the Stated Maturity of such Securities. Upon
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, and subject to the foregoing limitations, the Company may elect to begin a
new Extension Period. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Trustee and the
Property Trustee notice of its election to begin any such Extension Period (or
an extension thereof) at least three Business Days prior to the Interest Payment
Date or, with respect to the Securities of a series issued to a Highlands
Capital Trust, prior to the earlier of (i) the date the Distributions on the
Trust Securities of such Highlands Capital Trust would have been payable except
for the election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees or such Highlands Capital Trust are required to give
notice to any automated quotation system or to holders of Trust Securities of
the record date or the date such Distributions are payable, but in any event not
less than three Business Days prior to such record date. There is no limitation
on the number of times that the Company may elect to begin an Extension Period.
SECTION 3.13. 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 or other related material as
a convenience to Holders; provided, however, that any such notice or other
related material 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 or other related material 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.
So long as the Securities are held by or on behalf of a Highlands
Capital Trust, notwithstanding anything to the contrary herein, the Company
shall have the right to set off any payment it is otherwise required to make
hereunder in respect of any Security with and to the extent the Company has
theretofore made, or is concurrently on the date of such payment making, any
payment under a Company Guarantee used to satisfy the related payment of
indebtedness hereunder.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.
This Indenture, upon Company Request, shall cease to be of further effect
(except as to (i) any surviving rights of transfer, substitution and exchange of
Securities, (ii) rights hereunder of Holders to receive payments of principal of
and interest on the Securities and other rights, duties and
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obligations of the Holders as beneficiaries hereof with respect to the amounts,
if any, deposited with the Trustee pursuant to this Article IV and (iii) the
rights and obligations of the Trustee hereunder), and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities that have been destroyed, lost or
stolen and that have been replaced or paid as provided in Section
3.07 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 10.03) 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 Stated
Maturity within one year of the date of deposit, or
(iii) 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 Company,
and the Company, in the case of Clause (B)(i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which
the Securities of such series are payable sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and interest
(including any Additional Interest) to the date of such deposit (in the
case of Securities that have become due and payable) or to the Stated
Maturity or the date for redemption, as the case may be;
(2) the Company has paid or caused 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.
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Notwithstanding the satisfaction and discharge of this Indenture or the earlier
resignation or removal of the Trustee, the obligations of the Company to the
Trustee under Section 6.07 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 4.02 and the last paragraph of Section 10.03 shall
survive.
SECTION 4.02. Application of Trust Money. Subject to the provisions
of the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal and interest for the payment of which such
money or obligations have been deposited with or received by the Trustee;
provided, however, that such moneys need not be segregated from other funds
except to the extent required by law.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default", wherever used
herein with respect to the Securities of any series, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of
that series, including any Additional Interest in respect thereof, when
it becomes due and payable, and continuance of such default for a
period of 30 days (subject to the deferral of any due date in the case
of an Extension Period); or
(2) default in the payment of the principal of any Security of
that series when due, whether at its Maturity, upon redemption, by
declaration of acceleration or otherwise; or
(3) default in the observance or performance in any material
respect, of any covenant of the Company in this Indenture (other than a
covenant a default in the performance of which or the breach of which
is elsewhere in this Section specifically dealt with), and continuance
of such default for a period of 90 days after there has been
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given, by registered or certified mail, to the Company by the Trustee
or to the Company and the Trustee by the Holders of at least 25% in
aggregate outstanding principal amount of the Securities of that series
a written notice specifying such default and requiring it to be
remedied; or
(4) the entry of a decree or order by a court having jurisdiction
in the premises 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 bankruptcy, insolvency,
reorganization or other similar law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Company or of any substantial part of its property or ordering
the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days; or
(5) the institution by the Company of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become
due and its willingness to be adjudicated a bankrupt, or the taking of
corporate action by the Company in furtherance of any such action; or
(6) in respect of a series issued to a Highlands Capital Trust,
the voluntary or involuntary dissolution, winding-up or termination of
a Highlands Capital Trust, except in connection with the distribution
of the Securities of such series to the holders of Trust Securities in
liquidation of such Highlands Capital Trust, the redemption of all the
Trust Securities of a Highlands Capital Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the applicable
Trust Agreement; or
(7) any other Event of Default with respect to Securities of that
series as set forth in the Board Resolution and the Officers'
Certificate, or established in a supplemental indenture hereto, prior
to the issuance of the series of such Securities as contemplated by
Section 3.01.
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SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), provided,
however, that, in the case of the Securities of a series issued to a Highlands
Capital Trust, if, upon an Event of Default, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding Securities of
that series fail to declare the principal of all the Securities of that series
to be immediately due and payable, the holders of at least 25% in aggregate
Liquidation Amount of the corresponding series of Capital Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee with a copy to the Property Trustee. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of a series may annul
such declaration and waive the default by written notice to the Property
Trustee, the Company and the Trustee if the default (other than the nonpayment
of the principal of these Securities that has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee. Should the Holders of the Securities of such a
series 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. Upon any such declaration such principal amount (or specified
amount) of and the accrued interest (including any Additional Interest) on all
the Securities of such series shall become immediately due and payable,
provided, however, that the payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIV.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series, 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 installments of interest (including any
Additional Interest) on all Securities of that series,
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(B) the principal of any Securities of that series that has
become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel.
(2) all Events of Default with respect to Securities of that
series, other than the nonpayment of the principal of Securities of
that series that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.13.
The Company is required to file annually with the Trustee a certificate
as to whether or not the Company is in compliance with all the conditions and
covenants applicable to it under this Indenture.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities of
a series all or part of which is represented by a Global Security, a record date
shall be established for determining Holders of Outstanding Securities of such
series entitled to join in such notice, which record date shall be at the close
of business on the day the Trustee receives such notice. The Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to join in such notice, whether or not such Holders remain Holders
after such record date; provided, however, that, unless such declaration of
acceleration, or rescission and annulment, as the case may be, shall have become
effective by virtue of the requisite percentage having joined in such notice
prior to the day that is 90 days after such record date, such notice of
declaration of acceleration, or rescission and annulment, as the case may be,
shall automatically and without further action by any Holder be canceled and of
no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy
of a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice that has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 5.02.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if:
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(1) default is made in the payment of any installment of interest
(including any Additional 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 the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations and interest (including any Additional Interest); and, in
addition thereto, all amounts owing to the Trustee under Section 6.07 and
Section 10.06.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series 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.
SECTION 5.04. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Company for the payment
of overdue principal or interest (including any Additional Interest))
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of
principal and interest (including any
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Additional Interest) owing and unpaid in respect to the Securities
and to file such other papers or documents as may be necessary or
advisable and to take any and all actions as are authorized under
the Trust Indenture Act in order to have the claims of the Holders
and any predecessor to the Trustee under Section 6.07 and of the
Holders allowed in any such judicial proceedings; and
(ii) 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 in
accordance with Section 5.06; and
(b) 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 for distribution in accordance with Section 5.06, 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 to it and
any predecessor Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any proceeding; provided, however, that
the Trustee may, on behalf of the Holders, vote for the election of a trustee in
bankruptcy or similar official and be a member of a creditors' or other similar
committee.
SECTION 5.05. Trustee May Enforce Claim Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee 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 an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing to the Trustee and any
predecessor Trustee under Section 6.07, 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 5.06. Application of Money Collected. Any money or property
collected or to be applied by the Trustee with respect to a series of Securities
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 or
property on account of principal or interest (including any Additional
Interest), upon presentation of the Securities and the
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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 and any
predecessor Trustee under Section 6.07;
Second: to the payment of the amounts then due and unpaid upon
such series of Securities for principal and interest (including any
Additional Interest), in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority
of any kind, according to the amounts due and payable on such series of
Securities for principal and interest (including any Additional
Interest), respectively; and
Third: the balance, if any, to the Person or Persons entitled
thereto.
SECTION 5.07. Limitation on Suits. No Holder of any Securities of any
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture or for the appointment of a receiver, assignee,
trustee, liquidator, sequestrator (or other similar official) or for any other
remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series 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 of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right
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under this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all such Holders.
SECTION 5.08. Unconditional Right of Holders to Receive Principal and
Interest. Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right that is absolute and unconditional to receive
payment of the principal of and (subject to Section 3.08) interest (including
any Additional Interest) on such Security on the respective Stated Maturities
expressed in such Security and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Securities of a series issued to a Highlands Capital
Trust, any holder of the corresponding series of Capital Securities shall have
the right, upon the occurrence of an Event of Default described in Section
5.01(1) or 5.01(2) hereof, to institute a suit directly against the Company for
enforcement of payment to such Holder of principal of and (subject to Section
3.08) interest (including any Additional Interest) on the Securities having a
principal amount equal to the aggregate Liquidation Amount of the Capital
Securities of the corresponding series held by such Holder. Notwithstanding any
payments made to a holder of Capital Securities by the Company in connection
with a suit directly against the Company, the Company shall remain obligated to
pay the principal of or interest on the Securities, 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 suit directly against the Company.
The holders of the Capital Securities will not be able to exercise
directly any remedies, other than those set forth in this Section 5.08,
available to the holders of the Securities unless there shall have been an Event
of Default under the Trust Agreement.
SECTION 5.09. 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 case the Company, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 5.10. Rights and Remedies Cumulate. Except as otherwise
provided in the last paragraph of Section 3.07, 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 right
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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 5.11. Delay or Omission Not Waiver. Except as otherwise
provided in the last paragraph of Section 3.07, 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 5.12. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities of any series 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, with respect to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law
or with this Indenture;
(2) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction; and
(3) subject to the provisions of Section 6.01, the Trustee shall
have the right to decline to follow such direction if the Trustee in
good faith shall, by a Responsible Officer or Officers of the Trustee,
determine that the proceeding so directed would be unjustly prejudicial
to the Holders not joining in any such direction or would involve the
Trustee in personal liability.
Upon receipt by the Trustee of any written notice directing the time,
method or place of conducting any such proceeding or exercising any such trust
or power, with respect to Securities of a series all or part of which is
represented by a Global Security, a record date shall be established for
determining Holders of outstanding Securities of such series entitled to join in
such notice, which record date shall be at the close of business on the day the
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, however, that, unless the Holders of a majority in principal amount of
the Outstanding Securities of such series
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shall have joined in such notice prior to the day that is 90 days after such
record date, such notice shall automatically and without further action by any
Holder be canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder, or a proxy of a Holder, from giving, after expiration of such
90-day period, a new written notice identical to a written notice that has been
canceled pursuant to the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of this Section
5.12.
SECTION 5.13. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of a series affected
thereby may, on behalf of the Holders of all the Securities of such series,
waive any past default, except a default in the payment of principal of or
interest (including any Additional Interest) (unless such default has been cured
and a sum sufficient to pay all overdue installments of interest and principal
due otherwise than by acceleration has been deposited with the Trustee) on any
Security of such series or a default in respect of a covenant or provision that,
under Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Security of such series and, in the case of
Securities of a series issued to a Highlands Capital Trust, 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 related series of
Capital Securities shall have such right.
Upon any such waiver, such default shall cease to exist, 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 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 10% in principal amount of the
outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of or interest (including
any Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.
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SECTION 5.15. Waiver of Usury, 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 usury, stay or extension law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
that by any provisions hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(b) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct except that:
(i) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
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(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of Holders pursuant to Section 5.12 relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture with respect to the Securities of such
series.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it against such risk or
liability is not assured to it.
(e) 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 6.02. Notice of Defaults. Within 90 days after actual
knowledge by a Responsible officer of the Trustee of the occurrence of any
default hereunder with respect to the Securities of any series, the Trustee
shall transmit by mail to all Holders of Securities of such series, as their
names and addresses appear in the Securities Register, notice of such default
hereunder known to a Responsible Officer of the Trustee, unless such default
shall have been cured or waived; provided, however, that, except in the case of
a default in the payment of the principal of or interest (including any
Additional Interest) on any Security of such series, the Trustee shall be fully
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 determines that the withholding of such
notice is in the interests of the Holders of Securities of such series; and
provided, further, however, that, in the case of any default of the character
specified in Section 5.01(3), no such notice to Holders of Securities of such
series shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event that is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
SECTION 6.03. Certain Rights of Trustee. Subject to the provisions of
Section 6.01:
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(a) the 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, Security or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request 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 is herein specifically prescribed) shall be entitled to
receive and may, in the absence of bad faith on its part, conclusively
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
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 security or indemnity
satisfactory to it against the costs, expenses and liabilities that
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, indenture, Security or other paper or document, but the
Trustee in its discretion may make such inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company, personally
or by agent or attorney at the reasonable cost of the Company upon
giving reasonable notice to the Company and shall incur no liability or
additional liability of any kind by reason of such inquiry or
investigation;
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(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;
(h) the Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Indenture;
(i) the Trustee shall not be charged with knowledge of any Event
of Default unless either (1) a Responsible Officer of the Trustee shall
have actual knowledge or (2) the Trustee shall have received notice
thereof in accordance with Section 1.05(1) hereof from the Company or a
Holder;
(j) no permissive power or authority available to the Trustee
shall be construed as a duty; and
(k) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 6.04. 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 or any offering or disclosure materials prepared in connection
therewith. The Trustee shall not be accountable for the use or application by
the Company of the Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, any Paying Agent,
Securities Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Securities Registrar or such
other agent.
