Registration Statement No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 10
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GENERAL FORM FOR REGISTRATION
OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
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BNP U.S. FUNDING L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 13-3972207
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
499 Park Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 415-9622
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Securities to be registered pursuant
to Section 12(b) of the Act:
Title of each Name of each exchange
class to be on which each class
registered is to be registered
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None None
Securities to be registered pursuant
to Section 12(g) of the Act:
Noncumulative Preferred Securities, Series A
(Liquidation Preference US$10,000
per Series A Preferred Security)
(Title of class)
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Item 1. Business
GENERAL
BNP U.S. Funding L.L.C. (the "Company") is a Delaware
limited liability company formed on October 14, 1997 by the
filing of a certificate of formation with the Secretary of State
of the State of Delaware and the execution of the Limited
Liability Company Agreement of the Company by the New York Branch
(the "Branch") of Banque Nationale de Paris, a societe anonyme or
limited liability banking corporation, organized under the laws
of The Republic of France ("BNP" or the "Bank"). The Company was
continued pursuant to the Amended and Restated Limited Liability
Company Agreement of the Company (the "Company's Charter" or the
"Charter") entered into on December 5, 1997 by the Branch, as
holder of all of the common limited liability company interests
of the Company (the "Common Securities"), and the holders of the
preferred limited liability company interests of the Company (the
"Preferred Securities"), including the Noncumulative Preferred
Securities, Series A (the "Series A Preferred Securities") as
they may exist and be outstanding from time to time. The Bank has
agreed with the Company that, for so long as any Series A
Preferred Securities are outstanding, the Bank will maintain
direct or indirect ownership of 100% of the outstanding Common
Securities.
The Company was formed for the principal purpose of
acquiring and holding Eligible Securities (as defined herein) to
generate net income for distribution to the holders of the Series
A Preferred Securities ("Series A Preferred Securityholders") and
the holder of the Common Securities. On December 5, 1997 (the
"Closing Date"), (i) 50,000 Series A Preferred Securities were
sold to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933 (the "Securities Act"), (ii) the
Branch acquired 53,010 Common Securities (in addition to the
single Common Security that it had acquired upon the formation of
the Company) and (iii) the Company used the aggregate net
proceeds of approximately $1 billion received in connection with
the sales referred to in (i) and (ii) to purchase a portfolio of
Eligible Securities (the "Initial Portfolio") from the Branch.
The Company will acquire Eligible Securities in the future to
replace securities held by the Company that are repaid. The
acquisition of such additional securities will be funded with the
proceeds of principal distributions on the securities included in
the securities portfolio of the Company (the "Portfolio") or the
issuance of additional Common Securities and additional Preferred
Securities. Future acquisitions of Eligible Securities will be
made from unaffiliated third parties.
The Company entered into a services agreement (the
"Services Agreement") with the Branch on the Closing Date
pursuant to which the Branch maintains the Portfolio and performs
other administrative functions. All of the Company's officers and
employees are officers or employees of the Branch or the Bank or
its affiliates. The securities in the Portfolio are held by
Citibank N.A., acting as trustee under the trust agreement
between the Company and Citibank N.A. dated December 1, 1997 (the
"Trust Agreement").
The principal executive offices of the Company are located
at 499 Park Avenue, New York, New York 10022.
GENERAL DESCRIPTION OF ELIGIBLE SECURITIES; INVESTMENT POLICY
Types of Eligible Securities
Eligible Securities consist of (i) mortgage pass-through
securities issued or guaranteed by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC") that represent fractional undivided
interests in pools of the relevant mortgage loans ("Agency
Securities"); (ii) REMIC securities that are issued or guaranteed
by GNMA, FHLMC or FNMA and that represent beneficial ownership
interests in trusts established by GNMA, FHLMC or FNMA, the
assets of which consist directly or indirectly of Agency
Securities or other, previously issued REMIC securities of this
type ("REMIC Agency Securities"); (iii) REMIC securities that are
issued by an unrelated private company and secured directly or
indirectly by Agency Securities and rated AAA by Standard &
Poor's as to creditworthiness, that
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represent beneficial ownership interests in a trust established
by such private company, the assets of which consist directly or
indirectly of Agency Securities, REMIC Agency Securities, or
other previously issued REMIC securities of this type ("Agency
Collateralized Securities"); (iv) U.S. Treasury securities with a
maturity of up to ten years ("Treasuries"); and (v) specified
short-term investments not subject to U.S. withholding tax
("Short-Term Instruments" and, collectively with the securities
included in (i)-(iv) above, the "Eligible Securities").
Categories (i) through (iii) above are referred to herein as
"Mortgage-Backed Securities". All Mortgage-Backed Securities
issued or guaranteed by GNMA are backed by the full faith and
credit of the United States. No Mortgage-Backed Securities issued
by FHLMC or FNMA are backed, directly or indirectly, by the full
faith and credit of the United States.
The types of Agency Securities within the Initial Portfolio
are (i) securities backed only by mortgages with adjustable rates
that reset annually at a given rate plus a net margin ("Agency
ARMs") or (ii) securities backed by mortgages with a fixed rate
for a specified period of time, after which they reset annually
at a given rate plus a net margin ("Agency Hybrid ARMs"). REMIC
Agency Securities include GNMA REMIC Securities, FHLMC REMIC
Securities and FNMA REMIC Securities. The trusts set up
in connection with REMIC Agency Securities and Agency Collateralized
Securities may have elected to be treated as real estate mortgage
investment conduits ("REMICs") for federal income tax purposes.
Government National Mortgage Association
GNMA is a wholly-owned corporate instrumentality of the
United States within the United States Department of Housing and
Urban Development. Section 306(g) of Title III of the National
Housing Act of 1934, as amended (the "Housing Act"), authorizes
GNMA to guarantee the timely payment of the principal of and
interest on certificates which represent an interest in a pool of
mortgage loans insured by the Federal Housing Administration
("FHA") under the Housing Act, or guaranteed by the Rural Housing
Service ("FHA Loans"), or partially guaranteed by the Department
of Veterans Affairs ("VA Loans").
Section 306(g) of the Housing Act provides that "the full
faith and credit of the United States is pledged to the payment
of all amounts which may be required to be paid under any
guaranty under this subsection." In order to meet its obligations
under any such guarantee, GNMA may, under Section 306(d) of the
Housing Act, borrow from the United States Treasury with no
limitation as to amount.
GNMA Certificates
Each GNMA Certificate held by the Company (which may be
issued under either the GNMA I program or the GNMA II program) is
and will be a "fully modified pass-through" mortgage-backed
certificate issued and serviced by a mortgage banking company or
other financial concern ("GNMA Issuer") approved by GNMA or by
FNMA as a seller-servicer of FHA Loans and/or VA Loans. Each GNMA
Certificate represents a fractional undivided interest in a pool
of such mortgage loans. GNMA will approve the issuance of each
such GNMA Certificate in accordance with a guaranty agreement (a
"Guaranty Agreement") between GNMA and the GNMA Issuer. Pursuant
to its Guaranty Agreement, a GNMA Issuer is and will be required
to advance its own funds in order to make timely payments of all
amounts due on each such GNMA Certificate, even if the payments
received by the GNMA Issuer on the FHA Loans or VA Loans
underlying each such GNMA Certificate are less than the amounts
due on each such GNMA Certificate.
The full and timely payment of principal of and interest on
each GNMA Certificate is and will be guaranteed by GNMA, which
obligation is backed by the full faith and credit of the United
States. Each such GNMA Certificate has and will have an original
maturity of not more than approximately 30 years (but may have an
original maturity of substantially less than 30 years). Each such
GNMA Certificate is and will be based on and backed by a pool of
FHA Loans or VA Loans secured by one- to four-family residential
properties and provides and will provide for the payment by or on
behalf of the GNMA Issuer to the registered holder of such GNMA
Certificate of scheduled monthly payments of principal and
interest equal to the registered holder's proportionate interest
in the aggregate amount of the monthly principal and interest
payment on each FHA Loan or VA Loan underlying such GNMA
Certificate, less the applicable servicing and guarantee fee
which together equal the
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difference between the interest on the FHA Loan or VA Loan and
the pass-through rate on the GNMA Certificate. In addition, each
payment includes and will include proportionate pass-through
payments of any prepayments of principal on the FHA Loans or VA
Loans underlying such GNMA Certificate and liquidation proceeds
in the event of a foreclosure or other disposition of any such
FHA Loans or VA Loans.
If a GNMA Issuer is unable to make the payments on a GNMA
Certificate as they become due, it must promptly notify GNMA and
request GNMA to make such payments. Upon notification and
request, GNMA will make such payments directly to the registered
holder of such GNMA Certificate. In the event no payment is made
by a GNMA Issuer and the GNMA Issuer fails to notify and request
GNMA to make such payment, the holder of such GNMA Certificate
will have recourse only against GNMA to obtain such payment. The
Company or its nominee, as registered holder of the GNMA
Certificates held by the Company, has and will have the right to
proceed directly against GNMA under the terms of the Guaranty
Agreements relating to such GNMA Certificates for any amounts
that are not paid when due.
Regular monthly installment payments on each GNMA
Certificate held by the Company are and will be comprised of
interest due as specified on such GNMA Certificate plus the
scheduled principal payments on the FHA Loans or VA Loans
underlying such GNMA Certificate due on the first day of the
month in which the scheduled monthly installment on such GNMA
Certificate is due. Such regular monthly installments on each
such GNMA Certificate are required to be paid to the Company or
its nominee as registered holder by the 15th day of each month in
the case of a GNMA I Certificate and are required to be mailed to
the Company or its nominee by the 20th day of each month in the
case of a GNMA II Certificate. Any principal prepayments on any
FHA Loans or VA Loans underlying a GNMA Certificate held by the
Company, or any other early recovery of principal on such loan,
are and will be passed through to the Company or its nominee as
the registered holder of such GNMA Certificate.
GNMA REMIC Securities
The GNMA REMIC Securities which are sold in one or more
series (each, a "Series") represent interests in separate GNMA
REMIC Trusts (each, a "Trust") established from time to time.
Each Trust is comprised primarily of (i) GNMA Certificates as to
which GNMA has guaranteed the timely payment of principal and
interest pursuant to the GNMA I Program or the GNMA II Program
and/or (ii) certificates backed by GNMA Certificates as to which
GNMA has guaranteed the timely payment of principal and interest
pursuant to the GNMA Platinum Program (each, a "GNMA Platinum
Certificate") (GNMA Certificates and GNMA Platinum Certificates
being collectively referred to herein as "Ginnie Mae
Certificates"), and such Trust may in the future include
previously-issued GNMA REMIC securities. Each Series of GNMA
REMIC Securities is issued in one or more Classes. Each Class of
Securities of a Series evidences an interest in future principal
payments and/or an interest in future interest payments on the
Ginnie Mae Certificates in the related Trust or a group of Ginnie
Mae Certificates in the related Trust.
GNMA guarantees the timely payment of principal and
interest on each Class of GNMA REMIC Securities (the "GNMA
Guaranty"). The GNMA Guaranty is backed by the full faith and
credit of the United States of America.
Federal Home Loan Mortgage Corporation
FHLMC is a publicly-held government-sponsored enterprise
created pursuant to Title III of the Emergency Home Finance Act
of 1970, as amended (the "FHLMC Act"). FHLMC was established
primarily for the purpose of increasing the availability of
mortgage credit for the financing of urgently needed housing. It
seeks to provide an enhanced degree of liquidity for residential
mortgage investments primarily by assisting in the development of
secondary markets for conventional mortgages. The principal
activity of FHLMC currently consists of the purchase of first
lien conventional mortgage loans or participation interests in
such mortgage loans and the sale of the mortgage loans or
participations so purchased in the form of mortgage securities,
primarily FHLMC Certificates. FHLMC is confined to purchasing, so
far as practicable, mortgage loans that it deems to be of such
quality, type and class as to meet generally the purchase
standards imposed by private institutional mortgage investors.
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FHLMC Certificates
Each FHLMC Certificate represents an undivided interest in
a pool of mortgage loans that may consist of first lien
conventional loans, FHA Loans or VA Loans (a "FHLMC Certificate
group"). FHLMC Certificates are sold under the terms of a
Mortgage Participation Certificate Agreement. A FHLMC Certificate
may be issued under either FHLMC's Cash Program or Guarantor
Program.
Mortgage loans underlying the FHLMC Certificates will
consist of mortgage loans with original terms to maturity of
between approximately 10 and 30 years. Each such mortgage loan
must meet the applicable standards set forth in the FHLMC Act. A
FHLMC Certificate group may include whole loans, participation
interests in whole loans and undivided interests in whole loans
and/or participations comprising another FHLMC Certificate group.
Under the Guarantor Program, any such FHLMC Certificate group may
include only whole loans or participation interests in whole
loans.
FHLMC Certificates may be held of record only by the
entities eligible to maintain book-entry accounts with a Federal
Reserve Bank. The holder of a FHLMC Certificate is not
necessarily the beneficial owner thereof. Beneficial owners
ordinarily hold FHLMC Certificates through financial
intermediaries that, in turn, hold the FHLMC Certificates through
an entity eligible to maintain accounts with a Federal Reserve
Bank.
FHLMC guarantees to each registered holder of a FHLMC
Certificate the timely payment of interest on the underlying
mortgage loans to the extent of the applicable Certificate rate
on the registered holder's pro rata share of the unpaid principal
balance outstanding on the underlying mortgage loans in the FHLMC
Certificate group represented by such FHLMC Certificate, whether
or not received. A holder that is not also the beneficial owner
of a FHLMC Certificate, and each other financial intermediary in
the chain between the holder and the beneficial owner, will be
responsible for establishing and maintaining accounts for and
making the relevant payments to their respective customers.
FHLMC also guarantees to each registered holder of a FHLMC
Certificate collection by such holder of all principal on the
underlying mortgage loans, without any offset or deduction, to
the extent of such holder's pro rata share thereof, but does not,
except in limited cases, guarantee the timely payment of
scheduled principal. Pursuant to its guarantees, FHLMC
indemnifies holders of FHLMC Certificates against any diminution
in principal by reason of charges for property repairs,
maintenance and foreclosure. FHLMC may remit the amount due on
account of its guaranty of collection of principal at any time
after default on an underlying mortgage loan, but not later than
(i) 30 days following foreclosure sale, (ii) 30 days following
payment of the claim by any mortgage insurer or (iii) 30 days
following the expiration of any right of redemption, whichever
occurs later, but in any event no later than one year after
demand has been made upon the mortgagor for accelerated payment
of principal. In taking actions regarding the collection of
principal after default on the mortgage loans underlying FHLMC
Certificates, including the timing of demand for acceleration,
FHLMC reserves the right to exercise its judgment with respect to
the mortgage loans in the same manner as for mortgage loans that
it has purchased but not sold. The length of time necessary for
FHLMC to determine that a mortgage loan should be accelerated
varies with the particular circumstances of each mortgagor, and
FHLMC has not adopted standards which require that the demand be
made within any specified period.
FHLMC Certificates are not guaranteed by the United States
or by any Federal Home Loan Bank and do not constitute debts or
obligations of the United States or any Federal Home Loan Bank.
The obligations of FHLMC under its guarantee are obligations
solely of FHLMC and are not backed by, or entitled to, the full
faith and credit of the United States. If FHLMC were unable to
satisfy such obligations, distributions to holders of FHLMC
Certificates would consist solely of payments and other
recoveries on the underlying mortgage loans and, accordingly,
monthly distributions to holders of FHLMC Certificates would be
affected by delinquent payments and defaults on such mortgage
loans.
Registered holders of FHLMC Certificates are entitled to
receive their monthly pro rata share of all principal payments on
the underlying mortgage loans received by FHLMC, including any
scheduled principal payments, full and partial prepayments of
principal and principal received by FHLMC by virtue of
condemnation, insurance, liquidation or foreclosure, and
repurchases of the mortgage loans by FHLMC or the seller thereof.
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FHLMC is required to remit each registered FHLMC
Certificateholder's pro rata share of principal payments on the
underlying mortgage loans, interest at the FHLMC pass-through
rate and any other sums such as prepayment fees, within 60 days
of the date on which such payments are deemed to have been
received by FHLMC.
Under FHLMC's Cash Program, with respect to pools formed
prior to June 1, 1987, there is no limitation on the amount by
which interest rates on the mortgage loans underlying a FHLMC
Certificate may exceed the pass-through rate on the FHLMC
Certificate. With respect to FHLMC Certificates issued on or
after June 1, 1987, the maximum interest rate on the mortgage
loans underlying such FHLMC Certificates may exceed the
pass-through rate by 50 to 100 basis points. Under such program,
FHLMC purchases groups of whole mortgage loans from sellers at
specified percentages of their unpaid principal balances,
adjusted for accrued or prepaid interest, which when applied to
the interest rate of the mortgage loans and participations
purchased results in the yield (expressed as a percentage)
required by FHLMC. The required yield, which includes a minimum
servicing fee retained by the servicer, is calculated using the
outstanding principal balance. The rate of interest rates on the
mortgage loans and participations in a FHLMC Certificate group
under the Cash Program will vary since mortgage loans and
participations are purchased and assigned to a FHLMC Certificate
group based upon their yield to FHLMC rather than on the interest
rate on the underlying mortgage loans. Under FHLMC's guarantor
program, interest rates on the mortgage loans underlying a FHLMC
Certificate may range from the pass-through rate plus a minimum
servicing fee) to 250 basis points higher than such rate. FHLMC
Certificates may also be backed by adjustable rate mortgages.
FHLMC Certificates duly presented for registration of
ownership on or before the last business day of a month are
registered effective as of the first day of the month. The first
remittance to a registered holder of a FHLMC Certificate will be
distributed so as to be received normally by the 15th day of the
second month following the month in which the purchaser became a
registered holder of the FHLMC Certificates. Thereafter, such
remittance will be distributed monthly to the registered holder
so as to be received normally by the 15th day of each month. The
Federal Reserve Bank of New York maintains book-entry accounts
with respect to FHLMC Certificates sold by FHLMC on or after
January 2, 1985, and makes payments of principal and interest
each month to the registered holders thereof in accordance with
such holders' instructions.
FHLMC REMIC Securities
The FHLMC REMIC Securities consist of REMIC securities
issued or guaranteed by FHLMC ("FHLMC REMIC Certificates") which
represent beneficial ownership interests in (i) pools of Freddie
Mac Gold Mortgage Participation Certificates (the "Gold PCs") and
Freddie Mac Gold Giant Mortgage Participation Certificates (the
"Gold Giant PCs"); (ii) other pools of Freddie Mac Mortgage
Participation Certificates ("Freddie Mac PCs"); (iii) one or more
Freddie Mac Stripped Mortgage Participation Certificates
("Stripped Giant PCs"), which represent undivided interests in
the distributions on a "Standard Giant PC", which in turn
represent beneficial ownership interests in one or more pools of
Gold PCs, Gold Giant PCs or FHLMC REMIC Certificates; (iv) one or
more previously-issued FHLMC REMIC Certificates; or (v) one or
more Ginnie Mae Certificates. FHLMC REMIC Securities may also
include other REMIC securities issued or guaranteed by FHLMC
which are secured directly or indirectly by mortgages. The
Freddie Mac PCs, Gold PCs and Gold Giant PCs issued by FHLMC
represent either an undivided interest in a group of residential
mortgages purchased by FHLMC or participations therein. Each
FHLMC REMIC Certificate is a regular interest in a REMIC trust
established by FHLMC and is a part of a series of multiclass
mortgage participation certificates issued by FHLMC.
Distributions on the FHLMC REMIC Securities are made on the 15th
day of each month, of if such day is not a business day, on the
next succeeding business day.
FHLMC guarantees to each holder of a FHLMC REMIC
Certificate the timely payment of interest and the payment of
principal as principal payments are required to be made on the
underlying Gold PCs and Gold Giant PCs in accordance with their
terms. FHLMC guarantees to each holder of the Gold PC or Gold
Giant PC the timely payment of interest and the timely payment of
principal due to be paid on the underlying mortgage loans as
calculated by FHLMC, to the extent of such holder's pro rata
share of the unpaid principal balance of such mortgage loans.
With respect to Stripped Giant PCs, FHLMC guarantees to each
holder thereof the timely payment of interest, if any, at the
applicable Stripped Giant PC interest rate and payment of
principal, if any, as principal payments are required to be made
on the underlying Gold PCs, Gold Giant PCs or FHLMC REMIC
Certificates. A series of
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FHLMC REMIC Certificates may be redeemed in whole, but not in
part, at the option of FHLMC on any distribution date on or after
the date on which, after giving effect to principal payments to
be made on such series on such date, the aggregate outstanding principal
amount of such series is less than 1% of the aggregate original
principal amount of such series. Stripped Giant PCs are not
redeemable, but a Stripped Giant PC backed by a FHLMC Multiclass
PC will be retired if such Multiclass PC is redeemed.
The guarantee of FHLMC is solely the obligation of FHLMC
and is not backed by the full faith and credit of the United
States.
Federal National Mortgage Association
FNMA is a federally-chartered and privately-owned
corporation organized and existing under the Federal National
Mortgage Association Charter Act, as amended. FNMA was originally
established in 1938 as a United States government agency to
provide supplemental liquidity to the mortgage market and was
transformed into a stockholder-owned and privately-managed
corporation by legislation enacted in 1968.
FNMA provides funds to the mortgage market primarily by
purchasing mortgage loans from lenders, thereby replenishing
their funds for additional lending. FNMA acquires funds to
purchase mortgage loans from many capital market investors that
may not ordinarily invest in mortgages, thereby expanding the
total amount of funds available for housing.
FNMA Certificates
FNMA Certificates are Guaranteed Mortgage Pass-Through
Certificates representing fractional undivided interests in a
pool of mortgage loans formed by FNMA. Each mortgage loan must
meet the applicable standards of the FNMA purchase program.
Mortgage loans comprising a pool are either provided by FNMA from
its own portfolio or purchased pursuant to the criteria of the
FNMA purchase program.
Mortgage loans underlying FNMA Certificates held by the
Company may include conventional mortgage loans, FHA Loans or VA
Loans. Original maturities of substantially all of the
conventional, level payment mortgage loans underlying a FNMA
Certificate are expected to be between either 8 to 15 years or 20
to 30 years. The original maturities of substantially all of the
fixed rate level payment FHA Loans or VA Loans are expected to be
30 years.
Mortgage loans underlying a FNMA Certificate may have
annual interest rates that vary by as much as two percentage
points from each other. The rate of interest payable on a FNMA
Certificate is equal to the lowest interest rate of any mortgage
loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and FNMA's
guaranty fee. Thus, the annual interest rates on the mortgage
loans underlying a FNMA Certificate will generally be between 50
basis points and 250 basis points greater than the annual FNMA
Certificate pass-through rate. FNMA Certificates may also be
backed by adjustable rate mortgages.
FNMA guarantees to each registered holder of a FNMA
Certificate that it will distribute amounts representing such
holder's proportionate share of scheduled principal and interest
payments at the applicable pass-through rate provided for by such
FNMA Certificate on the underlying mortgage loans, whether or not
received, and such holder's proportionate share of the full
principal amount of any foreclosed or other finally liquidated
mortgage loan, whether or not such principal amount is actually
recovered. The obligations of FNMA under its guarantees are
obligations solely of FNMA and are not backed by, nor entitled
to, the full faith and credit of the United States. If FNMA were
unable to satisfy its obligations, distributions to holders of
FNMA Certificates would consist solely of payments and other
recoveries on the underlying mortgage loans and, accordingly,
monthly distributions to holders of FNMA Certificates would be
affected by delinquent payments and defaults on such mortgage
loans.
FNMA REMIC Securities
The FNMA REMIC Securities consist of REMIC securities
issued or guaranteed by FNMA ("FNMA REMIC Certificates"), which
represent beneficial ownership interests in one or more (i) FNMA
REMIC Trusts, the
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assets of which consist of primarily FNMA Guaranteed Mortgage
Pass-Through Certificates ("FNMA MBS Certificates"); (ii) FNMA
Stripped Mortgage-Backed Securities ("FNMA SMBS Certificates")
which represent beneficial ownership interests in the principal
distributions on certain FNMA MBS Certificates held in the form
of one or more Guaranteed MBS Pass-Through Securities ("Mega
Certificates") representing interests in a pool of FNMA MBS
Certificates; (iii) Ginnie Mae Certificates; or (iv)
previously-issued FNMA REMIC Certificates. FNMA REMIC Securities
may also include other REMIC securities issued or guaranteed by
FNMA which are secured directly or indirectly by mortgages. FNMA
MBS Certificates represent beneficial ownership interests in
pools of residential mortgage loans.
Each of the FNMA REMIC Certificates is a REMIC regular
interest in a REMIC trust established by FNMA and is part of a
multiclass issuance of REMIC pass-through certificates issued by
each REMIC trust. Distributions on the FNMA Securities are made
on the 25th day of each month or, if such day is not a business
day, on the next succeeding business day.
FNMA guarantees to each holder of a FNMA REMIC Certificate
the timely distribution of required installments of principal and
interest and the distribution of the principal balance of each
FNMA REMIC Certificate in full no later than the final
distribution date specified for such FNMA REMIC Certificate
whether or not sufficient funds are available therefor in the
related trust. FNMA guarantees to each holder of a FNMA MBS
Certificate the timely distribution of scheduled installments of
principal of an interest on the underlying mortgage loans,
whether or not received, and the distribution of the full
principal balance of any foreclosed mortgage loan. With respect
to FNMA SMBS Certificates, FNMA acknowledges that its obligations
to make distributions to holders of FNMA SMBS Certificates are
primary obligations of FNMA ranking on a parity with its
obligations under its guaranty of the related Mega Certificates.
FNMA further acknowledges that FNMA is directly obligated to the
holders of FNMA SMBS Certificates in respect of such guaranty
obligations to the same extent as if such holders were holders of
such Mega Certificates. FNMA may repurchase the underlying
mortgage loans, thus indirectly effecting an early termination of
the related REMIC trust or FNMA SMBS Certificates, if only one
mortgage loan remains in the pool of underlying mortgage loans or
the aggregate principal balance of all underlying mortgage loans
is less than one percent of the aggregate original principal
balance of such mortgage loans.
The guarantee of FNMA is solely the obligation of FNMA and
is not backed by the full faith and credit of the United States.
DESCRIPTION OF THE PORTFOLIO
Purchase
The Company acquired the Initial Portfolio on the Closing
Date pursuant to the terms of a securities purchase agreement
with the Branch (the "Portfolio Securities Purchase Agreement").
The Branch made certain representations and warranties with
respect to the securities purchased from it and included in the
Initial Portfolio for the benefit of the Company and is obligated
to repurchase any securities sold by it to the Company as to
which there is a material breach of any such representation or
warranty, unless the Branch elects to substitute a qualified
security for such security or pay damages to the Company
compensating the Company for such breach. The repurchase price
for any such security is the higher of (i) the outstanding unpaid
principal amount of such security as of the most recent date as
of which the issuer of such security (or an authorized person
acting on behalf of the issuer) has announced the outstanding
unpaid principal amount of such security or released information
permitting holders of such security to calculate its outstanding
unpaid principal amount plus accrued and unpaid interest, and
(ii) the market value of such security, as if such security was
not impaired due to such breach, in each case as of the date of
repurchase. The damage payment with respect to any such
securities will be equal to the excess of (i) the higher of the
unpaid principal balance plus accrued and unpaid interest and the
market value of such security, as if such security was not
impaired due to such breach, over (ii) the market value of the
Company's interest in such security given the occurrence of such
breach, in each case as of the date the damage payment is made.
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General
Set forth below is a description, as of December 31, 1997,
of the Portfolio.
As of December 31, 1997, the Eligible Securities included
in the Portfolio had an aggregate unpaid principal balance of
$973,176,760 and an estimated market value of $997,748,181. As of
such date, 26.85% (by aggregate unpaid principal balance) of the
securities in the Portfolio were floating rate REMIC securities
("Floating-rate REMICs"), 4.81% were fixed rate REMIC securities
("Fixed-rate REMICs"), 36.19% were Agency ARMs, 17.76% were
Agency Hybrid ARMs and 14.39% were Treasuries.
The following table sets forth certain information with
respect to each type of security included in the Portfolio:
Portfolio
As of December 31, 1997
Aggregate
Unpaid Percentage of
Principal Portfolio by
Balance Aggregate Unpaid
Type of Security ($000) Principal Balance
- -------------------- --------- -----------------
Floating-rate REMICs $261,330 26.853%
Fixed-rate REMIC.... 46,839 4.813
Agency ARMs......... 352,204 36.191
Agency Hybrid ARMs.. 172,804 17.757
Treasuries.......... 140,000 14.386
--------- --------
TOTAL $973,177 100.00%
========
Weighted Average
Number of Life Range
Type of Security Securities (years)(1)
- -------------------- ---------- ----------------
Floating-rate REMICs 18 0.46 - 4.41
Fixed-rate REMIC.... 1 10.7
Agency ARMs......... 22 5.57 - 6.80
Agency Hybrid ARMs.. 6 5.49 - 5.68
Treasuries.......... 2 8.8 - 9.4
-----------
TOTAL 49 0.46 - 10.7
===========
- ---------
(1) Determined as described under "--Prepayment Analysis" herein
(except for Treasuries where it equals the number of years
to the maturity date), and subject to the assumptions and
qualifications in that section. Prepayments will not occur
at the rate assumed and the actual weighted average lives
of the securities may differ significantly from those
shown.
DESCRIPTION OF TYPES OF SECURITIES
Floating-rate REMICs
Floating-rate REMICs are backed by Agency Securities where
a particular portion of the cash flows are directed to the
Floating-rate REMICs. FNMA, FHLMC, and GNMA all guarantee the
full and timely payment of principal and interest on the pools of
mortgages, which flow through to the REMICs. These REMICs are
floating-rate securities that reset (i) monthly at the
then-current rate of one month LIBOR plus a margin (except one
Floating-rate REMIC, see note (2) to the table below). They are
subject to a lifetime cap and floor. The cap, floor, and margin
all vary by security. The Floating-rate REMICs have final
remaining periods to their stated maturities ranging from 8.67
to 29.55 years. The latest stated maturity date of any Floating-
rate REMIC in the Portfolio is July 2027.
9
<PAGE>
FLOATING-RATE REMICS
As of December 31, 1997
Current
Unpaid
Principal Current
Series Balance ($000) Coupon Life Cap
- ---------------------------- -------------- ------- --------
FANNIE MAE 1993-210 FB...... $45,170 6.525% 9%
FHLMC-GNMA 38 F............. $8,111 6.625 10
FANNIE MAE 1997-28 FA....... $26,187 6.02354 10
FANNIE MAE 1996-51 FA....... $16,007 6.625 9
FREDDIE MAC 1933 FR......... $8,010 6.625 8.5
FANNIE MAE 1990-121 F....... $21,845 6.925 11.5
Collateralized Mortgage
Obligation Trust 66 F... $1,467 6.725 11
FREDDIE MAC 1382 LC......... $4,221 6.525 10
FANNIE MAE 1992-141 FA...... $8,017 6.625 10.5
FREDDIE MAC 1256 CA......... $6,202 6.825 10.5
Morgan Stanley Mortgage
Trust 41 Class 1........ $7,855 6.775 10
FANNIE MAE 1993-155 FG...... $5,159 6.625 9.5
FREDDIE MAC 1040 H.......... $22,586 7.075 11
FANNIE MAE 1997-37 F........ $31,163 6.525 10
FANNIE MAE 1997-52 F........ $9,515 6.625 9.5
FANNIE MAE 1997-42 F........ $9,300 6.625 9
FANNIE MAE 1997-44 F........ $9,724 6.525 10
FANNIE MAE 1997-67 FB....... $20,791 6.525 9
Total....................... $261,330
========
Margin Weighted Prepayment
over LIBOR Average Life Speed
Series (basis points) (years)(1) Assumption
- ---------------------------- -------------- ------------ -----------
FANNIE MAE 1993-210 FB...... 40 2.84 150%PSA
FHLMC-GNMA 38 F............. 50 3.48 200 PSA
FANNIE MAE 1997-28 FA....... (2) 1.50 50 CPR
FANNIE MAE 1996-51 FA....... 50 2.31 335 PSA
FREDDIE MAC 1933 FR......... 50 1.01 340 PSA
FANNIE MAE 1990-121 F....... 80 3.98 335 PSA
Collateralized Mortgage
Obligation Trust 66 F... 60 0.46 290 PSA
FREDDIE MAC 1382 LC......... 40 1.15 250 PSA
FANNIE MAE 1992-141 FA...... 50 2.81 275 PSA
FREDDIE MAC 1256 CA......... 70 1.84 345 PSA
Morgan Stanley Mortgage
Trust 41 Class 1........ 65 4.40 300 PSA
FANNIE MAE 1993-155 FG...... 50 1.25 172 PSA
FREDDIE MAC 1040 H.......... 95 4.02 330 PSA
FANNIE MAE 1997-37 F........ 40 2.50 335 PSA
FANNIE MAE 1997-52 F........ 50 2.69 245 PSA
FANNIE MAE 1997-42 F........ 50 3.89 215 PSA
FANNIE MAE 1997-44 F........ 40 4.41 225 PSA
FANNIE MAE 1997-67 FB....... 40 1.23 320 PSA
Total.......................
- ----------------
(1) Determined as described under "--Prepayment Analysis" herein,
and subject to the assumptions and qualifications in that
section. Prepayments will not occur at the rate assumed and
average lives of the securities may differ significantly from
those shown.
(2) The FANNIE MAE 1997-28 FA security bears interest at a rate
per annum equal to the weighted average coupon of the
underlying ARM pools minus 1.45%. The coupon of each such ARM
pool adjusts annually, reflecting the weighted averages of the
net margins for the underlying mortgages in such pool and the
then-current rate of the One-Year Constant Maturity Treasury
Index, in each case as of the applicable date.
Fixed-rate REMICs
Fixed-rate REMICs are backed by Agency Securities where a
particular portion of the cash flows is directed to the
Fixed-rate REMICs. FNMA, GNMA and FHLMC all guarantee the full
and timely payment of principal and interest on the pools of
mortgages, which flow through to the Fixed-rate REMIC. The only
Fixed-rate REMIC included in the Portfolio has a coupon of
6.50%. Its stated maturity date is June 2026.
FIXED-RATE REMIC
As of December 31, 1997
Current Prepayment
Unpaid Weighted Speed
Principal Average Assumption
Series Balance ($000) Coupon Life (years) PSA
- --------------------- -------------- ------ ------------ ----------
FANNIE MAE 1997-56 PE........ $ 46,839 6.50% 10.7 175%
10
<PAGE>
Agency ARMs
The Agency ARMs in the ARM pools consist of securities
having the timely payment of principal and interest generally
guaranteed by GNMA, FNMA and FHLMC. The pools consist of
adjustable rate mortgages, which reset annually at a rate equal
to the then-current rate of the One-Year Constant Maturity
Treasury Index (as defined below) plus a net margin. Each ARM
pool is subject to a periodic cap and a lifetime cap, which vary
by agency and pool. The latest stated maturity date of any Agency
ARM in the Portfolio is September 2027.
The One-Year Constant Maturity Treasury Index ("CMT") is the
weekly average yield on U.S. Treasury securities adjusted to a constant
maturity of one year as published by the Federal Reserve Board in
Statistical Release H. 15(519) or any similar publication or, if
not so published, as reported by any Federal Reserve Bank or by
any U.S. Government department or agency.
AGENCY ARMs
As of December 31, 1997
Average
Number Pre-
Current Margin of payment
Unpaid over Months Weighted Speed
Principal CMT to Average Assump-
Balance Current Life (basis Rate Life tion
Pool No. ($000) Coupon Cap points) Reset (years)(1) (CPR)
- --------------- --------- ------- ------ ------- ----- ---------- -------
FN 394850...... $36,147 6.064% 12.06% 233 5.5 5.63 20%
FN 397901...... $44,511 5.887 11.89 233 6.6 5.63 20
FH 846384...... $15,097 7.340 11.73 236 8.5 5.65 30
FN 374711...... $8,702 5.716 11.68 212 3.6 5.60 20
FN 374773...... $12,791 5.836 11.82 232 4.9 5.62 20
FH 410544...... $6,440 5.914 11.91 238 7.6 5.68 20
FH 610727...... $12,405 5.742 11.74 239 4.6 5.68 18
G2 080094...... $49,508 6.000 11.00 150 9.0 6.80 8
FN 313242...... $7,349 7.716 11.86 232 8.1 5.59 30
FN 367349...... $12,089 5.929 11.93 235 11.0 5.61 30
FN 313311...... $7,381 7.408 11.77 238 6.8 5.67 30
FN 363057...... $10,630 5.449 11.39 221 11.9 5.60 30
FN 313190...... $7,827 7.911 12.08 233 6.3 5.57 30
FN 363070...... $6,195 5.494 11.50 220 7.3 5.61 18
FN 313377...... $23,174 6.106 11.56 227 10.2 5.60 30
FN 370479...... $9,288 5.328 11.33 234 6.8 5.60 30
FN 378243...... $3,640 6.221 12.22 235 5.6 5.64 18
FN 313432...... $32,645 5.954 11.81 235 0.5 5.62 30
FN 370478...... $9,999 5.353 11.35 234 0.9 5.60 30
FN 396355...... $8,366 5.600 11.80 233 5.5 5.62 18
FN 374774...... $8,262 5.427 11.39 233 6.5 5.61 18
FN 391247...... $19,758 6.561 11.38 224 7.9 5.68 30
Total....... $352,204
========
---------------
(1) Determined as described under "--Prepayment Analysis" herein,
and subject to the assumptions and qualifications in that
section. Prepayments will not occur at the rate assumed and
average lives of the securities may differ significantly from
those shown.
11
<PAGE>
Agency Hybrid ARMs
The Agency Hybrid ARMs in the ARM pools consist of
securities having the timely payment of principal and interest
guaranteed by FNMA and FHLMC. The pools consist of mortgages that
have a fixed coupon for a specified period of time, after which
they reset annually at a rate equal to the then-current rate of
the One-Year Constant Maturity Treasury Index (as defined above)
plus the security net margin. Each ARM pool is subject to a
periodic cap and a lifetime cap which vary by pool. The length of
the fixed period ranges from 42 to 105 months in the Portfolio,
as of December 31, 1997. The latest stated maturity date of any
Agency Hybrid ARM in the Portfolio is August 2036.
AGENCY HYBRID ARMs
As of December 31, 1997
Current
Unpaid Margin
Principal over CMT
Balance Current Life (basis
Pool No. ($000) Coupon Cap points)
- ---------------- --------- ------- ------ -------
FN 345856....... $16,772 6.865% 11.86% 220
FN 374138....... $17,753 6.349 11.35 221
FN 361370....... $48,016 7.559 13.56 227
FN 397136....... $13,014 7.750 13.75 214
FN 361372....... $68,308 7.881 12.88 226
FN 312824....... $8,941 7.375 12.38 225
Total........... $172,804
========
Average
Number Pre-
of payment
Months Weighted Speed
to Average Assump-
Rate Life tion
Pool No. Reset (years)(1) (CPR)
- ---------------- ------- ---------- -------
FN 345856....... 42.7 5.68 15%
FN 374138....... 48.7 5.57 15
FN 361370....... 53.5 5.50 15
FN 397136....... 105.6 5.56 15
FN 361372....... 85.5 5.49 15
FN 312824....... 84.5 5.49 15
Total...........
- ----------
(1) Determined as described under "--Prepayment Analysis" herein,
and subject to the assumptions and qualifications in that
section. Prepayments will not occur at the rate assumed and
average lives of the securities may differ significantly from
those shown.
TREASURIES
As of December 31, 1997
Current
Unpaid
Principal Number of
Balance Years to
Security Description ($ 000) Coupon Maturity Maturity
- ------------------------------- ---------- ------ ---------- ----------
Tnote 6.625 05/15/07........... $ 70,000 6.625% 05/15/2007 9.4
Tnote 6.5 10/15/06............. 70,000 6.500 10/15/2006 8.8
----------
Total....................... $140,000
========
PREPAYMENT ANALYSIS
Mortgage Prepayments
The rates of principal payments on the Mortgage-Backed
Securities depend indirectly on the rates of principal payments
on the related underlying mortgages. Mortgage principal payments
may be in the form of scheduled amortization or partial or full
prepayments. "Prepayments" include prepayments by the borrower,
liquidations resulting from default, casualty or condemnation and
payments made by the related Agency pursuant to its guarantee of
principal (other than scheduled amortization) on such securities.
The underlying mortgages are subject to prepayment at any time
without penalty.
12
<PAGE>
Mortgage prepayment rates are likely to fluctuate
significantly. In general, when prevailing mortgage interest
rates decline significantly below the interest rates on the
underlying mortgages, the prepayment rate on the underlying
mortgages is likely to increase, although a number of other
factors also may influence the prepayment rate. See Item 2 for a
discussion of the prepayment history of the securities in the
Portfolio.
Prepayment Models
Prepayments on pools of mortgages are commonly measured
relative to a variety of prepayment models. The models used
herein are the constant prepayment rate ("CPR") and the Bond
Market Association's standard prepayment model, or "PSA". The CPR
model assumes a constant rate of prepayments on an annualized
basis. For example, at 10% CPR, mortgage loans are assumed to
prepay at a rate of 10% per annum. The PSA model assumes that
mortgages will prepay at an annual rate of 0.2% in the first
month after origination, that the prepayment rate increases at an
annual rate of 0.2% per month up to the 30th month after
origination and that the prepayment rate is constant at 6% per
annum in the 30th and later months (this assumption is called
"100% PSA"). For example, at 100% PSA, mortgages with a loan age
of three months (i.e., mortgages in their fourth month after
origination) are assumed to prepay at an annual rate of 0.8%. "0%
PSA" assumes no prepayments; "50% PSA" assumes prepayment rates
equal to 0.50 times 100% PSA; "200% PSA" assumes prepayment rates
equal to 2.00 times 100% PSA; and so forth. CPR or PSA are not
descriptions of historical prepayment experience or a prediction
of the rate of prepayment of the underlying mortgages.
Weighted Average Life
The weighted average life of a security refers to the
average amount of time that will elapse from the date of its
purchase by the Company until each dollar of principal has been
repaid to the investor. The weighted average life of an issue of
mortgage-backed securities depends primarily on the rate at which
principal is paid on the related mortgages. In each case, the
Company has calculated the weighted average life by (i)
multiplying the assumed net reduction, if any, in the principal
amount on each payment date for such mortgage-backed securities
by the number of years from the date of purchase by the Company
for such mortgage-backed securities to such payment date, (ii)
summing the results and (iii) dividing the sum by the aggregate
amount of the assumed net reductions in principal amount.
Modeling Assumptions
The weighted average lives set forth herein have been
prepared on the basis of characteristics of the mortgage-backed
securities and the related underlying mortgages included in the
Portfolio. The weighted average lives are based on the following
assumptions (the "Modeling Assumptions"), among others:
1. as of December 31, 1997, the mortgage-backed securities
have the principal balances set forth in the tables above;
2. each mortgage loan underlying a mortgage-backed security
has characteristics equal to the weighted average of the
characteristics of the mortgage loans in the applicable pool
as reported on Bloomberg Financial Markets ("Bloomberg") on
December 31, 1997;
3. scheduled monthly payments of principal and interest on
the underlying mortgages are received on a timely basis and no
defaults occur;
4. principal prepayments on the underlying mortgage loans
for the Floating-rate REMICs and the Fixed-rate REMICs will
be received at the respective percentages of the applicable
prepayment assumption as reported on the Median Dealer
Pre-Payment Forecasts page of Bloomberg on December 31, 1997
and set forth in the above tables. For the Agency ARMs, the
Agency Hybrid ARMs and the FANNIE MAE 1997-28 FA, prepayments are
assumed to be received at the CPR set forth in the above
tables;
5. the applicable issuer and underlying servicer do not
repurchase any underlying mortgage loan and do not make an
optional redemption;
13
<PAGE>
6. with respect to the Agency ARMs, and Agency Hybrid
ARMS, the level of the One-Year Treasury Index remains constant
at 5.20% per annum;
7. with respect to the Agency ARMs and Agency Hybrid
ARMs, the scheduled monthly payment for each underlying mortgage
loan is adjusted on its next payment date, based upon a security
coupon rate equal to the sum of (a) the assumed rate of the
One-Year Treasury Index set forth in item 6 above, and (b) the
applicable security net margin, so that such scheduled monthly
payment would amortize the remaining balance by the end of the
weighted average remaining term to stated maturity for the
mortgage loans in the applicable pool as reported on Bloomberg on
December 31, 1997.
MANAGEMENT POLICIES AND PROGRAMS
Pursuant to the Services Agreement between the Company and
the Branch, the Branch maintains the Portfolio in accordance with
the Base Investment Policy Guidelines (as described below and as
set forth in Section 6.2(b) of the Charter) and, at any time when
the Series A Preferred Securities are not registered under
Section 12(g) of the Exchange Act, the Additional Investment
Policy Guidelines (as described below and as set forth in Section
6.2(c) of the Charter). In addition, the Company's Charter
specifies certain policies with respect to the acquisition and
disposition of securities, use of capital and leverage. The
amendment of certain policies requires the approval of the
member, or a majority of the members, of the Company's Board of
Directors who are not a current officer or employee of the
Company, the Bank or any affiliate of the Bank or of any person
or persons that, in the aggregate, owns or own more than 50% of
the outstanding Common Securities (an "Independent Director").
See Item 11, "Description of Series A Preferred Securities --
Independent Director Approval".
Asset Acquisition and Disposition Policies
Subsequent to the acquisition of the Initial Portfolio, the
Company will purchase from time to time and in accordance with
the Base Investment Policy Guidelines and, at any time when the
Series A Preferred Securities are not registered under Section
12(g) of the Exchange Act, the Additional Investment Policy
Guidelines, additional securities from third parties unaffiliated
with the Bank out of proceeds received in connection with (i) the
issuance of additional Common Securities and additional Preferred
Securities or (ii) the repayment of securities upon maturity or
the prepayment of securities.
Under the Base Investment Policy Guidelines, (i) the
Company may not acquire any assets other than Eligible
Securities; (ii) subject to limited exceptions, the Company may
not dispose of securities owned by it prior to their maturity
without the consent of a majority of the Independent Directors
(which consent the Company does not expect to be available); and
(iii) the Company may not dispose of securities owned by it
primarily for the purpose of realizing gain or decreasing loss.
Under the Additional Investment Policy Guidelines, the
Company (i) may not acquire assets other than Agency Securities,
Treasuries or Short-Term Instruments and (ii) must comply with
rules concerning (a) the accumulation of amounts of proceeds from
the prepayment or repayment of securities before reinvestment
thereof in Eligible Securities, (b) the procedure to be followed
for such reinvestment and (c) the criteria (as to issuer, type of
securities, weighted average life, maturity and yield) to be
applied in selecting new securities. The Company's Charter
further provides that the Base and the Additional Investment
Policy Guidelines may not be amended without the consent of a
majority of the Independent Directors. On December 19, 1997, the
Board of Directors of the Company adopted resolutions
establishing the Company's policy concerning the short-term
investment of interest payments and payments of principal amounts
with respect to securities pending either reinvestment in
additional Eligible Securities or payment of dividends on the
Company's Securities. Such policy provides that interest amounts
will be invested in the highest yielding fixed-rate certificates
of deposit offered by the Trustee maturing on Dividend Payment
Dates and that principal amounts will be invested in a specified
offshore deposit account offered by the Trustee.
14
<PAGE>
Capital and Leverage Policies
The Company's principal liquidity needs are and will be to
pay dividends on the Series A Preferred Securities and to fund
the acquisition of additional Eligible Securities as securities
held by the Company are repaid. The acquisition of such
additional securities is and will be funded with the proceeds of
principal distributions on the securities included in the
Portfolio or the issuance of additional Common Securities and
additional Preferred Securities. The Company has not had and does
not anticipate that it will have any other material capital
expenditures. The Company believes that the amounts generated
from the payment of interest on securities in the Portfolio will
provide sufficient funds to meet both operating requirements and
payment of dividends by the Company for the foreseeable future.
The Company is prohibited by its Charter from incurring any
indebtedness for borrowed money.
To the extent that the Board of Directors determines that
additional funding is required, the Company may raise such funds
through additional equity offerings or retention of cash flow or
a combination of these methods. The Company may issue additional
series of Preferred Securities. However, the Company may not
issue additional Preferred Securities senior to the Series A
Preferred Securities without the consent of holders of at least
66 2/3% (by liquidation preference) of the outstanding Series A
Preferred Securities at that time, and the Company may not issue
additional Preferred Securities on a parity with the Series A
Preferred Securities without the approval of a majority of the
Company's Independent Directors. The Company may issue additional
Preferred Securities if such issuance would appear to provide the
Bank with cost-effective means of raising capital for bank
regulatory purposes at the time.
Conflict of Interest Policies
Because of the nature of the Company's relationship with
the Bank and its affiliates, it is likely that conflicts of
interest will arise with respect to certain transactions. The
officers of the Company are (and the Company anticipates that all
future officers will be) officers or employees of the Branch, the
Bank or one of its affiliates. Pursuant to the Services Agreement
between the Company and the Branch, the Branch will maintain the
Company's portfolio of securities as described herein and provide
certain accounting, legal, tax and other support services to the
Company. Conflicts of interest may arise between the discharge by
such individuals of their duties as officers or employees of the
Company on the one hand and the Branch, the Bank or one of its
affiliates on the other hand. It is the Company's policy that the
terms of any financial dealings with the Branch, the Bank or one
of its affiliates will be consistent with those available from
third parties in the securities markets.
It is the intention of the Company and the Bank that any
agreements and transactions between the Company, on the one hand,
and the Bank or its affiliates, on the other hand, including
without limitation the Portfolio Securities Purchase Agreement,
are fair to all parties and are consistent with market terms for
such types of transactions. The requirement in the Company's
Charter that certain actions of the Company be approved by a
majority of the Independent Directors is also intended to ensure
fair dealings between the Company and the Bank and its
affiliates. However, there can be no assurance that any such
agreement or transaction will be on terms as favorable to the
Company as would have been obtained from unaffiliated third
parties.
Other Policies
The Company intends to operate in a manner that will not
subject it to regulation under the Investment Company Act of 1940
(the "1940 Act"). The Company does not intend to (i) invest in
the securities of other issuers for the purpose of exercising
control over such issuers, (ii) underwrite securities of other
issuers, (iii) actively trade in investments, (iv) offer
securities in exchange for property, or (v) make loans to third
parties, including, without limitation, officers, directors or
other affiliates of the Company. The Company may, under certain
circumstances, purchase the Series A Preferred Securities and
other of its capital securities in the open market or otherwise,
provided, however, that, other than during a Shift Period (as
defined in Item 11), the Company will not redeem or repurchase
any of its Common Securities for so long as any Series A
Preferred Securities are outstanding without the approval of a
majority of the Independent Directors, unless the Company
concurrently redeems an equal
15
<PAGE>
proportion of the aggregate liquidation preference (based on the
aggregate redemption price) of Series A Preferred Securities
unless (i) the General Secretariat of the French Banking
Commission (Secretariat general de la Commission bancaire) shall
have approved such redemption or repurchase and (ii) each of
Moody's Investors Service Inc. and Standard and Poor's (each, a
"Rating Agency") then rating the Series A Preferred Securities
shall have informed the Company that the redemption or repurchase
of such Common Securities would not adversely affect its initial
rating of the Series A Preferred Securities.
COMPETITION
The Company will purchase Eligible Securities in addition
to those in the Portfolio as needed to maintain the Company's
operations and such additional Eligible Securities will be
purchased from third parties that are unaffiliated with the Bank.
The Company competes with investment banking firms, savings and
loan associations, banks, thrift and loan associations, finance
companies, mortgage bankers and insurance companies in acquiring
its additional Eligible Securities.
PLAN OF OPERATION FOR THE REMAINDER OF THE 1998 FISCAL YEAR
The Company intends to manage the securities in the
Portfolio in a manner consistent and complying with the Base and
Additional Investment Policy Guidelines in order to generate
revenues commensurate with the payment of dividends on the Series
A Preferred Securities and the Common Securities.
FORWARD LOOKING STATEMENTS
This Form 10 and future filings made by the Company with
the Securities and Exchange Commission (the "Commission"), as
well as other filings, reports and press releases made or issued
by the Company, and oral statements made by executive officers of
the Company, may include forward-looking statements relating to
such matters as expectations of income from the securities owned
by the Company. Such forward-looking statements are based on
assumptions rather than historical or current facts and,
therefore, are inherently uncertain and subject to risk.
To comply with the terms of a "safe harbor" provided by the
Private Securities Litigation Reform Act of 1995 that protects
the making of such forward-looking statements from liability
under certain circumstances, the Company notes that a variety of
factors could cause the actual results or experience to differ
materially from the anticipated results or other expectations
described or implied by such forward-looking statements. The
risks and uncertainties that may affect the operations,
performance, development and results of the Company's business
include the following: (a) the risk of a decline in interest
rates and therefore on income from securities with adjustable
interest rates; (b) an increase in prepayment of Mortgage-Backed
Securities, especially those with fixed interest rates, in an
environment of declining interest rates; (c) increased
competition from other financial and non-financial institutions;
and (d) other risks detailed from time to time in the Company's
filings with the Commission. The Company does not undertake any
obligation to update or revise any forward-looking statements
subsequent to the date on which they are made.
16
<PAGE>
Item 2. Financial Information
SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
As of December 31, 1997 and for the period from December 5, 1997
(inception) through December 31, 1997.
(in thousands, except per share and yield data)
INTEREST INCOME STATEMENT:
Interest Income $ 4,188
Net Income $ 4,142
Average number of redeemable
Common Securities outstanding 53,011
Net Income per redeemable Common Security(1) $ 78.14
BALANCE SHEET:
Securities $ 995,398
Total assets $1,034,304
Series A Preferred Securities outstanding $ 500,000
Total redeemable Common Securities,
Preferred Securities and
Securityholders' equity $1,034,258
OTHER DATA:
Dividends paid on Series A Preferred Securities -
Dividends paid on redeemable Common Securities -
Number of Series A Preferred Securities
outstanding 50,000
Number of redeemable Common Securities outstanding 53,011
Average yield on securities 5.92%
(1) Dividends on the Series A Preferred Securities are not
accrued until declared. If dividends on the Series A
Preferred Securities had been declared as of December 31,
1997, such dividends would have amounted to $2,686,806 and
net income of $53.73 per Series A Preferred Security. Net
Income per redeemable Common Security would have been $27.46.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company was formed on October 14, 1997 and commenced
operations on December 5, 1997. Consequently, the following
discussion pertains only to the period from December 5, 1997
through December 31, 1997. Due to the Company's brief operating
history, trends with respect to revenue and expenses have not yet
become apparent and therefore are not analyzed in the following
discussion.
During the period from December 5, 1997 through
December 31, 1997, the Company had revenues of $4,188,125. This
amount consisted entirely of interest income. Interest on the
securities in the Portfolio amounted to $4,162,524, representing
an aggregate average yield of 5.92%. Interest earned and average
yield with respect to each category of security in the Portfolio
was as follows: Floating-rate REMICs ($1,175,000, 6.34%);
Fixed-rate REMICs ($225,000, 6.92%); Agency ARMs ($1,443,000,
5.62%); Agency Hybrid ARMs ($708,000, 5.66%); and Treasuries
($612,000, 5.86%). The average book value of the Portfolio during
the period was $1,010,016,312, reflecting the following
prepayments: Agency ARMs ($18,597,468), Floating rate REMICs
($6,986,866) and Agency Hybrid ARMs ($3,389,795). The Company
also recorded $25,601 of interest income from the short-term
investment of (i) interest payments on securities in the
Portfolio and (ii) such prepayments of principal.
The aggregate market value of the securities in the
Portfolio at December 31, 1997 was higher than the book value by
approximately 0.24%, due to a net decrease in interest rates.
Because management intends to hold such securities until
maturity, the unrealized net gain of approximately $2,350,000 was
not recognized in reporting income.
Operating expenses for the period totaled $45,877.
Operating expenses consisted of audit fees, an accrued portion of
the fees of Citibank as Trustee and of the Branch under the Services
Agreement, a fee of $8,000 payable to French American Banking
Corporation ("FABC") as dividend paying agent, registrar and
transfer agent, and the independent director's fee of $6,000.
The Company's net income during the period from December
5, to December 31, 1997 was $4,142,248. No dividends were
declared during this period, however, with respect to either the
Series A Preferred Securities or the Common Securities.
The Company's sole source of income is interest
generated by the securities in the Portfolio. Any decline in
prevailing interest rates in the United States would result in
lower revenues for the Company, both due to lower interest income
from the floating-rate securities in the Portfolio, which
constitute approximately 80% thereof, and from increased
prepayments and reinvestment of the proceeds therefrom in
lower-yielding securities. During the first quarter of 1998,
however, management anticipates a stable interest rate environment.
18
<PAGE>
Item 3. Properties
The Company does not own or lease any property. It uses the
facilities of the Branch located at 499 Park Avenue, New York, NY
10022.
Item 4. Security Ownership of Certain Beneficial Owners And
Management
As shown in the following table, all of the outstanding
Common Securities are owned by the Branch.
- ------------------------------------------------------------------------------
Name And Address Of Amount And Nature Of
Title Of Class Beneficial Owner Beneficial Ownership Percent Of Class
- ------------------------------------------------------------------------------
Common Banque Nationale de 53,011 100%
Securities Paris, New York Branch
499 Park Avenue
New York, NY 10022
- ------------------------------------------------------------------------------
None of the members of the Company's Board of Directors
owns any Common Securities or Series A Preferred Securities.
Item 5. Directors and Executive Officers
The following table sets forth information concerning the
directors and executive officers of the Company. The directors
serve 3-year terms (5 years in the case of the Independent
Director), subject to earlier resignation or removal. The current
term of office of each director commenced on the Closing Date.
Name and Age Position and Offices Held
------------ -------------------------
Jean-Francois Lepetit (55).............. Chairman and Director
Martine Billeaud (52)................... Director
Jean-Pierre Beck (54)................... Director
Donald J. Puglisi (52).................. Independent Director
Eric Deudon (34)........................ President and Director
Bruno Di Nardo (58)..................... Secretary and Director
Lisa Hermann (37)....................... Treasurer
The following is a summary of the experience of each of the
executive officers and directors of the Company:
Jean-Francois Lepetit is Advisor to the Chairman of the Bank
and a Member of the General Management Committee. He is Chairman of
the Bank's Market Risk Committee and Co-Chairman of BNP Prime East.
Mr. Lepetit is also in charge of the Bank's Asset and Liability
Management. He was previously Vice Chairman of the Board and Chief
Executive Officer of Banque Indosuez. Mr. Lepetit was born in 1942.
Martine Billeaud is in charge of the Bank's treasury
activities related to Asset and Liability Management. She was
previously responsible for worldwide foreign exchange and
interest rate products distribution and French franc trading. Ms.
Billeaud was born in 1945 in Choisy le Roi, France.
Jean-Pierre Beck is Executive Vice President in charge of
Asset and Liability Management and Capital Markets activities of
the Bank's U.S. branches. Prior to this position, he was the
Global Market Risk Manager of the Bank. He has worked for
the Bank since 1964. Mr. Beck was born in 1943 in Mulhouse,
France.
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<PAGE>
Donald J. Puglisi, the Independent Director, is the MBNA
America Business Professor and Professor of Finance at the
University of Delaware where he has been on the faculty since
1971. In addition, he is the Managing Director of Puglisi &
Associates, a company which provides investment management,
accounting and other administrative services to a variety of
different companies. Mr. Puglisi holds a Directorship or
Trusteeship in the following companies that are registered under
either the Exchange Act or the 1940 Act: AJL PEPS Trust,
Automatic Common Exchange Security Trust II, DECS Trust, DECS
Trust II, Dole Food Automatic Common Exchange Security Trust,
Great Lakes Fund, Inc., Huron Investment Fund, Inc., Mandatory
Common Exchange Trust, Nextel STRYPES Trust; Select Asset Fund,
Series 1, Inc., Select Asset Fund, Series 2, Inc., Snyder STRYPES
Trust, and, WBK STRYPES Trust.
Eric Deudon is Senior Vice President in charge of Capital
Markets activities of the Branch. Since joining the Bank in 1990
in Tokyo, he has run or supervised securities trading and
investment portfolios and foreign exchange activities. Mr. Deudon
was born in 1963 in Saint Cloud, France.
Bruno Di Nardo is an attorney in New York and has acted as
General Counsel of the Bank and its subsidiary French American
Banking Corporation in New York for the past 24 years. He was
born in 1939.
Lisa Hermann is Assistant Vice President responsible for
securities trading and investment portfolios at the Branch. She
joined the Information Systems Department of the Bank in New York
in 1990 and in 1993 was appointed to the trading room as a
securities trader. Ms. Hermann was born in 1960 in Philadelphia,
Pennsylvania.
Item 6. Executive Compensation
The Independent Director, Donald J. Puglisi, receives an
annual salary of $6,000. None of the other members of the
Company's Board of Directors or officers receives any
compensation from the Company.
Item 7. Certain Relationships and Related Transactions
On the Closing Date, the Branch acquired the Common
Securities from the Company for an aggregate purchase price of
$530,110,000, and pursuant to the terms of the Portfolio
Securities Purchase Agreement with the Branch, the Company
purchased the Initial Portfolio for an aggregate purchase price
of $1,030,110,000. See Item 1, "Decription of the Portfolio--
Purchase". In addition, the Company entered into the Services
Agreement with the Branch pursuant to which the Branch
agreed to provide certain portfolio management, legal, tax,
accounting and other support services to the Company, and the
Company agreed to pay the Branch an annual fee of $50,000 for
such services.
The purchase price of the Initial Portfolio was based
on the estimated market value of the securities included therein
as of November 28, 1997. The estimated market value was
determined by representatives of the Branch and the Company,
under the direction of Eric Deudon, Senior Vice President of the
Branch and President of the Company, based on the trading levels
of similar bonds in the market at the time of the pricing noted
by the Branch securities arbitrage desk. The use of "proxy bonds"
trading levels is systematically used by the desk to price its
trading portfolio, and therefore the same methodology was applied
to price the securities in the Initial Portfolio.
20
<PAGE>
The following tables set forth the purchase price and
date of purchase of the securities included in the Initial
Portfolio that were purchased by the Branch in the two years
prior to their sale to the Company on December 5, 1997.
FLOATING-RATE REMICS
Price Paid by
Series the Branch Purchase Date
- ------------------------------- --------------------- --------------------
FANNIE MAE 1993-210 FB.......... $ 49,951,986.53 09/12/97
FHLMC-GNMA 38 F................. $ 9,332,381.60 05/07/97
FANNIE MAE 1997-28 FA........... $ 49,953,125.00 04/30/97
FANNIE MAE 1996-51 FA........... $ 17,197,611.81 07/23/97
FREDDIE MAC 1933 FR............. $ 6,811,115.05 02/28/97
FANNIE MAE 1990-121 F........... $ 27,665,447.29 12/14/96
Collateralized Mortgage
Obligation Trust 66 F....... $ 4,765,718.60 06/19/96
FREDDIE MAC 1382 LC............. $ 7,215,145.09 06/12/96
FANNIE MAE 1992-141 FA.......... $ 970,971.93 02/28/97
FREDDIE MAC 1256 CA............. $ 8,950,943.70 11/05/96
Morgan Stanley Mortgage
Trust 41 Class 1............ $ 9,833,214.64 01/24/97
FANNIE MAE 1993-155 FG.......... $ 6,825,933.67 05/16/97
FREDDIE MAC 1040 H.............. $ 24,899,334.03 08/20/97
FANNIE MAE 1997-37 F............ $239,710,218.21 10/09/97
FANNIE MAE 1997-52 F............ $ 9,579,790.00 07/30/97
FANNIE MAE 1997-42 F............ $ 9,735,842.17 10/09/97
FANNIE MAE 1997-44 F............ $ 9,911,047.24 10/09/97
FANNIE MAE 1997-67 FB........... $ 22,623,401.67 10/16/97
FIXED-RATE REMIC
Price Paid by
Series the Branch Purchase Date
---------------------
- ------------------------------- --------------------- --------------------
FANNIE MAE 1997-56 PE........ $ 46,121,777.81 10/08/97
21
<PAGE>
AGENCY ARMs
Price Paid by
Series the Branch Purchase Date
- ------------------------------- --------------------- --------------------
FN 394850................ $ 40,518,280.54 08/25/97
FN 397901................ $ 47,984,906.37 08/25/97
FH 846384................ $ 26,352,260.48 02/24/97
FN 374711................ $ 10,170.301.97 07/24/97
FN 374773................ $ 15,081,841.84 07/24/97
FH 410544............... $ 6,919,540.23 09/24/97
FH 610727............... $ 12,900,058.29 09/24/97
G2 080094................ $ 50,428,422.91 10/07/97
FN 313242................ $ 19,803,564.31 01/23/97
FN 367349................ $ 24,240,937.50 01/23/97
FN 313311................ $ 22,744,411.89 01/23/97
FN 363057................ $ 13,725,081.69 03/24/97
FN 313190................ $ 21,610,810.09 02/25/97
FN 363070................ $ 8,347,462.23 03/24/97
FN 313377................ $ 44,102,402.00 03/24/97
FN 370479................ $ 12,538,776.18 04/23/97
FN 378243................ $ 5,117,282.86 07/24/97
FN 313432................ $ 51,431,093.75 02/28/97
FN 370478................ $ 11,225,485.24 09/24/97
FN 396355................ $ 10,066,560.16 09/24/97
FN 374774................ $ 8,701,904.94 09/24/97
FN 391247................ $ 25,697,362.98 09/25/97
AGENCY HYBRID ARMs
Price Paid by
Series the Branch Purchase Date
- ------------------------------- --------------------- --------------------
FN 345856.................. $ 17,372,126.92 04/23/97
FN 374138.................. $ 17,816,400.02 04/23/97
FN 361370.................. $ 51,233,613.40 08/24/97
FN 397136.................. $ 14,128,503.78 09/24/97
FN 361372.................. $ 30,165,653.78 10/23/97
FN 312824.................. $ 9,521,125.64 11/24/97
TREASURIES
Price Paid by
Series the Branch Purchase Date
- ------------------------------- --------------------- --------------------
Tnote 6.625 05/15/07........ $ 71,465,625.00 12/05/97
Tnote 6.5 10/15/06.......... $ 72,850,155.00 10/24/97
22
<PAGE>
Item 8. Legal Proceedings
The Company is not the subject of any litigation.
Item 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters
MARKET INFORMATION
There is no established public trading market for the Common
Securities, all of which are held by the Branch. The Bank has
agreed with the Company that, for so long as any Series A
Preferred Securities are outstanding, the Bank will maintain
direct or indirect ownership of 100% of the outstanding Common
Securities.
DIVIDENDS
As of the date of this Form 10, the Company has not
declared any dividends on the Common Securities.
Holders of Common Securities are entitled to receive
dividends if declared by the Company's Board of Directors out of
net gains from the disposition of Securities in the Portfolio and
net income not required to be applied to fund dividends with
respect to the Series A Preferred Securities. (Series A Preferred
Securityholders are entitled to receive dividends if declared by
the Company's Board of Directors as described in Item 11,
"Description of Series A Preferred Securities -- Dividends".)