SECTION 6.06. 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 6.07. Compensation and Reimbursement. The Company, as
borrower on the Securities, agrees:
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(1) to pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time 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) 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 the Trustee for, and to hold it harmless
against, any loss, liability or expense (other than taxes based upon,
measured by or determined by the income of the Trustee) (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel) incurred without negligence or bad faith, arising
out of or in connection with the acceptance or administration of this
trust or the performance of its duties 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.
The obligations of the Company under this Section 6.07 shall survive
the termination of this Indenture or the earlier resignation or removal of the
Trustee.
To secure the Company's payment obligations in this Section, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee.
Such lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code of 1978, as amended, or any successor
statute.
The provisions of this Section 6.07 shall survive the termination of
this Indenture.
SECTION 6.08. Disqualification; Conflicting Interests. The Trustee
for the Securities of any series issued hereunder shall be subject to the
provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall
prevent the Trustee from filing with the Commission the application referred to
in the second-to-last paragraph of Section 310(b) of the Trust Indenture Act.
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SECTION 6.09. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder that shall be:
(a) a corporation organized and doing business under the laws of
the United States of America or of any state, territory or the District
of Columbia, authorized under such laws to exercise corporate trust
powers and subject to supervision or examination by Federal, state,
territorial or District of Columbia authority, or
(b) a corporation or other Person organized and doing business
under the laws of a foreign government that is permitted to act as
Trustee pursuant to a rule, regulation or order of the Commission,
authorized under such laws to exercise corporate trust powers, and
subject to supervision or examination by authority of such foreign
government or a political subdivision thereof substantially equivalent
to the supervision or examination applicable to United States
institutional trustees, in either case having a combined capital and
surplus of at least $50,000,000, subject to supervision of examination
by Federal or state authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
the aforesaid supervising or examining authority, then, for the
purposes of this Section, 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. 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 hereafter specified in this Article. Neither the
Company nor any Person directly or indirectly controlling, controlled
by or under common control with the Company shall serve as Trustee for
the Securities of any series issued hereunder.
SECTION 6.10. 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 6.11.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series 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 with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of
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a majority in principal amount of the Outstanding Securities of such series,
delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08 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
(ii) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(iii) 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,
(x) the Company, acting pursuant to the authority of a Board
Resolution, may remove the Trustee, or (y) subject to Section 5.14, 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
with respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a Successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a Successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series 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 with respect to the Securities of such series and
supersede the Successor Trustee appointed by the Company. If no Successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereafter provided, within 30 days of such resignation or removal the Trustee or
any Holder who has been a bona fide Holder of a Security for at least six
months, subject to Section 5.14, on behalf of himself and all others similarly
situated, may petition any court of competent jurisdiction for the appointment
of a Successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of
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any series and each appointment of a Successor Trustee with respect to the
Securities of any series by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders of Securities of such series as their
names and addresses appear in the Securities Register. Each notice shall include
the name of the Successor Trustee with respect to the Securities of such series
and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment Successor. (a) In case of the
appointment hereunder of a Successor Trustee with respect to all Securities,
every such Successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such Successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on the request of the Company or the
Successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such Successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such Successor Trustee all property and money held by
such retiring Trustee hereunder.
(b) In case of the appointment hereunder of the Successor Trustee
with respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each Successor Trustee with respect to the Securities
of one or more series shall execute and deliver a written instrument or an
indenture supplemental hereto wherein each Successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each Successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
Successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such written instrument or supplemental
indenture shall constitute such Trustees as co-trustees of the same trust and
that each such Trustee shall be trustee of a trust or trusts hereunder separate
and apart from any trust or trusts hereunder administered by any other such
Trustee, and upon the execution and delivery of such written instrument or
supplemental indenture, the resignation or removal of the retiring Trustee shall
become effective to the
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extent provided therein, and each 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 with respect to the Securities of
that or those series to which the appointment of such Successor Trustee relates;
but, on request of the Company or any Successor Trustee, such retiring Trustee
shall duly assign, transfer and deliver to such Successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the Securities
of that or those series to which the appointment of such Successor Trustee
relates.
(c) 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 rights, powers and trusts referred to
in paragraph (a) or (b) of this Section, as the case may be.
(d) 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. In the event that the Trust Indenture Act applies
to this Indenture at the time that any Successor Trustee is appointed, such
Successor Trustee shall qualify under such Act.
SECTION 6.12. 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 of 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 (including qualification under the Trust Indenture Act, if applicable),
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, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such Successor Trustee, and in all cases the certificate of
authentication shall have the full force that it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Company. If
and when the Trustee shall be or become 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).
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SECTION 6.14. Appointment of Authenticating Agent. The Trustee may
appoint an authenticating agent or agents (each, an "Authenticating Agent") with
respect to one or more series of Securities that shall be authorized to act on
behalf of the Trustee to authenticate Securities of such series issued upon
original issue and upon exchange, registration of transfer or partial redemption
thereof, and Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Where reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any state, Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of such supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such
Authenticating Agent 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 an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent that shall be acceptable to the Company and shall give notice of such
appointment in the
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manner provided in Section 1.06 to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of each series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the within mentioned
Indenture.
Dated: ___________________________________
Agent Trustee
by_________________________________
As Authenticating Agent
by_________________________________
Authorized Signatory
SECTION 6.15. Trustee's Rights and Obligations. The Trustee shall
have and be subject to all the duties and responsibilities specified with
respect to an indenture trustee under the Trust Indenture Act. Subject to such
provisions, the Trustee is under no obligation to exercise any of the powers
vested in it by this Indenture at the request of any holder of the Securities,
unless offered indemnity to its satisfaction by such holder against the costs,
expenses and liabilities that might be incurred thereby. The Trustee will not be
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Trustee reasonably believes
that repayment or adequate indemnity is not reasonably assured to it.
Notwithstanding the foregoing, nothing in this Section 6.15 shall be deemed to
abrogate any of the rights, indemnities or protections otherwise provided to the
Trustee under this Indenture.
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ARTICLE VII
Holder's Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee:
(a) quarterly, not more than 15 days after each Regular Record
Date in each year, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more 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
Securities Registrar.
SECTION 7.02. 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 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 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 privileges of the Trustee, shall be as provided in 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
the disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 7.03. 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) Reports so required to be transmitted at stated intervals of
not more than 12 months shall be transmitted no later than the last calendar day
in February of each calendar year, commencing with the last calendar day in
February of the year following the Original Issue Date.
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(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities exchange
upon which the Securities are listed and also with the Commission. The Company
will notify the Trustee whenever the Securities are listed on any securities
exchange.
SECTION 7.04. Reports by Company. The Company shall file with the
Trustee and with 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 in
the Trust Indenture Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, shall be filed
with the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the information,
documents and other reports that are specified in Sections 13 and 15(d) of the
Securities Exchange Act of 1934, as amended. The Company also shall comply with
the other provisions of Trust Indenture Act Section 314(a). Delivery of such
reports, information and documents to the Trustee is for informational purposes
only, and the Trustee's receipt of such shall not constitute constructive notice
of any information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate Only on Certain Terms. The
Company shall not consolidate with or merge with or into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge with or into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge with or
into another Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, the corporation
formed by such consolidation or into which the Company is merged or the
Person that acquires by conveyance or transfer, or that leases, the
properties and assets of the Company substantially as an entirety shall
be a corporation, partnership or trust
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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 interest (including any Additional
Interest) on all the Securities and the performance of every covenant
and every obligation 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 that, after notice or lapse of time, or both,
would become an Event of Default, shall have occurred and be
continuing;
(3) if at such time Securities of a series issued to a Highlands
Capital Trust are Outstanding, such consolidation, merger, conveyance,
transfer or lease is permitted under the related Trust Agreement and
Company Guarantee and does not give rise to any breach or violation of
the related Trust Agreement or Company Guarantee; and
(4) 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 6.01, may
rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section
8.01.
SECTION 8.02. Successor Company 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 8.01, the successor
corporation 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 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 that 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
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in this Indenture prescribed, the Trustee shall authenticate and shall make
available for delivery any Securities that 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 that 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.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. 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:
(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 contained;
(2) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee or to surrender any right or power herein
conferred upon the Company;
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 or 3.01;
(4) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are
to be for the benefit of less than all series of Securities, stating
that such covenants are expressly being included solely for the benefit
of such series) or to surrender any right or power herein conferred
upon the Company;
(5) to add any additional Events of Default;
(6) to change or eliminate any of the provisions of this
Indenture; provided that any such change or elimination (a) shall
become effective only when there is no Security
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Outstanding of any series created prior to the execution of such
supplemental indenture that is entitled to the benefit of such
provision or (b) shall not apply to any Outstanding Securities;
(7) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided that such action pursuant to this clause
(7) shall not materially adversely affect the interest of (a) the
Holders of Securities of any series or, (b) in the case of the
Securities of a series issued to a Highlands Capital Trust and for so
long as any of the corresponding series of Capital Securities shall
remain outstanding, the holders of such Capital Securities;
(8) to evidence and provide for the acceptance of appointment
hereunder by a Successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 9.02. 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 of each series affected by such supplemental
indenture, by Act of such 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 of
Securities of such series 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 by Section 3.12 or as
otherwise specified as contemplated by Section 3.01 with respect to the
extension of the interest payment period of the Securities of any
series, change the Stated Maturity of the principal of, or any
installment of interest (including any Additional Interest) on, any
Security, or reduce the principal amount thereof or the rate of
interest thereon, or reduce the amount of principal of a Discount
Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.02, or
change the place of payment where, or the coin or currency in
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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 date fixed for redemption thereof);
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, 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;
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.05, 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 Security affected
thereby; or
(4) modify the provisions in Article XIII of this Indenture with
respect to the subordination of outstanding Securities of any series in
a manner adverse to the Holders thereof;
provided that, in the case of the Securities of a series issued to a Highlands
Capital Trust, so long as any of the corresponding series of Capital Securities
remain outstanding, no such amendment shall be made that adversely affects the
holders of such Capital Securities in any material respect, 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 Amount of such Capital Securities then outstanding unless and until
the principal of the Securities of such series and all accrued and, subject to
Section 3.08, unpaid interest (including any Additional Interest) thereon have
been paid in full; and provided further, however, that in the case of the
securities of a series issued to a Highlands Capital Trust, so long as any of
the corresponding series of Capital Securities remain outstanding, no amendment
shall be made to Section 5.08 of this Indenture that would impair the rights of
the holders of such Capital Securities provided herein without the prior consent
of the holders of each Capital Security then outstanding unless and until the
principal of the Securities of such series and all accrued and (subject to
Section 3.08) unpaid interest (including any Additional Interest) thereon have
been paid in full.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated Proxies, and only such Persons, shall be entitled to
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consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date that is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities, or that modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
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.
SECTION 9.03. Execution of Supplemental Indentures. In executing or
accepting the additional trusts 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
6.01) shall be fully protected in conclusively relying upon, an Officer's
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture that affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, or
that may subject it to liability or be contrary to applicable law.
SECTION 9.04. 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 9.05. Conformity with Trust Indenture Act. No supplemental
indenture will be qualified or executed pursuant to the Trust Indenture Act
unless this Indenture is so qualified, or in connection with Capital Securities
that are registered under the Securities Exchange Act of 1934, as amended, upon
the effectiveness of a registration statement. Every supplemental indenture so
qualified or executed shall conform to the requirements of the Trust Indenture
Act as then in effect.
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SECTION 9.06. 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 Company,
bear a notation in form approved by the Company as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
of any series so modified as to conform, in the opinion of 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 of such Series.
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal and Interest. The Company
covenants and agrees for the benefit of each series of Securities that it will
duly and punctually pay the principal of and interest on the Securities of that
series in accordance with the terms of such Securities and this Indenture.
SECTION 10.02. Maintenance of Office or Agency. The Company will
maintain in each Place of Payment for any series, an office or agency where
Securities of that series may be presented or surrendered for payment and an
office or agency where Securities may be surrendered for transfer or exchange
and where notices and demand to or upon the Company in respect of the Securities
and this Indenture may be served. The Company initially appoints the Trustee,
acting through its Corporate Trust Office, as its agent for such purposes. The
Company will give prompt written notice to the Trustee of any change in the
location of any such office or agency. If at any time the Company shall fail to
maintain such office or agency or shall fall 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 where the Securities may be presented or surrendered for any
or all of 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 each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
SECTION 10.03. Money for Security Payments to be Held in Trust. If
the Company shall at any time act as its own Paying
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Agent with respect to any series of Securities, it will, on or before each due
date of the principal of or interest on any of the Securities of such series,
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 failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. Richmond, Virginia time on each due date of the principal of
or interest on any Securities, deposit with a Paying Agent a sum sufficient to
pay the principal or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal or interest, and (unless
such Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and make available for delivery 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:
(1) hold all sums held by it for the payment of the principal of
or interest on Securities in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Company
(or any other obligor upon the Securities) in the making of any payment
of principal or interest;
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent.
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
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, such Paying 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
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principal of or interest on any Security and remaining unclaimed for two years
after such principal or interest has become due and payable shall (unless
otherwise required by mandatory provision of applicable escheat or abandoned or
unclaimed property law) be paid on Company Request to the Company, or (if then
held by the Company) shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) 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;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, the City of New York, notice that such money remains unclaimed and
that, after a date specified therein, that shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 10.04. Statement as to Compliance. The Company shall deliver
to the Trustee, within 120 days after the end of such calendar year of the
Company commencing after the date hereof, an Officers' Certificate executed by
authorized officers at least one of whom shall be the principal executive,
financial or accounting officer of the Company covering the preceding calendar
year, stating whether or not to the best knowledge of the signers thereof the
Company is in default in the performance, observance or fulfillment of or
compliance with any of the material terms, provisions covenants and conditions
of this Indenture, and if the Company shall be in such default, specifying all
such defaults and the nature and status thereof of which they may have
knowledge. For the purpose of this Section 10.04, compliance shall be determined
without regard to any grace period (other than an Extension Period) or
requirement of notice provided pursuant to the terms of this Indenture.
SECTION 10.05. Waiver of Certain Covenants. The Company may omit in
any particular instance to comply with any covenant or condition as specified as
contemplated by Section 3.01 with respect to the Securities of any series, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the outstanding Securities of such series shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company in respect of any such covenant or condition shall remain in full force
and effect.
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SECTION 10.06. Payment of the Trusts' Costs and Expenses. Since the
Highlands Capital Trusts are being formed solely to facilitate the investment in
the Securities, the Company, as borrower on the Securities, hereby covenants to
pay all debts and obligations (other than with respect to the payment of
principal and interest on the Trust Securities) and all costs and expenses of
such Trusts (including, but not limited to, all costs and expenses relating to
the organization of such Trusts, the fees and expenses of the Trustees and all
costs and expenses relating to the operation of such Trusts) and to pay any and
all taxes, duties, assessments or other governmental charges of whatever nature
(other than United States withholding taxes) imposed on such Trusts by the
United States, or any other taxing authority (such payments of amounts in
connection with taxes being herein referred to as "Additional Sums"), so that
the net amounts received and retained by such Trusts and their respective
Property Trustees after paying such expenses or Additional Sums will be equal to
the amounts such Trusts and Property Trustees would have received had no such
costs, expenses or taxes, duties, assessments or other governmental charges been
incurred by or imposed on such Trusts. The foregoing obligations of the Company
are for the benefit of, and shall be enforceable by, any person to whom such
debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or
not such Creditor has received notice thereof. Any such Creditor may enforce
such obligations of the Company hereunder directly against the Company, and the
Company hereby irrevocably waives any right or remedy to require that any such
Creditor take any action against any Trust or any other person before proceeding
against the Company. The Company also agrees hereby to execute such additional
agreements as may be necessary or desirable to give full effect to the
foregoing.
SECTION 10.07. Additional Covenants. The Company covenants and agrees
with each Holder of Securities of a series issued to a Highlands Capital Trust
that it will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
shares of the Company's capital stock (which includes common and preferred
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 (including
Other Debentures) that rank pari passu with or junior in interest to the
Securities of such series or (iii) make any guarantee payments with respect to
any guarantee by the Company of debt securities of any subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in interest to the Securities (other than (a) dividends or distributions in
Common Stock of the Company, (b) 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, (c) payments under the Company Guarantee, (d) purchases
or acquisitions of shares of the Company's Common Stock in connection with the
satisfaction by the Company of its obligations under any employee
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benefit plan or other contractual obligation of the Company (other than a
contractual obligation ranking pari passu with or junior in interest to these
Securities), (e) as a result of a reclassification of the Company's capital
Stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock or (f)
the purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged), if at such time (i) there shall have
occurred an Event of Default, (ii) the Company shall be in default with respect
to its payment of any obligations under the related Company Guarantee or (iii)
the Company shall have given notice of its election to begin an Extension Period
as provided herein and shall not have rescinded such notice, or such Extension
Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a series
issued to a Highlands Capital Trust (i) to maintain directly, or indirectly
through a wholly owned Subsidiary, 100% ownership of the Common Securities of
such Highlands Capital Trust; provided, however, that any permitted successor of
the Company hereunder may succeed to the Company's ownership of such Common
Securities, (ii) not to voluntarily terminate, wind-up or liquidate such
Highlands Capital Trust, except (a) in connection with a distribution of the
Securities of such series to the holders of Capital Securities in liquidation of
such Highlands Capital Trust or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the related Trust Agreement and
(iii) to use its reasonable best efforts, consistent with the terms and
provisions of such Trust Agreement, (x) not to adversely affect such Highlands
Capital Trust's status as a grantor trust and (y) not to cause such Highlands
Capital Trust to be classified as an association taxable as a corporation for
United States Federal income tax purposes.
SECTION 10.08. Information Returns. For each year during which any
Securities are outstanding, the Company shall furnish to each Paying Agent on a
timely basis such information as may be reasonably requested by each Paying
Agent in order that such Paying Agent may prepare the information that it is
required to report for such year on Internal Revenue Service Forms 1096 and
1099. Such information shall include the amount of original issue discount, if
any, includible in income for each $1,000 of principal amount at Stated Maturity
of outstanding Securities during such year.
SECTION 10.09. Statement by Officers as to Default. The Company shall
deliver to the Trustee, within five days after the Company becomes aware of the
occurrence of any Event of Default, an Officers' Certificate setting forth the
details of such Event of Default and the action that the Company proposes to
take with respect thereto, if known at such time.
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SECTION 10.10 Delivery of Certain Information. If specified as
contemplated by Section 3.01 with respect to a series of Securities, at any time
when the Company is not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Security,
the Company will promptly furnish or cause to be furnished Rule 144A Information
(as defined below) to such Holder, to a prospective purchaser who is a
"qualified institutional buyer", within the meaning of Rule 144A under the
Securities Act, of such Security designated by such Holder in order to permit
compliance by such Holder with Rule 144A in connection with the resale of such
Security by such Holder; provided, however, that unless otherwise specified as
contemplated by Section 3.01, the Company shall not be required to furnish such
information in connection with any request made on or after the date that is two
years from the later of (i) the date such Security (or any predecessor Security)
was acquired from the Company or (ii) the date such Security (or any predecessor
Security) was last acquired from an "affiliate" of the Company within the
meaning of Rule 144 under the Securities Act. "Rule 144A Information" shall be
such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act as in effect on the date hereof.
ARTICLE XI
Redemption or Prepayment of Securities
SECTION 11.01. Applicability of This Article. Redemption of
Securities (whether by operation of a sinking fund or otherwise) as permitted or
required by any form of Security issued pursuant to this Indenture shall be made
in accordance with such form of Security and this Article; provided, however,
that if any provision of any such form of security shall conflict with any
provision of this Article, the provision of such form of Security shall govern.
Except as otherwise set forth in the form of Security for such series, each
Security shall be subject to partial redemption only in an amount not less than
$100,000 or, in the case of the Securities of a series issued to a Highlands
Capital Trust, an amount not less than $100,000, or multiples of $1,000 in
excess thereof.
SECTION 11.02. Election To Redeem: Notice to Trustee. The election of
the Company to redeem any Securities shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company of
any Securities of any particular series and having the same terms, the Company
shall, not less than 30 nor more than 60 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee and, in the case of Securities held by or on behalf of a
Highlands Capital Trust, the Property Trustee of such date and of the principal
amount of Securities of that series to be redeemed. In the case of any
redemption of Securities prior to the expiration of any
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restriction on such redemption provided in the terms of such Securities, the
Company shall furnish the Trustee with an Officers' Certificate and an Opinion
of Counsel evidencing compliance with such restriction. Any such notice given to
the Trustee hereunder shall include the information required by Section 11.04
hereof.
SECTION 11.03. Selection of Securities to be Redeemed. If less than
all the Securities of any series are to be redeemed (unless all the Securities
of such series and of a specified tenor are to be redeemed or unless such
redemption affects only a single Security all as designated to the Trustee by
the Company), the particular Securities to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and that may provide
for the selection for redemption of a portion of the principal amount of any
Security of such series; provided that the unredeemed portion of the principal
amount of any Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) for such Security. If less
than all the Securities of such series and of a specified tenor are to be
redeemed (unless such redemption affects only a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
and specified tenor not previously called for redemption in accordance with the
preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. 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 Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security that has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
SECTION 11.04. Notice of Redemption. Notice of redemption (other than
at the Stated Maturity) shall be given by first-class mail, postage prepaid,
mailed not later than the thirtieth day, and not earlier than the sixtieth day,
prior to the date fixed for redemption, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice
of redemption shall state:
(a) the Redemption Date for Securities of such series;
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(b) the Redemption Price or, if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the
estimate of the Redemption Price provided pursuant to this Indenture
together with a statement that it is an estimate and that the actual
Redemption Price will be calculated on the third Business Day prior to
the Redemption Date (if such an estimate of the Redemption Price is
given, a subsequent notice shall be given as set forth above setting
forth the Redemption Price promptly following the calculation thereof);
(c) if less than all Outstanding Securities of such particular
series and having the same terms are to be redeemed, the identification
(and, in the case of partial redemption, the respective principal
amounts) of the particular Securities to be redeemed;
(d) that on the date fixed for redemption, the redemption price
at which such Securities are to be redeemed will become due and payable
upon each such Security or portion thereof, and that interest thereon,
if any, shall cease to accrue on and after such date;
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is the
case;
(g) such other provisions as may be required in respect of the
terms of a particular series of Securities; and
(h) the CUSIP number if any.
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 and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 11.05. Deposit of Redemption Price. Prior to 10:00 a.m.
Richmond, Virginia time on the Redemption Date specified in the notice of
redemption given as provided in Section 11.04, the Company will deposit with the
Trustee or with one or more Paying Agents an amount of money sufficient to
redeem on the Redemption
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Date all the Securities so called for redemption at the applicable Redemption
Price.
SECTION 11.06. Payment of Securities Called for Redemption. If any
notice of redemption has been given as provided in Section 11.04, the Securities
or portion of Securities with respect to which such notice has been given shall
become due and payable on the date and at the place or places stated in such
notice at the applicable Redemption Price. On presentation and surrender of such
Securities at a place of payment in such notice specified, such Securities or
the specified portions thereof shall be paid and redeemed by the Company at the
applicable Redemption Price.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of that
same series, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms. If the Global Security is so surrendered,
such new Security will (subject to Section 3.06) also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of such Security shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 11.07. Company's Right of Redemption. Unless otherwise
specified as contemplated by Section 3.01 with respect to the Securities of a
particular series and notwithstanding any additional redemption rights that may
be so specified, the Company, at its option, may redeem the Securities, subject
to the Company having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve,
(i) on or after the date specified in such Securities, in whole at any time or
in part from time to time, or (ii) upon the occurrence and during the
continuation of a Tax Event, an Investment Company Event or a Capital Treatment
Event, at any time within 90 days following the occurrence and during the
continuation of such Tax Event, Investment Company Event or Capital Treatment
Event, in whole (but not in part), in each case at a Redemption Price specified
in such Securities, together with accrued interest (including Additional
Interest) to the Redemption Date.
If less than all the Securities of any such series are to be redeemed,
the aggregate principal amount of such Securities remaining Outstanding after
giving effect to such redemption shall be sufficient to satisfy any provisions
of the Declaration of Trust related to the Highlands Capital Trust to which such
Securities were issued.
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ARTICLE XII
Sinking Funds
SECTION 12.01. Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of any series except as otherwise specified as contemplated by Section 3.01 for
such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount that is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment". If provided
for by the terms of any Securities of any series, the case amount of any sinking
fund payment may be subject to reduction as provided in Section 13.02. Each
sinking fund payment shall be applied to the redemption (or purchase by tender
or otherwise) of Securities of any series as provided for by the terms of such
Securities.
SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Company may at its option, at
any time no more than 16 months and no less than 45 days prior to the date on
which such sinking fund payment is due, deliver to the Trustee Securities of
such series (together with the unmatured Coupons, if any, appertaining thereto)
theretofore purchased or otherwise acquired by the Company, except Securities of
such series that have been redeemed through the application of mandatory or
optional sinking fund payments pursuant to the terms of the Securities of such
series, accompanied by a Company Order instructing the Trustee to credit such
obligations and stating that the Securities of such series were originally
issued by the Company by way of bona fide sale or other negotiation for value;
provided that the Securities to be so credited have not been previously so
credited. The Securities to be so credited shall be received and credited for
such purpose by the Trustee at the redemption price for such Securities, as
specified in the Securities so to be redeemed, for redemption through operation
of the sinking fund, and the amount of such sinking fund payment shall be
reduced accordingly.