There are a number of restrictions on the Company's ability
to pay dividends on the Common Securities. First, under the
Delaware Limited Liability Company Act, the Company may not pay
dividends or make other distributions on the Common Securities or
Series A Preferred Securities if, after giving effect to the
distributions, the Company's liabilities would exceed the fair
value of its assets. Second, the Company's Charter provides that
so long as any Series A Preferred Securities are outstanding (i)
other than during a Shift Period (as defined in Item 11), after a
shift in dividend preference, the amount of dividends on the
Common Securities in any fiscal year may not exceed the amount by
which the net income of the Company (determined in accordance
with generally accepted accounting principles) for such fiscal
year exceeds the stated dividends on the Series A Preferred
Securities scheduled to be paid during such fiscal year
irrespective of whether dividends on the Series A Preferred
Securities are in fact declared and paid, and (ii) other than
during a Shift Period, the Company may not redeem or repurchase
Common Securities without the concurrent redemption of an equal
proportion of the aggregate liquidation preference (based upon
the aggregate redemption price) of outstanding Series A Preferred
Securities unless (x) the General Secretariat of the French
Banking Commission (Secretariat general de la Commission
bancaire) shall have approved such redemption or repurchase and
(y) each Rating Agency then rating the Series A Preferred
Securities shall have informed the Company that the redemption or
repurchase of such Common Securities would not adversely affect
its initial rating of the Series A Preferred Securities. These
provisions regarding the limitations on payment of dividends in
respect of Common Securities and redemption or repurchase of
Common Securities may not be modified without the approval of a
majority of the Independent Directors. Third, other than during a
Shift Period, after a shift in dividend preference, no dividends
may be declared, paid or set apart for payment on the Common
Securities (a) with respect to any period of time included in any
Dividend Period (as defined in Item 11) unless full dividends
have been or contemporaneously are declared and paid, or declared
and a sum sufficient for the payment thereof is set apart for
such payment on the Series A Preferred Securities for the
then-current Dividend Period and (b) the Company may not declare,
pay or set apart funds for any dividends or other distributions
with respect to any Common Securities or repurchase, redeem or
otherwise acquire, or set apart funds for repurchase, redemption
or other acquisition of, any Common Securities through a sinking
fund or otherwise, unless and until (x) full dividends on the
Series A Preferred Securities for the two most recent preceding
Dividend Periods (or such lesser number of Dividend Periods
during which Series A Preferred Securities have been outstanding)
are declared and paid, or declared and a sum sufficient for
payment has been paid over to the dividend disbursing agent for
payment of such dividends and (y) the Company has declared a cash
dividend on the Series A Preferred Securities at the annual
dividend rate for the then-current Dividend Period, and
sufficient funds have been paid over to the
23
<PAGE>
dividend disbursing agent for the payment of such cash dividend
for such then-current Dividend Period; provided, however, that
notwithstanding the foregoing restrictions the Company may
repurchase or redeem Common Securities as set forth in (ii)
above. Notwithstanding the foregoing limitations, if a Shift
Event (as defined in Item 11) were to occur, the Company would
automatically redeem substantially all of its Common Securities
for an amount equal to the investment of the Branch attributable
to such Securities (initially $530,110,000).
Item 10. Recent Sales of Unregistered Securities
On December 5, 1997, the Company sold 50,000 Series A
Preferred Securities to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities Inc. and Salomon Brothers
Inc (the "Initial Purchasers") for an aggregate price of $500
million and the Bank paid the Initial Purchasers an aggregate
commission of $5 million. The Initial Purchasers resold the
50,000 Series A Preferred Securities to qualified institutional
buyers pursuant to Rule 144A under the Securities Act.
On October 14, 1997, the Company sold one Common Security to
the Branch for $10,000 and on December 5, 1997, the Company sold
53,010 Common Securities to the Branch for $530,100,000. Each
sale was made in reliance on Section 4(2) of the Securities Act.
The Company used the proceeds of the sale of Series A
Preferred Securities and Common Securities to purchase the
Initial Portfolio.
Item 11. Description of Registrant's Securities to be Registered
The following summary of the terms of the Series A
Preferred Securities does not purport to be complete and is
qualified in its entirety by reference to the Company's Charter.
GENERAL
The Series A Preferred Securities form a series of the
Preferred Securities of the Company, the terms of which are set
forth in the Company's Charter. Additional Preferred Securities
may be issued from time to time in one or more series with such
rights, preferences and limitations as are determined by the
Company's Board of Directors or, if then constituted, a duly
authorized committee thereof, subject to the limitations
described below. The Company has been authorized to issue the
Series A Preferred Securities.
The Series A Preferred Securities are validly issued, fully
paid and nonassessable. The Series A Preferred Securityholders
have no preemptive rights with respect to any capital securities
of the Company or any other securities of the Company convertible
into or carrying rights or options to purchase any such
securities. The Series A Preferred Securities are not convertible
into Common Securities or any other class or series of capital
securities of the Company and are not subject to any sinking fund
or other obligation of the Company for their repurchase or
retirement.
Interests in the Series A Preferred Securities may not be
sold or otherwise transferred, except to institutional investors
that are qualified institutional buyers as defined in Rule 144A
under the Securities Act, and certificates evidencing Series A
Preferred Securities bear a legend to this effect. Each purchaser
will be deemed to have read, and to have made the representations
contained in, "-- Transfer Restrictions; Notice to Investors".
The Series A Preferred Securities rank prior to the Common
Securities and to all other classes and series of equity
securities of the Company now or hereafter issued (collectively,
"Junior Securities"), other than any class or series of equity
securities of the Company expressly designated as being on a
parity with ("Parity Securities") or senior to ("Senior
Securities") the Series A Preferred Securities as to dividend
rights and rights upon dissolution, liquidation or winding up
(subject to the consequences of a Shift Event (as defined below)
occurring). The Company has the power to create and issue
additional Preferred Securities or other classes of securities
that rank on a parity with the Series A Preferred Securities, or
that constitute Junior Securities. So long as any Series A
24
<PAGE>
Preferred Securities remain outstanding, additional shares of
Senior Securities may not be issued without the approval of the
holders of at least two-thirds (by liquidation preference) of the
Series A Preferred Securities. So long as any Series A Preferred
Securities remain outstanding, additional shares of Parity
Securities may not be issued without the approval of a majority
of the Independent Directors.
DIVIDENDS
Series A Preferred Securityholders are entitled to receive
dividends when, as and if declared by the Company's Board of
Directors, out of the Company's net income, determined without
regard to capital gains or losses, and out of amounts contributed
by the Bank to the Company. (The Contingent Support Agreement
requires the contribution of certain amounts by the Bank under
certain circumstances following a Shift Event. See "--The
Contingent Support Agreement". The Bank will have no obligation
to make any contributions to the Company under any other
circumstances.) Dividends on the Series A Preferred Securities
are payable from December 5, 1997 on a non-cumulative basis as
follows: (i) through December 5, 2007, semi-annually in arrears
on the fifth day of June and December of each year, commencing
June 5, 1998, and (ii) thereafter, quarterly in arrears on the
third Wednesday of March, June, September and December of each
year (subject to adjustment of such date under certain
circumstances, as provided below). "Dividend Payment Date" refers
to each date on which dividends are payable in accordance with
the preceding sentence. Dividends payable on each Dividend
Payment Date will be calculated as provided below and will accrue
from and including the immediately preceding Dividend Payment
Date (or from and including December 5, 1997 with respect to the
dividend payable June 5, 1998) to but excluding the relevant
Dividend Payment Date or date fixed for redemption ("Redemption
Date"), as the case may be (each such period, a "Dividend
Period").
On December 19, 1997, the Board of Directors of the Company
adopted resolutions stating that it is the intention of the Board
of Directors to declare and to cause the Company to pay dividends
on the Series A Preferred Securities on each Dividend Payment
Date in the amount payable in accordance with Section 7.3(b)(ii)
of the Charter (and described in the next two paragraphs) out of
the Company's net income for the six calendar months ended
immediately prior to such Dividend Payment Date, determined
without regard to capital gains or losses, and out of any
contributions by the Bank to the capital of the Company
specifically designated as being for such purpose; provided,
however, that such policy will not apply during a Shift Period if
an annual meeting of shareholders of the Bank fails to declare
dividends on the Bank's common stock with respect to the
then-most recent fiscal year or the Board of Directors of the
Bank announces that it does not intend to propose to the
shareholders' meeting the declaration of a dividend on the Bank's
common stock with respect to the then-most recent fiscal year or
the then-current fiscal year, in which case all of the Company's
net income shall be paid on the Common Securities in accordance
with Section 7.3(c)(i)(A) of the Charter (subject to the
condition set forth therein and described in the fourth
succeeding paragraph herein).
With respect to each Dividend Period from December 5, 1997
to December 5, 2007, dividends will be payable on the liquidation
preference of the Series A Preferred Securities at a fixed rate
of 7.738% per annum, calculated on the basis of a 360-day year of
twelve 30-day months. If any Dividend Payment Date or Redemption
Date during such period falls on a day that is not a Business
Day, the relevant dividend will be payable on the next succeeding
Business Day without adjustment, interest or further payment as a
result of the delay. "Business Day" means a day other than
Saturday, Sunday or a day on which banking institutions in The
City of New York are authorized or required by law or order to
remain closed.
With respect to each Dividend Period following December 5,
2007, dividends will be calculated and accrue on the liquidation
preference of the Series A Preferred Securities, on a weekly
basis for each week in such Dividend Period, from and including
the LIBOR Reset Date (as defined below) falling in such week to
but excluding the LIBOR Reset Date falling in the next succeeding
week (each such period, a "Weekly Dividend Period"), at a rate
per annum equal to 2.8% plus One-Week LIBOR (as defined herein)
determined on the related LIBOR Determination Date (as defined
herein) for such Weekly Dividend Period. The dividend in respect
of each Weekly Dividend Period will be calculated on the basis of
a 360-day year and the actual number of days in such Weekly
Dividend Period. "LIBOR Reset Date" means the Wednesday of each
week falling in a Dividend Period commencing December 5, 2007. Each
Dividend Payment Date commencing December 5, 2007 will also be a
25
<PAGE>
LIBOR Reset Date. If any LIBOR Reset Date, Dividend Payment Date
or Redemption Date on or after December 5, 2007 falls on a day
that is not both a Business Day and a London Business Day such
LIBOR Reset Date, Dividend Payment Date or Redemption Date will
be postponed to the next succeeding day which is both a Business
Day and a London Business Day. "London Business Day" means a day
on which dealings in U.S. dollar deposits are transacted in the
London interbank market.
Each dividend will be payable to holders of record as they
appear on the securities register of the Company on the
corresponding record date. The record dates for the Series A
Preferred Securities will be, for so long as the Series A
Preferred Securities remain in book-entry form, one business day
prior to the relevant Dividend Payment Date and, in the event
that any of the Series A Preferred Securities are not in
book-entry form, the fifteenth day (whether or not a business
day) prior to the relevant Dividend Payment Date.
The Charter provides that during a Shift Period if an
annual meeting of shareholders of the Bank fails to declare
dividends on the Bank's common stock with respect to the
then-most recent fiscal year or the Board of Directors of the
Bank announces that it does not intend to propose to the
shareholder's meeting the declaration of a dividend on the Bank's
common stock with respect to the then-most recent fiscal year or
the then-current fiscal year, the dividend preference will shift
to the Common Securities such that all net income of the Company
will be distributed to the Bank as the holder of the Common
Securities and no dividends will be paid with respect to the
Series A Preferred Securities, unless the Bank, in its capacity
as holder of the Common Securities, determines (subject to the
prior approval of the General Secretariat of the French Banking
Commission (Secretariat general de la Commission bancaire)) to
cause the Company to pay all or part of a dividend on the Series
A Preferred Securities.
The Charter also provides that if the Bank determines to
pay any dividends on its Tier 1 capital stock during or after
termination of a Shift Period, the Company will be required to
pay full dividends on the Series A Preferred Securities on the
Dividend Payment Date immediately following the payment of such
dividends and on the next two Dividend Payment Dates thereafter
without any requirement that such dividends first be declared by
the Board of Directors of the Company. The Bank agreed in the
Contingent Support Agreement to (i) contribute additional funds
to the Company as necessary to ensure that the Company will have
cash in an amount sufficient to pay full dividends on the Series
A Preferred Securities in accordance with the preceding sentence
(provided that the Bank will not be required to contribute funds
with respect to any Dividend Period in an amount greater than (x)
the amount available for distribution to holders of the Bank's
Tier 1 capital stock (determined as of the date on which the
decision to pay the relevant dividend on the Bank's Tier 1
capital stock is made and without giving effect to the
declaration of such dividend) or (y) if the Special Dividend has
been paid, the amount thereof) and (ii) procure payment by the
Company to the Series A Preferred Securityholders of dividends in
the amounts, for the Dividend Periods and in the circumstances
described in this paragraph.
The Charter further provides that if the Bank's Tier 1
risk-based capital ratio declines below the minimum percentage
required by French banking regulations (currently 4%), the
Company will pay the Special Dividend (as defined in "-- Shift
Events") on the Common Securities in an amount equal to the
Company's net assets (other than assets having a total market
value of approximately $40 million).
The Paying Agent will calculate One-Week LIBOR ("One-Week
LIBOR") for each Weekly Dividend Period on the second London
Business Day before the applicable LIBOR Reset Date at the
beginning of such Weekly Dividend Period (a "LIBOR Determination
Date") and will make such rate calculation available upon request
to investors. For this purpose, "London Business Day" means a day
on which dealings in U.S. dollar deposits are transacted in the
London inter-bank market. On each LIBOR Determination Date, the
Paying Agent will determine One-Week LIBOR as follows:
(i) One-Week LIBOR will be determined on the basis of the
offered rates for one-week deposits in U.S. dollars of not less
than U.S.$1,000,000, commencing on the second London Business Day
immediately following such LIBOR Determination Date, which
appears on Telerate Page 3750 (as defined below) as of
approximately 11:00 a.m., London time, on such LIBOR
Determination Date. "Telerate Page 3750" means the display
designated on page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such
26
<PAGE>
other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. Dollar deposits). If no rate
appears on Telerate Page 3750, One-Week LIBOR for such LIBOR
Determination Date will be determined in accordance with the
provisions of paragraph (ii) below.
(ii) With respect to a LIBOR Determination Date on which no
rate appears on Telerate Page 3750 as of approximately 11:00
a.m., London time, the Paying Agent shall on such LIBOR
Determination Date request the principal London offices of each
of four major reference banks in the London interbank market
selected by the Paying Agent to provide the Paying Agent with a
quotation of the rate at which one-week deposits in U.S. dollars,
commencing on the second London Business Day immediately
following such LIBOR Determination Date, are offered by it to
prime banks in the London interbank market as of approximately
11:00 a.m., London time, on such LIBOR Determination Date and in
a principal amount equal to an amount of not less than
U.S.$1,000,000 that is representative for a single transaction in
such market at such time. If at least two such quotations are
provided, One-Week LIBOR for such LIBOR Determination Date will
be the arithmetic mean of such quotations as calculated by the
Paying Agent. If fewer than two quotations are provided, One-Week
LIBOR for such LIBOR Determination Date will be the arithmetic
mean of the rates quoted as of approximately 11:00 a.m., New York
City time, on such LIBOR Determination Date by three major banks
in The City of New York selected by the Paying Agent (after
consultation with the Company) for loans in U.S. dollars to
leading European banks, having a one-week maturity commencing on
the second London Business Day immediately following such LIBOR
Determination Date and in a principal amount equal to an amount
of not less than U.S.$1,000,000 that is representative for a
single transaction in such market at such time; provided,
however, that if the banks selected as aforesaid by the Paying
Agent are not quoting as mentioned in this sentence, One-Week
LIBOR for such LIBOR Determination Date will be One-Week LIBOR
determined with respect to the immediately preceding LIBOR
Determination Date.
All percentages resulting from any calculation regarding
dividends on the Series A Preferred Securities will be rounded to
the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% or
(.0987655)), and all amounts used in or resulting from such
calculation will be rounded, in the case of United States
dollars, to the nearest cent.
The right of Series A Preferred Securityholders to receive
dividends is noncumulative. Accordingly, if, for any reason, the
Board of Directors does not declare a dividend payable in respect
of any Dividend Period, Series A Preferred Securityholders will
have no right to receive a dividend in respect of such Dividend
Period, and the Company will have no obligation to pay a dividend
in respect of such Dividend Period, whether or not dividends are
authorized and declared payable in respect of any future Dividend
Period.
If any Series A Preferred Securities are outstanding, no
dividends or other distributions shall be declared or paid or set
apart on any Parity Securities or Junior Securities (other than
on Common Securities during a Shift Period after a shift in
dividend preference) for any Dividend Period unless full
dividends have been or contemporaneously are paid, or declared
and a sum sufficient for the payment thereof is set apart for
such payments on the Series A Preferred Securities for (i) the
immediately preceding Dividend Period, in the case of Parity
Securities, and (ii) the then-current Dividend Period, in the
case of Junior Securities. When sufficient funds are not
available to pay dividends in full (or a sum sufficient for such
full payment is not so set apart) for any Dividend Period upon
the Series A Preferred Securities and any Parity Securities, all
dividends declared on the Series A Preferred Securities and such
Parity Securities shall only be declared pro rata based upon the
respective amounts that would have been paid on the Series A
Preferred Securities and any Parity Securities, if any, had
dividends been declared in full.
In addition to the foregoing restriction, except during a
Shift Period, the Company shall not declare, pay or set apart
funds for any dividends or other distributions with respect to
any Common Securities or other Junior Securities or repurchase,
redeem or otherwise acquire, or set apart funds for repurchase,
redemption or other acquisition of, any Common Securities or
other Junior Securities through a sinking fund or otherwise,
unless and until (i) full dividends on the Series A Preferred
Securities for the two most recent preceding Dividend Periods (or
such lesser number of Dividend Periods during which shares of
Series A Preferred Securities have been
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outstanding) are declared and paid or a sum sufficient for
payment has been paid over to the dividend disbursing agent for
payment of such dividends, and (ii) the Company has declared a
dividend on the Series A Preferred Securities at the annual
dividend rate for the then-current Dividend Period or sufficient
funds have been paid over to the dividend disbursing agent for
the payment of such dividend for the then-current Dividend
Period.
No dividend shall be declared, paid or set aside for Series
A Preferred Securityholders for a Dividend Period unless full
dividends have been declared, paid or set aside for the holders
of each class or series of equity securities, if any, ranking
prior to the Series A Preferred Securities as to dividends for
such Dividend Period.
SHIFT EVENTS
A "Shift Event" would be deemed to have occurred if (i) the
Bank's total risk-based capital ratio or Tier 1 risk-based
capital ratio were to decline below the minimum percentages
required by French banking regulations, (ii) the Bank were to be
declared insolvent (en redressement ou liquidation judiciaire) or
a receiver (administrateur provisoire or a liquidator in
accordance with articles 44 and 46 of the French Banking Law No.
84.46 of January 24, 1984, respectively), were appointed in
relation to the Bank (each, "Receivership Proceedings"), or (iii)
the French Banking Commission (Commission bancaire), in its sole
discretion, were to notify the Bank and the Company that it has
determined that the Bank's financial condition was deteriorating
such that either of the foregoing clauses (i) or (ii) would apply
in the near term. A "Shift Period" refers herein to any period
during which a Shift Event has occurred and is continuing. French
banking regulations currently require French banks to maintain a
minimum total risk-based capital ratio of at least 8.0% and a
minimum Tier 1 risk-based capital ratio of at least 4.0%. As of
June 30, 1997, the Bank's total risk-based capital ratio was 9.6%
and its Tier 1 risk-based capital ratio was 5.6%. For further
information with respect to the Bank and such ratios, see
"--Certain Information regarding the Bank".
A Shift Event occurring pursuant to clause (ii) or (iii) of
the preceding paragraph shall be deemed to have occurred (x) on
the date such Receivership Proceedings were commenced (in the
case of clause (ii)) or (y) on the date the Bank and the Company
receive the French Banking Commission's notice (in the case of
clause (iii)). For purposes of determining when a Shift Event has
occurred as a result of the Bank's total risk-based capital ratio
or Tier 1 risk-based capital ratio falling below the minimum
percentages required by French banking regulations, the Company's
Charter will provide that (i) no later than the tenth Business
Day after each date on which the Bank first publishes its audited
annual financial statements or its semi-annual financial
statements (whether audited or unaudited), the Bank shall deliver
to the Company a certificate (a "Capital Adequacy Certificate")
setting forth the Bank's total risk-based capital ratio and Tier
1 risk-based capital ratio as of the date of the balance sheet
included in such financial statements, (ii) the Bank's
calculations of such ratios shall be deemed to be correct absent
manifest error, and (iii) if a Capital Adequacy Certificate shows
that the Bank's total-risk based capital ratio or Tier 1 risk-
based capital ratio is less than the minimum then required by
French banking regulations, the related Shift Event shall be
deemed to occur at the opening of business on the Business Day
immediately succeeding the date of delivery of such Capital
Adequacy Certificate to the Company. The Company shall mail a
written notice of the occurrence of a Shift Event, and of
termination of any Shift Period, to each holder of record of
Series A Preferred Securities at the address for such holder as
shown on the Company's register of holders promptly and in any
event within five Business Days after such occurrence or
termination.
Once a Shift Event has occurred, a Shift Period will
continue until none of the elements of a Shift Event is present.
In the case of a decline in the total risk-based capital ratio or
Tier 1 risk-based capital ratio below the applicable
requirements, that element of a Shift Event will cease to exist
at any time the Bank certifies to the Company that both capital
ratios equal or surpass the applicable requirement. In the case
of a Receivership Proceeding, that element of a Shift Event will
cease to exist at any time such Proceeding is terminated. In the
case of a determination by the French Banking Commission
(Commission bancaire), that element will cease to exist if the
French Banking Commission provides a further notice to the Bank
and to the Company that the relevant Shift Event will not apply
in the near term.
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<PAGE>
The Charter contains the following provisions with respect
to Shift Events:
(i) upon the occurrence of a Shift Event, the Company will
redeem (no later than the tenth Business Day after such
occurrence) substantially all of the Common Securities held by
the Branch for an amount equal to the investment of the Branch
attributable to such securities (initially $530,110,000) (with
a minimal amount of Common Securities possessing the full
voting, distribution and liquidation rights of the Common
Securities being retained by the Branch);
(ii) during a Shift Period if the Bank decides not to pay
dividends on its common stock, the dividend preference of the
Series A Preferred Securities will shift to the Common
Securities such that all net income of the Company will be
distributed to the Bank as the holder of the Common Securities
unless the Bank, in its capacity as the holder of the Common
Securities (subject to the prior approval of the General
Secretariat of the French Banking Commission (Secretariat
general de la Commission bancaire)), causes the Company to pay
all or part of a dividend for such Dividend Period on the
Series A Preferred Securities; and
(iii) if the Bank's Tier 1 risk-based capital ratio as
shown on the latest audited financial statements or
semi-annual financial statements (whether audited or
unaudited) of the Bank declines below the minimum percentage
required by French banking regulations (currently 4%), all of
the Company's remaining net assets (other than assets having a
market value of approximately $40 million) will be distributed
to the Bank as holder of the Common Securities (the "Special
Dividend").
The Charter also provides that, if during or after
termination of a Shift Period, the Bank were to determine to pay
any dividends on its Tier 1 capital stock, the Company will be
required to pay dividends on the Series A Preferred Securities
for the then-current and the two subsequent Dividend Periods
without any requirement that such dividends first be declared by
the Board of Directors of the Company. The Bank agreed in the
Contingent Support Agreement to (i) contribute additional funds
to the Company as necessary to ensure that the Company will have
cash in an amount sufficient to pay full dividends on the Series
A Preferred Securities in accordance with the preceding sentence
(provided that the Bank will not be required to contribute funds
with respect to any Dividend Period in an amount greater than (x)
the amount available for distribution to holders of the Bank's
Tier 1 capital stock (determined as of the date on which the
decision to pay the relevant dividend on the Bank's Tier 1
capital stock is made and without giving effect to the
declaration of such dividend) or (y) if the Special Dividend has
been paid, the amount thereof) and (ii) procure payment by the
Company to the Series A Preferred Securityholders of dividends in
the amounts, for the Dividend Periods and under the circumstances
described in this paragraph.
The Charter also contains provisions regarding a
liquidation of the Company and the Bank during a Shift Period and
of the Bank following the occurrence of a Shift Event. See "--
Rights upon Liquidation".
CONTINGENT SUPPORT AGREEMENT
The Bank and the Company entered into a Contingent Support
Agreement on December 5, 1997 (the "Contingent Support
Agreement"). Pursuant to the Contingent Support Agreement, the
Bank agreed to (a) acquire additional Common Securities in an
amount necessary to ensure that the Company will have sufficient
available cash to pay dividends on the Series A Preferred
Securities for the then-current and the two subsequent Dividend
Periods in the event that a Shift Event occurs (whether or not a
Shift Event is then continuing) and the Bank thereafter
determines to pay dividends on its Tier 1 capital stock (provided
that the Bank will not be required to contribute funds with
respect to any Dividend Period in an amount greater than (i) the
amount available for distribution to holders of the Bank's Tier 1
capital stock (determined as of the date on which the decision to
pay the relevant dividend on the Bank's Tier 1 capital stock is
made and without giving effect to the declaration of such
dividend), or (ii) if a Special Dividend has previously been paid
by the Company, the amount thereof) and (b) procure payment of
such amounts by the Company to the Series A Preferred
Securityholders in the circumstances described above. The Charter
provides that any proceeds received from the Bank's purchase of
additional Common Securities will be used to pay such dividends
to the Series A Preferred Securityholders.
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<PAGE>
In addition, the Bank agreed in the Contingent Support
Agreement that, in the case of liquidation of the Bank following
the occurrence of a Shift Event (whether or not a Shift Period is
then continuing), following a determination by the liquidator of
the Bank, in consultation with the French Banking Commission
(Commission bancaire), that all of the Bank's liabilities
(including any debt instruments, such as titres participatifs and
prets participatifs, constituting Tier 2 capital) have been or
will be paid in full and before making any distribution to
holders of its capital stock, the Bank will acquire additional
Common Securities from the Company in an amount equal to the
lowest of: (i) the amount remaining to the Bank after payment of
all such liabilities, (ii) the difference, if any, between the
aggregate liquidation preference of the outstanding Series A
Preferred Securities and the net assets of the Company
immediately prior to the acquisition of such additional Common
Securities, and (iii) the aggregate amount previously received by
the Bank upon (x) the redemption of Common Securities, (y)
payment of a Special Dividend, if any, and (z) a liquidation of
the Company. The Company will waive any potential claim (remise
de dette) against the Bank under the Contingent Support Agreement
to the extent that the Bank's liabilities as described above are
not paid in full. Any amounts received by the Company pursuant to
the Contingent Support Agreement would then be available for
distribution to holders of Series A Preferred Securities as part
of the liquidation of the Company.
The Bank also agreed with the Company in the Contingent
Support Agreement to own directly or indirectly 100% of the
outstanding Common Securities for so long as any shares of Series
A Preferred Securities are outstanding.
Although the Company and the Bank consider it unlikely, it
is nonetheless possible that shareholders of the Bank, creditors
or other persons might try to challenge under French law (i) the
Bank's obligation to make payments to the Company in respect of
dividends on the Series A Preferred Securities, as described
above, on the ground that this obligation impermissibly burdens
the statutory right of the Bank's shareholders to determine the
Bank's dividends, or (ii) the Bank's obligations upon
liquidation, as described above, on the ground that the
subordination of this contract claim to certain subordinated debt
instruments of the Bank contravenes the statutorily mandated
junior ranking of such debt instruments by subordinating such
contract claim to such instruments. Although there is no legal
precedent on these issues, the Company and the Bank believe that
any such challenge, if made, is unlikely to be successful.
For so long as any Series A Preferred Securities are
outstanding, the Contingent Support Agreement may not be amended
without the consent of two-thirds of the holders (by liquidation
preference and excluding any such securities owned by the Bank or
any of its affiliates) of the Series A Preferred Securities
voting as a class. The Contingent Support Agreement is governed
by the laws of the State of New York.
The Company has the sole right and obligation to enforce
the Contingent Support Agreement. The Independent Director(s) has
the power to cause the Company to enforce the Contingent Support
Agreement. The Series A Preferred Securityholders will not be
third-party beneficiaries of the Contingent Support Agreement and
will not have any direct right against the Bank to perform its
obligations thereunder. They will, however, have the ability to
cause the Company to enforce the Contingent Support Agreement if
the Company does not otherwise do so.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the Company other than during a
Shift Period, the Series A Preferred Securityholders will be
entitled to receive out of assets of the Company available for
distribution to securityholders, before any distribution of
assets is made to holders of Common Securities or any other class
of stock ranking junior to the Series A Preferred Securities upon
liquidation, liquidating distributions in the amount of the
liquidation preference per security, plus unpaid dividends
thereon with respect to the then-current Series A Dividend Period
to the date of liquidation and any declared and unpaid dividends
in respect of prior Series A Dividend Periods (without interest)
but without accumulation of any undeclared and unpaid dividends
for any Series A Dividend Period.
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<PAGE>
The Charter provides that the Company will be liquidated if
the Bank is liquidated. In the case of a liquidation of the
Company in connection with the liquidation of the Bank during a
Shift Period, the Common Securities will have a preference upon
liquidation of the Company (and the liquidation preference of the
Series A Preferred Securities will be subordinated) to the
extent, if any, that all liabilities of the Bank (including any
debt instruments, such as titres participatifs and prets
participatifs, constituting Tier 2 capital), have not been paid
in full. Following payment of all such Bank liabilities, the
Series A Preferred Securities will have a preference with respect
to any remaining assets of the Company. In the case of a
liquidation of the Bank occurring outside a Shift Period, the
Series A Preferred Securities will be entitled to their normal
liquidation preference upon liquidation of the Company.
After payment of the full amount of the liquidating
distributions to which they are entitled, the Series A Preferred
Securityholders will have no right or claim to any of the
remaining assets of the Company. In the event that, upon any such
voluntary or involuntary dissolution, liquidation or winding up,
the available assets of the Company are insufficient to pay the
amount of the liquidation distributions on all outstanding Series
A Preferred Securities and the corresponding amounts payable on
all shares of other classes or series of capital securities of
the Company ranking on a parity with the Series A Preferred
Securities as to the distribution of assets upon any dissolution,
liquidation or winding up of the affairs of the Company, then the
holders of the Series A Preferred Securities and such other
classes or series of capital securities shall share ratably in
any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be
respectively entitled.
For such purposes, the consolidation or merger of the
Company with or into any other entity, the consolidation or
merger of any other entity with or into the Company or the sale
of all or substantially all of the property or business of the
Company, shall not be deemed to constitute a dissolution,
liquidation or winding up of the Company.
For a discussion of certain rights of the Company in the
event of a liquidation of the Bank under certain circumstances,
see "--Contingent Support Agreement".
VOTING RIGHTS
Except as expressly required by applicable law, or except
as indicated below, the Series A Preferred Securityholders are
not entitled to vote. In the event the Series A Preferred
Securityholders are entitled to vote as indicated below, each
Series A Preferred Security will be entitled to one vote on
matters on which Series A Preferred Securityholders are entitled
to vote.
Pursuant to its Charter, the Company has one initial
Independent Director who will serve a five year term from
December 5, 1997. The Series A Preferred Securityholders (along
with the holders of any Parity Securities) will have the right to
remove the initial Independent Director at any time with or
without cause. Removal of, and election of a replacement, initial
Independent Director requires the vote of Series A Preferred
Securityholders (voting together as a class with holders of any
Parity Securities) holding a majority by liquidation preference
of the outstanding Series A Preferred Securities (and any Parity
Securities). A meeting of the Series A Preferred Securityholders
(and holders of any outstanding Parity Securities) may be called
by the holders of at least 25% (by liquidation preference) of the
outstanding Series A Preferred Securities (voting together as a
class with holders of any Parity Securities). The Series A
Preferred Securityholders (along with holders of any Parity
Securities) also have the right to replace the initial
Independent Director at the end of the initial and subsequent
five year term.
If full dividends on Series A Preferred Securities shall
not have been paid for two consecutive Dividend Periods or if a
Shift Period is in effect, the maximum authorized number of
directors of the Company shall be increased by one. Subject to
compliance with any requirement for regulatory approval of (or
non-objection to) persons serving as directors, the Series A
Preferred Securityholders, voting together as a class with the
holders of any Parity Securities, shall have the exclusive right
to elect the additional director at the Company's next meeting of
securityholders and at each subsequent meeting at which such
director's term expires until (x) full dividends have been paid
or declared and a sum sufficient for payment thereof is set apart
for payment on the Series A Preferred Securities for four
consecutive Dividend Periods and (y) if a Shift Event has
occurred, the related Shift Period shall
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have been terminated. The term of such director elected thereby
shall terminate, and the total number of directors shall be
decreased by one, upon the first meeting of securityholders after
the payment or the declaration and setting aside for payment of
full dividends on the Series A Preferred Securities for four
consecutive Dividend Periods and if a Shift Period is not then in
effect. Any such director may be removed with or without cause
by, and shall not be removed except by, the vote of the holders
of record of a majority of the outstanding Series A Preferred
Securities and Parity Securities entitled to vote, voting
together as a single class without regard to series, at a meeting
of the Company's securityholders, or of the holders of Series A
Preferred Securities and Parity Securities so entitled to vote
thereon, called for that purpose by holders of at least 25% of
the outstanding Series A Preferred Securities and such Parity
Securities. During any Shift Period or so long as full dividends
on the Series A Preferred Securities shall not have been paid for
two consecutive Dividend Periods, (i) any vacancy in the office
of any such director may be filled (except as provided in the
following clause (ii)) by an instrument in writing signed by any
such remaining director and filed with the Company, and (ii) in
the case of the removal of any such director, the vacancy may be
filled by vote of the holders of the outstanding Series A
Preferred Securities and Parity Securities entitled to vote,
voting together as a single class without regard to series, at
the same meeting at which such removal shall be voted.
So long as any Series A Preferred Securities are
outstanding, the Company shall not, without the consent or vote
of at least two-thirds (by liquidation preference) of the
outstanding Series A Preferred Securities, voting separately as a
class, (a) amend, alter or repeal or otherwise change any
provision of the Company's Charter (including the terms of the
Series A Preferred Securities) if such amendment, alteration,
repeal or change would materially and adversely affect the
rights, preferences, powers or privileges of the Series A
Preferred Securities, (b) authorize, create or increase the
authorized amount of or issue any class or series of any equity
securities of the Company, or any warrants, options or other
rights convertible or exchangeable into any class or series of
any equity securities of the Company, ranking prior to the Series
A Preferred Securities, either as to dividend rights or rights on
dissolution, liquidation or winding up of the Company, or (c)
merge, consolidate, reorganize or effect any other business
combination involving the Company, unless the resulting entity
will thereafter have no class or series of equity securities
either authorized or outstanding ranking prior to the Series A
Preferred Securities as to dividends or as to the distribution of
assets upon dissolution, liquidation or winding up, except the
same number of shares of such equity securities with the same
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications or terms or conditions or redemption as the shares
of equity securities of the Company that are authorized and
outstanding immediately prior to such transaction, and each
Series A Preferred Securityholder immediately prior to such
transaction shall receive securities with the same preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions,
qualifications or terms or conditions or redemption of the
resulting entity as the Series A Preferred Securities held by
such Series A Preferred Securityholders immediately prior
thereto.
The creation or issuance of Parity Securities or Junior
Securities, or an amendment that increases the number of
authorized Preferred Securities, or Series A Preferred Securities
or any Junior Securities or Parity Securities, shall not be
deemed to be a material and adverse change requiring a vote of
the Preferred Securityholders.