SECTION 12.03. Redemption of Securities Sinking Fund. Not less than
45 days prior to each sinking fund payment date for any series of securities,
the Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for such Securities pursuant to
the terms of such Securities, the portion thereof, if any, that is to be
satisfied by payment of cash in the currency in which the Securities of such
series are payable (except as provided
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pursuant to Section 3.01) and the portion thereof, if any, that is to be
satisfied by delivering and crediting Securities pursuant to Section 13.02 and
will also deliver to the Trustee any Securities to be so delivered. Such
Certificate shall be irrevocable and upon its delivery the Company shall be
obligated to make the cash payment or payments therein referred to, if any, on
or before the succeeding sinking fund payment date. In the case of the failure
of the Company to deliver such Certificate (or, as required by this Indenture,
the Securities and coupons, if any, specified in such Certificate) by the due
date therefor, the sinking fund payment due on the succeeding sinking fund
payment date for such series shall be paid entirely in cash and shall be
sufficient to redeem the principal amount of the Securities of such series
subject to a mandatory sinking fund payment without the right to deliver or
credit securities as provided in Section 13.02 and without the right to make the
optional sinking fund payment with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the redemption price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or by the Company if the Company is acting as its own Paying Agent), in
which case such moneys shall be segregated and held in trust as provided in
Section 10.03) for such series and together with such payment (or such amount so
segregated) shall be applied in accordance with the provisions of this Section
12.03. Any and all sinking fund moneys with respect to the Securities of any
particular series held by the Trustee (or if the Company is acting as its own
Paying Agent, segregated and held in trust as provided in Section 10.03) on the
last sinking fund payment date with respect to Securities of such series and not
held for the payment or redemption of particular Securities of such series shall
be applied by the Trustee (or by the Company if the Company is acting as its own
Paying Agent), together with other moneys, if necessary, to be deposited (or
segregated) sufficient for the purpose, to the payment of the principal of the
Securities of such series at Maturity. The Trustee shall select the Securities
to be redeemed upon such sinking fund payment date in the manner specified in
Section 11.03 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Section 11.04.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Section 11.06. On or before each
sinking fund payment date, the Company shall pay to the
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Trustee (or, if the Company is acting as its own Paying Agent, the Company shall
segregate and hold in trust as provided in Section 10.03) in cash a sum in the
currency in which Securities of such series are payable (except as provided
pursuant to Section 3.01) equal to the principal and any interest accrued to the
redemption date for Securities or portions thereof to be redeemed on such
sinking fund payment date pursuant to this Section 12.03.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Company if the
Company is then acting as its own Paying Agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with the terms of this
Article XII. Except as aforesaid, any moneys in the sinking fund for such series
at the time when any such default or Event of Default shall occur and any moneys
thereafter paid into such sinking fund shall, during the continuance of such
default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 12.03.
ARTICLE XIII
Subordination of Securities
SECTION 13.01. Securities Subordinate to Senior Debt. The Company
covenants and agrees, and each Holder of a Security, by its acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereafter
set forth in this Article, the payment of the principal of and interest
(including any Additional Interest) on each and all of the Securities are hereby
expressly made subordinate and junior in right of payment to the prior payment
in full of all amounts then due and payable in respect of all Senior Debt.
SECTION 13.02. Payment Over of Proceeds upon Dissolution. In the
event of (a) any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company, its
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creditors or its property, (b) any proceeding for the liquidation, dissolution,
or other winding up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings, (c) any assignment by the
Company for the benefit of creditors or (d) any other marshaling of the assets
of the Company (each such event, if any, herein sometimes referred to as a
"Proceeding"), then the holders of Senior Debt shall be entitled to receive
payment in full of principal of and interest, if any, on such Senior Debt, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, before the
Holders of the Securities are entitled to receive or retain any payment or
distribution of any kind or character, whether in cash, property or securities
(including any payment by distribution that may be payable or deliverable by
reason of the payment of any other debt of the Company (including any series of
the Securities) subordinated to the payment of the Securities, such payment or
distribution being hereafter referred to as a "Junior Subordinated Payment"), on
account of principal of or interest (including any Additional Interest) on the
Securities or on account of the purchase or other acquisition of Securities by
the Company or any Subsidiary and to that end the holders of Senior Debt shall
be entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
including any Junior Subordinated Payment, that may be payable or deliverable in
respect of the Securities in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt is paid in full or payment thereof is provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, and if such fact shall, at or prior to the time of such
payment or distribution, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Debt remaining unpaid, to the extent necessary to
pay all Senior Debt in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in 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 or reorganization or readjustment, in each case, which securities are
subordinated in right of payment to all then outstanding
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Senior Debt to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article VIII shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person that
acquires by sale such properties and assets substantially as an entirety, as the
case may be, shall, as a part of such consolidation, merger, or sale comply with
the conditions set forth in Article VIII.
SECTION 13.03. Prior Payment to Senior Debt Upon Acceleration of
Securities. In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall first be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt (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 Senior Debt, before the Holders of the Securities
will be entitled to receive or retain any payment or distribution of any kind or
character, whether in cash, property or securities (including any Junior
Subordinated Payment) by the Company on account of the principal of or interest
(including any Additional Interest) on the Securities or on account of the
purchase or other acquisition of Securities by the Company or any Subsidiary;
provided, however, that nothing in this Section shall prevent the satisfaction
of any sinking fund payment in accordance with this Indenture or as otherwise
specified as contemplated by Section 3.01 for the Securities of any series by
delivering and crediting pursuant to Section 12.02 or as otherwise specified as
contemplated by Section 3.01 for the Securities of any series of Securities that
have been acquired (upon redemption or otherwise) prior to such declaration of
acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 13.02 would be applicable.
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<PAGE>
SECTION 13.04. No Payment When Senior Debt in Default. (a) In the
event and during the continuation of any default by the Company in the payment
of principal of or interest, if any, on any Senior Debt, or in the event that
any event of default with respect to any Senior Debt shall have occurred and be
continuing and shall have resulted in such Senior Debt 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 (b) in the event any judicial proceeding shall be
pending with respect to any such default in payment or event of default, then no
direct or indirect payment or distribution of any kind or character, whether in
cash, property or securities (including any Junior Subordinated Payment), by
set-off or otherwise, shall be made or agreed to be made by the Company on
account of principal or interest (including any Additional Interest) on the
Securities or on account of any redemption, repayment, retirement, purchase or
other acquisition of any Securities by the Company or any Subsidiary; provided,
however, that nothing in this Section shall prevent the satisfaction of any
sinking fund payment in accordance with this Indenture or as otherwise specified
as contemplated by Section 3.01 for the Securities of any series by delivering
and crediting pursuant to Section 12.02 or as otherwise specified as
contemplated by Section 3.01 for the Securities of any series of Securities that
have been acquired (upon redemption or otherwise) prior to such default in
payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 13.02 would be applicable.
SECTION 13.05. Payment Permitted If No Default. Nothing contained in
this Article or elsewhere in this Indenture or in any of the Securities shall
prevent (a) the Company, at any time except during the pendency of any
Proceeding referred to in Section 13.02 or under the conditions described in
Sections 13.03 and 13.04, from making payments at any time of principal of or
interest (including any Additional Interest) on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of or interest (including any
Additional Interest) on the Securities or the retention of such payment by the
Holders, if, at the time of such payment by the Company or application by the
Trustee, as
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<PAGE>
the case may be, it did not have knowledge that such payment or application, as
the case may be, would have been prohibited by the provisions of this Article.
SECTION 13.06. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due on all Senior Debt to the
extent required under Sections 13.02 and 13.03 of this Indenture, or the
provision for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, the Holders of the Securities shall
be subrogated to the extent of the payments or distributions made to the holders
of such Senior Debt pursuant to the provisions of this Article (equally and
ratably with the holders of all indebtedness of the Company that by its express
terms is subordinated to Senior Debt of the Company to substantially the same
extent as the Securities are subordinated to the Senior Debt and is entitled to
like rights of subrogation by reason of any payments or distributions made to
holders of such Senior Debt) to the rights of the holders of such Senior Debt to
receive payments and distributions of cash, property and securities applicable
to the Senior Debt until the principal of and interest on the Securities shall
be paid in full. For purposes of such subrogation or assignment, no payments or
distributions to the holders of the Senior Debt 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, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt, and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 13.07. Provisions Solely to Define Relative Rights. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Debt on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (a) impair, as between the Company and the Holders of the Securities, the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest (including any
Additional Interest) on the Securities as and when the same shall become due and
payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and creditors of the
Company other than their rights in relation to the holders of Senior Debt; or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this Indenture
including, without limitation, filing and voting claims in any Proceeding,
subject to the rights, if any, under this Article of the holders of Senior Debt
to receive cash, property and
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<PAGE>
securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 13.08. Trustee to Effectuate Subordination. Each Holder of a
Security by his or her acceptance thereof authorizes and directs the Trustee on
his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination provided in this Article and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 13.09. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Debt 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 be otherwise charged with.
SECTION 13.10. Notice to Trustee. The Company shall give prompt
written notice to the Trustee of any fact known to the Company that would
prohibit the making of any payment to or by the Trustee in respect of the
Securities. Notwithstanding the provisions of this Article 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 to or
by the Trustee in respect of the Securities, unless and until the Trustee shall
have received written notice thereof from the Company or a holder of Senior Debt
or from any trustee, agent or representative therefor (whether or not the facts
contained in such notice are true); provided, however, that if the Trustee shall
not have received the notice provided for in this Section at least two Business
Days prior to the date upon which by the terms hereof any monies may become
payable for any purpose (including, without limitation, the payment of the
principal of or interest (including any Additional Interest) on any Security),
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such monies and to apply the same
to the purpose 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.
SECTION 13.11. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Article
VI, and the Holders of the Securities shall be entitled to conclusively rely
upon any order or decree entered by any court of competent jurisdiction in which
such Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such
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<PAGE>
payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt. The
Trustee, in its capacity as trustee under this Indenture, shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt and shall not be liable to
any such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Debt shall be entitled by virtue of
this Article or otherwise.
SECTION 13.13. Rights of Trustee as Holder of Senior Debt:
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Debt that may at any time be held by it, to the same extent as any other
holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee
of any of its rights as such holder.
SECTION 13.14. Article Applicable to Paying Agents. In case at any
time any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee.
SECTION 13.15. Certain Conversions or Exchanges Deemed Payment. For
purposes of this Article XIII only, (a) the issuance and delivery of junior
securities (as defined below) upon conversion or exchange of Securities shall
not be deemed to constitute a payment or distribution on account of the
principal of or interest (including any Additional Interest) on the Securities
or on account of the purchase or other acquisition of Securities, and (b) the
payment, issuance or delivery of cash, property or securities (other than junior
securities) upon conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such Security. For the
purposes of this Section, the term "junior securities" means (i) shares of any
stock of any class of the Company and (ii) securities of the Company that are
subordinated in right of payment to all Senior Debt that may be outstanding at
the time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article.
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<PAGE>
This instrument may be executed in any number of counterparts, each of
which when 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 written above.
HIGHLANDS BANKSHARES, INC.
By:________________________________
Name:
Title:
[Seal]
WILMINGTON TRUST COMPANY,
as Trustee
By:________________________________
Name:
Title:
[Seal]
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<PAGE>
EXHIBIT A
[Form of Restricted Securities Certificate]
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 3.05 and Section 3.06
of the Junior Subordinated Indenture)
[__________________________],
as Security Registrar
[address]
Re: Junior Subordinated Debt Securities of Highlands Bankshares, Inc. (the
"Company") (the "Securities")
Reference is made to the Junior Subordinated Indenture, dated as of
____________ (the "Indenture"), between Highlands Bankshares, Inc. and
Wilmington Trust Company, as trustee (the "Trustee"). Terms used herein and
defined in the Indenture or in Regulation D, Rule 144A or Rule 144 under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), are used herein
as so defined.
This certificate relates to $____________ aggregate principal amount of
Securities, that are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). __________________________________________
CERTIFICATE No(s). ____________________________________
CURRENTLY IN BOOK-ENTRY FORM: __Yes __No (check one)
The person in whose name this certificate is executed below (the "undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary in the name of the Undersigned, as or on behalf of the
Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a Restricted
Security. In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement
<PAGE>
under the Securities Act, it is being effected in accordance with one of the
following as indicated (check one):
______ (1) transferred to the Company; or
______ (2) exchanged for the undersigned's own account without transfer; or
______ (3) transferred pursuant to and in compliance with Rule 144A under the
Securities Act; or
______ (4) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring the Securities for its own
account, or for the account of such an institutional "accredited
investor," for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of
the Securities Act; or
______ (5) transferred pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless such transfer is being effected in accordance with one of the above, the
Securities Registrar will refuse to register any of the Securities evidenced by
this certificate in the name of any person other than the Holder thereof;
provided, however, that if (4) or (5) is applicable, the Securities Registrar
may require, prior to registering any such transfer of the Securities such legal
opinions, certifications and other information as 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, such as the exemption provided by Rule 144 under such Act;
provided, further, that if box (3) is checked, the transferee must also certify
that it is a qualified institutional buyer as defined in Rule 144A.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated: ___________________________________
(Print the name of the
Undersigned, as such term
is defined in the second
paragraph of this
certificate.)