REGISTRATION UNDER THE EXCHANGE ACT
As a result of certain considerations under ERISA and the
regulations thereunder, the Company entered into a registration
agreement with the Initial Purchasers (the "Registration
Agreement") for the benefit of the Series A Preferred
Securityholders, wherein it agreed to use its best efforts (i) to
file a registration statement under Section 12(g) of the Exchange
Act with respect to the Series A Preferred Securities (the
"Registration Statement") with the Commission, (ii) to cause the
Registration Statement to become effective by May 31, 1998, and
(iii) thereafter, to keep the Registration Statement effective
for so long as any Series A Preferred Securities remain
outstanding.
During any period following May 31, 1998 in which a
Registration Statement is not effective, the Company will pay as
liquidated damages an additional dividend on the liquidation
preference of the Series A Preferred at a rate of 0.25% per annum
from and including the date on which the Registration Statement
ceases to be effective (or May 31, 1998, if it is not effective
on such date) to but excluding the date on which a Registration
Statement again becomes effective. Any additional dividend that
accrues in a Dividend Period shall be payable on
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the Dividend Payment Date that ends such Dividend Period, in the
same manner and subject to the same limitations and conditions as
the regular dividends on the Series A Preferred Securities for
such Dividend Period.
Registration of the Series A Preferred Stock under the
Exchange Act will have no effect on the resale restrictions
applicable to the Series A Preferred Stock as described in "--
Transfer Restrictions; Notice to Investors", which resale
restrictions will remain applicable to the Series A Preferred
Stock for so long as it remains outstanding.
The Registration Agreement is governed by the laws of the
State of New York. The foregoing description of the Registration
Agreement is a summary only, does not purport to be complete and
is qualified in its entirety by reference to all provisions of
the Registration Agreement.
REDEMPTION
The Series A Preferred Securities will not be redeemable
prior to December 5, 2007 (except upon the occurrence of a
Regulatory Event). On or after December 5, 2007, the Series A
Preferred Securities will be redeemable at the option of the
Company, in whole or in part, at any time or from time to time
(except during a Shift Period following the payment by the
Company of a Special Dividend), on not less than 30 nor more than
60 days' notice by mail, at a redemption price of $10,000 per
security, plus unpaid dividends thereon for the current Dividend
Period to the Redemption Date and any declared and unpaid
dividends in respect of prior Dividend Periods, without interest,
but without accumulation of any undeclared and unpaid dividends
for any prior Dividend Period. Any such redemption is subject to
applicable regulatory and other requirements including receipt of
the prior approval of the General Secretariat of the French
Banking Commission (Secretariat general de la Commission
bancaire) (unless at such time such approval is not required). If
the Company has sufficient funds to pay dividends on any Series A
Preferred Securities but dividends are unpaid, no Series A
Preferred Securities shall be redeemed unless all outstanding
Series A Preferred Securities are redeemed and the Company shall
not purchase or otherwise acquire any Series A Preferred
Securities; provided, however, that the Company may purchase or
acquire Series A Preferred Securities pursuant to a purchase or
exchange offer made on the same terms to all Preferred
Securityholders.
In the event that fewer than all of the outstanding Series
A Preferred Securities are to be redeemed, the number of Series A
Preferred Securities to be redeemed shall be determined by the
Board of Directors, and the securities to be redeemed shall be
determined by lot or pro rata as may be determined by the Board
of Directors in its sole discretion to be equitable, provided
that such method satisfies any applicable requirements of any
securities exchange on which the Series A Preferred Securities
may then be listed and, if the Series A Preferred Securities are
then held by The Depository Trust Company ("DTC") or its nominee
in the form of a global security, any applicable requirements of
DTC. The Company shall promptly notify the registrar and transfer
agent for the Series A Preferred Securities in writing of the
Series A Preferred Securities selected for redemption and, in the
case of any Series A Preferred Securities selected for partial
redemption, the liquidation preference thereof to be redeemed.
Except during a Shift Period following the payment by the
Company of a Special Dividend to the Bank as holder of the Common
Securities, the Company will also have the right at any time
prior to December 5, 2007, upon the occurrence of a Regulatory
Event, to redeem the Series A Preferred Securities in whole (but
not in part) at a redemption price equal to the higher of $10,000
per security or the Make-Whole Amount (as defined below) per
security, plus unpaid dividends thereon for the current Dividend
Period and any declared and unpaid dividends in respect of prior
Dividend Periods, without interest, but without accumulation of
any undeclared and unpaid dividends for any prior Dividend
Period.
"Regulatory Event" means a Change of Capital Event or a Tax
Event.
"Change of Capital Event" means a notification to the Bank
by the French Banking Commission (Commission bancaire) of its
determination that the Series A Preferred Securities do not
constitute Tier 1 capital of BNP on a consolidated basis for
purposes of the application of French banking regulations.
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"Tax Event" means the receipt by the Company of an opinion
of a nationally recognized law firm experienced in such matters
to the effect that, as a result of (i) any amendment to,
clarification of, or change (including any announced prospective
change) in, the laws or treaties (or any regulations thereunder)
of the United States and France or any political subdivision or
taxing authority thereof or therein affecting taxation, (ii) any
judicial decision, official administrative pronouncement,
published or private ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to
adopt such procedures or regulations) ("Administrative Action"),
or (iii) any amendment to, clarification of, or change in the
official position or the interpretation of such Administrative
Action or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action that differs
from the theretofore generally accepted position, in each case,
by any legislative body, court, governmental authority or
regulatory body, irrespective of the manner in which such
amendment, clarification or change is made known, which
amendment, clarification, or change is effective or such
pronouncement or decision is announced on or after the date of
issuance of the Series A Preferred Securities, there is more than
an insubstantial risk that (i) the Company is, or will be subject
to more than a de minimis amount of additional taxes, duties or
other governmental charges or civil claims, or (ii) the payments
on the Series A Preferred Securities will not be respected as
payments to Series A Preferred Securityholders for tax purposes,
and, as a result, the Bank is or will be subject to more than a
de minimis amount of additional taxes, duties, governmental
charges or civil claims.
The "Make-Whole Amount" will be equal to the amount as
determined by the Calculation Agent (as defined below), equal to
the sum of the present value of the liquidation preference of the
Series A Preferred Securities at December 5, 2007, together with
the present values of scheduled non-cumulative dividend payments
from the Regulatory Event Redemption Date to December 5, 2007
(the "Remaining Life"), in each case discounted to the Regulatory
Event Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of 30-day months) at the Adjusted Treasury Rate.
"Adjusted Treasury Rate" means, with respect to any
Regulatory Event Redemption Date, (a) the Treasury Rate plus (b)
.25%.
"Treasury Rate" means (i) the yield, under the heading
which represents the average for the immediately prior week,
appearing in the most recently published statistical release
designated "H. 15(519)" or any successor publication which is
published weekly by the Federal Reserve and which establishes
yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the
Remaining Life (if no maturity is within three months before or
after the Remaining Life, yields for the two published maturities
most closely corresponding to the Remaining Life shall be
determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding
to the nearest month), or (ii) if such release (or any successor
release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per
annum equal to the quarterly 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
Regulatory Event Redemption Date. The Treasury Rate shall be
calculated on the third Business Day preceding the Regulatory
Event Redemption Date.
"Business Day", for purposes of determining the Make-Whole
Amount means a day other than (a) a Saturday or Sunday, or (b) a
day on which banking institutions in The City of New York are
authorized or required by law or executive order to remain
closed.
"Calculation Agent" means FABC, an affiliate of the
Company, and its successors.
"Comparable Treasury Issue" means, with respect to any
Regulatory Event Redemption Date, the United States Treasury
security selected by the Company 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 or corporate debt securities of comparable
maturity to the Remaining Life. If no United States Treasury
security has a maturity which is within a period from three
months before to three months after December 5, 2007, the two
most closely corresponding United States Treasury securities
shall be used as the Comparable Treasury Issue, and the
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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 of such Regulatory Event
Redemption Date, after excluding the highest and lowest such
Reference Treasury Dealer Quotations, or (b) if the Calculation
Agent obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Primary Treasury Dealer" means a primary U.S. Government
securities dealer in New York City.
"Reference Treasury Dealer" means any Primary Treasury
Dealer selected by the Calculation Agent after consultation with
the Company.
"Reference Treasury Dealer Quotations" means, with respect
to each Reference Treasury Dealer and any Regulatory Event
Redemption Date, the average, as determined by the Calculation
Agent, 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 Calculation Agent by such
Reference Treasury Dealer at 5:00 p.m. New York City time, on the
third Business Day preceding such Regulatory Event Redemption
Date.
REGISTRATION AND TRANSFER OF SERIES A PREFERRED SECURITIES
The Series A Preferred Securities are represented by three
global certificates registered in the name of DTC or its nominee.
Beneficial interests in the Series A Preferred Securities are
shown on, and transfers thereof may be effected only through,
records maintained by participants in DTC ("Participants").
Except as described below, Series A Preferred Securities in
certificated form will not be issued in exchange for the global
certificates.
A global security shall be exchangeable for Series A
Preferred Securities registered in the names of persons other
than DTC or its nominee only if (i) DTC notifies the Company 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 as such under the Exchange Act at a time when DTC is
required to be so registered to act as such depositary, or (ii)
the Company in its sole discretion determines that such global
security shall be so exchangeable. Any global security that is
exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive 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. In the event that Series A Preferred Securities are
issued in definitive form, such Series A Preferred Securities
will be in denominations of $10,000 and integral multiples
thereof and may be transferred or exchanged at the offices
described below.
Purchases and transfers of Series A Preferred Securities
represented by one or more global securities held by DTC or its
nominee may be made as described under "-- Book-Entry Issuance".
None of the Bank, any Paying Agent, or the registrar for the
Series A Preferred Securities will have any responsibility or
liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the global
securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. In the
event Series A Preferred Securities are issued in certificated
form, the liquidation preference and dividends will be payable,
the transfer of the Series A Preferred Securities will be
registrable, and Series A Preferred Securities will be
exchangeable for Series A Preferred Securities of other
denominations of a like aggregate liquidation preference, at the
office of the Company in New York City, or at the offices of any
paying agent or transfer agent appointed by the Company provided
that payment of any dividend may be made at the option of the
Company by check mailed to the address of the persons entitled
thereto, by wire transfer or by direct deposit. In addition, if
the Series A Preferred Securities are issued in certificated
form, the record dates for payment of dividends will be fifteen
days prior to the relevant Dividend Payment Date. For a
description of DTC and the terms of the depositary arrangement
relating to payment, transfers, voting rights, redemptions and
other notices and other matters, see "-- Book-Entry Issuance".
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PAYMENTS AND PAYING AGENTS
Payments in respect of the Series A Preferred Securities
shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable Dividend Payment Dates or, if the Series A
Preferred Securities are not held by DTC, such payments shall be
made by wire transfer, direct deposit or 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 FABC and any co-paying agent chosen by FABC
and acceptable to the Company. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice
to the Company. In the event that the Branch shall no longer be
the Paying Agent, the Company shall appoint a successor (which
shall be a bank or trust company acceptable to the Company) to
act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
FABC will act as registrar and transfer agent for the
Series A Preferred Securities.
Registration of transfers of Series A Preferred Securities
will be effected without charge by or on behalf of the Company,
but upon payment of any tax or other governmental charges that
may be imposed in connection with any transfer or exchange. The
Company will not be required to register or cause to be
registered the transfer of Series A Preferred Securities after
such Series A Preferred Securities have been called for
redemption.
INDEPENDENT DIRECTOR APPROVAL
The Charter provides that, so long as any Series A
Preferred Securities are outstanding, certain actions by the
Company must be approved by a majority of the Independent
Directors. For so long as there is only one Independent Director,
any action that requires the approval of a majority of
Independent Directors must be approved by such Independent
Director. In order to be considered "independent," a director
must not be a current officer or employee of the Company, the
Bank or any affiliate of the Bank or of any person or persons
that, in the aggregate, own more than 50% of the Common
Securities of the Company. In addition, any members of the Board
of Directors elected by holders of the Company's Preferred
Securities, including the Series A Preferred Securities, will be
deemed to be Independent Directors for purposes of approving
actions requiring the approval of a majority of the Independent
Directors.
So long as any Preferred Securities are outstanding, the
following actions require the approval of a majority of the
Independent Directors: (i) the issuance of additional Preferred
Securities ranking on a parity with the Series A Preferred
Securities, (ii) any material amendment to or modification of the
Trust Agreement pursuant to which the securities are held, (iii)
other than during a Shift Period after a shift in dividend
preference, the payment of dividends on the Common Securities in
any fiscal year in an amount exceeding the amount by which the
net income of the Company (determined in accordance with
generally accepted accounting principles) for such fiscal year
exceeds the stated dividends on the Series A Preferred Securities
that would be paid during such fiscal year irrespective of
whether dividends on the Series A Preferred Securities are in
fact declared and paid, (iv) other than during a Shift Period,
redemption or repurchase of Common Securities without the
concurrent redemption of a like proportion (based upon the
aggregate redemption price) of outstanding Series A Preferred
Securities, unless (x) the General Secretariat of the French
Banking Commission (Secretariat general de la Commission
bancaire) shall have approved such redemption or repurchase and
(y) each Rating Agency then rating the Series A Preferred
Securities shall have informed the Company that the redemption or
repurchase of such Common Securities would not adversely affect
its initial rating of the Series A Preferred Securities, (v) any
modification of the Base or the Additional Investment Policy
Guidelines, (vi) payment of dividends on the Series A Preferred
Securities other than out of net income of the Company,
determined without regard to gains and losses resulting from any
disposition of securities owned by the Company, or out of
contributions by the Bank to the capital of the Company, and
(vii) other than during a Shift Period, disposition of any
security owned by the Company prior to its maturity.
Additionally, a majority of the Independent Directors, acting
alone and without the vote or consent of the other members of the
Board of Directors, has the power to cause the Company to enforce
the Contingent Support Agreement. Except with respect to
enforcement of the Contingent Support Agreement, the Company's
Charter provides that the Independent Directors will consider the
interests of holders of both the Common Securities and the
Preferred Securities,
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including the Series A Preferred Securities, in determining
whether any proposed action requiring their approval is in the
best interests of the Company.
TRANSFER RESTRICTIONS; NOTICE TO INVESTORS
Because of the following restrictions, purchasers are
advised to consult legal counsel prior to making any offer,
resale, pledge or other transfer of Series A Preferred
Securities.
Each purchaser of the Series A Preferred Securities
(including the registered holders of, and any persons who have a
beneficial interest in (the "Beneficial Owners"), the Series A
Preferred Securities as they exist from time to time, in each
case as of the time of purchase and with respect to paragraph 4,
on each day from the date of acquisition of the Series A
Preferred Securities through and including the date of
disposition of such securities) will be deemed to have
acknowledged, represented to and agreed with the Company, the
Bank and the Initial Purchasers as follows (terms used in this
paragraph that are defined in Rule 144A under the Securities Act
are used herein as defined therein):
(1) The purchaser (i) is a qualified institutional buyer,
(ii) is aware that the sale of the Series A Preferred
Securities to it is being made in reliance on Rule 144A, and
(iii) is acquiring such Series A Preferred Securities for its
own account or the account of a qualified institutional buyer.
(2) The purchaser understands and acknowledges that (i) the
Company has not been registered under the 1940 Act in reliance
on Rule 3a-7(a)(2)(ii) thereunder and that the Series A
Preferred Securities have not been registered under the
Securities Act and may not be offered, resold, pledged or
otherwise transferred by such purchaser except to a person who
is a qualified institutional buyer acquiring for its own
account or the account of a person who is a qualified
institutional buyer in a transaction meeting the requirements
of Rule 144A, (ii) the Company has the right, at any time, to
request that any purchaser of Series A Preferred Securities
certify that, as of the time it acquired the Series A
Preferred Securities or an interest therein, such purchaser
was a qualified institutional buyer, and (iii) if the
purchaser was not a qualified institutional buyer at the time
it acquired Series A Preferred Securities or an interest
therein, the purchaser shall, upon demand of the Company and
in any event within ten business days after receiving such
demand, sell all of its Series A Preferred Securities or
interest therein to a transferee whom such purchaser
reasonably believes is a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A.
(3) Certificates evidencing Series A Preferred Securities
will bear a legend to the following effect unless the Company
and the Bank determine otherwise in compliance with applicable
law:
"THE ISSUER OF THE SERIES A PREFERRED SECURITIES EVIDENCED
HEREBY HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY
ACT OF 1940 AND SUCH SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT TO A PERSON WHO IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER
THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
AND, IN EACH CASE, IN COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND
OTHER JURISDICTIONS."
(4) The purchaser (A) is not itself, and is not acquiring
Series A Preferred 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") or an entity whose underlying
assets include "plan assets" by reason of any Plan's
investment in the entity (each, a "Plan"), or (B) (1) is
itself, or is acquiring Series A Preferred Securities with the
assets of, an "investment fund" (within the meaning of Part
V(b) of prohibited transaction class exemption ("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
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properly authorized the decision of such fund to purchase
Series A Preferred Securities, under circumstances such that
PTCE 84-14 is applicable to the purchase, holding and
disposition of such Series A Preferred Securities, (2) is
itself, or is acquiring Series A Preferred 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 Series A Preferred Securities, under circumstances
such that PTCE 96-23 is applicable to the purchase, holding
and disposition of such Series A Preferred Securities, (3) is
an insurance company pooled separate account purchasing Series
A Preferred Securities pursuant to Part I of PTCE 90-1 or a
bank collective investment fund purchasing Series A Preferred
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)
and, in either case, such exemption is applicable to the
purchase, holding and disposition of such Series A Preferred
Securities or (4) is an insurance company using the assets of
its general account to purchase the Series A Preferred
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 and such exemption is applicable to
the purchase, holding and disposition of such Series A
Preferred Securities.
THE FOREGOING RESTRICTIONS WILL APPLY NOTWITHSTANDING ANY
FUTURE REGISTRATION OF THE SERIES A PREFERRED SECURITIES UNDER
THE EXCHANGE ACT. THE SERIES A PREFERRED SECURITIES WILL AT ALL
TIMES REMAIN RESTRICTED AS PROVIDED ABOVE.
BOOK-ENTRY ISSUANCE
DTC acts as securities depositary for all of the Series A
Preferred Securities. The Series A Preferred Securities were
issued only as fully-registered securities registered in the name
of Cede & Co. (DTC's nominee). Three fully-registered global
certificates were issued for the Series A Preferred Securities
representing in the aggregate the total number of Series A
Preferred Securities and were deposited with DTC.
DTC has advised the Company as follows: DTC is a limited
purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC holds
securities that its Participants deposit with DTC. DTC also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants"
include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers
and dealers, banks and trust companies that clear through or
maintain custodial relationships with Direct Participants, either
directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the
Commission.
Purchase of Series A Preferred Securities within the DTC
system must be made by or through Direct Participants, which will
receive a credit for the Series A Preferred Securities on DTC's
records. The ownership interest of each actual purchaser of each
Series A Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC
of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as
well as periodic statements of their holdings, from the Direct or
Indirect Participants through which the Beneficial Owners
purchased Series A Preferred Securities. Transfers of ownership
interests in the Series A Preferred Securities are to be
accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Series A
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Preferred Securities, except in the event that use of the
book-entry system for the Series A Preferred Securities is
discontinued.
DTC has no knowledge of the actual Beneficial Owners of the
Series A Preferred Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Series
A Preferred Securities are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners and the voting rights of Direct
Participants, Indirect Participants and Beneficial Owners will be
governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the
registered holder of the Series A Preferred Securities. If less
than all of the Series A Preferred Securities are being redeemed,
DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Series A Preferred
Securities is limited to the holders of record of the Series A
Preferred Securities, in those instances in which a vote is
required, neither DTC nor Cede & Co. will itself consent or vote
with respect to Series A Preferred Securities. Under its usual
procedures, DTC would mail an omnibus proxy to the registrar as
soon as possible after the record date. Such omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Series A Preferred Securities
are credited on the record date (identified in a listing attached
to such omnibus proxy).
Dividend payments on the Series A Preferred Securities will
be made to DTC. DTC's practice is to credit Direct Participants'
accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason
to believe that it will not receive payments on such payment
date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and
will be the responsibility of such Participant and not of DTC,
the Paying Agent, the Bank or the Company, subject to any
statutory or regulatory requirements as may be in effect from
time to time. Payment of Dividends to DTC is the responsibility
of the Paying Agent, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursements of
such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities
depositary with respect to the Series A Preferred Securities or
at any time by giving reasonable notice to the registrar and the
Company. In the event that a successor securities depositary is
not obtained, definitive certificates representing the Series A
Preferred Securities are required to be printed and delivered.
The Company, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor
depositary). In any such event, definitive certificates for the
Series A Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company
believes to be accurate, but the Company assumes no
responsibility for the accuracy thereof. The Company has no
responsibility for the performance by DTC or its Participants of
their respective obligations as described herein or under the
rules and procedures governing their respective operations.
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CERTAIN INFORMATION REGARDING BNP
BNP IS NOT AN ISSUER OR A GUARANTOR OF THE SERIES A
PREFERRED SECURITIES OR A REGISTRANT UNDER THIS REGISTRATION
STATEMENT, NOR DOES IT PROVIDE ANY CREDIT ENHANCEMENT WITH
RESPECT TO THE SERIES A PREFERRED SECURITIES. HOLDERS OF THE
SERIES A PREFERRED SECURITIES WILL HAVE NO RECOURSE AGAINST BNP
IN THE EVENT OF NON-PAYMENT OF DIVIDENDS OR THE LIQUIDATION
PREFERENCE OF THE SERIES A PREFERRED SECURITIES.
FOR ADDITIONAL INFORMATION WITH RESPECT TO BNP, REFERENCE
IS MADE TO THE ANNUAL AND SEMI-ANNUAL REPORTS AND OTHER DOCUMENTS
SENT BY BNP TO THE COMMISSION PURSUANT TO RULE 12G3-2(B) UNDER
THE EXCHANGE ACT. THE COMPANY WILL SEND A COPY OF ANY SUCH ANNUAL
OR SEMI-ANNUAL REPORT TO A SERIES A PREFERRED SECURITYHOLDER UPON
REQUEST.
General
BNP is a French corporation that conducts retail banking
activities in France and corporate and private banking and other
financial activities both in France and throughout the world. BNP
also has numerous subsidiaries and affiliates inside and outside
of France that engage in banking and other financial activities.
At December 31, 1996, BNP and its consolidated subsidiaries (the
"BNP Group") had 2,585 offices (i.e., subsidiaries, branches,
agencies, affiliates and representative offices) in France,
French overseas departments and territories and 76 foreign
countries. At December 31, 1996, the BNP Group had consolidated
assets of FF 1,861 billion ($355 billion), consolidated gross
customer loans of FF 834 billion ($159.3 billion), consolidated
customer deposits (including retail and negotiable certificates
of deposit) of FF 832 billion ($158.9 billion) and stockholders'
equity (BNP Group's share) of FF 55.6 billion ($10.6 billion).
According to the ranking published in July 1997 by The Banker,
based on total assets at December 31, 1996, the BNP Group was the
second largest banking group in France, the sixth largest banking
group in Europe and the fourteenth largest banking group in the
world, and based on Tier 1 capital, was the third, ninth and
twenty-first largest banking group in France, Europe and the
world, respectively, as of such date.
The BNP Group is engaged in a broad range of banking and
financial services activities both in France and abroad,
functionally organized in two divisions: Domestic Banking and
International Banking and Finance. In France, the retail bank
provides a full range of banking services through a network of
2,030 branches and an extensive home banking network. BNP's
domestic customers include approximately one-third of France's
small and medium-sized companies, roughly 400,000 self-employed
customers, private banking customers and approximately 5.3
million retail customers. BNP offers its domestic customers a
comprehensive range of financial products and services designed
to cover a wide variety of needs, including conventional lending,
specialized finance, leasing, leveraged buyouts, factoring,
credit insurance, investment banking, mortgage and customer
lending, life/endowment insurance, property/casualty insurance
(as a broker), savings products and asset management.
BNP conducts its international corporate and private
banking and finance activities (organized within the functional
division International Banking and Finance) directly and through
an international network of foreign subsidiaries, branches,
agencies, affiliates and representative offices. BNP's
international operations service four main categories of
customers: multinational companies, to which it offers general
financing and advisory services; companies, either French or
local, to which it offers primarily international trade financing
services; high net-worth individual customers, to whom it offers
private banking services; and banks and institutional investors,
to which it provides capital market and correspondent banking
services.
Recent Development
The French Government recommenced in December 1997 the
process of selling a 67% stake in Credit Industriel et Commercial
("CIC"), a French bank with approximately FF 604 billion in
assets. The process of privatizing CIC had previously been
commenced in the Fall of 1996, prior to being suspended by the
Government.
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BNP has again expressed an interest in acquiring CIC,
and is currently conducting a detailed review of CIC. BNP's Board
of Directors will decide, prior to the deadline of February 23,
1998 set by the Government, whether to submit a binding offer.
The Government has announced that an initial group of bidders
will be announced in the first half of March 1998 and that the
winner of the bidding process should be announced at the end of
March 1998.
Governmental Supervision And Regulation Of BNP In France
The French Banking System
The French banking system consists primarily of
privately-owned banks and financial institutions, as well as a
number of state-owned banks and financial institutions, all of
which are subject to the same banking laws and regulations. As a
result of nationalizations which occurred in 1945 and 1982,
ownership of most French banks and of certain French financial
institutions was formerly held by the French State. Since 1986,
eight state-owned banks have been privatized, including BNP in
1993.
All French credit institutions are required to belong to a
professional organization or central body affiliated with the
French Credit Institutions and Investment Firms Association
(Association Francaise des Etablissements de Credit et des
Entreprises d'Investissement), which represents the interests of
credit institutions with the public authorities, provides
consultative advice, disseminates information and studies
questions relating to banking activities. All registered banks,
including BNP, are members of the French Banking Association
(Association Francaise des Banques).
French Supervisory Bodies
The French banking law (the "Banking Law") sets forth the
conditions under which credit institutions (etablissements de
credit), including banks, may operate. The Banking Law vests
related supervisory and regulatory powers in certain
administrative authorities.
The National Credit and Securities Council (Conseil
National du Credit et du Titre), which is chaired by the Minister
of the Economy, Finance and Industry with the Governor of the
Bank of France (Banque de France), the French central bank, as
its vice chairman, is made up of 53 members, consisting of
representatives of the French Government and credit institutions,
regionally or nationally elected representatives, representatives
of unions and qualified personnel and representatives of various
economic sectors. The Council is a consultative organization that
studies the operation of the banking and financial service
industries and participates in the formulation of national credit
and monetary policy.
The Banking Regulatory and Finance Committee (Comite de la
Reglementation Bancaire et Financiere), which is chaired by the
Minister of the Economy, Finance and Industry establishes general
rules for the conditions under which credit institutions operate,
including accounting principles, management standards, financial
ratios and credit policy, determination of capital requirements
and accounting standards applicable to investment companies.
The Credit Institutions and Investment Firms Committee
(Comite des Etablissements de Credit et des Entreprises
d'Investissement) grants banking licenses and makes other
specific decisions and grants specific exemptions as provided in
applicable banking regulations.
The Banking Commission (Commission Bancaire), which is
chaired by the Governor of the Bank of France, is responsible for
the supervision of credit institutions. It supervises the
enforcement of laws and regulations applicable to banks and other
credit institutions. Banks are required to submit periodic
(either monthly or quarterly) accounting reports to the Banking
Commission concerning the principal areas of their activity. The
Banking Commission may also request additional information which
it deems necessary and may carry out on-site inspections. The
reports permit close monitoring of the condition of each bank and
also facilitate computation of the total deposits of all banks
and their use. Where regulations have been violated, the Banking
Commission may
41
<PAGE>
act as an administrative court and impose sanctions which may
include deregistration of a bank, resulting in closure. The
Banking Commission also has the power to appoint a temporary
administrator to manage provisionally a bank which it deems to be
mismanaged. In addition, in its administrative capacity the
Commission Bancaire may impose disciplinary sanctions, or appoint
a liquidator. These decisions of the Banking Commission may be
appealed to the French Supreme Administrative Court (Conseil
d'Etat).
Banking Regulations
For a discussion of certain regulations relating to capital
and solvency applicable to BNP, see "--Solvency Ratios". In
addition to the requirements discussed therein, the principal
regulations applicable to deposit banks such as BNP concern
equity and permanent resources ratios, risk diversification and
liquidity, as well as monetary policy, restrictions on equity
investments and reporting requirements.
An equity and permanent resources ratio (coefficient de
fonds propres et de ressources permanentes) requires French
credit institutions to maintain, as of the end of December of
each year, a minimum ratio of 60% between amounts representing
equity and related items and amounts representing certain
long-term assets denominated in French francs. At December 31,
1996, BNP was in compliance with such requirement.
French credit institutions must satisfy, on a consolidated
basis, certain restrictions relating to concentration of risks
(ratio de controle des grands risques). The aggregate of a French
credit institution's loans and a portion of certain other
exposure (risques) to a single customer may not exceed 40% (25%
as of January 1, 1999) of the credit institution's regulatory
capital as defined by French capital ratio requirements. If a
credit institution has exposure with any customer in amounts
exceeding 15% (10% as of January 1, 1999) of the credit
institution's regulatory capital, the aggregate amount of
exposure with all such customers may not exceed eight times the
credit institution's regulatory capital. BNP currently complies
with the reduced thresholds.
Each French credit institution is required to calculate, as
of the end of each month, the ratio of the weighted total of
certain short-term and liquid assets to the weighted total of
short-term liabilities. This liquidity ratio (coefficient de
liquidite) is required to exceed 100%. At June 30, 1997, BNP was
in compliance with this requirement.
French credit institutions are required to maintain on
deposit in non-interest bearing accounts with the Bank of France
(Banque de France) a percentage, fixed by the Bank of France and
calculated monthly, of various categories of demand and
short-term deposits, currently equal to 1% of deposits with
maturities of less than 10 days and pass-book account deposits
and 0.5% of various kinds of term deposits with maturities of up
to one year.
BNP's commercial banking operations in France are also
significantly affected by monetary policies established from time
to time by the Bank of France. In addition to the reserve
requirements outlined above, measures currently in force to carry
out such policies include a prohibition of interest on certain
demand deposits and a ceiling on interest rates for various forms
of deposits with a maturity of less than one month. Commercial
banking operations, particularly in their fixing of short-term
interest rates, are also affected in practice by the rates at
which the Bank of France intervenes in the French domestic
interbank market.
French credit institutions are subject to restrictions on
equity investments and, subject to certain specified exemptions
for short-term investments and investments in financial
institutions and insurance companies, "qualifying shareholdings"
held by credit institutions must comply with the following
requirements: (a) no qualifying shareholding may exceed 15% of
regulatory capital of the concerned credit institution and (b)
aggregate qualifying shareholdings may not exceed 60% of
regulatory capital of the concerned credit institution. An equity
investment is a qualifying shareholding for purposes of these
provisions if (i) it represents more than 10% of the share
capital or votes available to the shareholdings of the company in
which the investment is made or (ii) it provides, or is acquired
with a view to providing, a "significant influence" (as defined
below) in such company.
French regulations permit only licensed credit institutions
to engage in banking activities on a regular basis.
Correlatively, institutions licensed as credit institutions may
not, on a regular basis, engage in activities other than
42
<PAGE>
banking, bank-related activities and a limited number of non-banking
activities determined pursuant to the regulations issued by the
Banking Regulatory Committee. A regulation issued in November
1986 by the Committee sets forth an exhaustive list of such
non-banking activities and requires revenues from such activities
to be limited in the aggregate to a maximum of 10% of total net
revenues.
Accounting Rules
French credit institutions are subject to special
accounting rules, including rules requiring specific methods of
presenting financial statements, the full, proportional or equity
method consolidation of other entities controlled singly or
jointly by them or in which they have a "significant influence"
(influence notable, usually construed as controlling at least 20%
of voting rights), a fiscal year corresponding to the calendar
year, the availability of audited accounts no later than May 31
of the following year, the filing on a regular basis of financial
statements and other documents with the Banking Commission, and
the publication of financial statements in a legal publication.
Examination
The principal means used by the Banking Commission to
ensure compliance by large deposit banks with applicable
regulations is the examination of the detailed periodic (monthly
or quarterly) financial statements and other documents that such
banks are required to submit to the Banking Commission on a
regular basis. In the event that any such examination reveals a
material adverse change in the financial condition of a bank, an
inquiry would be made, which could be followed by an inspection.
The Banking Commission may also inspect banks on an unannounced
basis.
In addition, the process of regulation and inspection of
French credit institutions is supplemented by the requirement
that the financial statements of credit institutions be audited
by independent auditors.
Reporting Requirements
In addition to furnishing to the Banking Commission the
detailed monthly report mentioned above, credit institutions must
also report monthly (and, with respect to lease financings,
quarterly) to the Bank of France the names (and related amounts
of certain customers (principally companies and individuals
engaged in commercial activities)) having loan utilization
exceeding FF 700,000. The Bank of France then returns to each
credit institution a list stating, as to that credit
institution's customers, total loan utilizations from all
reporting credit institutions. In BNP's case the information to
and from the Bank of France is supplied at the branch level.
Credit institutions must make periodic reports,
collectively referred to as etats periodiques, to the Banking
Commission. The etats periodiques comprise principally (i) a
statement of the activity of the concerned institution during the
relevant period (situation), to which are attached exhibits that
provide a more detailed breakdown of the amounts involved in each
category, (ii) a statement of income, together with exhibits, and
(iii) certain additional data relating to operations (indicateurs
d'activite) such as the number of employees, client accounts and
branches.
43
<PAGE>
Stockholders' Equity and Solvency Ratios
Stockholders' Equity
At December 31,
---------------
1996 1995
---- ----
(FF in millions)
----------------
Consolidated stockholders' equity, BNP Group's
share*........................................... 55,552 48,642
Minority interests*.............................. 1,882 2,212
------- -------
Consolidated stockholders' equity, including
minority interests*.............................. 57,434 50,854
====== ======
- --------------
* After appropriation of income.
The BNP Group's share of consolidated stockholders' equity
amounted to FF 55.6 billion at December 31, 1996, up 14.2% from
December 31, 1995. This increase resulted principally from the
increase in appropriations to reserves of undistributed earnings
in 1996 (FF 2.7 billion) and a FF 2.4 billion capital increase
pursuant to the stock-for-stock public tender offer launched by
BNP for its subsidiaries BNP Espana and Compagnie
d'Investissements de Paris. Other items accounting for the
increase were (i) the payment of dividends in the form of shares
and a capital increase reserved to employees (totalling FF 0.4
billion), (ii) the effect of ceasing to carry Union des
Assurances de Paris ("UAP") under the equity method, and thus
eliminating the impact on the BNP Group's financial statements of
holding its own stock via the reciprocal shareholding with UAP
(FF 1.0 billion), and (iii) the effects of exchange rate
fluctuations and other (FF 0.4 billion).
At December 31, 1996, the BNP Group's consolidated
stockholders' equity including minority interests amounted to FF
57.4 billion. Minority interests in BNP's consolidated
stockholders' equity decreased by 14.9% primarily due to the
acquisition of the stockholders' equity of Compagnie
d'Investissements de Paris following the stock-for-stock public
tender offer. This factor more than offset the impact of the
issue of FF 393 million of preferred shares by BNP's U.S.
subsidiary BancWest Corporation.
At June 30, 1997 At December 31, 1996
---------------- --------------------
(FF in millions) (FF in millions)
Consolidated stockholders' equity,
BNP Group's share*.................. 59,803 56,672
Minority interests*................. 1,902 1,959
----- -----
Consolidated stockholders' equity,
including minority interests*....... 61,705 58,631
====== ======
- --------------
* Before appropriation of income.
The BNP Group's share of consolidated stockholders' equity
amounted to FF 59.8 billion at June 30, 1997, up 5.5% from
December 31, 1996. This increase resulted principally from the FF
229 million capital increase pursuant to the stock-for-stock
public tender offer launched by BNP on its subsidiary BNP
Intercontinentale, the effects of exchange rate fluctuations and
other items (FF 978 million) and net income attributable to the
BNP Group for the six months ended June 30, 1997 (FF 3.044
billion), which more than offset the dividend paid with respect
to the 1996 fiscal year (FF 1.120 billion). At June 30, 1997, the
BNP Group's consolidated stockholders' equity including minority
interests amounted to FF 61.7 billion, up 5.2% from December 31,
1996.
Solvency Ratios
BIS Ratios
In 1988, the Basle Committee on Banking Regulations and
Supervisory Practices, a committee consisting of representatives
of the central banks and supervisory authorities from the
so-called "Group of Ten" countries (Belgium, Canada, France,
Germany, Italy, Japan, the Netherlands, Sweden, the United
Kingdom and the United States) and Luxembourg that meet at the
Bank for International Settlements, issued a capital accord
setting out standards for risk-weighting and minimum ratios of
regulatory capital to risk-weighted assets. The BIS standards
44
<PAGE>
contained in the accord have been widely adopted by bank
regulatory authorities throughout the world, including regulatory
authorities in France. Under the BIS standards, the risk-based
capital ratio is determined by allocating assets and specified
off-balance sheet financial instruments into four weighted
categories, with higher levels of capital being required for the
categories perceived as representing greater risk. Banks located
in the Group of Ten countries that conduct activities in foreign
currencies amounting to more than one-third of their consolidated
assets must comply with a minimum ratio of total capital to
risk-weighted assets of 8% and a minimum ratio of Tier 1 capital
to risk-weighted assets of 4%.
The total risk-based capital ratio represents the ratio of
total capital (Tier 1 capital plus supplementary capital) to
risk-weighted assets (which equals assets plus the credit risk
equivalent of certain off-balance sheet items, each multiplied by
the appropriate risk weight). Tier 1 capital essentially consists
of stockholders' equity, noncumulative perpetual preferred stock
and minority interests in consolidated subsidiaries, less certain
intangible assets. Supplementary capital includes, among other
things, certain qualifying subordinated debt and a portion of
general loan loss reserves. The Tier 1 risk-based capital ratio
represents the ratio of Tier 1 capital to risk-weighted assets.
The following table sets forth BNP's risk-weighted assets,
Tier 1 and Tier 2 capital and BIS ratios for the dates indicated:
At June 30, At December 31,
----------- ------------------
1997 1996 1995
(FF in billions, except percentages)
Weighted risks............. 1,162.1 1,129.3 1,022.1
Tier 1 capital.......... 65.5 60.8 56.1
Tier 2 capital.......... 45.9 42.1 36.7
Total capital ratio..... 9.6% 9.1% 9.1%
Tier 1 capital ratio.... 5.6% 5.4% 5.5%
In 1996 BNP's Tier 1 and 2 capital increased in line with
its weighted risks (10.8% or FF 10.1 billion, and 10.5%,
respectively). As a result, the Total Capital ratio remained
unchanged as compared to 1995 at 9.1%. Tier 1 capital increased
by FRF 4.7 billion; the increase in stockholders' equity (FF 6.6
billion) more than offset the decrease in the reserve for general
banking risks (FF 1.8 billion). Tier 2 capital increased by FRF
5.4 billion as a result of the issuance of undated floating-rate
subordinated notes and other subordinated debt securities. The
increase in weighted assets resulted from the sharp increase in
business conducted by the international network, as well as the
effect of fluctuating exchange rates.
BNP closely monitored its capital ratios during the six
months ended June 30, 1997 and weighted risks accordingly
increased by only 2.9%. BNP reinforced its Tier 1 and Total
Capital by 7.8% and 8.3%, respectively. The FF 4.7 billion
increase in Tier 1 capital was due to the increase in
stockholders' equity, itself due particularly to net income for
the six months ended June 30, 1997. The FF 3.8 billion increase
in Tier 2 capital resulted from the issuance of undated
floating-rate subordinated notes and other subordinated debt
securities.
CAD Ratio
In 1993, the Council of the European Community adopted a
Capital Adequacy Directive for credit institutions and investment
enterprises under which member States were required to adopt
regulations to supplement the solvency rules so as to take into
account risks associated with a bank's trading activities in
addition to credit risk. In 1995, the Banking Regulatory and
Finance Committee adopted Regulation 95-02 (the "CAD Regulation")
to implement the Capital Adequacy Directive. Effective as of
January 1, 1996, the CAD Regulation subjects French banks to
capital adequacy requirements with respect to their trading
activities that are supplemental to the capital adequacy
requirements applicable to a bank's commercial banking
activities. The CAD Regulation specifies standards for a bank's
trading activities designed to reflect interest rate risk, market
risk and settlement risk. The CAD Regulation also requires banks
to maintain additional capital measured by reference to the
foreign exchange risk of all their activities, including
commercial banking and trading. The minimum CAD ratio is 100%.
45
<PAGE>
At June 30, 1997 and December 31, 1996, the BNP Group's
total need for stockholders' equity, determined in accordance
with the CAD Regulation, may be analyzed as shown in the
following table:
At June 30, At December 31,
----------- ---------------
1997 1996
---- ----
(FF in billions)
For credit risk exposure (excluding the
trading portfolio)......................... 85.3 82.1
For market risk exposure:
For interest-rate risk exposure......... 4.8 4.3
For stock price risk exposure........... 1.0 1.2
For settlement/counterparty risk
exposure................................ 1.7 1.6
For currency risk exposure.............. 0.4 0.2
------- ------
Total for market risk
exposure............................ 7.9 7.3
------- ------
For large risk exposure.................... -- --
------- ------
Total............................... 93.2 89.4
BNP's ratio of available stockholders' equity to required
stockholders' equity, determined in accordance with the CAD
Regulation, stood at 127% at June 30, 1997 and 120% at December
31, 1996.
Item 12. Indemnification of Directors and Officers
The Company's By-Laws, which are filed as Exhibit 3.3 to
this Form 10, provide that the Company will indemnify its
directors and officers to the full extent permitted under the
Delaware Limited Liability Company Act for damages incurred as a
result of such director or officer being made or being threatened
to be made a party to any action, suit or proceeding, whether
civil criminal, administrative or investigative, except as a
result of such director's or officer's gross negligence or
willful misconduct.
In addition, the Bank also maintains group insurance
coverage for the benefit of directors and officers of its direct
and indirect subsidiaries, including the Company, with respect to
many types of claims that may be made against them.
46
<PAGE>
Item 13. Financial Statements and Supplementary Data
Report of Independent Accountants
To the Board of Directors and
Shareholders of BNP U.S. Funding,
L.L.C.
In our opinion, the accompanying balance sheet and the
related statements of income and and cash flows present
fairly, in all material respects, the financial position of BNP
U.S. Funding L.L.C. as of December 31, 1997, and the results of
its operations and its cash flows for the period from December 5,
1997 (inception) through December 31, 1997 in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these
financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the
opinion expressed above.
/s/ PRICE WATERHOUSE LLP
New York, New York
February 4, 1998
47
<PAGE>
BNP U.S. FUNDING L.LC.
BALANCE SHEET
at December 31, 1997
(in thousands, except share data)
ASSETS:
Cash and cash equivalents $ 33,762
Securities, at cost (market value - $997,748) 995,398
Accrued interest receivable 5,144
----------
TOTAL ASSETS $1,034,304
==========
LIABILITIES:
Accrued expenses $ 34
Due to affiliates 12
----------
TOTAL LIABILITIES 46
----------
Redeemeable common securities, par value $10,000
per security; 150,000 securities authorized, 53,011
securities issued and outstanding 530,110
----------
Preferred securities, liquidation preference
$10,000 per security; 150,000 securities
authorized, 50,000 securities issued and
outstanding 500,000
Common securities, par value $10,000 per 530,110
security; 150,000 securities authorized,
53,011 securities issued and outstanding
Additional paid in capital 6
Retained earnings 4,142
----------
REDEEMABLE COMMON SECURITIES, PREFERRED
SECURITIES AND SECURITYHOLDERS' EQUITY 1,034,258
----------
TOTAL LIABILITIES AND REDEEMABLE COMMON
SECURITIES, PREFERRED SECURITIES AND
SECURITYHOLDERS' EQUITY $1,034,304
==========
The accompanying Notes to Financial Statements are an integral
part of these Statements.
48
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF INCOME
For the period from December 5, 1997 (inception) through
December 31, 1997
(in thousands, except share data)
INTEREST INCOME:
Collateralized Mortgage Obligations:
Floating-rate REMICs $ 1,175
Fixed-rate REMIC 225
Mortgage Backed Securities:
Agency ARMs 1,443
Agency Hybrid ARMs 708
Treasury Notes 612
Interest on deposits 25
-----------
4,188
-----------
NONINTEREST EXPENSE:
Fees and expenses 46
-----------
NET INCOME APPLICABLE TO PREFERRED AND
REDEEMABLE COMMON SECURITIES $ 4,142
===========
NET INCOME PER REDEEMABLE COMMON SECURITY $ 78.14
===========
The accompanying Notes to Financial Statements are an integral
part of these Statements.
49
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF CHANGES IN REDEEMABLE COMMON SECURITIES,
PREFERRED SECURITIES AND SECURITYHOLDERS' EQUITY
For the period from December 5, 1997 (inception)
through December 31, 1997
(in thousands)
REDEEMABLE COMMON SECURITIES:
Issuance upon incorporation (October 14, 1997) $ 10
Issuance on December 5, 1997 530,100
-------------
Balance at December 31, 1997 530,110
-------------
PREFERRED SECURITIES:
Private placement on December 5, 1997 $ 500,000
-------------
Balance at December 31, 1997 500,000
-------------
ADDITIONAL PAID IN CAPITAL:
Issuance of Common Securities on December 5, 1997 6
-------------
Balance at December 31, 1997 6
-------------
RETAINED EARNINGS:
Net income 4,142
-------------
Balance at December 31, 1997 4,142
-------------
TOTAL REDEEMABLE COMMON SECURITIES,
PREFERRED SECURITIES AND SECURITYHOLDERS'
EQUITY $ 1,034,258
=============
The accompanying Notes to Financial Statements are an integral
part of these Statements.
50
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF CASH FLOWS
For the period from December 5, 1997 (inception)
through December 31, 1997
(in thousands)
OPERATING ACTIVITIES:
Net income $ 4,142
Adjustments to reconcile net income to cash
provided by operations:
Decrease in interest receivable 337
Decrease in unamortized premium 262
Increase in accrued expenses 34
Increase in due to affiliates 12
----------
Net cash provided from operations 4,787
INVESTING ACTIVITIES:
Purchase of investment securities portfolio:
Floating-rate REMICs (268,316)
Fixed-rate REMIC (46,839)
Agency ARMs (370,801)
Agency Hybrid ARMs (176,194)
U.S. Treasury Notes (140,000)
Premium paid (22,484)
Interest receivable (5,481)
Principal payments received 28,974
Net cash used by investing activities (1,001,141)
----------
FINANCING ACTIVITIES:
Proceeds from preferred securities issuance 500,000
Proceeds from common securities issuance 530,106
----------
Net cash provided by financing activities 1,030,106
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 33,752
CASH AND CASH EQUIVALENTS AT DECEMBER 5, 1997 10
----------
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1997
$33,762
The accompanying Notes to Financial Statements are an integral
part of these Statements.
51
<PAGE>
BNP U.S. FUNDING L.L.C.
December 31, 1997
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
BNP U.S. Funding L.L.C. (the "Company") is a Delaware limited
liability corporation formed on October 14, 1997 for the purpose
of acquiring and holding Eligible Securities (as defined in Item
1 of this Form 10) that will generate net income for distribution
to the holders of its Series A Preferred Securities and its
redeemable Common Securities. The Company is a wholly owned
subsidiary of the New York Branch (the "Branch") of Banque
Nationale de Paris (the "Bank" or "BNP"). BNP is a French
corporation that conducts retail banking activities in France and
corporate and private banking and other financial activities both
in France and throughout the world.
The Company was initially capitalized on October 14, 1997 with
the issuance to the Branch of one share of the Company's
redeemable common securities, $10,000 par value (the "Common
Securities"). On December 5, 1997, the Company commenced
operations concurrent with the issuance of 50,000 noncumulative
preferred securities, Series A, liquidation preference $10,000
per security, (the "Series A Preferred Securities") to qualified
institutional buyers, and the issuance of 53,010 of Common
Securities to the Branch. These issuances raised in the aggregate
$1,030,115,873 of net capital (including $5,873 of additional
paid in capital). This entire amount was used to purchase from
the Branch a portfolio of securities at their estimated fair
values.
The accounting and financial reporting policies of the Company
conform to U.S. generally accepted accounting principles and
current industry practices. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and
revenues during the reporting period. Actual results could differ
from those estimates.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT SECURITIES:
Management's intent is to hold securities of the Company until
maturity or until the underlying mortgage obligation is paid.
Therefore, the portfolio is classified as "held-to-maturity" and
is accounted for at amortized cost.
Interest on securities is included in interest income and is
recognized using the interest method.
Premiums and discounts are amortized based on the weighted
average life of the securities and are recognized in interest
income.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include cash and short-term deposits
with original maturities of three months or less.
ISSUANCE COSTS:
All costs of issuance were incurred by BNP directly and not
through the Branch or Company.
DIVIDENDS:
Dividends on the Series A Preferred Securities, when, as
and if declared by the Company's Board of Directors, are payable
semi-annually in arrears on a non-cumulative basis on the fifth
day of June andDecember of each year, commencing June 5, 1998, at
a rate per annum of 7.738% of the liquidation preference through
and including December 5, 2007. Thereafter, dividends, when, as
and if declared by the Company's Board of Directors, will be
payable quarterly in arrears on the third Wednesday of March,
June, September, and December of each year and will be calculated
on a weekly basis in each quarter at a rate per annum of the
liquidation preference equal to 2.8%
52
<PAGE>
BNP U.S. FUNDING L.L.C.
December 31, 1997
NOTES TO FINANCIAL STATEMENTS
per annum above one-week LIBOR for the week concerned
as determined on the related LIBOR Determination Date.
Holders of common securities are entitled to receive dividends
when, as and if declared by the Company's Board of Directors out
of the Company's net income not required to be applied to fund
dividends with respect to the Series A Preferred Securities.
If the Bank's financial condition were to deteriorate with the
consequence that a Shift Event (as defined below) were to occur,
substantially all of the Common Securities would be redeemed
automatically without prior redemption of the Series A Preferred
Securities and dividends payable on each share of Series A
Preferred Securities could be substantially reduced or completely
eliminated. In addition, if the Bank's Tier 1 risk-based capital
ratio were to decline below the minimum percentage required by
French banking regulations (currently 4%), the Company would pay
a special dividend consisting of all of the Company's net assets
(other than assets having a total market value of approximately
$40 million) to the Bank as holder of the Common Securities,
A "Shift Event" would be deemed to have occurred if (i) the
Bank's total risk-based capital ratio or Tier l risk-based
capital ratio were to decline below the minimum percentages
required by French banking regulations, (ii) the Bank were to
become subject to certain specified receivership proceedings or
(iii) the French Banking Commission (Commission bancaire), in its
sole discretion, were to notify the Bank and the Company that it
has determined that the Bank's financial condition was
deteriorating such that either of the foregoing clauses (i) or
(ii) would apply in the near term. French banking regulations
currently require French banks to maintain a minimum total
risk-based capital ratio of at least 8.0% and a minimum Tier 1
risk-based capital ratio of at least 4.0%.
NET INCOME PER COMMON SECURITY:
Net income per common security is calculated by dividing net
income after preferred dividends by the weighted average number
of Common Securities outstanding.
If dividends had been declared at year end on the Series A
Preferred Securities for the period from December 5, 1997 through
December 31, 1997, the amount of such dividend would have been
approximately $2,686,806. Under this scenario, "net income
applicable to common securities" and "net income per common
security" would have been $1,455,442 and $27.46, respectively.
INCOME TAXES:
The Company expects to be treated as a partnership for U.S.
Federal income tax purposes. Because a partnership is not a
taxable entity, the Company will not be subject to U.S. federal
income tax on its income. Instead, each securityholder is
required to take into account its allocable share of items of
income, gain, loss and deduction of the partnership in computing
its U.S. Federal tax liability. Accordingly, the Company has made
no provision for income taxes in the accompanying income
statement.
53
<PAGE>
BNP U.S. FUNDING L.L.C.
December 31, 1997
NOTES TO FINANCIAL STATEMENTS
NOTE 3--INVESTMENT SECURITIES:
The amortized cost and fair value of securities held for
investment on December 31, 1997 were as follows: ($ in 000's):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
========= ========== ========== =====
Collateralized Mortgage
Obligations:
Floating-rate REMICs $263,209 $ 118 $ 585 $262,742
Fixed-rate REMIC 46,837 -- 607 46,230
Mortgage Backed
Securities:
Agency ARMs 360,343 1,283 909 360,717
Agency Hybrid ARMs 178,405 2,271 -- 180,676
U.S. Treasury Notes 146,604 779 -- 147,383
-------- ------ ------ -------
Total $995,398 $4,451 $2,101 $997,748
======== ====== ====== ========
The breakdown of the Company's securities held for investment by
category and expected maturity distribution (stated in terms of
amortized cost), is summarized below ($ in 000's):
Due in Due after
1 1 Due after
year through 5 through Due after
or less 5 years 10 years 10 years Total
-------- -------- --------- --------- -----
Collateralized Mortgage
Obligations:
Floating-rate REMICs $ 1,470 $261,739 $ -- $ -- $263,209
Fixed-rate REMIC -- -- -- 46,837 46,837
Mortgage Backed
Securities:
Agency ARMs -- -- 360,343 -- 360,343
Agency Hybrid ARMs -- -- 178,405 -- 178,405
U.S. Treasury Notes -- -- 146,604 -- 146,604
------- ------- -------- ------- --------
Total $ 1,470 $261,739 $685,352 $46,837 $995,398
======= ======== ======== ======= ========
Actual maturities may differ from maturities shown above due to
prepayments.
The breakdown of the Company's securities held for investment by
category and yield is summarized below:
Due in Due after
1 1 Due after
year through 5 through Due after
or less 5 years 10 years 10 years Total
-------- -------- --------- --------- -----
Collateralized Mortgage
Obligations:
Floating-rate REMICs 6.22% 6.34% -% -% 6.34%
Fixed-rate REMIC - - - 6.92 6.92
Mortgage Backed
Securities:
Agency ARMs - - 5.62 - 5.62
Agency Hybrid ARMs - - 5.66 - 5.66
U.S. Treasury Notes - - 5.86 - 5.86
----- ----- ----- ----- -----
Total 6.22% 6.34% 5.68% 6.92% 5.92%
54
<PAGE>
BNP U.S. FUNDING L.L.C.
December 31, 1997
NOTES TO FINANCIAL STATEMENTS
NOTE 4--DIVIDENDS:
No dividends were declared on either the Series A Preferred
Securities or the Common Securities during the period from
December 5, 1997 (inception) to December 31, 1997.
NOTE 5--RELATED PARTY TRANSACTIONS:
The Company entered into a Services Agreement with the Branch on
December 5, 1997 pursuant to which the Branch manages the
securities portfolio of the Company and performs other
administrative functions for a fee of $50,000 per annum.
French American Banking Corporation (FABC), an affiliate of BNP,
serves as the dividend paying agent, registrar, and transfer
agent with respect to the Series A Preferred Securities. The
Company will pay FABC an upfront fee of $4,000 and a fee of
$4,000 per annum for these services.
The Company maintains a credit balance account with the Branch
for clearing certain transactions.
All of the Company's officers and employees and all but one of
the members of the Company's Board of Directors are officers and
employees of the Branch or BNP.
NOTE 6--FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair values of securities at December 31, 1997 were obtained
from independent market sources and are summarized in Note 3. The
fair value of cash and cash equivalents, accrued interest
receivable, accrued expenses, and due to affiliates approximates
carrying value. The fair value of investment securities, as shown
in Note 3, approximates the market value.
55
<PAGE>
Item 14. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
Item 15. Financial Statements and Exhibits
(a) Financial Statements filed as part of this Form 10
The following are included in Item 13 of this form 10:
Report of Independent Auditors;
Consolidated Balance Sheet at December 31, 1997;
Consolidated Statement of Income for the period
from December 5, 1997 (inception) through
December 31, 1997;
Consolidated Statement of Changes in Redeemable
Common Securities, Preferred Securities and
Securityholders' Equity for the period from
December 5, 1997 (inception) through December 31,
1997;
Consolidated Statement of Cash Flows for the
period from December 5, 1997 (inception) through
December 31, 1997; and
Notes to the Consolidate Financial Statements.
(b) Exhibits filed as part of this Form 10
The Exhibits described in the Exhibit List immediately
following the signature page of this Form 10 (which is
incorporated by reference) are hereby filed as part of this Form
10.
(c) Financial Statement Schedules
None.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
BNP U.S. Funding L.L.C.
By: /s/ Eric Deudon
---------------------------
Name: Eric Deudon
Title: President and Director
Date: February 6, 1998
By: /s/ Jean-Pierre Beck
---------------------------
Name: Jean-Pierre Beck
Title: Director
Date: February 6, 1998
<PAGE>
Exhibit Index
-------------
Exhibit
Number Description
- ------- -----------
3.1 Certificate of Formation of the Company,
dated October 14, 1997
3.2 Amended and Restated Limited Liability
Company Agreement of the Company dated
December 5, 1997
3.3 By-Laws of the Company
4.1 Form of Series A Preferred Security
Global Certificate
10.1 Trust Agreement between the Company and
Citibank N.A. dated December 1, 1997
10.2 Portfolio Securities Purchase Agreement
between the Company and the Branch dated
December 1, 1997
10.3 Services Agreement between the Company
and the Branch dated December 5, 1997
10.4 Contingent Support Agreement between the
Company and the Bank dated December 5, 1997
10.5 Registration Agreement among the Company,
the Bank and the Initial Purchasers dated
December 5, 1997
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF LIMITED LIABILITY COMPANY OF "BNP U.S.
FUNDING L.L.C.", FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF
OCTOBER, A.D. 1997, AT 12:15 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2807747 8100 8702294
DATE:
971345508 10-15-97
<PAGE>
CERTIFICATE OF FORMATION
OF
BNP U.S. FUNDING L.L.C.
This Certificate of Formation of BNP U.S. Funding L.L.C.
(the "LLC"), dated as of October 14, 1997, is being duly executed and
filed by James G. Leyden, Jr., as an authorized person, to form a
limited liability company under the Delaware Limited Liability
Company Act (6 Del.C. Section 18-101, et seq.)
FIRST. The name of the limited liability company formed
hereby is BNP U.S. Funding L.L.C.
SECOND. The address of the registered office of the LLC in
the State of Delaware is c/o RL&F Service Corp., One Rodney
Square, 10th floor, Tenth and King Streets, Wilmington, New
Castle County, Delaware 19801.
THIRD. The name and address of the registered agent for
service of process on the LLC in the State of Delaware is RL&F
Service Corp., One Rodney Square, 10th Floor, Tenth and King
Streets, Wilmington, New Castle County, Delaware 19801.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Formation as of the date first above written.
/s/ James G. Leyden, Jr.
------------------------
Name: James G. Leyden, Jr.
Authorized Person
EXECUTION COPY
- -----------------------------------------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
BNP U.S. FUNDING L.L.C.
Dated as of December 5, 1997
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions.......................................2
Section 1.2 Headings.........................................12
ARTICLE II
FORMATION AND TERM; ADMISSION OF SECURITYHOLDERS
Section 2.1 Formation........................................12
Section 2.2 Admission of Securityholders.....................12
Section 2.3 Name.............................................13
Section 2.4 Term.............................................13
Section 2.5 Registered Agent and Office......................13
Section 2.6 Principal Place of Business......................13
Section 2.7 Qualification in Other Jurisdictions.............13
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY; BYLAWS;
Section 3.1 Purpose and Powers...............................13
Section 3.2 By-Laws..........................................14
ARTICLE IV
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES
Section 4.1 Form of Contribution.............................14
Section 4.2 Contributions with Respect to the Common
Securityholder...................................14
Section 4.3 Contributions with Respect to the Preferred
Securityholders..................................14
Section 4.4 Allocation of Profits and Losses.................14
Section 4.5 Withholding......................................15
Section 4.6 Securities as Personal Property..................15
i
<PAGE>
ARTICLE V
SECURITYHOLDERS
Section 5.1 Powers of Securityholders........................15
Section 5.2 Partition........................................15
Section 5.3 Resignation......................................15
Section 5.4 Liability of Securityholders.....................15
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company........................16
Section 6.2 Limits on Board of Directors' Powers.............19
Section 6.3 Reliance by Third Parties........................23
Section 6.4 No Management by Any Preferred Securityholders...23
Section 6.5 Business Transactions of the Common
Securityholder with the Company..................23
Section 6.6 Outside Businesses...............................23
Section 6.7 Duties of Independent Directors..................24
ARTICLE VII
COMMON SECURITIES AND PREFERRED SECURITIES
Section 7.1 Common Securities and Preferred Securities.......24
Section 7.2 General Provisions Regarding Preferred
Securities.......................................25
Section 7.3 Series A Preferred Securities....................26
ARTICLE VIII
VOTING AND MEETINGS
Section 8.1 Voting Rights of Preferred Securityholders.......37
Section 8.2 Voting Rights of Common Securityholders..........37
Section 8.3 Meetings of the Securityholders..................37
ARTICLE IX
DIVIDENDS
Section 9.1 Dividends........................................38
Section 9.2 Limitations on Distributions.....................39
ii
<PAGE>
ARTICLE X
BOOKS AND RECORDS
Section 10.1 Financial Statements............................39
Section 10.2 Limitation on Access to Records.................39
Section 10.3 Accounting Method...............................39
Section 10.4 Annual Audit....................................39
ARTICLE XI
TAX MATTERS
Section 11.1 Company Tax Returns.............................40
Section 11.2 Tax Reports.....................................40
Section 11.3 Taxation as a Partnership.......................40
Section 11.4 Taxation of Securityholders.....................40
ARTICLE XII
EXPENSES
Section 12.1 Expenses........................................40
ARTICLE XIII
TRANSFERS OF SECURITIES BY SECURITYHOLDERS AND RELATED
MATTERS
Section 13.1 Right of Assignee to Become a Preferred
Securityholder..................................41
Section 13.2 Events of Cessation of Security Ownership.......41
Section 13.3 Persons Deemed Preferred Securityholders........41
Section 13.4 The Preferred Certificates......................42
Section 13.5 Book-Entry Preferred Securities.................42
Section 13.6 Transfer of Preferred Certificates; Legends.....43
Section 13.7 Mutilated, Destroyed, Lost or Stolen
Preferred Certificates..........................45
Section 13.8 Restrictions on Transfers of Securities.........45
ARTICLE XIV
MERGERS, CONSOLIDATIONS AND SALES
Section 14.1 The Company.....................................46
iii
<PAGE>
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1 No Dissolution..................................46
Section 15.2 Events Causing Dissolution......................47
Section 15.3 Notice of Dissolution...........................47
Section 15.4 Liquidation.....................................47
Section 15.5 Termination.....................................47
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Amendments......................................47
Section 16.2 Amendment of Certificate........................48
Section 16.3 Successors......................................48
Section 16.4 Law; Severability...............................48
Section 16.5 Filings.........................................48
Section 16.6 Power of Attorney...............................48
Section 16.7 Exculpation.....................................49
Section 16.8 Indemnification.................................49
Section 16.9 Additional Documents............................49
Section 16.10 Notices........................................50
iv
<PAGE>
ANNEX A
-------
FORM OF CONTINGENT SUPPORT AGREEMENT
ANNEX B
-------
BY-LAWS
ANNEX C
-------
LIST OF THE INITIAL DIRECTORS AND OFFICERS
ANNEX D
-------
FORM OF PREFERRED CERTIFICATE EVIDENCING
SERIES A PREFERRED SECURITIES
ANNEX E
-------
FORM OF TRUST AGREEMENT
ANNEX F
-------
FORM OF AGENCY AGREEMENT
SCHEDULE 7.1
------------
CASH CONTRIBUTED BY THE BRANCH TO THE COMPANY ON
DECEMBER 5, 1997 WITH RESPECT TO THE PURCHASE
OF 53,011 COMMON SECURITIES
v
<PAGE>
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
BNP U.S. FUNDING L.L.C.
This Amended and Restated Limited Liability Company
Agreement of BNP U.S. FUNDING L.L.C. (the "Company") is made as
of December 5, 1997, among BANQUE NATIONALE DE PARIS (the
"Bank"), acting through its New York Branch (the "Branch"), as
initial Securityholder (as defined below) of the Company, and the
Persons (as defined below) who become additional Securityholders
of the Company in accordance with the provisions hereof.
WHEREAS, the Branch as initial Securityholder has
formed a limited liability company pursuant to the Delaware
Limited Liability Company Act, 6 Del.C. ss.18-101, et seq., as
amended from time to time (the "Delaware Act"), by filing a
Certificate of Formation of the Company with the office of the
Secretary of State of the State of Delaware on October 14, 1997,
and has entered into a Limited Liability Company Agreement of the
Company dated as of October 14, 1997 (the "Original Agreement");
WHEREAS, the Securityholders desire to amend and
restate the Original Agreement as provided in this Amended and
Restated Limited Liability Company Agreement (as amended,
modified or supplemented from time to time in accordance with its
terms, this "Agreement") and to continue the Company as a limited
liability company under the Delaware Act in accordance with the
provisions of this Agreement; and
WHEREAS, simultaneously with the Branch's execution
and delivery of this Agreement, the Company and the Bank are
executing and delivering the Contingent Support Agreement dated
as of the date hereof substantially in the form of Annex A hereto
(as amended, modified or supplemented from time to time in
accordance with its terms, the "Contingent Support Agreement").
NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Securityholders hereby agree as follows:
<PAGE>
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. Unless the context otherwise
requires, the terms defined in this Article I shall, for the
purposes of this Agreement, have the meanings herein specified.
"Additional Investment Guidelines" has the meaning set
forth in Section 6.2(c).
"Adjusted Treasury Rate" has the meaning specified in
Section 7.3(d)(iii)(B).
"Administrative Action" has the meaning specified in
this Section 7.3(d)(iii)(B).
"Affiliate" means with respect to a specified Person,
any Person that directly or indirectly controls, is controlled
by, or is under common control with, the specified Person. As
used in this definition, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"Agency" means GNMA, FHLMC or FNMA.
"Agency Agreement" means the Agency Agreement between
the Company and FABC, dated as of December 5, 1997, as amended,
modified or supplemented from time to time.
"Agency pass-throughs" means mortgage pass-through
securities issued or guaranteed by an Agency that represent
fractional undivided interests in pools of mortgage loans.
"Agency ARMs" means mortgage pass-through securities
issued or guaranteed by an Agency that represent fractional
undivided interests in pools of mortgage loans consisting
entirely of adjustable-rate mortgage loans which either (i) reset
annually at a rate equal to the then-current rate of the One-Year
Constant Maturity Treasury Index or (ii) have a fixed coupon for
a specified period of time, after which they reset annually at a
rate equal to the then-current rate of the One-Year Constant
Maturity Treasury Index plus a margin.
"Agency Collateralized Securities" means multi-class
securities that are issued by a private company unrelated to an
Agency and rated AAA by Standard & Poor's, a division of McGraw
Hill, Inc., as to creditworthiness, that represent beneficial
ownership interests in a trust established by such private
company, the assets of which consist directly or indirectly of
Agency pass-throughs and/or REMIC Agency Securities.
"Agency Securities" means Agency ARMs, Floating-rate
REMICs and Fixed-rate REMICs.
2
<PAGE>
"Agreement" means this Amended and Restated Limited
Liability Company Agreement, as it may be further amended,
modified, supplemented or restated from time to time in
accordance with its terms.
"Applicable Procedures" means, with respect to any
transfer or transaction involving a Book-Entry Preferred
Security, the rules and procedures of the Clearing Agency for
such Book-Entry Preferred Security, in each case to the extent
applicable to such transaction and as in effect from time to
time.
"authorized person" has the meaning specified in
Section 2.1(b).
"Bank" has the meaning specified in the Preamble of
this Agreement.
"Base Investment Guidelines" has the meaning set forth
in Section 6.2(b).
"Board of Directors" means the Board of Directors of
the Company as constituted in accordance with this Agreement and
the By-Laws.
"Book-Entry Preferred Security" means a Preferred
Security the ownership and transfer of which shall be made
through book entries by a Clearing Agency as described in Section
13.5.
"Book-Entry Preferred Certificate" means a Preferred
Certificate evidencing ownership of Book-Entry Preferred
Securities.
"Branch" has the meaning specified in the Preamble of
this Agreement.
"Business Day" means a day other than Saturday, Sunday
or a day on which banking institutions in The City of New York
are authorized or required by law or order to remain closed.
"By-Laws" mean the By-Laws of the Company in the form
of Annex B hereto, as they may be amended from time to time by
the Board of Directors of the Company in accordance with the
provisions of this Agreement (which By-Laws are, for all purposes
of this Agreement, deemed to be incorporated herein and to be a
part hereof).
"Calculation Agent" means FABC and subsequently any
successor thereto.
"Capital Adequacy Certificate" has the meaning
specified in Section 7.3(c)(iv)(A).