By:________________________________
Name:
Title:
-2-
<PAGE>
(If the Undersigned is a
corporation, partnership or
fiduciary, the title of the
person signing on behalf of
the Undersigned must be
stated.)
-3-
Exhibit 4.6
EXECUTION COPY
GUARANTEE AGREEMENT
Between
HIGHLANDS BANKSHARES, INC.
(as Guarantor)
and
WILMINGTON TRUST COMPANY
(as Trustee)
Dated as of
CLOSING DATE
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust Indenture Section of
Act of 1939, as amended Guarantee Agreement
310(a) .......................................... 4.01(a)
310(b) .......................................... 4.01(c), 2.08
310(c) .......................................... Inapplicable
311(a) .......................................... 2.02(b)
311(b) .......................................... 2.02(b)
311(c) .......................................... Inapplicable
312(a) .......................................... 2.02(a)
312(b) .......................................... 2.02(b)
313(a) .......................................... 2.03
313(b) .......................................... 2.03
313(c) .......................................... 2.03
313(d) .......................................... 2.03
314(a) .......................................... 2.04
314(b) .......................................... Inapplicable
314(c) .......................................... 2.05
314(d) .......................................... Inapplicable
314(e) .......................................... 1.01, 2.05, 3.02
314(f) .......................................... 2.01, 3.02
315(a) .......................................... 3.01(d)
315(b) .......................................... 2.07
315(c) .......................................... 3.01(c)
315(d) .......................................... 3.01(d)
316(a) .......................................... 1.01, 2.06, 5.04
316(b) .......................................... 5.03, 5.04
316(c) .......................................... 8.02
317(a) .......................................... Inapplicable
317(b) .......................................... Inapplicable
318(a) .......................................... 2.01(b)
- ------------
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
TABLE OF CONTENTS
ARTICLE I -- Definitions......................................................2
SECTION 1.01. Definitions..................................................2
ARTICLE II -- Trust Indenture Act.............................................5
SECTION 2.01. Trust Indenture Act; Application.............................5
SECTION 2.02. List of Holders..............................................5
SECTION 2.03. Reports by the Guarantee Trustee.............................6
SECTION 2.04. Periodic Reports to the Guarantee Trustee....................6
SECTION 2.05. Evidence of Compliance with Conditions Precedent.............6
SECTION 2.06. Events of Default; Waiver....................................6
SECTION 2.07. Event of Default; Notice.....................................6
SECTION 2.08. Conflicting Interests........................................7
ARTICLE III-- Powers, Duties and Rights of the Guarantee Trustee..............7
SECTION 3.01. Powers and Duties of the Guarantee Trustee...................7
SECTION 3.02. Certain Rights of Guarantee Trustee..........................9
SECTION 3.03. Indemnity...................................................11
SECTION 3.04. Expenses....................................................11
ARTICLE IV -- Guarantee Trustee..............................................11
SECTION 4.01. Guarantee Trustee: Eligibility..............................11
SECTION 4.02. Appointment, Removal and Resignation of the
Guarantee Trustee...........................................12
ARTICLE V -- Guarantee.......................................................13
SECTION 5.01. Guarantee...................................................13
SECTION 5.02. Waiver of Notice and Demand.................................13
SECTION 5.03. Obligations Not Affected....................................13
SECTION 5.04. Rights of Holders...........................................14
SECTION 5.05. Guarantee of Payment........................................14
SECTION 5.06. Subrogation.................................................15
SECTION 5.07. Independent Obligations.....................................15
ARTICLE VI -- Covenants and Subordination....................................15
SECTION 6.01. Subordination...............................................15
SECTION 6.02. Pari Passu Guaranty.........................................15
ARTICLE VII -- Termination...................................................16
SECTION 7.01. Termination.................................................16
ARTICLE VIII -- Miscellaneous................................................16
SECTION 8.01. Successors and Assigns......................................16
SECTION 8.02. Amendments..................................................16
SECTION 8.03. Notices.....................................................16
SECTION 8.04. Benefit.....................................................18
SECTION 8.05. Interpretation..............................................18
SECTION 8.06. Governing Law...............................................18
<PAGE>
GUARANTEE AGREEMENT (this "Guarantee
Agreement"), dated as of CLOSING DATE, executed and
delivered by HIGHLANDS BANKSHARES, INC., a bank
holding company (the "Guarantor") having its
principal office at _____________________________
_________________________________________________,
and WILMINGTON TRUST COMPANY, a Delaware corporation
(the "Guarantee Trustee"), for the benefit of the
Holders (as defined herein) from time to time of the
Trust Securities (as defined herein) of HIGHLANDS
CAPITAL TRUST I, a Delaware statutory business trust
(the "Issuer").
WHEREAS pursuant to an Amended and Restated Declaration of Trust (the
"Declaration of Trust"), dated as of CLOSING DATE, among the Trustees named
therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial ownership interests in the assets of the Issuer, the Issuer
is issuing $_______________ aggregate Liquidation Amount of its Capital Trust
Securities, Liquidation Amount $1,000 per security (the "Capital Securities"),
and $_______________ aggregate Liquidation Amount of its Common Securities,
Liquidation Amount $1,000 per security (the "Common Securities" and collectively
with the Capital Securities, the "Trust Securities"), representing undivided
beneficial ownership interests in the assets of the Issuer and having the terms
set forth in the Declaration of Trust;
WHEREAS the Trust Securities will be issued by the Issuer and the
proceeds thereof will be used by the Issuer to purchase the Junior Subordinated
Debt Securities due ____________ (as defined in the Declaration of Trust) (the
"Junior Subordinated Debt Securities") of the Guarantor, which will be held by
Wilmington Trust Company, as Property Trustee under the Declaration of Trust, as
trust assets; and
WHEREAS, as incentive for the Holders to purchase Trust Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase of Trust Securities by
each Holder, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Trust Securities.
<PAGE>
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Guarantee Agreement, the
terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Declaration of Trust as in effect on the date hereof.
"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; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. 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.
"Capital Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Common Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Declaration of Trust" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice; provided, further, that no
Event of Default shall occur unless an Event of Default (as defined in the
Indenture or the Declaration of Trust) shall have occurred and be continuing.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Trust Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions required to be paid on the Trust Securities, to the extent that
the Issuer shall have funds on hand available therefor at such time, (ii) the
redemption price, including all accrued and unpaid Distributions to the date of
redemption (the "Redemption Price"), with respect
2
<PAGE>
to the Trust Securities called for redemption by the Issuer to the extent that
the Issuer shall have funds on hand available therefor at such time, and (iii)
upon a voluntary or involuntary termination, winding-up or liquidation of the
Issuer, unless Junior Subordinated Debt Securities are distributed to the
Holders or all of the Capital Securities are redeemed, the lesser of (a) the
aggregate of the Liquidation Amount of $1,000 per Trust Security plus accrued
and unpaid Distributions on the Trust Securities to the date of payment to the
extent that the Issuer shall have funds on hand available to make such payment
at such time and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer after satisfaction of
liabilities to creditors of the Issuer as required by applicable law (in either
case, the "Liquidation Distribution"). If an Event of Default under the
Declaration of Trust has occurred and is continuing, no Guarantee Payments with
respect to the Common Securities or any guarantee payment under any Other
Guarantees (as defined in the Indenture) with respect to Common Securities of
any other Highlands Capital Trust (as defined in the Indenture), if any, shall
be made until the Holders of Capital Securities shall be paid in full the
Guarantee Payments to which they are entitled under this Guarantee Agreement.
Subordination of Guarantee Payments on the Common Securities following such an
Event of Default under the Declaration of Trust shall be analogous to the
subordination of the Common Securities provided for in Section 4.03 of the
Declaration of Trust.
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first recital of
this Guarantee Agreement.
"Holder" means a person in whose name a Trust Security or Trust
Securities is registered on the books and records of the Issuer; provided,
however, that in determining whether the holders of the requisite percentage of
Trust Securities have given any request, notice, consent or waiver hereunder,
"Holder" shall not include the Guarantor, the Guarantee Trustee, or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of CLOSING
DATE, as supplemented and amended between the Guarantor and Wilmington Trust
Company, as trustee, relating to the issuance of the Junior Subordinated Debt
Securities.
3
<PAGE>
"Issuer" shall have the meaning specified in the first recital of this
Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in Liquidation Amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the aggregate Liquidation Amount of all then
Outstanding Capital Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer, President or a
Vice President, and by the Treasurer, an Associate Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of such
Person, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) statement that each 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 officer,
such condition or covenant has been complied with.
"Responsible Officer" when used with respect to the Guarantee Trustee
means any officer assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of this
Guarantee Agreement, and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
4
<PAGE>
"Senior Debt" shall have the meaning specified in the Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" has the meaning specified in Section 1.01 of the
Indenture.
"Trust Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee
Agreement will not be qualified under the Trust Indenture Act except upon the
effectiveness of a registration statement with respect to this Guarantee
Agreement.
(b) Upon qualification under the Trust Indenture Act as
contemplated in clause (a) above, if and to the extent that any provision of
this Guarantee Agreement 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 2.02. List of Holders. (a) The Guarantor shall furnish or
cause to be furnished to the Guarantee Trustee (i) semiannually, not more than
15 days after ____________ and ____________ of each year, a list, in such form
as the Guarantee Trustee may reasonably require, of the names and addresses of
the Holders ("List of Holders") as of a date not more than 15 days prior to the
delivery thereof, and (ii) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the Guarantor of any
such request, a List of Holders as of a date not more than 15 days prior to the
time such list is furnished, in each case to the extent such information is in
the possession or control of the Guarantor and is not identical to a previously
supplied list of Holders or has not otherwise been received by the Guarantee
Trustee in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
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(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Not later than the
last calendar day in __________ of each calendar year, commencing with the last
calendar day in ____________, the Guarantee Trustee shall provide to the Holders
such reports, if any, as are required by Section 313 of the Trust Indenture Act
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 2.04. Periodic Reports to the Guarantee Trustee. The
Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange
Commission and the Holders such documents, reports and information, if any, as
required by Section 314 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 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
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 any officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
Liquidation Amount of the Securities may, by vote, on behalf of the Holders,
waive any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent therefrom.
SECTION 2.07. Event of Default; Notice. (a) The Guarantee Trustee
shall, within 90 days after the occurrence of an Event of Default, transmit by
mail, first class postage prepaid, to the Holders, notices of all Events of
Default known to the Guarantee Trustee, unless such Events of Default have been
cured before the giving of such notice; provided that, except in the case of a
default in the payment of a Guarantee Payment, the Guarantee Trustee shall be
protected in withholding such notice if and so long as the Board of Directors,
the executive committee or a
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trust committee of directors and/or a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless a Responsible Officer charged with the
administration of the Declaration of Trust shall have received written notice of
such Event of Default.
SECTION 2.08. Conflicting Interests. The Declaration of Trust shall
be deemed to be specifically described in this Guarantee Agreement for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.
ARTICLE III
Powers, Duties and Rights of the
Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of
the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, 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 an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.06), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
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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 Agreement 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 Event of Default and after the
curing or waiving of all such 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 Agreement, 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 Agreement; and
(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 Agreement; but in the case of any such certificates or
opinions that by any provision hereof or of the Trust Indenture
Act 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 Agreement;
(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 Agreement; and
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(iv) no provision of this Guarantee Agreement 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 assured to it under the terms of this
Guarantee Agreement or indemnity satisfactory to it against such risk
or liability is not reasonably assured to it.
SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject to the
provisions of Section 3.01:
(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 reasonably
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 Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement,
the Guarantee Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting to take 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 from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and the
advice or written opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or opinion.
Such legal counsel may be legal counsel to the Guarantor or any of its
Affiliates and may be one of its employees. The Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration
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of this Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement 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 it, against the costs, expenses
(including attorneys' fees and expenses) 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 3.02(a)(v) shall be
taken to relieve the Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested
in it by this Guarantee Agreement.
(vi) 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.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee Agreement
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 (A) may request instructions
from the Holders, (B) may refrain from enforcing such remedy or right
or taking such other action until such instructions are received and
(C) shall be fully protected in acting in accordance with such
instructions.
(ix) The Guarantee 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 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.
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(b) No provision of this Guarantee Agreement 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 to act in accordance with such power and
authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
Guarantee Trustee, and to hold it harmless against, any loss, liability or
expense including taxes (other than taxes based upon, measured by or determined
by the income of the Guarantee Trustee) incurred without negligence or bad faith
on the part of the Guarantee Trustee, arising out of or in connection with the
acceptance or administration of this Guarantee Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
Guarantee Trustee will not claim or exact any lien or charge on any Guarantee
Payments as a result of any amount due to it under this Guarantee Agreement.
This indemnity shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.
SECTION 3.04. Expenses. The Guarantor, as obligor on the Junior
Subordinated Debt Securities, shall from time to time reimburse the Guarantee
Trustee for such expenses and costs incurred in connection with the performance
of its duties hereunder as shall be agreed to in writing from time to time by
the Guarantor and the Guarantee Trustee.