"Certificate" means the Certificate of Formation of
the Company and any and all amendments thereto and restatements
thereof filed on behalf of the Company with the office of the
Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"Certificate Depository Agreement" means, with respect
to each series of Preferred Securities, an agreement between the
Company and the Clearing Agency in such form
3
<PAGE>
as may be approved by the Board of Directors or otherwise
pursuant to this Agreement, as the same may be amended and
supplemented from time to time.
"Certificate of Designation" means a Certificate of
Designation establishing the terms and conditions of a series of
Preferred Securities adopted by the Board of Directors pursuant
to Section 7.2(a).
"Change of Capital Event" has the meaning specified in
Section 7.3(d)(iii)(B).
"Clearing Agency" means an organization registered as
a "clearing agency" pursuant to Section 17A of the Exchange Act.
"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" means the date of the "Closing Time" or
a "Closing Date" under a Purchase Agreement.
"Closing Time" means the "Closing Time" under a
Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended or any corresponding federal tax statute enacted after
the date of this Agreement. A reference to a specific section
(ss.) of the Code refers not only to such section but also to any
corresponding provision of any federal tax statute enacted after
the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application
of the provisions of this Agreement containing such reference.
"Commission" means the United States Securities and
Exchange Commission.
"Common Securityholder" means a Securityholder that
owns one or more Common Securities.
"Common Securities" means the securities of the
Company representing common limited liability company interests
in the Company which are described in this Agreement.
"Company" has the meaning specified in the Preamble of
this Agreement.
"Comparable Treasury Issue" has the meaning specified
in Section 7.3(d)(iii)(B).
"Comparable Treasury Price" has the meaning specified
in Section 7.3(d)(iii)(B).
"Contingent Support Agreement" has the meaning set
forth in the Preamble to this Agreement.
4
<PAGE>
"Definitive Preferred Certificate" means either or
both (as the context requires) of (i) Preferred Securities issued
as Book-Entry Preferred Certificates, and (ii) Preferred
Certificates issued in certificated, fully registered form.
"Delaware Act" has the meaning specified in the first
Recital of this Agreement.
"Directors" means each of the Persons listed as a
Director on Annex C hereto until such Persons shall resign or
otherwise be duly removed as a Director, and each Person who may
from time to time be appointed or elected to serve as a successor
to any Director of the Company in accordance with the provisions
of this Agreement and of the By-Laws.
"DTC" means the Depository Trust Company, the initial
Clearing Agency.
"Eligible Securities" means Agency pass-throughs,
Agency Securities, Agency Collateralized Securities, REMIC Agency
Securities, Short-Term Instruments and Treasuries.
"FABC" means French American Banking Corporation.
"Fiscal Year" means (i) the period commencing upon the
formation of the Company and ending on December 31, 1997, and
(ii) any subsequent twelve (12) month period commencing on
January 1 and ending on December 31.
"Fixed-rate REMICs" means securities issued or
guaranteed by an Agency that (i) represent beneficial ownership
interests in a trust established by an Agency the assets of which
consist directly or indirectly of Agency pass-throughs or other,
previously issued REMIC Agency Securities, (ii) are planned
amortization class securities which receive principal payments
using a predetermined schedule derived by assuming two constant
prepayment rates for the underlying mortgage loans, (iii) have
fixed coupons and (iv) pay interest on a current basis.
"FHLMC" means the Federal Home Loan Mortgage
Corporation.
"Floating-rate REMICs" means securities issued or
guaranteed by an Agency that (i) represent beneficial ownership
interests in a trust established by an Agency the assets of which
consist directly or indirectly of Agency pass-throughs or other,
previously issued REMIC Agency Securities, (ii) have coupons that
are reset periodically based on an index and that vary directly
and on a one to one ratio with changes in the index and (iii) pay
interest on a current basis.
"FNMA" means the Federal National Mortgage
Association.
"French Banking Commission" means the Commission
bancaire, as from time to time constituted and created under the
laws of The Republic of France, or, if at any time after the
execution of this Agreement the Commission bancaire is not
existing or performing the duties now assigned to it under French
law with respect to regulatory oversight of the Bank, then the
body performing such duties at such time.
5
<PAGE>
"GAAP" means the generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession in the United
States, which are in effect from time to time.
"General Secretariat of the French Banking Commission"
means the Secretariat general de la Commission bancaire as from
time to time constituted and created under the laws of The
Republic of France, or, if at any time after the execution of
this Agreement the Secretariat general de la Commission bancaire
is not existing or performing the duties now assigned to it under
French law with respect to regulatory oversight of the Bank, then
the body performing such duties at such time.
"GNMA" means the Government National Mortgage
Association.
"Independent Director" means each member of the Board
of Directors who is not a current officer or employee of the
Company, the Bank or any Affiliate of the Bank or of
any Person or Persons that, in the aggregate, owns or own more
than 50% of the outstanding Common Securities. In addition, any
member of the Board of Directors elected by holders of Preferred
Securities, including the Series A Preferred Securities, will be
deemed to be an Independent Director.
"Initial Portfolio" means all the securities sold by
the Branch to the Company pursuant to the Portfolio Securities
Purchase Agreement.
"Initial Purchasers" means the initial purchasers
named in a Purchase Agreement.
"Junior Securities" means the Common Securities and
all other classes and series of equity securities of the Company
now or hereafter issued, other than any class or series of equity
securities of the Company expressly designated as being on a
parity with or senior to the Series A Preferred Securities as to
dividend rights and rights upon dissolution, liquidation or
winding up (subject, in the case of the Common Securities, to the
consequences of a Shift Event).
"LIBOR Determination Date" has the meaning specified
in Section 7.3(b)(iv).
"LIBOR Reset Date" has the meaning specified in
Section 7.3(b)(ii).
"Liquidation Distribution" has the meaning specified
in Section 7.3(e)(i)(A).
"liquidation preference" means with respect to each
Series A Preferred Security, the stated liquidation preference
thereof, i.e., $10,000.
"London Business Day" means a day on which dealings in
U.S. dollar deposits are transacted in the London interbank
market.
6
<PAGE>
"Majority (or Other Stated Percentage) in Liquidation
Preference" means Preferred Securities whose aggregate
liquidation preferences represent more than 50% or not less than
such stated percentage of the aggregate liquidation preference of
all Preferred Securities then outstanding.
"Make-Whole Amount" has the meaning specified in
Section 7.3(d)(iii)(B).
"1940 Act" means the Investment Company Act of 1940,
as amended.
"Officers" means each of the Persons listed as an
Officer on Annex C hereto until such Persons shall resign or
otherwise be duly removed as an Officer and each Person who may
from time to time be duly appointed an Officer by the Board of
Directors or pursuant to Section 6.1(b) and acting in accordance
with the provisions of this Agreement and of the By-Laws.
"Offering Memorandum" means the Offering Memorandum,
dated December 1, 1997, relating to the offering of the Series A
Preferred Securities.
"The One-Year Constant Maturity Treasury Index" means
the weekly average yield on U.S. Treasury securities adjusted to
a constant maturity of one year as published by the Federal
Reserve Board in Statistical Release H. 15(519) or any similar
publication or, if not so published, as reported by any Federal
Reserve Bank or by any U.S. Government department or agency.
"One-Week LIBOR" means the rate offered on the London
Interbank market for one-week U.S. dollar deposits as determined
by the Calculation Agent pursuant to Section 7.3(b)(iv).
"Operating Documents" means the Services Agreement,
the Contingent Support Agreement, the Agency Agreement, the
Registration Undertaking Letter Agreement and the Trust
Agreement.
"Original Agreement" has the meaning specified in the
recitals of this Agreement.
"Owner" means each Person who is (i) in the case of
Preferred Securities evidenced by Book-Entry Preferred
Securities, the beneficial owner of a Book-Entry Preferred
Security as reflected in the records of the Clearing Agency or,
if a Clearing Agency Participant is not the Owner, 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), and (ii) in the case of Preferred
Securities issued in certificated, fully registered form, the
record owner reflected on the securities registration maintained
by the Registrar.
"Parity Securities" means any class or series of
equity securities of the Company expressly designated as being on
a parity with the Series A Preferred Securities as to dividend
rights and rights upon dissolution, liquidation or winding up.
7
<PAGE>
"Person" means any individual, corporation,
association, partnership (general or limited), joint venture,
trust, estate, limited liability company, or other legal entity
or organization.
"Plan" means each of (i) an employee benefit or other
plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, or Section 4975 of the Code and
(ii) an entity whose underlying assets include "plan assets" by
reason of any Plan's investment in the entity.
"Portfolio Securities Purchase Agreement" means the
Portfolio Securities Purchase Agreement between the Company and
the Bank dated as of December 1, 1997, as amended, modified or
supplemented from time to time in accordance with its terms.
"Power of Attorney" means the Power of Attorney
granted pursuant to Section 16.6.
"Preferred Certificate" means a certificate
substantially in the form attached hereto as Annex D, evidencing
the Preferred Securities held by a Preferred Securityholder,
which has been duly executed as provided in Section 13.4.
"Preferred Securityholder" means a Securityholder
which holds one or more Preferred Securities.
"Preferred Securities" means the securities of the
Company representing preferred limited liability company
interests in the Company and which are described in this
Agreement.
"Primary Treasury Dealer" has the meaning specified in
Section 7.3(d)(iii)(B).
"Purchase Agreement" means a Purchase Agreement among
the Bank, the Company and the Initial Purchasers named therein,
relating to the sale and issuance of Preferred Securities,
including the Purchase Agreement dated December 1, 1997 relating
to the Series A Preferred Securities.
"Purchase Price" for any Preferred Security means the
amount paid per Preferred Security pursuant to a Purchase
Agreement under which such Preferred Securities are being
purchased, payment of which shall constitute the contribution to
capital contemplated by Section 4.3 of this Agreement.
"QIB" means a "qualified institutional buyer" within
the meaning of Rule 144A.
"Rating Agency" means each of Moody's Investors
Service Inc. and Standard & Poor's, a division of McGraw Hill,
Inc.
"Receivership Proceedings" means with respect to the
Bank, the rendering by a
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French court of a judgment opening insolvency proceedings
(redressement ou liquidation judiciaire) or the appointment of a
receiver (administrateur provisoire or a liquidator in accordance
with articles 44 and 46 of the French Banking Law No. 84.46 of
January 24, 1984, respectively, or any successor provisions
thereto).
"Redemption Date" has the meaning set forth in Section
7.3(b)(i).
"Reference Treasury Dealer" has the meaning specified
in Section 7.3(d)(iii)(B).
"Reference Treasury Dealer Quotations" has the meaning
specified in Section 7.3(d)(iii)(B).
"Registrar" has the meaning specified in Section
13.6(a).
"Registration Statement" means a registration
statement relating to the Series A Preferred Securities filed by
the Company under Section 12(g) of the Exchange Act with the
Commission.
"Registration Undertaking Letter Agreement" means the
agreement dated December 5, 1997 among the Bank, the Company and
the Initial Purchasers named therein, relating to the filing of a
Registration Statement.
"Regulatory Event" has the meaning specified in
Section 7.3(d)(iii)(B).
"Remaining Life" has the meaning specified in Section
7.3(d)(iii)(B).
"REMIC Agency Securities" means multi-class securities
that are issued or guaranteed by an Agency and that represent
beneficial ownership interests in a trust established by an
Agency, the assets of which consist directly or indirectly of
Agency pass-throughs.
"Restricted Short-Term Instruments" means the
Trustee's Demand Deposit Account (SWEEP), the Trustee's
Certificates of Deposits and the Trustee's Cash Reserve Account
as defined under the Trust Agreement and the related contractual
documentation between the Company and the Trustee.
"Rule 144A" means Rule 144A of the Commission under
the Securities Act.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security" means a limited liability company interest
in the Company, including the right of the holder thereof to any
and all benefits to which a Securityholder may be entitled as
provided in this Agreement, together with the obligations of a
Securityholder to comply with all of the terms and provisions of
this Agreement, and includes the Common Securities and the
Preferred Securities from time to time outstanding.
"Securityholder" means any Person that holds a
Security of the Company and is
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<PAGE>
admitted as a member and Securityholder of the Company pursuant
to the provisions of this Agreement and of the Delaware Act, in
its capacity as a Securityholder of the Company. For purposes of
the Delaware Act, the Common Securityholders and the Preferred
Securityholders shall constitute separate classes or groups of
Securityholders and of members.
"Series A Dividend Payment Date" has the meaning
specified in Section 7.3(b)(i).
"Series A Dividend Period" has the meaning specified
in Section 7.3(b)(i).
"Series A Preferred Securityholder" means any Person
that holds any Series A Preferred Security.
"Series A Preferred Securities" has the meaning
specified in Section 7.3(a).
"Services Agreement" means the Services Agreement
between the Company and the Branch, dated as of December 5, 1997,
as amended, modified or supplemented from time to time.
"Shift Event" means any of the following events that
occur: (i) either the Bank's total risk-based capital ratio or
Tier 1 risk-based capital ratio shall decline below the minimum
percentages required by French banking regulations, (ii) the Bank
shall be subject to Receivership Proceedings, or (iii) the French
Banking Commission, in its sole discretion, shall notify the Bank
and the Company that it has determined that the Bank's financial
condition is deteriorating such that either of the foregoing
clauses (i) or (ii) will apply in the near term. A Shift Event
occurring pursuant to clause (i) of the preceding sentence shall
be deemed to have occurred as provided in Section 7.3(c)(iv); a
Shift Event occurring pursuant to clause (ii) or (iii) of the
second preceding sentence shall be deemed to have occurred (x) on
the date such Receivership Proceedings were commenced either by a
judgment opening insolvency proceedings or by the effective
appointment of a receiver (in the case of clause (ii)) or (y) the
date the Bank and the Company receive the French Banking
Commission's notice (in the case of clause (iii)).
"shift in dividend preference" has the meaning
specified in Section 7.3(c)(i)(A).
"Shift Period" means the period from the day of
occurrence of a Shift Event through but excluding the first day
on which none of the elements of a Shift Event is present. In the
case of decline in the total risk-based capital ratio or Tier 1
risk-based capital ratio below the applicable requirement, that
element of a Shift Event will cease to exist at any time the Bank
certifies to the Company pursuant to a Capital Adequacy
Certificate, that both capital ratios equal or surpass the
applicable requirement. In the case of a Receivership Proceeding,
that element of a Shift Event will cease to exist at any time
such Receivership Proceeding is terminated (either because the
Bank is no longer subject to any procedure under law n(degree)
85-98 of January 25, 1985 (or any similar procedure in the
future) other than a plan de continuation or no receiver is any
longer appointed in relation to the Bank). In the case of
determination by the French Banking Commission, that element will
cease to exist if the French Banking Commission provides a
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further notice to the Bank and to the Company that the relevant
Shift Event will not apply in the near term.
"Short-Term Instruments" means short-term investment
instruments not subject to U.S. withholding tax.
"Special Dividend" has the meaning specified in
Section 7.3(c)(ii).
"Successor Securities" has the meaning specified in
Section 14.1.
"Tax Event" has the meaning specified in Section
7.3(d)(iii)(B).
"Tax Matters Partner" means the Branch designated as
such in Section 11.1(a).
"Telerate Page 3750" means the display designated on
page "3750" on the Telerate Service (or such other page as may
replace page 3750 on that service or such other service or
services as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for
U.S. Dollar deposits).
"Tier 1 risk-based capital ratio" means, as to the
Bank at any time, the ratio of the Bank's Tier 1 capital to its
risk-adjusted assets, both determined in accordance with
applicable French banking regulations in effect at the time of
determination.
"Tier 1 capital" means common equity and qualifying
non-cumulative perpetual preferred stock, reserves (other than
revaluation reserves), share premiums, retained earnings,
unallocated profits with respect to the most recent year (less
the amount of any related dividend proposed for approval to the
shareholders) and minority interests in the equity accounts of
consolidated subsidiaries.
"Tier 2 capital" means revaluation reserves (reserves
arising from the revaluation of assets in accordance with
relevant French banking regulations), perpetual equity not
qualifying for Tier 1 capital treatment, perpetual subordinated
debt and subordinated debt with an original maturity of at least
five years.
"Total risk-based capital ratio" means, as to the Bank
at any time, the ratio of the Bank's Tier 1 capital plus Tier 2
capital to its risk-adjusted assets, each determined in
accordance with applicable French banking regulations in effect
at the time of determination.
"Transfer Agent" has the meaning specified in Section
13.6(a).
"Treasuries" means U.S. Treasury securities with a
remaining maturity of up to ten years.
"Treasury Rate" has the meaning specified in Section
7.3(d)(iii)(B).
"Treasury Regulations" means the income tax
regulations, including temporary
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<PAGE>
regulations, promulgated under the Code, as such regulations may
be amended from time to time (including corresponding provisions
of succeeding regulations).
"Trust Agreement" means the Trust Agreement dated as
of December 1, 1997 substantially in the form of Annex E hereto,
as amended, modified or supplemented from time to time in
accordance with its terms, pursuant to which the Trustee therein
will hold title to assets of the Company in trust for the benefit
of the Company and its Securityholders.
"Trustee" means Citibank, N.A.
"U.S. dollars" or "U.S.$" or "$" means United States
dollars.
"Weekly Dividend Period" has the meaning specified in
Section 7.3(b)(ii).
Section 1.2 Headings. The headings and subheadings in
this Agreement are included for convenience and identification
only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any
provision hereof.
ARTICLE II
CONTINUATION AND TERM;
ADMISSION OF SECURITYHOLDERS
Section 2.1 Continuation. (a) The Securityholders
hereby agree to the continuation of the Company as a limited
liability company under and pursuant to the provisions of the
Delaware Act and of this Agreement and agree that the rights,
duties and liabilities of the Securityholders shall be as
provided in the Delaware Act, except as otherwise provided herein
or in the By-Laws.
(b) Any Person designated as an "authorized person" by
the Board of Directors is authorized to execute, deliver and file
on behalf of the Company any and all amendments to and
restatements of the Certificate, as an authorized person within
the meaning of the Delaware Act.
Section 2.2 Admission of Securityholders. Upon the
execution of this Agreement, the Branch shall become and be
designated as automatically and without any further act on the
part of any Person being necessary, the Common Securityholder.
Without execution of this Agreement, upon execution and delivery
by the Company and the Bank of the Contingent Support Agreement
and the payment to the Company for the Preferred Securities being
acquired by a Person in connection with the issuance of Preferred
Securities, including the issuance of the Series A Preferred
Securities on the Closing Date pursuant to the terms of the
related Purchase Agreement, which action shall be deemed to
constitute a request by the Person that the books and records of
the Company reflect its admission as a Preferred Securityholder,
the Person shall thereupon be admitted to the Company as a
Preferred Securityholder.
Section 2.3 Name. The name of the Company being formed
and continued
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hereby is "BNP U.S. FUNDING L.L.C.". The business of the Company
may be conducted upon compliance with all applicable laws under
any other name designated by the Board of Directors.
Section 2.4 Term. The term of the Company commenced
upon the date on which the Certificate was filed in the office of
the Secretary of State of the State of Delaware and shall
continue perpetually, unless the Company is dissolved in
accordance with the provisions of the Delaware Act and this
Agreement. The existence of the Company as a separate legal
entity shall continue until the cancellation of the Certificate
in the manner required by the Delaware Act.
Section 2.5 Registered Agent and Office. The Company's
registered agent in Delaware shall be RL&F Service Corp., One
Rodney Square, 10th Floor, Tenth and King Streets, Wilmington,
New Castle County, Delaware 19801 and its office shall be c/o the
registered agent. At any time, the Board of Directors may
designate another registered agent and/or registered office.
Section 2.6 Principal Place of Business. The principal
place of business of the Company shall be at 499 Park Avenue, New
York, New York 10022. The Board of Directors may change the
location of the Company's principal place of business; provided
however, that such change has no material adverse effect upon any
Preferred Securityholder.
Section 2.7 Qualification in Other Jurisdictions. The
Board of Directors shall cause the Company to be qualified or
registered under assumed or fictitious name statutes or similar
laws in any jurisdiction in which the Company conducts business
and in which such qualification or registration is required by
law or deemed advisable by the Board of Directors. Each Person
designated by the Board of Directors as an "authorized person" is
authorized to execute, deliver and file on behalf of the Company
any certificates (and any amendments and/or restatements thereof)
necessary for the Company to qualify to do business in each
jurisdiction in which the Board of Directors has determined that
the Company shall conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY;
BY-LAWS
Section 3.1 Purposes and Powers. The sole purposes of
the Company are to issue Preferred Securities and Common
Securities and to use substantially all of the proceeds thereof
to purchase and hold Eligible Securities and, except as otherwise
expressly limited herein, to enter into, make and perform all
contracts and other undertakings, and engage in all activities
and transactions, as the Board of Directors may reasonably deem
necessary or advisable for the carrying out of the foregoing
purposes of the Company. The Company may not conduct any other
business or operations except as contemplated by the preceding
sentence. The Company shall have the power and authority to take
any and all actions necessary, appropriate, proper, advisable,
incidental or convenient to or for the furtherance of the
purposes of the
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<PAGE>
Company as set forth herein.
Section 3.2 By-Laws. The Board of Directors, Officers
and Securityholders shall be subject to the express provisions of
this Agreement and of the By-Laws. In case of any conflict
between any provisions of this Agreement and any provisions of
the By-Laws, the provisions of this Agreement shall control.
ARTICLE IV
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES
Section 4.1 Form of Contribution. The contribution to
the Company with respect to a Securityholder may, as determined
by the Board of Directors in its discretion, be in cash or other
legal consideration.
Section 4.2 Contributions with Respect to the Common
Securityholder. The Common Securityholder shall contribute to the
Company on or prior to each Closing Date, either in connection
with the purchase of Common Securities or otherwise, cash or
property having a total value at the time of contribution equal
to the stated value of the Common Securities received.
Section 4.3 Contributions with Respect to the
Preferred Securityholders. On each Closing Date there shall be
contributed to the capital of the Company, with respect to each
Person who purchases a Preferred Security on such Closing Date,
an amount in cash equal to the Purchase Price for such Preferred
Security (such amount being such Person's capital contribution to
the Company). Preferred Securityholders, in their capacity as
Securityholders of the Company, shall not be required to make any
additional contributions to the Company (except as required by
law).
Section 4.4 Allocation of Profits and Losses. Except
as otherwise provided in Section 7.3 or in any Certificate of
Designation with respect to any period following the occurrence
of a Shift Event, the profits, gains, and losses of the Company
for any Fiscal Year (or portion thereof) shall be allocated as
follows:
(a) all gains and losses resulting from any
redemption, prepayment, sale, exchange, transfer or disposition
of Company assets by the Company shall be allocated 100% to
the Common Securityholders;
(b) net profit of the Company (determined without
regard to the amount of any gains and losses described in
subparagraph (a) of this Section 4.4) shall be allocated (i) pro
rata to the Preferred Securityholders until the amount so
allocated to each Preferred Securityholder equals the amount of
dividends attributable for such Fiscal Year (or portion thereof)
as determined on a daily accrual basis with respect to the
Preferred Securities held by such Securityholder and (ii)
thereafter to the Common Securityholders; and
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(c) net loss of the Company (determined without regard
to the amount of any gains and losses described in subparagraph
(a) of this Section 4.4) shall be allocated 100% to the Common
Securityholders.
Section 4.5 Withholding. The Company shall comply with
any withholding requirements under federal, state and local law
and shall remit amounts withheld to and file required forms with
applicable jurisdictions. To the extent that the Company is
required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any
Securityholder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to such
Securityholder. To the fullest extent permitted by law, in the
event of any claimed over withholding, Securityholders shall be
limited to an action against the applicable jurisdiction. If the
amount withheld was not withheld from actual distributions, the
Company may reduce subsequent distributions by the amount of such
withholding. Each Securityholder, by its acceptance of
Securities, shall be deemed to agree to furnish the Company with
any representations and forms as shall reasonably be requested by
the Company to assist it in determining the extent of, and in
fulfilling, its withholding obligations.
Section 4.6 Securities as Personal Property. Each
Securityholder hereby agrees that its Securities shall for all
purposes be personal property. A Securityholder has no interest
in specific property of the Company.
ARTICLE V
SECURITYHOLDERS
Section 5.1 Powers of Securityholders. The
Securityholders shall have the power to exercise any and all
rights or powers granted to the Securityholders pursuant to the
express terms of this Agreement and of the By-Laws and shall be
subject in all respects to the provisions hereof and thereof.
Section 5.2 Partition. Each Securityholder waives any
and all rights that it may have to maintain an action for
partition of the property of the Company.
Section 5.3 Resignation. A Securityholder may resign
from the Company prior to the dissolution and winding up of the
Company only upon the assignment of its entire ownership interest
in any Securities (including any redemption, repurchase or other
acquisition by the Company of such Securities) in accordance with
the provisions of this Agreement. A Securityholder who has
resigned shall not be entitled to receive from the Company any
distribution, the fair value of its Securities or any portion
thereof except as otherwise expressly provided for in this
Agreement.
Section 5.4 Liability of Securityholders.
(a) Except as otherwise provided by the Delaware Act,
(i) the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be
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<PAGE>
solely the debts, obligations and liabilities of the Company and
(ii) no Securityholder shall be obligated personally for any such
debt, obligation or liability of the Company solely by reason of
being a Securityholder of the Company.
(b) A Securityholder, in its capacity as such, shall
have no liability in excess of (i) the amount of its capital
contributions, (ii) its share of any assets and undistributed
profits of the Company, (iii) any amounts required to be paid by
such Securityholder pursuant to this Agreement or any payment
and/or indemnity in connection with the registration of transfers
of Securities and (iv) the amount of any distributions wrongfully
distributed to it to the extent set forth in the Delaware Act.
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company.
(a) Except as otherwise expressly provided in this
Agreement or in the By-Laws or as provided in the Delaware Act,
the business and affairs of the Company shall be managed, and all
actions required under this Agreement shall be determined, solely
and exclusively by the Board of Directors, which shall have all
rights and powers on behalf and in the name of the Company to
perform all acts necessary and desirable to the objects and
purposes of the Company, including the right to appoint Officers
and to authorize any Officer to act on behalf of the Company. Any
action taken by the Board of Directors or any duly appointed and
acting Officer in accordance with this Agreement or the By-Laws
shall constitute the act of, and shall serve to bind, the
Company.
(b) The number of directors of the Company initially
shall be six, which number may be increased or decreased as
provided in the By-Laws, but shall never be less than three nor
more than seven and which shall, at all times during which the
Board of Directors shall be acting, have at least one Independent
Director. The names of the initial Directors, including
the name of the initial Independent Director are set forth in
Annex C hereto. The Directors may increase the number of
Directors and may fill any vacancy, whether resulting from an
increase in the number of directors or otherwise, on the Board of
Directors occurring before the first meeting of Securityholders
in the manner provided in the By-Laws. The Directors will serve
three-year terms (five years in the case of Independent
Directors), subject to earlier death, resignation or removal
pursuant to Section 7.3(f) or the By-Laws. The names of the
initial Officers, and their offices, are set forth in Annex C
hereto. Each such Officer shall have the duties and
responsibilities that would apply to his or her office if the
Company were a corporation established under the Delaware General
Corporation Law, except to the extent that the Directors from
time-to-time determine otherwise.
(c) Each member of the Board of Directors shall be a
"manager" of the Company for all purposes of, and within the
meaning of, the Delaware Act.
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(d) Without limiting the generality of the foregoing,
and subject to the provisions of Section 6.2, the Board of
Directors shall have all authority, rights and powers in the
management of the business of the Company to do any and all other
acts and things necessary, proper, convenient or advisable to
effectuate the purposes of this Agreement, including by way of
illustration but not by way of limitation, the following:
(i) to authorize the Company or any Officer of the
Company on behalf of the Company, to engage in transactions
and dealings, including transactions and dealings with any
Securityholder or any Affiliate of any Securityholder and
including the entering into and performance by the Company
of one or more agreements with any person, corporation,
association, company, trust, partnership (limited or
general) or other organization whereby, subject to the
supervision and control of the Board of Directors, any such
other person, corporation, association, company, trust,
partnership (limited or general) or other organization
shall render or make available to the Company managerial,
investment, advisory and/or related services, office space
and other services and facilities upon such terms and
conditions as may be provided in such agreement or
agreements (including, if deemed fair and equitable by the
Board of Directors, the compensation payable thereunder by
the Company);
(ii) to call meetings of Securityholders or any class
or series thereof;
(iii) to issue Securities, including Common
Securities and Preferred Securities, in accordance with the
provisions of this Agreement;
(iv) to pay all expenses incurred in forming the Company
to the extent not paid by the Bank or the Branch;
(v) to authorize, declare or otherwise determine and
make dividends or any distribution, in cash or otherwise,
on Securities, in accordance with such dividend policies as
it may adopt from time to time, the provisions of this
Agreement and of the Delaware Act;
(vi) to purchase, hold and dispose of Eligible Securities
in accordance with the Base Investment Guidelines and the
Additional Investment Guidelines;
(vii) to establish, when a record date is not
otherwise established by this Agreement, a record date with
respect to all actions to be taken hereunder that require a
record date to be established, including with respect to
allocations, dividends and voting rights;
(viii) to establish or set aside in their discretion
any reserve or reserves for contingencies and for any other
proper Company purpose;
(ix) to redeem or repurchase on behalf of the Company
Securities which may be so redeemed or repurchased in
accordance with the provisions of this Agreement;
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(x) to appoint (and dismiss from appointment)
attorneys and agents on behalf of the Company, and employ
(and dismiss from employment) any and all Persons providing
legal, accounting or financial services to the Company, or
such other employees or agents as the Directors deem
necessary or desirable for the management and operation of
the Company;
(xi) to incur and pay all expenses and obligations
incident to the operation and management of the Company,
including, without limitation, the services referred to in
the preceding paragraph, taxes, interest, rent and
insurance;
(xii) to acquire and enter into any contract of
insurance necessary or desirable for the protection or
conservation of the Company and its assets or otherwise in
the interest of the Company as the Board of Directors shall
determine;
(xiii) to open accounts and deposit, maintain and
withdraw funds in the name of the Company in banks, savings
and loan associations, brokerage firms or other financial
institutions, which bank accounts if opened prior to
December 31, 1997, may be opened by any Officer that is
authorized to do so by a written consent of any Director;
(xiv) to bring and defend on behalf of the Company
actions and proceedings at law or equity before any court
or governmental, administrative or other regulatory agency,
body or commission or otherwise;
(xv) to prepare and cause to be prepared reports,
statements and other relevant information for distribution
to Securityholders or filing with appropriate regulatory
authorities as may be required or determined to be
appropriate by the Board of Directors from time to time;
(xvi) to prepare and file all necessary returns and
statements and pay all taxes, assessments and other impositions
applicable to the assets of the Company;
(xvii) to execute all other documents or instruments,
perform all duties and powers and do all things for and
on behalf of the Company in all matters necessary or
desirable or incidental to the foregoing; and
(xviii) to purchase and maintain on behalf of the
Company insurance to protect any Director or Officer
against any liability asserted against him or her, or
incurred by him or her, arising out of his or her status as
such.
(e) Subject to the provisions of Section 6.2, the
expression of any power or authority of the Board of Directors
shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in
this Agreement.
(f) The determination as to any of the following
matters, made in good faith by or pursuant to the direction of
the Board of Directors consistent with this Agreement and in the
absence of actual receipt of an improper benefit in money,
property or services or active and
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deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Company and every
Securityholder: the amount of the net income of the Company for
any period and the amount of assets at any time legally available
for the payment of dividends, redemption of its Securities or the
payment of other distributions on its Securities; the amount of
paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or
excess of profits over losses on sales of assets; the amount,
purpose or time of creation of any gain or loss on disposition of
securities; the amount, purpose, time of creation, increase or
decrease, alteration or cancellation of any reserves or charges
and the propriety thereof (whether or not any obligation of
liability for which such reserves or charges shall have been
created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the
fair value, of any asset owned or held by the Company; and any
matters relating to the acquisition, holding and disposition of
any assets by the Company.
(g) The Board of Directors shall cause the Company to
use its available funds, after satisfaction of the Company's
liabilities and other obligations and distributions to
Securityholders in accordance with this Agreement (including upon
the occurrence of a Shift Event), to purchase securities that are
Eligible Securities in accordance with the Base Investment
Guidelines and the Additional Investment Guidelines set forth in
Section 6.2(b).
Section 6.2 Limits on Board of Directors' Powers.
(a) Anything in this Agreement to the contrary
notwithstanding, the Board of Directors shall not cause or permit
the Company to, and the Company shall not:
(i) incur any indebtedness for borrowed money;
(ii) except for securities purchased by the Company
from the Branch pursuant to the Portfolio Securities
Purchase Agreement on the Closing Date under the Purchase
Agreement relating to the Series A Preferred Securities,
purchase any securities or other assets from the Bank or
any Affiliate of the Bank;
(iii) possess Company Property for other than a Company
purpose;
(iv) admit a Person as a Securityholder, except as
expressly provided in this Agreement;
(v) perform any act that would subject any Preferred
Securityholder to liability for (A) the debts, obligations
and liabilities of the Company in any jurisdiction, except
as expressly provided in this Agreement, or (B) a tax on
"unrelated business taxable income" under the Code as a
consequence of such act; or
(vi) engage in any activity that is not consistent
with the purposes of the Company, as set forth in Section
3.1.
(b) Anything in this Agreement to the contrary
notwithstanding, the Board of Directors shall not cause, or
permit, the Company to take any of the following actions (such
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limitations being referred to herein as the "Base Investment
Guidelines"):
(i) acquire any assets other than Eligible Securities;
(ii) except to fund payment of any distribution with
respect to the Common Securities pursuant to Section
7.3(c)(i)(C) and the Special Dividend pursuant to Section
7.3(c)(ii), dispose of securities owned by the Company
prior to their maturity without the consent of a majority
of the Independent Directors; or
(iii) dispose of securities owned by the Company
primarily for the purpose of realizing gain or decreasing
loss on such securities.
(c) In addition, at any time that the Series A
Preferred Securities are not registered with the Commission under
Section 12(g) of the Exchange Act, the Board of Directors shall
not cause, or permit, the Company to acquire any assets other
than Agency Securities or Restricted Short-Term Instruments or to
engage in any other financial transactions and shall cause the
Company:
(i) to apply the cash proceeds from repayments of the
principal amounts of securities as follows:
(A) such cash proceeds shall be held in Restricted
Short-Term Instruments, unless at any time the
aggregate amount invested in such Instruments
equals or exceeds $40,000,000;
(B) On the first Business Day after the aggregate
amount invested in such Restricted Short-Term
Instruments reaches $40,000,000, the Board of
Directors shall cause the Company to solicit
offers to sell to the Company securities having
the characteristics described in paragraph (D)
below from at least two but no more than five
nationally recognized brokers or dealers that make
active markets in such securities. The offer which
gives the highest yield shall be chosen, and the
securities shall be purchased prior to the close
of business on such Business Day.
(C) If there are not at least two offers of securities
meeting the criteria set forth in paragraph
(D)(1)-(3) below, the cash proceeds from
repayments of principal amounts of securities then
invested in Restricted Short-Term Instruments and
the interest thereon (together with the proceeds
of any further repayments of principal of
securities) shall continue to be held in
Restricted Short-Term Instruments, and offers will
be solicited on each Business Day thereafter as
provided in paragraph (B) above, until such cash
proceeds are invested in securities meeting the
criteria set forth in paragraph (D) below in
accordance with the procedures set forth in
paragraph (B) above and this paragraph (C).
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(D) The securities to be purchased at any time when
the aggregate proceeds from repayments of the
principal amounts of securities and the interest
thereon equal $40,000,000 shall have the following
characteristics:
(1) They shall be the type of Agency Securities
(Agency ARMs, Fixed-rate REMICs or Floating-rate
REMICs) whose representation (as a percentage of
the aggregate unpaid principal amount) in the
overall portfolio of securities held by the
Company at such time (after giving effect to the
repayment of the principal amount of the
securities the proceeds of which constitute the
amount to be reinvested) has declined the most
from its representation in the Initial Portfolio
(as described in the section entitled "Description
of the Initial Portfolio" in the Offering
Memorandum); provided that in the case of
Floating-rate REMICs, the coupons thereof shall
reset periodically based solely on a London
inter-bank offered rate.
(2) Based on (a) the modeling methodology used for the
valuation of the Initial Portfolio as described in
the section entitled "Description of the Initial
Portfolio" in the Offering Memorandum and (b) the
prepayment speed assumptions reported on Bloomberg
Financial Markets (or such other screen-based
financial information provider which has replaced
Bloomberg Financial Markets as the most commonly
used financial information provider as a source by
brokers and dealers in mortgage-backed
securities) on such Business Day, the weighted
average life of such securities shall be:
(a) in the case of Fixed-rate REMICs, the period
of time that is the closest to 10.8 years
less that having elapsed from December 5,
1997 through such Business Day;
(b) in the case of Floating-rate REMICs and
Agency ARMs, the period such that, following
the purchase of new Floating-rate REMICs or
Agency ARMs, as the case may be, the
aggregate weighted average life of all
Floating-rate REMICs or Agency ARMs, as the
case may be, held by the Company is the
closest to the initial aggregate weighted
average life of all Floating-rate REMICs or
Agency ARMs, as the case may be, in the
Initial Portfolio; provided that the weighted
average life of any such Floating-rate REMICs
and Agency ARMs shall not exceed the period
of time from such Business Day through
December 5, 2007.
(3) The yield shall be the highest yield offered on
securities meeting the foregoing three criteria
and available in the amount to be invested; and
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(ii) to apply payments of interest amounts received in
respect of the securities exclusively to acquire Restricted
Short-Term Instruments and to dispose of such Restricted
Short-Term Instruments only at such time and in such
amounts necessary for (A) the payment of dividends declared
by the Board of Directors with respect to the Series A
Preferred Securities or the Common Securities (including a
Special Dividend as described in, and pursuant to, Section
7.3(c)(ii)) and (B) the redemption of Common Securities
pursuant to Sections 7.3(c)(i)(C).
The guidelines set forth in this sub-section (c) are
herein referred to as the "Additional Investment Guidelines".
(d) Anything in this Agreement to the contrary
notwithstanding, the Board of Directors shall not cause, or
permit, the Company to take any of the following actions, unless
such action shall have received the prior approval of both a
majority of the Board of Directors and a majority of the
Independent Directors:
(i) the issuance of any class or series of equity
securities of the Company ranking on a parity with the
Series A Preferred Securities as to dividend rights or as
to rights upon dissolution, liquidation or winding up;
(ii) any material amendment to or material modification
of the Trust Agreement;
(iii) other than during a Shift Period after a shift
in dividend preference pursuant to Section 7.3(c)(i)(A),
the payment of dividends on the Common Securities in any
Fiscal Year in an amount exceeding the amount by which the
net income of the Company (determined in accordance with
GAAP) for such Fiscal Year exceeds the stated dividends on
the Series A Preferred Securities scheduled to be paid
during such Fiscal Year on the Series A Preferred
Securities irrespective of whether dividends on the Series
A Preferred Securities are in fact declared and paid;
(iv) other than during a Shift Period, redemption or
repurchase of Common Securities without the concurrent redemption
of a like proportion (based upon the aggregate redemption price)
of outstanding Series A Preferred Securities unless (x) the
General Secretariat of the French Banking Commission shall
have approved such redemption or repurchase and (y) each
Rating Agency then rating the Series A Preferred Securities
shall have informed the Company that the redemption or
repurchase of such Common Securities would not adversely
affect its initial rating of the Series A Preferred
Securities;
(v) any modification of the Base Investment Guidelines or
the Additional Investment Guidelines;
(vi) payment of dividends on the Series A Preferred
Securities other than out of net income of the Company,
determined without regard to gains and losses resulting
from any disposition of securities owned by the Company, or
out of contributions by the
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Bank to the capital of the Company; and
(vii) other than during a Shift Period, disposition of
any security owned by the Company prior to its maturity.
Section 6.3 Specific Authorization concerning the
Operating Documents. The Company and any Director or Officer may
enter into and perform the Operating Documents without any
further act, or approval, of any Securityholder, Director,
Officer or other Person, notwithstanding any other provisions of
this Agreement, the Delaware Act or other applicable law, rule or
regulation. The authorization set forth in the preceding sentence
shall not be deemed a restriction on the power of any Director or
any Officer to enter into any agreement on behalf of the Company.
Section 6.4 Reliance by Third Parties. Persons dealing
with the Company are entitled to rely conclusively upon the power
and authority of the Board of Directors and of any duly appointed
and acting Officers. In dealing with the Board of Directors or
any Officer duly appointed and acting as set forth in this
Agreement or in the By-Laws, no Person shall be required to
inquire into the authority of the Board of Directors or any such
Officer to bind the Company. Persons dealing with the Company are
entitled to rely conclusively on the power and authority of the
Board of Directors or any Officer duly appointed and acting as
set forth in this Agreement or in the By-Laws.
Section 6.5 No Management by Any Preferred
Securityholders. Except as otherwise expressly provided herein,
no Preferred Securityholder, in its capacity as a Preferred
Securityholder of the Company, shall take part in the day-to-day
management, operation or control of the business and affairs of
the Company. The Preferred Securityholders, in their capacity as
Preferred Securityholders of the Company, shall not be agents of
the Company and shall not have any right, power or authority to
transact any business in the name of the Company or to act for or
on behalf of or to bind the Company.
Section 6.6 Business Transactions of the Common
Securityholder with the Company. Subject to Sections 6.1 and 6.2
of this Agreement and applicable law, as long as a Registration
Statement is effective a Common Securityholder and any of its
Affiliates may hold deposits of, and enter into business
transactions with, the Company and, subject to applicable law,
shall have the same rights and obligations with respect to any
such matters as Persons who are not a Common Securityholder or
Affiliates thereof.
Section 6.7 Outside Businesses. Any Director, Officer,
Securityholder or Affiliate thereof 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 Company, and the Company and the Securityholders
shall have no rights by virtue of this Agreement 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 Company, shall not be deemed wrongful or
improper. No Director, Officer, Securityholder or Affiliate
thereof shall be obligated to present any particular investment
opportunity to the Company even if such opportunity is of a
character that, if presented to the Company, could be taken by
the Company,
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and any Director, Officer, Securityholder or Affiliate thereof
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 opportunity.
Section 6.8 Duties of Independent Directors. Except
with respect to enforcement of the Contingent Support Agreement,
the Independent Directors shall, in assessing the benefit to the
Company of any proposed action requiring hereunder or under the
By-Laws their affirmative vote take into account the interests of
both the Common Securityholders and the Preferred
Securityholders, including, without limitation, the Series A
Preferred Securityholders. In considering the interests of the
Preferred Securityholders, including without limitation the
Series A Preferred Securityholders, the Independent Directors
shall owe the Preferred Securityholders the same duties which the
Independent Directors owe to the Common Securityholders.
ARTICLE VII
COMMON SECURITIES AND PREFERRED SECURITIES
Section 7.1 Common Securities and Preferred Securities.
(a) The Securities of the Company shall be divided
into two classes, Common Securities and Preferred Securities.
There is hereby authorized for issuance and sale of Common
Securities having an aggregate liquidation preference of
$1,500,000,000. The Branch, as the initial Common Securityholder,
shall be deemed to be issued one (1) Common Security upon its
designation as the Common Securityholder pursuant to Section 2.2
of this Agreement. The Common Securityholder shall be deemed to
be issued one additional Common Security for each $10,000 in
total value of cash or property (as determined in good faith by
the Board of Directors) contributed by the Common Securityholder
to the Company pursuant to Section 4.2 and identified on Schedule
7.1 hereto.
(b) No Common Securityholders or Preferred
Securityholders shall be entitled as a matter of right to
subscribe for or purchase, or have any preemptive right with
respect to, any part of any new or additional issue of Preferred
Securities whatsoever, whether now or hereafter authorized and
whether issued for cash or other consideration or by way of a
dividend or other distribution.
(c) A Preferred Security shall be represented by the
corresponding Preferred Certificate. Common Securities shall not
be evidenced by any certificate or other written instrument, but
shall only be evidenced by this Agreement.
(d) Upon issuance of the Preferred Securities as
provided in this Agreement, the Preferred Securities so issued
shall be deemed to be validly issued, fully paid and
nonassessable.
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(e) So long as any Preferred Securities are outstanding:
(i) the Branch and/or one or more Affiliates of the Bank
shall be the sole Common Securityholder;
(ii) the Common Securityholders shall not take any
action to dissolve, liquidate or wind up the Company unless
the Bank is also being dissolved, liquidated or wound up.
(f) Each Preferred Securityholder and each Common
Securityholder agree that the Company and each Securityholder
will treat the Preferred Securityholders as holders of the
Preferred Securities for all purposes and not as holders of an
interest in the Bank or any other Person.
Section 7.2 General Provisions Regarding Preferred
Securities.
(a) There is hereby authorized for issuance and sale
of Preferred Securities having an aggregate liquidation
preference of $1,500,000,000. The specific designation, dividend
rate, liquidation preference, redemption terms, voting rights,
and other powers, preferences and special rights and limitations
of the Series A Preferred Securities are set forth in this
Agreement. Subject to the express provisions of this Agreement
and of the By-Laws, the Board of Directors shall have authority
to fix the terms of each other series of Preferred Securities
that may be issued by the Company by adopting in accordance with
the provisions of this Agreement a Certificate of Designation
relating to each such other series of Preferred Securities that
shall set forth the preferences and other terms of such series,
including without limitation the following: (1) the title and
stated value of such series; (2) the number of securities
of such series offered and the liquidation preference per
security of such series; (3) the dividend rate(s), period(s),
and/or payment date(s) or method(s) of calculation thereof
applicable to such series; (4) whether such class or series of
Preferred Securities is cumulative or not and, if cumulative, the
date from which dividends on such series shall accumulate; (5)
the provision for a sinking fund, if any, for such series; (6)
the provision for redemption, if applicable, of such series; (7)
any voting rights of such series; (8) the relative ranking and
preferences of such series as to dividend rights and rights upon
dissolution, liquidation or winding up of the affairs of the
company; (9) any limitations on issuance of any series of
Preferred Securities ranking senior to or on a parity with such
series of Preferred Securities as to dividend rights and rights
upon dissolution, liquidation or winding up of the affairs of the
Company; and (10) any other specific terms, preferences, rights,
limitations or restrictions of such series. Upon such adoption by
the Board of Directors, each such Certificate of Designation
shall thereupon be incorporated into and deemed to be part of
this Agreement.
(b) All Preferred Securities shall rank senior to all
other Securities in respect of the right to receive dividends or
other distributions and the right to receive payments out of the
assets of the Company upon voluntary or involuntary dissolution,
winding-up or termination of the Company in accordance with the
provisions hereof (subject to the consequences of a Shift Event
occurring as provided in Section 7.3 or in any Certificate of
Designation). All Preferred Securities redeemed, purchased or
otherwise acquired by the Company shall be canceled. The
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Preferred Securities shall be issued in registered form only.
(c) Neither the Bank nor any Affiliate of the Bank
shall have the right to vote or give or withhold consent with
respect to any Preferred Security owned by it, directly or
indirectly, and, for purposes of any matter upon which the
Preferred Securityholders may vote or give or withhold consent as
provided in this Agreement, Preferred Securities owned by the
Bank or any Affiliate of the Bank shall be treated as if they
were not outstanding.
(d) The Company shall, together with each payment of
dividends on Preferred Securities, mail a notice to each Owner
stating that (i) for so long as any Preferred Securities are
outstanding, no Person may acquire any Preferred Securities
unless such Person at the date of acquisition is a QIB and (ii)
any Person who acquires a Preferred Security in violation of the
foregoing clause may be required by the Company to sell such
Preferred Security or its interest therein to a Person that is a
QIB. The Company has the right, at any time, to request that any
Owner of Series A Preferred Securities certify that, as of the
time it acquired the Series A Preferred Securities or an interest
therein, such Person was a QIB.
(e) The payment of dividends and payments of
distributions by the Company in liquidation or on redemption in
respect of Preferred Securities shall not be guaranteed by the
Common Securityholder; provided, however, that the foregoing
shall not be interpreted to prevent the Common Securityholder
from entering into and performing the Contingent Support
Agreement.
Section 7.3 Series A Preferred Securities.
(a) Designation. There shall hereby be designated as a
series of Preferred Securities the Noncumulative Preferred
Securities, Series A (the "Series A Preferred Securities"). The
Series A Preferred Securities shall have a liquidation preference
of $10,000 per Security and $500,000,000 in the aggregate for all
Series A Preferred Securities.
(b) Dividends.
(i) Dividend Rights and Payment Dates. Series A
Preferred Securityholders shall be entitled to receive, when, as
and if declared by the Board of Directors, out of the Company's
net income, determined without regard to capital gains or losses,
and out of contributions by the Bank to the capital of the
Company, cash dividends from the date of original issue of the
Series A Preferred Securities payable on a noncumulative basis as
follows: through (A) December 5, 2007, semi-annually in arrears
on the fifth day of June and December of each year (or if such
day is not a Business Day on the next succeeding Business Day),
commencing June 5, 1998, and (B) thereafter, quarterly in arrears
on the third Wednesday of March, June, September and December of
each year (or if such day is not both a Business Day and a London
Business Day on the next succeeding day that is both a Business
Day and a London Business Day). "Series A Dividend Payment Date"
refers to each date on which dividends are payable in accordance
with the preceding sentence, without reference, in the case of
clause (A) above, to the parenthetical appearing therein.
Dividends payable on each Series A Dividend Payment Date will be
calculated as provided in (ii) below and will accrue from and
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including the immediately preceding Series A Dividend Payment
Date (or from and including December 5, 1997 with respect to the
dividend payable June 5, 1998) to but excluding the relevant
Dividend Payment Date or date fixed for redemption ("Redemption
Date"), as the case may be (each such period, a "Series A
Dividend Period").
(ii) Dividend Rates. With respect to each Series A
Dividend Period from December 5, 1997 to December 5, 2007,
dividends will be calculated on the liquidation preference of
such Securities at a fixed rate of 7.738% per annum, calculated
on the basis of a 360-day year of twelve 30-day months. Any
dividend paid with respect to Series A Preferred Securities on
the Business Day following the relevant Series A Dividend Payment
Date pursuant to the provisions of Section 7.3(b)(i) shall be
paid without adjustment, interest or further payment as a result
of the delay. With respect to each Series A Dividend Period
commencing on or after December 5, 2007, dividends will be
calculated on the liquidation preference of the Series A
Preferred Securities, on a weekly basis for each week in such
Series A Dividend Period, from and including the LIBOR Reset Date
falling in such week to but excluding the LIBOR Reset Date
falling in the next succeeding week (each such period, a "Weekly
Dividend Period"), at a rate per annum equal to 2.8% plus
One-Week LIBOR determined on the related LIBOR Determination Date
for such Weekly Dividend Period. The dividend in respect of each
Weekly Dividend Period will be calculated on the basis of a
360-day year and the actual number of days in such Weekly
Dividend Period. "LIBOR Reset Date" means the Wednesday of each
week falling in a Series A Dividend Period commencing on or after
December 5, 2007. Each Series A Dividend Payment Date commencing
December 5, 2007 will also be a LIBOR Reset Date.
(iii) Recipients. Each declared dividend shall be
payable to holders of record as they appear on the securities
register of the Company on the applicable record date for the
Series A Preferred Securities, which will be (i) for so long as
the Series A Preferred Securities are issued as Book-Entry
Preferred Certificates, one Business Day prior to the relevant
Series A Dividend Payment Date, and (ii) for so long as the
Series A Preferred Securities are issued in certificated, fully
registered form, the fifteenth day (whether or not a Business
Day) prior to the relevant Series A Dividend Payment Date.
(iv) LIBOR Calculations. The Calculation Agent will
calculate One-Week LIBOR for each Weekly Dividend Period on the
second London Business Day before the applicable LIBOR Reset Date
at the beginning of such Weekly Dividend Period (a "LIBOR
Determination Date") and will make such rate calculation
available upon request to Series A Preferred Securityholders. On
each LIBOR Determination Date, the Calculation Agent will
determine One-Week LIBOR as follows:
(A) One-Week LIBOR will be determined on the basis of
the offered rates for one-week deposits in U.S. dollars of not
less than U.S.$1,000,000, commencing on the second London
Business Day immediately following such LIBOR Determination Date,
which appears on Telerate Page 3750 as of approximately 11:00
a.m., London time, on such LIBOR Determination Date. If no rate
appears on Telerate Page 3750, One-Week LIBOR for such LIBOR
Determination Date will be determined in accordance with the
provisions of paragraph (B) below.
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(B) With respect to a LIBOR Determination Date on
which no rate appears on Telerate Page 3750 as of approximately
11:00 a.m., London time, the Calculation Agent shall on such
LIBOR Determination Date request the principal London offices of
each of four major reference banks in the London interbank market
selected by the Calculation Agent to provide the Calculation
Agent with a quotation of the rate at which one-week deposits in
U.S. dollars, commencing on the second London Business Day
immediately following such LIBOR Determination Date, are offered
by it to prime banks in the London interbank market as of
approximately 11:00 a.m., London time, on such LIBOR
Determination Date and in a principal amount equal to an amount
of not less than U.S.$1,000,000 that is representative for a
single transaction in such market at such time. If at least two
such quotations are provided, One-Week LIBOR for such LIBOR
Determination Date will be the arithmetic mean of such quotations
as calculated by the Calculation Agent. If fewer than two
quotations are provided, One-Week LIBOR for such LIBOR
Determination Date will be the arithmetic mean of the rates
quoted as of approximately 11:00 a.m., New York City time, on
such LIBOR Determination Date by three major banks in The City of
New York selected by the Calculation Agent (after consultation
with the Company) for loans in U.S. dollars to leading European
banks, having a one-week maturity commencing on the second London
Business Day immediately following such LIBOR Determination Date
and in a principal amount equal to an amount of not less than
U.S.$1,000,000 that is representative for a single transaction in
such market at such time; provided, however, that if the banks
selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, One-Week LIBOR for such LIBOR
Determination Date will be One-Week LIBOR determined with respect
to the immediately preceding LIBOR Determination Date.
All percentages resulting from any calculation
regarding dividends on the Series A Preferred Securities will be
rounded to the nearest one hundred-thousandth of a percentage
point, with five-one millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all amounts used in or resulting
from such calculation will be rounded, in the case of United
States dollars, to the nearest cent.
(v) Dividends not Cumulative. The right of Series A
Preferred Securityholders to receive dividends is noncumulative.
Accordingly, if, for any reason, the Board of Directors does not
declare a dividend payable in respect of any Series A Dividend
Period, Series A Preferred Securityholders will have no right to
receive a dividend in respect of such Series A Dividend Period,
and the Company will have no obligation to pay a dividend in
respect of such Series A Dividend Period, whether or not
dividends are authorized and declared payable or paid in respect
of any future Series A Dividend Period, except as otherwise
expressly provided in Section 7.3(c)(i)(B).
(vi) Parity and Junior Securities. If any Series A
Preferred Securities are outstanding:
(A) no dividends or other distributions shall be
declared or paid or set apart for payment on any Parity
Securities in any Series A Dividend Period unless full
dividends or prorated dividends (in the case of partial
dividends on Parity Securities, as calculated
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pursuant to the next succeeding sentence) have been or
contemporaneously are declared and paid, or declared and a
sum sufficient for the payment thereof is set apart for
such payments on the Series A Preferred Securities for the
immediately preceding Series A Dividend Period except as
otherwise expressly provided in the next succeeding
sentence or Section 7.3(c)(i). When sufficient funds are
not available to pay dividends in full (or a sum sufficient
for such full payment is not so set apart) for any Series A
Dividend Period upon the Series A Preferred Securities and
any Parity Securities, all dividends declared on the Series
A Preferred Securities and Parity Securities shall only be
declared pro rata based upon the respective amounts that
would have been paid on the Series A Preferred Securities
and any Parity Securities had dividends been declared in
full, except as otherwise expressly provided in Section
7.3(c)(i).
(B) except as otherwise expressly provided in Section
7.3(c)(i), no dividends or other distributions shall be
declared or paid or set apart for payment on any Junior
Securities with respect to any period of time included in
any Series A Dividend Period unless full dividends have
been or contemporaneously are declared and paid, or
declared and a sum sufficient for the payment thereof is
set apart for such payment on the Series A Preferred
Securities for the then-current Series A Dividend Period.
(vii) Dividend Preference vis-a-vis Common Securities
and other Junior Securities. In addition to the restriction set
forth in Section 7.3(b)(vi) and except as otherwise expressly
provided in Section 7.3(c), the Company shall not declare, pay or
set apart funds for any dividends or other distributions with
respect to any Common Securities or other Junior Securities or
repurchase, redeem or otherwise acquire, or set apart funds for
repurchase, redemption or other acquisition of, any Common
Securities or other Junior Securities through a sinking fund or
otherwise, unless and until (i) full dividends on the Series A
Preferred Securities for the two most recent preceding Series A
Dividend Periods (or such lesser number of Series A Dividend
Periods during which Series A Preferred Securities have been
outstanding) are declared and paid or declared and a sum
sufficient for payment has been paid over to the dividend
disbursing agent for payment of such dividends and (ii) the
Company has declared a cash dividend on the Series A Preferred
Securities at the annual dividend rate for the then-current
Series A Dividend Period, and sufficient funds have been paid
over to the dividend disbursing agent for the payment of such
cash dividend for such then-current Series A Dividend Period;
provided, however, that notwithstanding the foregoing
restrictions the Company may repurchase or redeem Common
Securities pursuant to Section 6.2(d)(iv).
(viii) Senior Securities. No dividend shall be paid or
set aside for Series A Preferred Securityholders for any Series A
Dividend Period unless full dividends have been paid or set aside
for the holders of each series of equity securities, if any,
ranking prior to the Series A Preferred Securities as to
dividends for such Series A Dividend Period.
(ix) Registration under the Exchange Act. During any
period following May 31, 1998 in which a Registration Statement
is not effective, the Company will pay as liquidated damages an
additional dividend on the liquidation preference of the Series A
Preferred Securities at a rate of 0.25% per annum from and
including the date on which the Registration
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Statement ceases to be effective (or May 31, 1998, if it is not
effective on such date) to but excluding the date on which a
Registration Statement again becomes effective. Any additional
dividend that accrues pursuant to the foregoing sentence during a
Series A Dividend Period shall be payable on the Dividend Payment
Date that ends such Series A Dividend Period, in the same manner
and subject to the same limitations and conditions as the regular
dividends on the Series A Preferred Securities for such Series A
Dividend Period pursuant to this Section 7.3(b).
(c) Shift Event. (i) Notwithstanding anything to the
contrary in this Agreement:
(A) if during a Shift Period, an annual meeting of
shareholders of the Bank fails to declare dividends on the Bank's
common stock with respect to the then-most recent fiscal year or
the Board of Directors of the Bank announces that it does not
intend to propose to the shareholders' meeting the declaration of
a dividend on the Bank's common stock with respect to the
then-most recent fiscal year or the then-current fiscal year, the
dividend preference set forth in Section 7.3(b)(vi) shall be
modified such that all net income of the Company will be
distributed to the Common Securityholder (a "shift in dividend
preference") unless the Common Securityholder (subject to the
prior approval of the General Secretariat of the French Banking
Commission), causes the Company to pay all or part of a dividend
on the Series A Preferred Securities for such Series A Dividend
Period;
(B) during or after termination of a Shift Period, if
the Bank declares a dividend with respect to any capital stock of
the Bank constituting Tier 1 capital, the Company shall pay, to
the extent the Company shall have funds available therefor in
accordance with the provisions of this Agreement and applicable
law, and whether or not declared by the Board of Directors,
dividends on the Series A Preferred Securities with respect to
the Series A Dividend Period during which such declaration is
made and the two succeeding Series A Dividend Periods; and
(C) within ten Business Days after the occurrence of a
Shift Event as determined in accordance with subsection (c)(iv)
below, the Company shall pay, whether or not any action is taken
by the Board of Directors, in redemption of all but one Common
Security outstanding, to the extent the Company shall have funds
legally available therefor, an amount equal to $10,000 per Common
Security being redeemed at such time payable either in cash or in
securities owned by the Company.
(ii) If the Bank's Tier 1 risk-based capital ratio as
shown on the latest Capital Adequacy Certificate declines below
the minimum percentage required at that time by French banking
regulations, all of the Company's net assets remaining after the
distribution is made with respect to the Common Securities
pursuant to Section 7.3(c)(i)(C) (other than assets having a
market value of $41,200,000) will be distributed, whether or not
such distribution is declared by the Board of Directors, with
respect to the Common Securities (the "Special Dividend") on the
Business Day immediately succeeding the date of delivery to the
Company of such Capital Adequacy Certificate.
(iii) the allocations of profits, gains and losses
specified in Section 4.4 shall be
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deemed amended to the extent necessary to permit payment of the
amounts specified in subsections (i) and (ii) of this Section
7.3(c).
(iv) (A) For purposes of determining when a Shift
Event has occurred as a result of the Bank's total risk-based
capital ratio or Tier 1 risk-based capital ratio falling below
the minimum percentages required by French banking regulations,
(I) no later than the tenth Business Day after each date on which
the Bank first publishes its audited annual financial statements
or its semi-annual financial statements (whether audited or
unaudited), the Bank shall deliver to the Company a certificate
(a "Capital Adequacy Certificate") setting forth the Bank's total
risk-based capital ratio and Tier 1 risk-based capital ratio as
of the date of the balance sheet included in such financial
statements, (II) the Bank's calculations of such ratios shall be
deemed to be correct absent manifest error, and (III) if a
Capital Adequacy Certificate shows that the Bank's total-risk
based capital ratio or Tier 1 risk-based capital ratio is less
than the minimum then required by French banking regulations, the
related Shift Event shall be deemed to occur at the opening of
business on the Business Day immediately succeeding the date of
delivery of such Capital Adequacy Certificate to the Company.
(B) The Company shall mail a written notice of the
occurrence of a Shift Event, and of termination of any Shift
Period, to each holder of record of Series A Preferred Securities
at the address for such holder as shown on the Company's register
of holders promptly and in any event within five Business Days
after such occurrence or termination.
(d) Redemption Terms. (i) The Series A Preferred
Securities shall not be redeemable prior to December 5, 2007
(except upon the occurrence of a Regulatory Event as provided in
Section 7.3(d)(iii)). On or after such date, the Series A
Preferred Securities shall be redeemable at the option of the
Company, in whole or in part, at any time or from time to time
(except during a Shift Period following the payment by the
Company of a Special Dividend to the Common Securityholder
pursuant to Section 7.3(c)(ii)) on not less than 30 nor more than
60 days' notice by mail, at a redemption price of $10,000 per
security, plus unpaid dividends thereon for the then-current
Series A Dividend Period to the Redemption Date and any declared
and unpaid dividends in respect of prior Series A Dividend
Periods, without interest, but without accumulation of any
undeclared and unpaid dividends for any prior Series A Dividend
Period. Any such redemption is subject to applicable regulatory
and other requirements including receipt of the prior approval of
the General Secretariat of the French Banking Commission. If the
Company has sufficient funds to pay dividends on any Series A
Preferred Securities but dividends are unpaid, no Series A
Preferred Securities shall be redeemed unless all outstanding
Series A Preferred Securities are redeemed and the Company shall
not purchase or otherwise acquire any Series A Preferred
Securities; provided, however, that the Company may purchase or
acquire Series A Preferred Securities pursuant to a purchase or
exchange offer made on the same terms to all Preferred
Securityholders.
(ii) In the event that fewer than all of the
outstanding Series A Preferred Securities are to be redeemed, the
number of Series A Preferred Securities to be redeemed shall be
determined by the Board of Directors, and the securities to be
redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors in its sole discretion to be
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equitable, provided that such method satisfies any applicable
requirements of any securities exchange on which the Series A
Preferred Securities may then be listed and, if the Series A
Preferred Securities are then held by DTC (or its nominee) in the
form of a global security, any applicable requirements of DTC.
The Company shall promptly notify the registrar and transfer
agent for the Series A Preferred Securities in writing of the
Series A Preferred Securities selected for redemption and, in the
case of any Series A Preferred Securities selected for partial
redemption, the liquidation preference thereof to be redeemed.
(iii) (A) Except during a Shift Period following the
payment by the Company of a Special Dividend to the Common
Securityholder pursuant to Section 7.3(c)(ii), the Company will
also have the right at any time prior to December 5, 2007, upon
the occurrence of a Regulatory Event, to redeem the Series A
Preferred Securities in whole (but not in part) at a redemption
price equal to the higher of $10,000 per security or the
Make-Whole Amount per security, plus unpaid dividends thereon for
the then-current Series A Dividend Period and any declared and
unpaid dividends in respect of prior Series A Dividend Periods,
without interest, but without accumulation of any undeclared and
unpaid dividends for any prior Series A Dividend Period.
(B) For purposes of this Section 7.3(d)(iii):
the "Make-Whole Amount" shall be equal to the amount
as determined by the Calculation Agent, equal to the
sum of the present value of the liquidation preference
of the Series A Preferred Securities at December 5,
2007, together with the present values of scheduled
non-cumulative dividend payments from the
Regulatory Event Redemption Date to December 5, 2007
(the "Remaining Life"), in each case discounted to the
Regulatory Event Redemption Date on a semi-annual
basis (assuming a 360-day year consisting of 30-day
months) at the Adjusted Treasury Rate;
"Adjusted Treasury Rate" means, with respect to any
Regulatory Event, Redemption Date, (I) the Treasury
Rate plus (II) 0.25%;
"Treasury Rate" means (i) the yield, under the heading
which represents the average for the immediately prior
week, appearing in the most recently published
statistical release designated "H. 15(519)" or any
successor publication which is published weekly by the
Federal Reserve and which establishes yields on
actively traded United States Treasury securities
adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity
corresponding to the Remaining Life (if no maturity is
within three months before or after the Remaining
Life, yields for the two published maturities most
closely corresponding to the Remaining Life shall be
determined and the Treasury Rate shall be interpolated
or extrapolated from such yields on a straight-line
basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published
during the week preceding the calculation date or does
not contain such yields, the rate per annum equal to
the quarterly equivalent yield to maturity
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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 Regulatory Event
Redemption Date. The Treasury Rate shall be calculated
on the third Business Day preceding the Regulatory
Event Redemption Date;
"Comparable Treasury Issue" means, with respect to any
Regulatory Event Redemption Date, the United States
Treasury security selected by the Company 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 or corporate debt securities of
comparable maturity to the Remaining Life. If no
United States Treasury security has a maturity which
is within a period from three months before to three
months after December 5, 2007, 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 of such
Regulatory Event Redemption Date, after excluding the
highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Calculation Agent obtains
fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Primary Treasury Dealer" means a primary U.S. Government
securities dealer in New York City.
"Reference Treasury Dealer" means any Primary Treasury
Dealer selected by the Calculation Agent after
consultation with the Company.
"Reference Treasury Dealer Quotations" means, with
respect to each Reference Treasury Dealer and any
Regulatory Event Redemption Date, the average, as
determined by the Calculation Agent, 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 Calculation
Agent by such Reference Treasury Dealer at 5:00 p.m.
New York City time, on the third Business Day
preceding such Regulatory Event Redemption Date.
"Regulatory Event" means a Change of Capital Event
or a Tax Event.
"Change of Capital Event" means a notification to BNP
and the Company by the French Banking Commission of
its finding, in its sole discretion, that the
Company's Preferred Securities do not constitute Tier
1 capital of BNP on a consolidated basis for purposes
of the application of French banking regulations.
"Tax Event" means the receipt by the Company of an
opinion of a nationally
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recognized law firm experienced in such matters to the
effect that, as a result of (i) any amendment to,
clarification of, or change (including any announced
prospective change) in, the laws or treaties (or any
regulations thereunder) of the United States or France or
any political subdivision or taxing authority thereof or
therein affecting taxation, (ii) any judicial
decision, official administrative pronouncement,
published or private ruling, regulatory procedure,
notice or announcement (including any notice or
announcement of intent to adopt such procedures or
regulations) ("Administrative Action") or (iii) any
amendment to, clarification of, or change in the
official position or the interpretation of such
Administrative Action or any interpretation or
pronouncement that provides for a position with
respect to such Administrative Action that differs
from the theretofore generally accepted position, in
each case, by any legislative body, court,
governmental authority or regulatory body,
irrespective of the manner in which such amendment,
clarification or change is made known, which
amendment, clarification, or change is effective or
such pronouncement or decision is announced on or
after the date of issuance of the Preferred
Securities, there is more than an insubstantial risk
that (i) the Company, is, or will be subject to more
than a de minimis amount of additional taxes, duties,
governmental charges or civil claims or (ii) the
payments on the Series A Preferred Securities will not
be respected as payments to Series A Preferred
Securityholders for tax purposes, and as a result, the
Bank is or will be subject to more than a de minimis
amount of additional taxes, duties, governmental
charges or civil claims.