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee: Eligibility. (a) There shall at all
times be a Guarantee Trustee that shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of
Section 310(c) of the Trust Indenture Act. If such corporation
publishes reports of
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condition at least annually, pursuant to law or to the requirements of
the supervising or examining authority, then, for the purposes of this
Section and to the extent permitted by the Trust Indenture Act, 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 4.10(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(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 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee. (a) Subject to Section 4.02(b), in the absence of the existence of an
Event of Default, the Guarantee Trustee may be appointed or removed without
cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed 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 hereunder shall hold 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 4.02 within 30 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, 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.
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ARTICLE V
Guarantee
SECTION 5.01. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by or on behalf of the Issuer),
as and when due, regardless of any defense, right of set-off or counterclaim
that the Issuer 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 Issuer to pay such amounts to the
Holders. The Guarantor shall give written notice to the Guarantee Trustee as
promptly as practicable in the event it makes any direct payment hereunder.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of the Guarantee Agreement and of any liability to
which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Guarantee Trustee, Issuer 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.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Trust Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions (other than any extension of time for
payment of Distributions that results from the extension of any
interest payment period on the Junior Subordinated Debt Securities as
so provided in the Indenture), Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Trust
Securities or the extension of time for the performance of any other
obligation arising under, out of or in connection with the Trust
Securities;
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(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
Trust Securities, or any action on the part of the Issuer 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
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Trust
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 5.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders; (iii) 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
available to the Guarantee Trustee in respect of this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Issuer or
any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates
a guarantee of payment and not of collection. This Guarantee Agreement will not
be discharged except by payment of the Guarantee Payments in full (without
duplication of amounts
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theretofore paid by the Issuer) or upon distribution of Junior Subordinated Debt
Securities to Holders as provided in the Declaration of Trust.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement and shall have
the right to waive payment by the Issuer pursuant to Section 5.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. 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 Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the Issuer
with respect to the Trust 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 Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03.
ARTICLE VI
Covenants and Subordination
SECTION 6.01. Subordination. This Guarantee Agreement will constitute
an unsecured obligation of the Guarantor and will rank subordinate and junior in
right of payment to all Senior Debt of the Guarantor, to the same extent and in
the same manner that the Junior Subordinated Debt Securities are subordinated to
Senior Debt pursuant to the Indenture, it being understood that the terms of
Article XIII of the Indenture shall apply to the obligations of the Guarantor
under this Guarantee Agreement as if (x) such Article XIII were set forth herein
in full and (y) such obligations were substituted for the term "Securities"
appearing in such Article XIII.
SECTION 6.02. Pari Passu Guaranty. This Guarantee Agreement shall
rank pari passu with any similar guarantee agreements issued by the Guarantor on
behalf of the holders of
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trust securities issued by a trust created by the Guarantor similar to Highlands
Capital Trust I.
ARTICLE VII
Termination
SECTION 7.01. Termination. This Guarantee Agreement shall terminate
and be of no further force and effect upon (i) full payment of the Redemption
Price of all Trust Securities, (ii) the distribution of Junior Subordinated Debt
Securities to the Holders in exchange for all of the Trust Securities or (iii)
full payment of the amounts payable in accordance with the Declaration of Trust
upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must repay any sums paid with respect to Trust
Securities or this Guarantee Agreement.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article VIII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantor's obligations hereunder, the Guarantor shall
not assign its obligations hereunder.
SECTION 8.02. Amendments. Except with respect to any changes that do
not adversely affect the rights of the Holders in any material respect (in which
case no consent of the Holders will be required), this Guarantee Agreement may
only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of the Securities. The provisions of Article VI
of the Declaration of Trust concerning meetings of the Holders shall apply to
the giving of such approval.
SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied (confirmed by delivery
of the original) or mailed by first class mail as follows:
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(a) if given to the Guarantor, to the address set forth below or
such other address, facsimile number or to the attention of such other
Person as the Guarantor may give notice to the Holders:
HIGHLANDS BANKSHARES, INC.
_____________________________
_____________________________
Facsimile No.: (___) ________
(b) if given to the Issuer, in care of the Guarantee Trustee, at
the Issuer's (and the Guarantee Trustee's) address set forth below or
such other address as the Guarantee Trustee on behalf of the Issuer may
give notice to the Holders:
HIGHLANDS CAPITAL TRUST I
c/o HIGHLANDS BANKSHARES, INC.
_____________________________
_____________________________
Facsimile No.: (___) ________
with a copy to:
Wilmington Trust Company
1100 North Market Street
Attn: Corporate Trust Administration
Wilmington, Delaware 19890
Facsimile No.: (302) 651-8882
(c) if given to the Guarantee Trustee:
Wilmington Trust Company
1100 North Market Street
Attn: Corporate Trust Administration
Wilmington, Delaware 19890
Facsimile No.: (302) 651-8882
(d) if given to any Holder, at the address set forth on the books
and records of the Issuer.
All notices hereunder 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
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given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from the Trust
Securities.
SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:
(a) a term defined anywhere in this Guarantee Agreement has the
same meaning throughout;
(b) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(c) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(d) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined
in this Guarantee Agreement or unless the context otherwise requires;
(e) a reference to the singular includes the plural and vice
versa; and
(f) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
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.
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
WILMINGTON TRUST COMPANY, as
Guarantee Trustee
By:_____________________________
Name:___________________________
Title:__________________________
HIGHLANDS BANKSHARES, INC., as
Guarantor
By:_____________________________
Name:___________________________
Title:__________________________
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Exhibit 4.7
ESCROW AGREEMENT
This Escrow Agreement made and entered into as of the __th day of
___________, 1997, by and among McKINNON & COMPANY, INC., a Virginia corporation
(the "Underwriter"), HIGHLANDS CAPITAL TRUST I, a statutory business trust
organized under Delaware law (the "Trust") and HIGHLANDS BANKSHARES, INC., a
Virginia corporation (the "Company" and, together with the Trust, the
"Offerors"), and WILMINGTON TRUST COMPANY, a ________ corporation (the "Escrow
Agent").
R E C I T A L S :
A. The Offerors propose to sell up to $_____ of ___% Capital
Securities, liquidation amount of $1,000 per preferred security (the "Capital
Securities"), to the public at a price of $___ per Capital Security (the
"Offering").
B. The Offerors have retained the Underwriter, as selling agent for
the Offerors on a best efforts basis, to sell the Capital Securities in the
Offering, and the Underwriter has agreed to sell the Capital Securities as the
Offerors' selling agent on a best efforts basis in the Offering, and the
Underwriter has agreed to serve in this capacity, the terms of which
relationship are set forth in an Underwriting Agreement between the Offerors and
the Underwriter, the form of which is attached hereto as Exhibit A (the
"Underwriting Agreement").
C. The Underwriter will enter into agreements with other
brokers/dealers (the "Selected Dealers" or individually, the "Selected Dealer")
to assist in the sale of the Capital Securities.
D. The Escrow Agent is willing to hold the proceeds in escrow
pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, it is hereby agreed as
follows:
1. Establishment of the Escrow Account. On or prior to the
date of commencement of the Offering, the parties shall establish a
non-interest-bearing account with the Escrow Agent, which escrow account shall
be entitled "Highlands Capital Trust I, Escrow Account" (the "Escrow Account").
The Underwriter will instruct subscribers to make checks payable to "Wilmington
Trust - Highlands Capital Trust I, Escrow Account." Any checks received by the
Underwriter or the Escrow Agent that are made payable to a party other than the
Escrow Agent shall be returned to the party that submitted the check.
2. Escrow Period. The escrow period (the "Escrow Period")
shall begin with the commencement of the Offering and shall terminate upon the
Closing Date (as defined in Section 7 of this Agreement), or __________,
whichever first occurs. During the Escrow Period, the Offerors are aware and
understand that they are not entitled to any funds received into escrow and no
amounts deposited by the Escrow Agent shall become property of the Offerors or
any other entity, or be subject to the debts of the Offerors or any other
entity.
<PAGE>
3. Deposits into the Escrow Account.
(a) The Underwriter agrees that it shall deliver by noon
of the next business day after receipt all monies received from subscribers for
the payment of the Capital Securities to the Escrow Agent for deposit in the
Escrow Account together with a written account of each sale, which account shall
set forth, among other things, (i) the subscriber's name and address, (ii) the
number of Capital Securities purchased by the subscriber, (iii) the amount paid
therefor by the subscriber, (iv) whether the consideration received from the
subscriber was in the form of a check, draft or money order, and (v) the
subscriber's social security or tax identification number.
(b) Funds received from Selected Dealers shall be
deposited in the Escrow Account, and the Underwriter shall use its best efforts
to immediately provide the Escrow Agent with any of the following information
not previously received by the Escrow Agent: (i) the name and address of the
Selected Dealer, (ii) the number of Capital Securities purchased through the
Selected Dealer, (iii) the amount of funds delivered by the Selected Dealer,
(iv) whether the consideration received from the Selected Dealer was in the form
of a check, draft or money order, and (v) the Selected Dealer's tax
identification number.
(c) In the event that the Selected Dealers transfer
subscriber monies directly to the Escrow Agent, the Selected Dealer shall
provide the Escrow Agent with the following information: (i) the subscriber's
name and address; (ii) the number of Capital Securities purchased by the
subscriber; (iii) the amount paid therefor by the subscriber; (iv) whether the
consideration received from the subscriber was in the form of a check, draft,
money order or wire transfer, and (v) the subscribers social security or tax
identification number. To the extent that a Selected Dealer fails to provide all
such information to the Escrow Agent, the Underwriter shall use its best efforts
to promptly provide, or cause such Selected Dealer to provide, the Escrow Agent
with such information.
All monies so deposited in the Escrow Account are hereinafter referred
to as the "Escrow Amount."
4. Collection Procedure.
(a) The Escrow Agent is hereby authorized to deposit each
check in the Escrow Account.
(b) In the event that any check paid by a subscriber and
deposited in the Escrow Account shall be returned, the Escrow Agent shall notify
the Underwriter by telephone of such occurrence and advise it of the name of the
purchaser, the amount of the check returned, and any other pertinent
information. The Escrow Agent shall then transmit the returned check directly to
the subscriber and shall transmit the statement previously delivered by the
Underwriter relating to such purchase to the Underwriter.
(c) If the Underwriter rejects any subscription for
which the Escrow Agent has already collected funds, the Escrow Agent shall
promptly issue a refund check to the rejected subscriber. If the Underwriter
rejects any subscription for which the Escrow Agent has not yet collected funds
but has submitted the subscriber's check for collection, the Escrow Agent shall
promptly issue a check in the amount of the subscriber's check to the rejected
subscriber after the Escrow Agent has cleared such funds. If the Escrow Agent
has not yet submitted a rejected subscriber's check for collection, the Escrow
Agent shall promptly remit the subscriber's check directly to the subscriber.
-2-
<PAGE>
5. Delivery of Escrow Account and the Capital Securities.
(a) At least two (2) business days prior to the Closing
(as hereinafter defined), the Underwriter and the Offerors shall provide the
Escrow Agent with a statement, executed by both parties, containing the
following information:
(i) The total number of Capital Securities sold by
the Underwriter and through the Selected Dealers in the Offering;
(ii) A listing of the number of Capital Securities
sold through the Selected Dealers and the manner in which such Capital
Securities should be registered upon issuance;
(iii) The total number of Capital Securities sold by
the Underwriter directly to subscribers (excluding Selected Dealers) and a list
of each subscriber, and the number of Capital Securities purchased by such
subscriber, and specification of the manner in which such Capital Securities
should be registered upon issuance; and
(iv) A calculation by the Underwriter and the
Offerors as to the manner in which the Escrow Account should be distributed to
the Offerors, the Underwriter and the Selected Dealers, and in the event of
oversubscription or rejection of certain subscription agreements, the aggregate
amount to be returned to individual subscribers and Selected Dealers and a
listing of the exact amount to be returned to each such subscriber and Selected
Dealer.
The Escrow Agent shall hold the Escrow Account and distribute it in accordance
with the above-described statement on the date of Closing or such later date
that it receives the above-described statement.
(b) The Offerors shall deliver the following to the
Escrow Agent by 12:00 p.m. on the day prior to Closing:
(i) certificates for the Capital Securities; and
(ii) pressure sensitive address labels for each
subscriber to whom Capital Securities are being sold and for each Selected
Dealer (who has not requested a different method of delivery) through whom
Capital Securities are being sold.
On the day of Closing, the Escrow Agent shall mail to each subscriber and
Selected Dealer (who has not requested a different method of delivery) the
certificate for the Capital Securities purchased, using the labels provided to
the Escrow Agent by the Offerors. If any Selected Dealer has requested a
different method of delivery of the Capital Securities being purchased for its
customers, the Underwriter shall inform the Escrow Agent of such request, and
the Escrow Agent shall use its best efforts to comply with such request.
(c) Upon cancellation of the Offering by the Offerors or
the Underwriter for any reason, the Escrow Agent shall return to the subscribers
and/or Selected Dealers who contributed to the Escrow Account the exact amount
contributed by them.
6. Investment of Escrow Account. The Escrow Agent shall
deposit subscription funds in the Escrow Account, which shall be a
non-interest-bearing account.
-3-
<PAGE>
7. Closing Date. The "Closing" and "Closing Time" shall be
that date specified in the Underwriting Agreement.
8. Compensation of Escrow Agent. The Underwriter shall pay
the Escrow Agent a fee for its services hereunder in an amount equal to
$________, which amount shall be deposited in the Escrow Account on or before
the date of Closing. In the event that the Offering is canceled for any reason,
the Underwriter shall pay the Escrow Agent its fee within ten (10) days after
the Escrow Account is refunded to subscribers and Selected Dealers, and no such
fee or any other monies whatsoever shall be paid out of or chargeable to the
funds on deposit in the Escrow Account.
9. Duties and Rights of the Escrow Agent. The foregoing
agreements and obligations of the Escrow Agent are subject to the following
provisions:
(a) The Escrow Agent's duties hereunder are limited
solely to the safekeeping of the Escrow Account and the delivery of the Capital
Securities in accordance with the terms of this Agreement. It is agreed that the
Escrow Agent shall have no other duties or obligations hereunder except as
expressly set forth herein, shall be responsible only for the performance of
such duties and obligations, shall not be required to take any action otherwise
than in accordance with the terms hereof, shall not be required to perform any
acts that may violate any applicable laws, and shall not be liable or
responsible in any manner for any loss or damage arising by reason of any act or
omission to act hereunder or in connection with any of the transactions
contemplated hereby, including, but not limited to, any loss or damage that may
occur by reason of forgery, false representation, the exercise of its discretion
in any particular manner or for any other reason, except any loss or damage
arising by reason of its gross negligence or willful misconduct.
(b) The Escrow Agent may rely upon, and shall be
protected in acting or refraining from acting upon, any written instructions
furnished to it hereunder and in good faith believed by it to be genuine or
presented by the proper party or parties, and the Escrow Agent may assume that
any person or entity purporting to give instructions in connection with
provisions hereof has been duly authorized to do so. The Escrow Agent may at any
time request written instructions from the Underwriter and the Offerors with
respect to the interpretation of this Agreement or of any action to be taken or
suffered or not taken hereunder.
(c) In the event that the Escrow Agent shall be uncertain
about the interpretation of this Escrow Agreement or about its rights or
obligations hereunder or the propriety of any action contemplated hereunder, or
if the Escrow Agent shall receive instructions with respect to the Escrow
Account that are in its opinion in conflict with any other instructions with
respect to the Escrow Account that it has received or in conflict with any
provision of this Agreement, (i) the Escrow Agent promptly shall notify the
Underwriter and the Offerors (and any other involved parties, if necessary) of
such uncertainty or inconsistent instructions, (ii) the Escrow Agent shall be
entitled to refrain from taking any action other than to keep safely the Escrow
Account until it shall be directed otherwise in writing signed by the
Underwriter and the Offerors (any other involved parties, if necessary) or by a
final order or judgment of a court of competent jurisdiction, and (iii) if the
Escrow Agent does not receive a notice signed by the Underwriter and the
Offerors (and any other involved parties, if necessary) resolving such
uncertainty or inconsistent instructions within a reasonable time, the Escrow
Agent shall have the right (but not the obligation) to file suit in interpleader
and obtain an order or judgment from a court of competent jurisdiction requiring
all persons involved to interplead and litigate in such court their several
claims and rights among themselves and, upon the conclusion thereof, to act in
accordance with the resolution of such litigation.
-4-
<PAGE>
10. Indemnification and Fees of the Escrow Agent. The
Underwriter and the Offerors hereby jointly and severally agree to indemnify,
defend and save harmless the Escrow Agent from and against any and all losses,
expenses (including without limitation, reasonable fees, disbursements and other
expenses of counsel), assessments, liabilities, claims, damages, actions, suits
or other charges incurred by or assessed against the Escrow Agent for anything
done or omitted by it in the performance of its duties hereunder other than as a
result of its gross negligence or willful misconduct. In addition to the
foregoing, the Underwriter and the Offerors hereby agree that the Escrow Agent
shall deduct from the Escrow Account prior to distributing or delivering the
Escrow Account in accordance with Section 8 hereof reasonable compensation for
the services rendered by the Escrow Agent hereunder.
11. Resignation and Replacement of the Escrow Agent.
(a) The Escrow Agent may resign at any time and thereupon
be discharged of its duties and obligations as escrow agent hereunder by giving
thirty (30) days' prior written notice thereof to the Underwriter and Offerors.
Upon expiration of such 30-day period, the Escrow Agent shall have no further
action until the Underwriter and the Offerors have jointly appointed a successor
escrow agent. Upon receipt of written instructions signed by the Underwriter and
the Offerors, the Escrow Agent shall promptly turn over the Escrow Account to
the successor escrow agent. The Escrow Agent shall thereafter have no further
duties or obligations hereunder.
(b) The Escrow Agent may be removed and discharged from
its duties and obligations as escrow agent hereunder upon the mutual agreement
of the Underwriter and the Offerors by delivering a written notice executed by
the Underwriter and the Offerors of such removal to the Escrow Agent specifying
the date when such removal shall be effective (but such a removal shall in no
event be effective prior to the appointment of a successor escrow agent). In the
event of such removal, the Underwriter and the Offerors shall, within thirty
(30) days after such notice, jointly appoint a successor escrow agent and, upon
receipt of written instructions signed by the Underwriter and the Offerors, the
Escrow Agent shall promptly turn over the Escrow Account to such successor
escrow agent. The Escrow Agent shall thereafter have no further duties or
obligations hereunder.
12. Notices. It is further agreed as follows:
(a) All notices given hereunder will be in writing,
served by registered or certified mail, return receipt requested, postage
prepaid, or by hand-delivery, to the parties at the following addresses:
To the Offerors:
Highlands Capital Trust I
Highlands Bankshares, Inc.
340 West Main Street
Post Office Box 1128
Abingdon, Virginia 24212-1128
Attention: Samuel L. Neese
-5-
<PAGE>
To the Underwriter:
McKinnon & Company, Inc.
1609 First Virginia Tower
555 Main Street
Norfolk, Virginia 23510
Attention: William J. McKinnon, Jr.
To the Escrow Agent:
Wilmington Trust Company
________________________
________________________
Attention:______________
13. Miscellaneous.
(a) This Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parries hereto and their respective
successors and assigns.
(b) If any provision of this Agreement shall be held
invalid by any court of competent jurisdiction, such holding shall not
invalidate any other provision hereof.
(c) This Agreement shall be governed by the applicable
laws of the State of Delaware.
(d) This Agreement may not be modified except in writing
signed by the parties hereto.
(e) All demands, notices, approvals, consents, requests
and other communications hereunder shall be given in the manner provided in this
Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective names, all as of the date first above written.
McKINNON & COMPANY, INC.
By: _____________________________
William J. McKinnon, Jr.
President
HIGHLANDS CAPITAL TRUST I
By: _____________________________
Trustee
HIGHLANDS BANKSHARES, INC.
By: _____________________________
Title: __________________________
WILMINGTON TRUST COMPANY
By: _____________________________
Title: __________________________
-7-
Exhibit 5.1
[WMCD LETTERHEAD]
_________________, 1997
Highlands Bankshares, Inc.
340 West Main Street
Abingdon, Virginia 24210
Re: Registration Statement on Form S-2 (Reg. No. 333-_______) with
respect to an Aggregate of $___________ of Junior Subordinated
Debt Securities and Guarantees
Ladies and Gentlemen:
We have acted as counsel to Highlands Bankshares, Inc. (the
"Corporation") in connection with the registration by the Corporation of up to
an aggregate of $10,000,000 of its junior subordinated debt securities (the
"Debt Securities") and guarantees of Capital Securities and Common Securities of
Highlands Capital Trust I (the "Guarantees", and, together with the Debt
Securities, the "Securities") as set forth in the Registration Statement on Form
S-2, File No. 333-____________ (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") by the Corporation
pursuant to the Securities Act of 1933, as amended. This opinion letter is
Exhibit 5.1 to the Registration Statement.
The Securities are to be issued, separately or together, in one or more
series and are to be sold from time to time as set forth in the Registration
Statement, the Prospectuses contained therein (each, a "Prospectus") and any
amendments or supplements thereto.
We have relied upon an officer's certificate as to corporate action
heretofore taken with respect to the Securities.
Based on the foregoing, we are of the opinion that when (1) the
Registration Statement shall have been declared effective by order of the
Commission, (2) the terms of any class or series of such Securities have been
authorized by appropriate corporate action of the Corporation and (3) such
Securities have been issued, sold and delivered upon the terms and conditions
set forth in the Registration Statement, the applicable Prospectus and any
applicable supplement(s) to such Prospectus (including, in the case of the Debt
Securities, due authentication thereof by the Trustee or by the authenticating
agent, in accordance with the provisions of the Indenture under which the Debt
Securities are to be issued), then the Securities will be validly authorized and
issued and binding obligations of the Corporation.
<PAGE>
In rendering this opinion, we are not expressing an opinion as to the
laws of any jurisdiction other than the Commonwealth of Virginia and the United
States of America, and we assume no responsibility as to the applicability of
the laws of any other jurisdiction to the subject matter hereof or to the
effects of such laws thereon.
This opinion is rendered to you and for your benefit solely in
connection with the registration of the Securities. This opinion may not be
relied on by you for any other purpose and may not be relied upon by, nor may
copies thereof be provided to, any other person, firm, corporation or entity for
any purposes whatsoever without our prior written consent. We hereby consent to
be named in the Registration Statement and in each of the Prospectuses as
attorneys who passed upon the legality of the Securities and to the filing of a
copy of this opinion as Exhibit 5.1 to the Registration Statement. Unless the
prior written consent of our firm is obtained, this opinion is not to be quoted
or otherwise referred to in any written report, proxy statement or other
registration statement, nor is it to be filed with or furnished to any other
governmental agency or other person, except as otherwise required by law.
Very truly yours,
WILLIAMS, MULLEN, CHRISTIAN & DOBBINS
By __________________________________
A Shareholder
2
Exhibit 5.2
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
October ___, 1997
Highlands Capital Trust I
c/o Highlands Bankshares, Inc.
340 West Main Street
Abingdon, Virginia 24210
Re: Highlands Capital Trust I
Ladies and Gentlemen:
We have acted as special Delaware counsel for Highlands Bankshares,
Inc., a Virginia corporation (the "Company") and Highlands Capital Trust I, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust (the "Certificate"),
dated October __, 1997, as filed with the office of the Secretary of State of
the State of Delaware, (the "Secretary of State") on October __, 1997;
(b) The Declaration of Trust of the Trust, dated as of October __,
1997, among the Company and the trustees of the Trust named therein;
(c) The Registration Statement (the "Registration Statement") on
Form S-2, including a preliminary prospectus with respect to the Trust (the
"Prospectus"), relating to the Capital Securities of the Trust representing
preferred undivided beneficial interests in the Trust (each, a "Capital
Security" and collectively, the "Capital Securities"), as filed by the Company
and the Trust with the Securities and Exchange Commission on October __, 1997;
(d) A form of Amended and Restated Declaration of Trust for the
Trust, to be entered into among the Company, the trustees of the Trust, and the
holders, from time to time, of the undivided beneficial interests in the assets
of such Trust (including the exhibits) (the "Declaration"), attached as an
exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated October __,
1997, obtained from the Secretary of State.
<PAGE>
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our own
but rather have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation, operation and
termination of the Trust, and that the Declaration and the Certificate are in
full force and effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due creation or due organization or due
formation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its creation, organization or formation, (iii) the legal capacity of
natural persons who are parties to the documents examined by us, (iv) that each
of the parties to the documents examined by us has the power and authority to
execute and deliver, and to perform its obligations under, such documents, (v)
the due authorization, execution and delivery by all parties thereto of all
documents examined by us, (vi) the receipt by each Person to whom a Capital
Security is to be issued by the Trust (collectively, the "Capital Security
Holders") of a Capital Security Certificate for such Capital Security and the
payment for the Capital Security, in accordance with the Declarations and the
Registration Statement, and (vii) that the Capital Securities are issued and
sold to the Capital Security Holders in accordance with the Declaration and the
Registration Statement. We have not participated in the preparation of the
Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
2
<PAGE>
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
ss. 3801, et seq.
2. The Capital Securities of the Trust will represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The Capital Security Holders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Capital Security
Holders may be obligated to make payments as set forth in the Declaration.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other person for any purpose.
Very truly yours,
3
Exhibit 8.1
[WMCD LETTERHEAD]
____________, 1997
McKinnon & Company, Inc.
555 Main Street
Norfolk, VA 23510
Gentlemen:
As special tax counsel to Highlands Capital Trust I, a statutory
business trust formed under the laws of Delaware (the "Trust"), and Highlands
Bankshares, Inc., a Virginia corporation, in connection with the issuance by the
Trust of $_________ of its ____% Capital Securities (the "Capital Securities"),
and assuming that the operative documents described in the Prospectus for the
Capital Securities dated ____________, 1997 (the "Prospectus"), will be
performed in accordance with the terms described therein, we hereby confirm to
you our opinion as set forth in the Prospectus under the heading "Certain United
States Federal Income Tax Consequences," subject to the limitations set forth
therein.
Very truly yours,
WILLIAMS, MULLEN, CHRISTIAN & DOBBINS
By: _________________________________
Exhibit 23.1
CONSENT OF BROWN, EDWARDS & COMPANY, L.L.P.
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-2 of Highlands
Bankshares, Inc. and Highland Capital Trust I of our report dated January 31,
1997, which appears on page F1 of the 1996 Annual Report to Shareholders of
Highlands Bankshares, Inc. which is incorporated by reference in Highlands
Bankshares, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996. We also consent to the reference to us under the hearing "Experts" in such
Prospectus.
/s/ Brown, Edwards & Company, L.L.P.
BROWN, EDWARDS & COMPANY, L.L.P.
Virginia
October 9, 1997
Exhibit 25.1
Registration No.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
HIGHLANDS BANKSHARES, INC.
(Exact name of obligor as specified in its charter)
Virginia 54-1796693
Delaware
(State of incorporation) (I.R.S. employer identification no.)
340 West Main Street
Abingdon, Virginia 24210
(Address of principal executive offices) (Zip Code)
Junior Subordinated Debt Securities
of Highlands Bankshares, Inc.
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 2nd day
of October, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ Patricia A. Evans By:/s/ James P. Lawler
------------------------ ------------------------
Assistant Secretary Name: James P. Lawler
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is Wilmington Trust Company
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and from
any of the bonds, mortgages, debentures, notes, shares of
capital stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part of
the property held or owned by the Corporation, and to sell and
pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business
of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
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<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article Fourth, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a
majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual
election of directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the
8
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that
purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the
day on which notice of the meeting was mailed to stockholders. Notice
of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
<PAGE>
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time designated
by the Board, and the Directors may keep the books of the Company
outside of the State of Delaware at such places as may be from time to
time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or indirectly,
or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth
or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 2, 1997 By: /s/ James P. Lawler
-------------------
Name: James P. Lawler
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks
and savings banks with state publication requirements.
It has not been approved by any state banking authorities.
Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY WILMINGTON
- ---------------------------------------------- of ----------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
----------
<TABLE>
<CAPTION>
ASSETS Thousand of Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins......................................... 208,942
Interest-bearing balances................................................................... 0
Held-to-maturity securities...................................................................... 403,700
Available-for-sale securities.................................................................... 905,200
Federal funds sold and securities purchased under agreements to resell........................... 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income.............. 3,816,484
LESS: Allowance for loan and lease losses............ 54,535
LESS: Allocated transfer risk reserve................ 0
Loans and leases, net of unearned income, allowance, and reserve............................. 3,761,949
Assets held in trading accounts................................................................... 0
Premises and fixed assets (including capitalized leases).......................................... 95,762
Other real estate owned........................................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies............................... 42
Customers' liability to this bank on acceptances outstanding...................................... 0
Intangible assets................................................................................. 3,572
Other assets...................................................................................... 108,295
Total assets...................................................................................... 5,640,913
CONTINUED ON NEXT PAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices............................................................................... 3,864,774
Noninterest-bearing................ 875,081
Interest-bearing................... 2,989,693
Federal funds purchased and Securities sold under agreements to repurchase........................ 337,784
Demand notes issued to the U.S. Treasury.......................................................... 95,000
Trading liabilities (from Schedule RC-D).......................................................... 0
Other borrowed money:............................................................................. ///////
With original maturity of one year or less............................................ 775,000
With original maturity of more than one year.......................................... 43,000
Bank's liability on acceptances executed and outstanding.......................................... 0
Subordinated notes and debentures................................................................. 0
Other liabilities (from Schedule RC-G)............................................................ 84,197
Total liabilities................................................................................. 5,199,755
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus..................................................... 0
Common Stock...................................................................................... 500
Surplus (exclude all surplus related to preferred stock).......................................... 62,118
Undivided profits and capital reserves............................................................ 376,212
Net unrealized holding gains (losses) on available-for-sale securities............................ (2,328)
Total equity capital.............................................................................. 441,158
Total liabilities, limited-life preferred stock, and equity capital............................... 5,640,913
</TABLE>
2
Exhibit 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
HIGHLANDS BANKSHARES, INC.
HIGHLANDS CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Virginia 54-1796693
Delaware
(State of incorporation) (I.R.S. employer identification no.)
340 West Main Street
Abingdon, Virginia 24210
(Address of principal executive offices) (Zip Code)
Capital Securities of Highlands Capital Trust I
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 2nd day
of October, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By:/s/ James P. Lawler
------------------------- -------------------------
Assistant Secretary Name: James P. Lawler
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is Wilmington Trust Company
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and from
any of the bonds, mortgages, debentures, notes, shares of
capital stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
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owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part of
the property held or owned by the Corporation, and to sell and
pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business
of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
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<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
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receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article Fourth, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a
majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual
election of directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that
purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the
day on which notice of the meeting was mailed to stockholders. Notice
of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time designated
by the Board, and the Directors may keep the books of the Company
outside of the State of Delaware at such places as may be from time to
time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or indirectly,
or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth
or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 2, 1997 By: /s/ James P. Lawler
-------------------
Name: James P. Lawler
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks
and savings banks with state publication requirements.
It has not been approved by any state banking authorities.
Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY WILMINGTON
- ---------------------------------------------- of ----------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
----------
<TABLE>
<CAPTION>
ASSETS Thousand of Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins......................................... 208,942
Interest-bearing balances................................................................... 0
Held-to-maturity securities...................................................................... 403,700
Available-for-sale securities.................................................................... 905,200
Federal funds sold and securities purchased under agreements to resell........................... 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income.............. 3,816,484
LESS: Allowance for loan and lease losses............ 54,535
LESS: Allocated transfer risk reserve................ 0
Loans and leases, net of unearned income, allowance, and reserve............................. 3,761,949
Assets held in trading accounts................................................................... 0
Premises and fixed assets (including capitalized leases).......................................... 95,762
Other real estate owned........................................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies............................... 42
Customers' liability to this bank on acceptances outstanding...................................... 0
Intangible assets................................................................................. 3,572
Other assets...................................................................................... 108,295
Total assets...................................................................................... 5,640,913
CONTINUED ON NEXT PAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices............................................................................... 3,864,774
Noninterest-bearing................ 875,081
Interest-bearing................... 2,989,693
Federal funds purchased and Securities sold under agreements to repurchase........................ 337,784
Demand notes issued to the U.S. Treasury.......................................................... 95,000
Trading liabilities (from Schedule RC-D).......................................................... 0
Other borrowed money:............................................................................. ///////
With original maturity of one year or less............................................ 775,000
With original maturity of more than one year.......................................... 43,000
Bank's liability on acceptances executed and outstanding.......................................... 0
Subordinated notes and debentures................................................................. 0
Other liabilities (from Schedule RC-G)............................................................ 84,197
Total liabilities................................................................................. 5,199,755
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus..................................................... 0
Common Stock...................................................................................... 500
Surplus (exclude all surplus related to preferred stock).......................................... 62,118
Undivided profits and capital reserves............................................................ 376,212
Net unrealized holding gains (losses) on available-for-sale securities............................ (2,328)
Total equity capital.............................................................................. 441,158
Total liabilities, limited-life preferred stock, and equity capital............................... 5,640,913
</TABLE>
2
Exhibit 25.3
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
HIGHLANDS BANKSHARES, INC.
(Exact name of obligor as specified in its charter)
Virginia 54-1796693
(State of incorporation) (I.R.S. employer identification no.)
340 West Main Street
Abington, Virginia 24210
(Address of principal executive offices) (Zip Code)
Guarantee of Highlands Bankshares, Inc. as to
the Capital Securities
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 2nd day
of October, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Patricia A. Evans By: /s/ James P. Lawler
--------------------------- ---------------------------
Assistant Secretary Name: James P. Lawler
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is Wilmington Trust Company
whose address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of this State,
to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and
silver bullion and foreign coins, to buy and sell bills of
exchange, and generally to use, exercise and enjoy all the
powers, rights, privileges and franchises incident to a
corporation which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body
politic, corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
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(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of interest, dividends and income upon and from
any of the bonds, mortgages, debentures, notes, shares of
capital stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual
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owners thereof, including the right to vote thereon; to invest
and deal in and with any of the moneys of the Corporation upon
such securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by pledges or
deeds of trust or mortgages of or upon the whole or any part of
the property held or owned by the Corporation, and to sell and
pledge such bonds, as and when the Board of Directors shall
determine, and in the promotion of its said corporate business
of investment and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge, mortgage and
convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
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(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative, participating, optional
and other special rights of each such series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of
any and all other series at any time outstanding; and, subject to the
provisions of subparagraph 1 of Paragraph (c) of this Article Fourth,
the Board of Directors of the Corporation is hereby expressly granted
authority to fix by resolution or resolutions adopted prior to the
issuance of any shares of a particular series of Preferred Stock, the
voting powers and the designations, preferences and relative, optional
and other special rights, and the qualifications, limitations and
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of
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<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements, if
any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to
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receive all of the remaining assets of the Corporation, tangible
and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article Fourth, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have
any preemptive right to purchase or subscribe for any unissued stock of
any class or series or any additional shares of any class or series to
be issued by reason of any increase of the authorized capital stock of
the Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
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(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a
majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall
be elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next annual
election of directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next election of
the class for which such director shall have been chosen and until his
successor shall be elected and qualified. No decrease in the number of
directors shall shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that
purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the
Corporation not later than the close of the seventh day following the
day on which notice of the meeting was mailed to stockholders. Notice
of nominations which are proposed by the Board of Directors shall be
given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be
disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time designated
by the Board, and the Directors may keep the books of the Company
outside of the State of Delaware at such places as may be from time to
time designated by them.
Fifteenth: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
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(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article Fifteenth
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of
any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter defined) beneficially own, directly or indirectly,
or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December 31,
1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth
or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who
2
<PAGE>
shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of
the Board of Directors when it is not in session to transact all business for
and in behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee
shall be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend
all investments that may be made of the funds of the Company, and shall direct
the disposal of the same, in accordance with such rules and regulations as the
Board of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or hereafter passed from time to time for that purpose, and
any provisions of these By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of any
such implementary Resolutions shall be suspended during such a disaster period
until it shall be determined by any interim Executive Committee acting under
this section that it shall be to the advantage of the Company to resume the
conduct and management of its affairs and business under all of the other
provisions of these By-Laws.
3
<PAGE>
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever
the majority of its members shall deem it to be proper for the transaction of
its business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not
more than
4
<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
5
<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
<PAGE>
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: October 2, 1997 By: /s/ James P. Lawler
-------------------
Name: James P. Lawler
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks
and savings banks with state publication requirements.
It has not been approved by any state banking authorities.
Refer to your appropriate state banking authorities for
your state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY WILMINGTON
- ---------------------------------------------- of ----------------
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
----------
<TABLE>
<CAPTION>
ASSETS Thousand of Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins......................................... 208,942
Interest-bearing balances................................................................... 0
Held-to-maturity securities...................................................................... 403,700
Available-for-sale securities.................................................................... 905,200
Federal funds sold and securities purchased under agreements to resell........................... 151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income.............. 3,816,484
LESS: Allowance for loan and lease losses............ 54,535
LESS: Allocated transfer risk reserve................ 0
Loans and leases, net of unearned income, allowance, and reserve............................. 3,761,949
Assets held in trading accounts................................................................... 0
Premises and fixed assets (including capitalized leases).......................................... 95,762
Other real estate owned........................................................................... 1,751
Investments in unconsolidated subsidiaries and associated companies............................... 42
Customers' liability to this bank on acceptances outstanding...................................... 0
Intangible assets................................................................................. 3,572
Other assets...................................................................................... 108,295
Total assets...................................................................................... 5,640,913
CONTINUED ON NEXT PAGE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices............................................................................... 3,864,774
Noninterest-bearing................ 875,081
Interest-bearing................... 2,989,693
Federal funds purchased and Securities sold under agreements to repurchase........................ 337,784
Demand notes issued to the U.S. Treasury.......................................................... 95,000
Trading liabilities (from Schedule RC-D).......................................................... 0
Other borrowed money:............................................................................. ///////
With original maturity of one year or less............................................ 775,000
With original maturity of more than one year.......................................... 43,000
Bank's liability on acceptances executed and outstanding.......................................... 0
Subordinated notes and debentures................................................................. 0
Other liabilities (from Schedule RC-G)............................................................ 84,197
Total liabilities................................................................................. 5,199,755
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus..................................................... 0
Common Stock...................................................................................... 500
Surplus (exclude all surplus related to preferred stock).......................................... 62,118
Undivided profits and capital reserves............................................................ 376,212
Net unrealized holding gains (losses) on available-for-sale securities............................ (2,328)
Total equity capital.............................................................................. 441,158
Total liabilities, limited-life preferred stock, and equity capital............................... 5,640,913
</TABLE>
2