(e) Liquidation Terms. (i) In the event of (A) any
voluntary or involuntary dissolution, liquidation or winding up
of the Company occurring without a simultaneous liquidation of
the Bank or (B) a dissolution, liquidation or winding-up of the
Company occurring pursuant to Section 15.2(c) but outside a Shift
Period:
(A) the Series A Preferred Securityholders shall be
entitled to receive out of assets of the Company available for
distribution to Securityholders, before any distribution of
assets is made to holders of Common Securities or any other class
of securities ranking junior to the Series A Preferred Securities
upon liquidation, liquidating distributions in an amount equal to
the liquidation preference per security, plus unpaid dividends
thereon with respect to the then-current Series A Dividend Period
to the date of liquidation and any declared and unpaid dividends
in respect of prior Series A Dividend Periods (without interest)
but without accumulation of any undeclared and unpaid dividends
for any prior Series A Dividend Period ("Liquidation
Distribution").
(B) After payment of the full amount of the
Liquidation Distribution to which they are entitled, the Series A
Preferred Securityholders shall have no right or claim to any of
the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary dissolution, liquidation or winding
up, the available assets of the Company are insufficient to pay
the amount of the Liquidation Distribution on all outstanding
Series A Preferred Securities and the corresponding amounts
payable on all shares of other classes or series of capital stock
of the Company ranking on a parity with the Series A Preferred
Securities as to the distribution of
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assets upon any dissolution, liquidation or winding up of the
affairs of the Company, then the holders of the Series A
Preferred Securities and such other classes or series of capital
securities shall share ratably in any such distribution of assets
in proportion to the full liquidating distributions to which they
would otherwise be respectively entitled. For such purposes, the
consolidation or merger of the Company with or into any other
entity, the consolidation or merger of any other entity with or
into the Company or the sale of all or substantially all of the
property or business of the Company, shall not be deemed to
constitute a liquidation, dissolution or winding up of the
Company.
(ii) In the event of any dissolution, liquidation or
winding up of the Company occurring pursuant to Section 15.2(c)
during a Shift Period, the outstanding Common Securities will
have a preference upon liquidation of the Company (and the
liquidation preference of the Series A Preferred Securities
stipulated in subsection 7.3(e)(i)(A) will be subordinated) to
the extent, if any, that all liabilities of the Bank (including
any debt instruments, such as titres participatifs and prets
participatifs, constituting Tier 2 capital), have not been paid
in full. Following payment of all such Bank liabilities, the
Series A Preferred Securities will have a preference with respect
to any remaining assets of the Company.
(f) Voting Rights. (i) Except as expressly required by
applicable law, or except as indicated below, the holders of the
Series A Preferred Securities shall not be entitled to vote. In
the event the Series A Preferred Securityholders are entitled to
vote as indicated below, each Series A Preferred Security shall
be entitled to one vote on matters on which Series A Preferred
Securityholders are entitled to vote.
(ii) The Series A Preferred Securityholders, voting
together as a class with the holders of any Parity Securities
upon which the same voting rights as those of the Series A
Preferred Securities have been conferred, will have the right to
remove the initial Independent Director at any time with or
without cause. Removal of, and election of a replacement for, the
initial Independent Director requires the vote of Series A
Preferred Securityholders (voting together as a class with any
such Parity Securities) holding a Majority in Liquidation
Preference of the outstanding Series A Preferred Securities and
any such Parity Securities. A meeting of the Series A Preferred
Securityholders (and holders of any such Parity Securities) may
be called by the holders of at least 25% in Liquidation
Preference of the outstanding Series A Preferred Securities and
any such Parity Securities. The Series A Preferred
Securityholders (voting together as a class with any such Parity
Securities) also have the right to replace the initial
Independent Director at the end of the initial and subsequent
five-year term of office of such initial Independent Director.
(iii) If full dividends on Series A Preferred
Securities shall not have been paid for two consecutive Series A
Dividend Periods or if a Shift Period is in effect, the maximum
authorized number of directors of the Company shall be increased
by one. Subject to compliance with any requirement for regulatory
approval of (or non-objection to) persons serving as directors,
the Series A Preferred Securityholders, voting together as a
class with the holders of any such Parity Securities, shall have
the exclusive right to elect the additional director at the
Company's next meeting of Securityholders (including a special
meeting called for such
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purpose) and at each subsequent meeting at which such director's
term expires until (x) full dividends have been paid or declared
and a sum sufficient for payment thereof is set apart for payment
on the Series A Preferred Securities for four consecutive Series
A Dividend Periods and (y) if a Shift Event has occurred, the
related Shift Period shall have been terminated. The term of such
director elected thereby shall terminate, and the total number of
directors shall be decreased by one, upon the first meeting of
Securityholders after the payment or the declaration and setting
aside for payment of full dividends on the Series A Preferred
Securities for four consecutive Series A Dividend Periods and if
a Shift Period is not then in effect. Any such director may be
removed with or without cause by, and shall not be removed except
by, the vote of the holders of record of a majority of the
outstanding Series A Preferred Securities and such Parity
Securities entitled to vote, voting together as a single class
without regard to series, at a meeting of the Company's
securityholders, or of the Series A Preferred Securityholders and
such Parity Securities so entitled to vote thereon, called for
that purpose by holders of at least 25% of the outstanding Series
A Preferred Securities and such Parity Securities. During any
Shift Period or so long as full dividends on the Series A
Preferred Securities shall not have been paid for four
consecutive Series A Dividend Periods, (i) any vacancy in the
office of any such director may be filled (except as provided in
the following clause (ii)) by an instrument in writing signed by
any such remaining director and filed with the Company, and (ii)
in the case of the removal of any such director, the vacancy may
be filled by vote of the holders of a Majority in Liquidation
Preference of the outstanding Series A Preferred Securities and
such Parity Securities entitled to vote, voting together as a
single class without regard to series, at the same meeting at
which such removal shall be voted.
(iv) So long as any Series A Preferred Securities are
outstanding, the Company shall not, without the consent or vote
of at least two-thirds in Liquidation Preference of the
outstanding Series A Preferred Securities, voting separately as a
class, (a) amend, alter or repeal or otherwise change any
provision of this Agreement if such amendment, alteration, repeal
or change would materially and adversely affect the rights,
preferences, powers or privileges of the Series A Preferred
Securities, (b) modify, amend or terminate the Contingent Support
Agreement, (c) authorize, create or increase the authorized
amount of or issue any class or series of any equity securities
of the Company, or any warrants, options or other rights
convertible or exchangeable into any class or series of any
equity securities of the Company, ranking prior to the Series A
Preferred Securities, either as to dividend rights or rights on
dissolution, liquidation or winding up of the Company or (d)
merge, consolidate, reorganize or effect any other business
combination involving the Company, unless the resulting entity
will thereafter have no class or series of equity securities
either authorized or outstanding ranking prior to the Series A
Preferred Securities as to dividends or as to the distribution of
assets upon dissolution, liquidation or winding up, except the
same number of shares of such equity securities with the same
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications or terms or conditions or redemption as the shares
of equity securities of the Company that are authorized and
outstanding immediately prior to such transaction, and each
Series A Preferred Securityholder immediately prior to such
transaction shall receive securities with the same preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications
or terms or conditions or redemption of the resulting entity
as the Series A Preferred Securities held by such
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Series A Preferred Securityholders immediately prior thereto.
(v) The creation or issuance of Parity Securities or
Junior Securities, or an amendment that increases the number of
authorized Preferred Securities, or Series A Preferred Securities
or any Junior Securities or Parity Securities, shall not be
deemed to be a material and adverse change requiring a vote of
the Preferred Securityholders.
ARTICLE VIII
VOTING AND MEETINGS
Section 8.1 Voting Rights of Preferred Securityholders.
(a) Except as shall be otherwise expressly provided
herein, in the By-Laws or in any Certificate of Designation
adopted by the Board of Directors or as otherwise required by the
Delaware Act, the Preferred Securityholders shall have no right
or power to vote on any question or matter or in any proceeding
or to be represented at, or to receive notice of, any meeting of
Securityholders.
(b) Notwithstanding that Securityholders holding
Preferred Securities are entitled to vote or consent under any of
the circumstances described in this Agreement, the By-Laws or any
such Certificate of Designation, any of the Preferred Securities
that are owned by the Bank or any Affiliate of the Bank, either
directly or indirectly, shall not be entitled to vote or consent
and shall, for the purposes of such vote or consent, be treated
as if they were not outstanding.
Section 8.2 Voting Rights of Common Securityholders.
Except as otherwise provided herein, and except as otherwise
provided by the Delaware Act, all voting rights of the
Securityholders shall be vested exclusively in the Common
Securityholders. The Common Securities shall entitle the Common
Securityholders to vote in proportion to their percentage
ownership interest in the Company upon all matters upon which
Common Securityholders have the right to vote. All Common
Securityholders shall have the right to vote separately as a
class on any matter on which the Common Securityholders have the
right to vote regardless of the voting rights of any other
Securityholder.
Section 8.3 Meetings of the Securityholders.
(a) Meetings of the Securityholders of any class or of
all classes of Securities may be called at any time by the Board
of Directors or as provided by this Agreement or the By-Laws.
Except to the extent otherwise provided, the following provisions
shall apply to meetings of Securityholders.
(b) Securityholders may vote in person or by proxy at
such meeting. Whenever a vote, consent or approval of
Securityholders is permitted or required under this Agreement,
such vote, consent or approval may be given at a meeting of
Securityholders or by written consent.
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(c) Each Securityholder may authorize any Person to
act for it by proxy on all matters in which a Securityholder is
entitled to participate, including waiving notice of any meeting,
or voting or participating at a meeting. Every proxy must be
signed by the Securityholder or a Person authorized by the
Securityholder in writing or otherwise. Every proxy shall be
revocable at the pleasure of the Securityholder executing it at
any time before it is voted.
(d) Each meeting of Securityholders shall be conducted
by the Board of Directors or by such other Person that the Board
of Directors may designate.
(e) Any required approval of Preferred Securityholders
may be given at a meeting of such Preferred Securityholders
convened for such purpose or at a meeting of Securityholders of
the Company or pursuant to written consent. The Board of
Directors shall cause a notice of any meeting at which Preferred
Securityholders holding Preferred Securities are entitled to vote
pursuant to Section 7.3, any Certificate of Designation adopted
by the Board of Directors or Article XIV of this Agreement, or of
any matter upon which action may be taken by written consent of
such Preferred Securityholders, to be mailed to each holder of
record of the Preferred Securities. Each such notice shall
include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description
of any action proposed to be taken at such meeting on which such
Preferred Securityholders are entitled to vote or of such matters
upon which written consent is sought and (iii) instructions for
the delivery of proxies or consents.
(f) Subject to Section 8.3(e) of this Agreement, the
Board of Directors, in its sole discretion, shall establish all
other provisions relating to meetings of Securityholders,
including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Securityholders, waiver
of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the
exercise of any such right to vote.
ARTICLE IX
DIVIDENDS
Section 9.1 Dividends.
(a) Subject to the terms of this Article IX, Preferred
Securityholders shall receive periodic dividends, if any, in
accordance with Article VII of this Agreement or any Certificate
of Designation duly adopted by the Board of Directors, only when,
as, and if declared by the Board of Directors, and Common
Securityholders shall receive periodic dividends and
distributions, subject to Article VII of this Agreement or any
Certificate of Designation duly adopted by the Board of
Directors, and to the provisions of the Delaware Act, when, as,
and if declared by the Board of Directors, in its discretion,
except as may otherwise be expressly provided herein with respect
to the occurrence of a Shift Event.
(b) A Securityholder shall not be entitled to receive
any dividend or other
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distribution with respect to any dividend payment date (and any
such dividend or other distribution shall not be considered due
and payable), irrespective of whether such dividend or other
distribution has been declared by the Directors, until such time
as the Company shall have funds legally available for the payment
of such dividend to such Securityholder pursuant to the terms of
this Agreement and the Delaware Act, and notwithstanding any
provision of Section 18-606 of the Delaware Act to the contrary,
until such time, a Securityholder shall not have the status of a
creditor of the Company, or the remedies available to a creditor
of the Company, with respect to such dividend or other
distribution. It is specifically agreed by the Common
Securityholder that the Delaware Act currently permits dividends
to be paid out of capital of the Company as contemplated hereby
in certain circumstances.
Section 9.2 Limitations on Distributions.
Notwithstanding any provision to the contrary contained in this
Agreement, the Company shall not make a distribution (including a
dividend) to any Securityholder on account of its Security if
such distribution would violate Section 18-607 of the Delaware
Act or other applicable law.
ARTICLE X
BOOKS AND RECORDS
Section 10.1 Financial Statements. The Board of
Directors shall, as soon as available after the end of each
Fiscal Year, cause to be prepared and mailed to each Common
Securityholder of record the audited financial statements of the
Company for such Fiscal Year prepared in accordance with
generally accepted accounting principles. At any time when a
Registration Statement is not effective, the Company will make
available to each Series A Preferred Securityholder and
prospective purchaser of Series A Preferred Securities upon
request the information required by paragraph (d) (4) of Rule
144A.
Section 10.2 Limitation on Access to Records.
Notwithstanding any provision of this Agreement, the Board of
Directors may, to the maximum extent permitted by law, keep, or
cause to be kept, confidential from the Preferred
Securityholders, for such period of time as the Board of
Directors deems reasonable, any information the disclosure of
which the Board of Directors reasonably believes to be in the
nature of trade secrets or other information the disclosure of
which the Board of Directors in good faith believe is not in the
best interest of the Company or could damage the Company or its
business or which the Company or the Board of Directors are
required by law or by an agreement with any Person to keep
confidential.
Section 10.3 Accounting Method. For both financial and
tax reporting purposes and for purposes of determining profits
and losses, the books and records of the Company shall be kept on
the accrual method of accounting applied in a consistent manner
and shall reflect all Company transactions and be appropriate and
adequate for the Company's business.
Section 10.4 Annual Audit. As soon as practical after
the end of each Fiscal Year, but not later than 90 days after
such end, the financial statements of the Company shall be
audited by a firm of independent certified public accountants
selected by the Board of Directors, and such financial statements
shall be accompanied by a report of such accountants containing
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their opinion. The cost of such audits shall be an expense of the
Company and paid by the Company.
ARTICLE XI
TAX MATTERS
Section 11.1 Company Tax Returns.
(a) The Branch is hereby designated as the Company's
"Tax Matters Partner" under Section 6231(a) (7) of the Code and
shall have all the powers and responsibilities of such position
as provided in the Code. The Tax Matters Partner is specifically
directed and authorized to take whatever steps the Tax Matters
Partner, in its discretion, deems necessary or desirable to
perfect such designation, including filing any forms or documents
with the Internal Revenue Service and taking such other action as
may from time to time be required under the Treasury Regulations.
Expenses incurred by the Tax Matters Partner in its capacity as
such shall be borne by the Company.
(b) The Tax Matters Partner shall cause to be prepared
and timely filed all tax returns required to be filed for the
Company. The Tax Matters Partner may, in its discretion, cause
the Company to make or refrain from making any federal, state or
local income or other tax elections for the Company that they
deem necessary or advisable, including, without limitation, any
election under Section 754 of the Code or any successor
provision.
Section 11.2 Tax Reports. The Tax Matters Partner
shall, as promptly as practicable and in any event within 90 days
of the end of each Fiscal Year, cause to be prepared and mailed
by the Company to each Preferred Securityholder of record
Internal Revenue Service Schedule K-1 and any other forms which
are necessary or advisable in order to permit the Securityholders
to comply with U.S. federal and any other income tax
requirements.
Section 11.3 Taxation as a Partnership. The
Securityholders intend that the Company shall be treated as a
partnership for U.S. federal income tax purposes.
Section 11.4 Taxation of Preferred Securityholders.
Income shall be allocated to each Preferred Securityholder on a
daily basis. The Securityholders intend that allocations of
income for U.S. federal income tax purposes be consistent with
the economic allocations of income under this Agreement.
ARTICLE XII
EXPENSES
Section 12.1 Expenses. Except as otherwise provided in
this Agreement, the Company shall be responsible for, and shall
pay, all expenses out of funds of the Company determined by the
Board of Directors to be available for such purpose, provided
that such expenses or obligations are those of the Company or are
otherwise incurred by or pursuant to the
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direction of the Board of Directors in connection with this
Agreement, including, without limitation and provided that the
costs and expenses of formation of the Company and any offering
of any Securities shall be paid or reimbursed by the Common
Securityholder:
(a) all costs and expenses related to the business of
the Company and all routine administrative expenses of the
Company, including the maintenance of books and records of the
Company, the preparation and dispatch to the Securityholders of
checks, financial reports, tax returns and notices required
pursuant to this Agreement and the holding of any meetings of
the Securityholders;
(b) all expenses incurred in connection with any
litigation involving the Company (including the cost of any
investigation and preparation) and the amount of any judgment or
settlement paid in connection therewith (other than expenses
incurred by any Director in connection with any litigation
brought by or on behalf of any Securityholder against such
Director);
(c) all expenses for indemnity or contribution payable
by the Company to any Person;
(d) all expenses incurred in connection with the
collection of amounts due to the Company from any Person;
(e) all expenses incurred in connection with the
preparation of amendments and/or restatements to this Agreement;
and
(f) all expenses incurred in connection with the
dissolution, winding up or termination of the Company.
ARTICLE XIII
TRANSFERS OF SECURITIES BY SECURITYHOLDERS
AND RELATED MATTERS
Section 13.1 Right of Assignee to Become a Preferred
Securityholder. An assignee shall become a Preferred
Securityholder upon compliance with the provisions of Section
13.6 of this Agreement.
Section 13.2 Events of Cessation of Security
Ownership. A Person shall cease to be a Securityholder upon the
lawful assignment of all of its Securities (including any
redemption or other repurchase by the Company) or as otherwise
provided herein.
Section 13.3 Persons Deemed Preferred Securityholders.
The Company may treat the Person in whose name any Preferred
Certificate shall be registered on the books and records of the
Company as the sole holder of such Preferred Certificate and of
the Preferred Securities represented by such Preferred
Certificate for purposes of receiving dividends or other
distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to
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recognize any equitable or other claim to or interest in such
Preferred Certificate or in the Preferred Securities represented
by such Preferred Certificate on the part of any other person,
whether or not the Company shall have actual or other notice
thereof.
Section 13.4 The Preferred Certificates.
(a) The Preferred Certificates shall be issued in a
denomination of $10,000 liquidation preference. Each Book-Entry
Preferred Certificate shall be signed, manually, by the
President, any Vice-President or the Secretary of the Company.
Preferred Certificates, other than Book-Entry Preferred
Certificates, shall also be manually signed by the Registrar.
Preferred Certificates bearing the signatures of individuals who
were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Company shall be validly
issued notwithstanding that such individuals or any of them shall
have ceased to be so authorized prior to the delivery of such
Preferred Certificates or did not hold such offices at the date
of delivery of such Preferred Certificates. A transferee of a
Preferred Certificate shall become a Securityholder, upon due
registration of such Preferred Certificate in such transferee's
name pursuant to Section 13.6.
(b) Upon their original issuance, Preferred
Certificates evidencing the Series A Preferred Securities shall
be issued in the form of one or more Book-Entry Preferred
Certificates registered in the name of DTC, as Clearing Agency,
or its nominee and deposited with DTC or a custodian for DTC for
credit by DTC to the respective accounts of the Owners thereof
(or such other accounts as they may direct).
Section 13.5 Book-Entry Preferred Securities.
(a) Each Book-Entry Preferred Certificate shall be
registered in the name of the Clearing Agency or a nominee
thereof and delivered to such Clearing Agency or a nominee
thereof or custodian thereof, and each such Book-Entry Preferred
Certificate shall constitute a single Preferred Certificate for
all purposes of this Agreement.
(b) Notwithstanding any other provision in this
Agreement, no Book-Entry Preferred Certificate may be exchanged
in whole or in part for Preferred Certificates registered, and no
transfer of a Book-Entry Preferred Certificate in whole or in
part may be registered, in the name of any Person other than the
Clearing Agency for such Book-Entry Preferred Certificate or a
nominee thereof unless (a) the Clearing Agency advises the
Company in writing that the Clearing Agency is no longer willing
or able to properly discharge its responsibilities with respect
to the Book-Entry Preferred Certificates, and the Company is
unable to locate a qualified successor or (b) the Company at its
option advises the Clearing Agency in writing that it elects to
terminate the book-entry system through the Clearing Agency. Upon
the occurrence of any event specified in clause (a) or (b) above,
the Company shall notify the Clearing Agency and instruct the
Clearing Agency to notify all Owners of Book-Entry Preferred
Securities of the occurrence of such event and of the
availability of the Definitive Preferred Certificates to Owners
of such class or classes, as applicable, requesting the same.
(c) If any Book-Entry Preferred Certificate is to be
exchanged for other
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Preferred Certificates or canceled in part, or if any other
Preferred Certificate is to be exchanged in whole or in part for
Book-Entry Preferred Securities represented by a Book-Entry
Preferred Certificate, then either such Book-Entry Preferred
Certificate shall be so surrendered for exchange or cancellation
as provided in this Article XIII. On surrender to the Company or
the Registrar of the Book-Entry Preferred Certificate or
Certificates by the Clearing Agency, accompanied by registration
instructions, the Company shall execute (or cause to be executed)
the Definitive Preferred Certificates in accordance with the
instructions of the Clearing Agency and in the manner provided
for in Section 13.4. None of the Registrar or the Company shall
be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Preferred
Certificates, the Company shall recognize the Securityholders of
the Definitive Preferred Certificates as Securityholders. The
Definitive Preferred Certificates shall be printed, lithographed
or engraved or may be produced in any other manner as is
reasonably acceptable to the Company.
(d) Every Preferred Certificate executed and delivered
upon registration of transfer of, or in exchange for or in lieu
of, a Book-Entry Preferred Certificate or any portion thereof,
shall be executed and delivered in the form of, and shall be, a
Book-Entry Preferred Certificate, unless such Preferred
Certificate is registered in the name of a Person other than the
Clearing Agency or such Book-Entry Certificate or a nominee
thereof.
(e) The Clearing Agency or its nominee, as registered
owner of a Book-Entry Preferred Certificate, shall be the
Securityholder of such Book-Entry Preferred Certificate for all
purposes under this Agreement and the Book-Entry Preferred
Certificate, and the Owners with respect to a Book-Entry
Preferred Certificate, shall hold such interests pursuant to the
Applicable Procedures. The Registrar and the Company shall be
entitled to deal with the Clearing Agency for all purposes of
this Agreement relating to the Book-Entry Preferred Certificates
(including the payment of the liquidation preference of and
dividends on the Book-Entry Preferred Securities represented
thereby and the giving of instructions or directions by Owners of
Book-Entry Preferred Securities represented thereby) as the sole
Securityholder of the Book-Entry Preferred Securities represented
thereby and shall have no obligations to the Owners thereof.
Neither the Company nor the Registrar shall have any liability in
respect of any transfers effected by the Clearing Agency.
(f) The rights of the Owners of the Book-Entry
Preferred Securities shall be exercised only through the Clearing
Agency and shall be limited to those established by law, the
Applicable Procedures and agreements between such Owners and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Certificate Depository Agreement, unless and until
Definitive Preferred Certificates are issued pursuant to Section
13.5(b), the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit payments on the Preferred Securities to such Clearing
Agency Participants, and the Company shall have any
responsibility or obligation with respect thereto.
Section 13.6 Transfer of Preferred Certificates;
Legends.
(a) The Board of Directors shall provide for the
registration of Preferred
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Certificates and of transfers of Preferred Certificates and shall
appoint a securities registrar (the "Registrar") and transfer
agent (the "Transfer Agent") to act on its behalf; provided,
however, that without any action on the part of the Board of
Directors being necessary, FABC is hereby appointed as the
initial Registrar and Transfer Agent. Subject to the other
provisions of this Article XIII, upon surrender for registration
or transfer of any Preferred Certificate, the Board of Directors
shall cause one or more new Preferred Certificates to be issued
in the name of the designated transferee or transferees. Every
Preferred Certificate surrendered for registration of transfer
shall be accompanied by a written instrument of transfer in form
satisfactory to the Board of Directors duly executed by the
Preferred Securityholder or his or her attorney duly authorized
in writing. Any registration of transfers shall be effected upon
the Transfer Agent being satisfied with the documents of title
and identity of the person making the request, upon the receipt
by the transfer agent of any applicable certificate relating to
transfer restrictions as described below, and subject to such
reasonable regulations as the Company may from time to time
establish. Each Preferred Certificate surrendered for
registration of transfer shall be canceled by the Board of
Directors. A transferee of a Preferred Certificate shall be
admitted to the Company as a Preferred Securityholder and shall
be entitled to the rights and subject to the obligations or a
Preferred Securityholder hereunder upon receipt by such
transferee of a Preferred Certificate. By acceptance of a
Preferred Certificate, each transferee shall be bound by this
Agreement. The transferor of a Preferred Certificate, in whole,
shall cease to be a Preferred Securityholder at the time that the
transferee of such Preferred Certificate is admitted to the
Company as a Preferred Securityholder in accordance with this
Section 13.6.
(b) Upon surrender for registration of transfer of any
Preferred Certificate at the office or agency of the Company or
the Registrar maintained for that purpose, subject to Section
13.8, the Company shall deliver or cause to be delivered to the
Registrar in a form duly executed on behalf of the Company in the
manner provided for in Section 13.4(a), and the Registrar shall
countersign in the manner provided in and to the extent required
by Section 13.4(a) and deliver, in the name of the designated
transferee or transferees, one or more new Preferred Certificates
in authorized denominations of a like aggregate liquidation
preference dated the date of execution by such Registrar.
The Registrar shall not be required, (i) to issue,
register the transfer of any Preferred Security during a period
beginning at the opening of business 15 days before the day of
selection for redemption of such Preferred Securities and ending
at the close of business on the day of mailing of the notice of
redemption, or (ii) to register the transfer of any Preferred
Security so selected for redemption in whole or in part, except,
in the case of any such Preferred Security to be redeemed in
part, any portion, hereof not to be redeemed.
No service charge shall be made for any registration
of transfer or exchange of Preferred Certificates, but the
Registrar may require payment of a sum sufficient to cover any
tax or governmental charge that be imposed in connection with any
transfer or exchange of Preferred Certificates.
(c) Notwithstanding any other provision of this
Agreement, transfers and exchanges of Preferred Certificates and the
beneficial interests in a Book-Entry Preferred
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Certificate of the kinds specified in this Section 13.6(c) shall
be made only in accordance with this Section 13.6(c).
(i) Non-Book-Entry Preferred Certificate to Non-Book
Entry Preferred Certificate. A Preferred Certificate that
is not a Book-Entry Preferred Certificate may be
transferred, in whole or in part, to a Person who takes
delivery in the form of another Preferred Certificate that
is not a Book-Entry Preferred Certificate as provided in
Section 13.6(a);
(ii) Exchanges between Book-Entry Preferred
Certificate and Non-Book Entry Preferred Certificate. A
beneficial interest in a Book-Entry Preferred Certificate
may be exchanged for a Preferred Certificate that is not a
Book-Entry Preferred Certificate as provided in Section
13.5.
(d) Any purchaser or Securityholder of any Preferred
Securities or any interest therein will be deemed to have
represented on each day that any Preferred Securities are held by
its purchase and holding thereof that it either (i) is not a Plan
and is not purchasing such Preferred Securities on behalf or with
"plan assets" of any Plan, or (ii) is eligible for the exemptive
relief available under U.S. Department of Labor Prohibited
Transaction Class Exemption 96-23, 95-60, 91-38, 90-1 or 84-14 or
another applicable exemption with respect to such purchase and
holding.
Section 13.7 Mutilated, Destroyed, Lost or Stolen
Preferred Certificates. If (a) any mutilated Preferred
Certificate shall be surrendered to the Registrar, or if the
Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Preferred Certificate, and (b)
there shall be delivered to the Registrar and the Company such
security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Preferred
Certificate shall have been acquired by a bona fide purchaser,
the Company shall sign, the Registrar shall countersign to the
extent required under Section 13.4(a), and the Company and the
Registrar shall make available for delivery (all in the manner
provided for in Section 13.4), in exchange for or in lieu of any
mutilated, destroyed, lost or stolen Preferred Certificate, a new
Preferred Certificate of like class, tenor and denomination. In
connection with the issuance of any new Preferred Certificate
under this Section 13.7, the Company or the Registrar may require
the payment of a sum sufficient to cover any tax or other
governmental charges that may be imposed in connection therewith.
Any duplicate Preferred Certificate issued pursuant to this
Section shall constitute conclusive evidence of a limited
liability company interest in the Company corresponding to that
evidenced by the lost, stolen or destroyed Preferred Certificate,
as if originally issued, whether or not the lost, stolen or
destroyed Preferred Certificate shall be found at any time.
Section 13.8 Restrictions on Transfers of Securities.
(a) Preferred Securities may not be sold or otherwise
transferred, except pursuant to sales or other transfers that
satisfy the requirements of Rule 144A under the Securities Act
and then only to institutional investors that are QIBs at the
time of transfer and shall bear a legend to this effect. If any
Preferred Securityholder or Owner was not a QIB at the
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time such Person acquired a Preferred Security or interest
therein, such Person shall, upon demand of the Company and in any
event within ten Business Days after receiving such demand, sell
all of its Preferred Securities or interest therein to a
transferee whom such other Person reasonably believes is a QIB.
(b) No Preferred Security shall be transferred, in
whole or in part, except in accordance with the terms and
conditions set forth in this Agreement. Any transfer or purported
transfer of any Preferred Security not made in accordance with
this Agreement shall be null and void.
ARTICLE XIV
MERGERS, CONSOLIDATIONS AND SALES
Section 14.1 The Company. The Company may not, and the
Common Securityholder shall not cause or allow the Company to,
without the prior consent or vote of the holders of at least
two-thirds in Liquidation Preference of the outstanding Preferred
Securities, merge or consolidate with or into, or be replaced by,
a limited liability company, limited partnership or trust
organized as such under the laws of any state of the United
States of America; unless (i) such successor entity either (a)
expressly assumes all of the obligations of the Company under the
Preferred Securities or (b) substitutes for the Preferred
Securities other securities (the "Successor Securities") so long
as the Successor Securities rank, with respect to participation
in the profits or assets of the successor entity, at least as
high as the Preferred Securities rank, with respect to
participation in the profits or assets of the Company, (ii) such
transaction does not cause the Preferred Securities (or any
Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, as that term is
defined by the Commission for purposes of Rule 436(g) (2) under
the Securities Act, (iii) such transaction does not adversely
affect the powers, preferences and other special rights of the
Preferred Securityholders or the holders of any Successor
Securities in any material respect (other than with respect to
any dilution of the holders' interest in the new entity), (iv)
prior to such transaction the Board of Directors has received an
opinion of nationally recognized independent counsel to the
Company experienced in such matters to the effect that Preferred
Securityholders shall not recognize any gain or loss for federal
income tax purposes as a result of such transaction, (y) such
successor entity shall not be treated as an association taxable
as a corporation for federal income tax purposes and (z) such
transaction shall not cause the Preferred Securityholders to be
generally liable for the debts, obligations or liabilities of the
Company or such successor person.
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1 No Dissolution. The Company shall not be
dissolved by the admission of Securityholders. The death,
insanity, retirement, resignation, expulsion, bankruptcy or
dissolution of a Securityholder, or the occurrence of any other
event which terminates the
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continued membership of a Securityholder in the Company, shall
not in and of itself cause the Company to be dissolved and its
affairs wound up. Upon the occurrence of any such event, the
business of the Company shall be continued without dissolution.
The bankruptcy of a Securityholder (as defined in Section 18-304
of the Delaware Act) shall not cause a Securityholder to cease to
be a member of the Company.
Section 15.2 Events Causing Dissolution. The Company
shall be dissolved and liquidated and its affairs shall be wound
up upon the occurrence of any of the following events:
(a) the entry of a decree of judicial dissolution
under Section 18-802 of the Delaware Act;
(b) the written consent of all Securityholders; or
(c) the commencement of the liquidation of the Bank.
Section 15.3 Notice of Dissolution. Upon the
dissolution of the Company, the Board of Directors shall promptly
notify the Securityholders of such dissolution.
Section 15.4 Liquidation. Upon dissolution of the
Company, the Board of Directors or, in the event that the
dissolution is caused by an event described in Sections 15.2(a)
and (c) and there are no Directors, a Person or Persons who may
be approved by the Preferred Securityholders holding not less
than a Majority in Liquidation Preference, as liquidating
trustees, shall immediately commence to wind up the Company's
affairs; provided, however, that a reasonable time shall be
allowed for the orderly liquidation of the assets of the Company
and the satisfaction of liabilities to creditors so as to
minimize the losses attendant upon a liquidation. The proceeds of
liquidation shall be distributed, as realized, in the manner
provided in Section 18-804 of the Delaware Act, subject to the
provisions of Section 7.3(e).
Section 15.5 Termination. The Company shall terminate
when all of the assets of the Company have been distributed in
the manner provided for in this Article XV, and the Certificate
shall have been canceled in the manner required by the Delaware
Act.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Amendments. This Agreement may be amended
by a written instrument executed by an Officer designated by the
Board of Directors without the consent of any Preferred
Securityholder; provided, however, that no amendment shall be
made, and any such purported amendment shall be void and
ineffective, to the extent either that such amendment (a) would
result in causing the Company to be treated as anything other
than a partnership for purposes of United States federal income
taxation, or (b) has not received the prior requisite approval of
the Preferred Securityholders, including the Series A Preferred
Securityholders, as may be expressly provided in this Agreement,
the By-Laws or any Certificate of Designation duly adopted by the
Board of Directors.
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Section 16.2 Amendment of Certificate. In the event
this Agreement shall be amended pursuant to Section 16.1, the
Board of Directors shall cause the Certificate to be amended to
reflect such change if it deems such amendment of the Certificate
to be necessary or appropriate.
Section 16.3 Successors. This Agreement shall be
binding as to the executors, administrators, estates, heirs and
legal successors, or nominees or representatives, of the
Securityholders.
Section 16.4 Law; Severability. This Agreement shall
be governed by and construed in accordance with the laws of the
State of Delaware. In particular, this Agreement shall be
construed to the maximum extent possible to comply with all of
the terms and conditions of the Delaware Act. If, nevertheless,
it shall be determined by a court of competent jurisdiction that
any provisions or wording of this Agreement shall be invalid or
unenforceable under the Delaware Act or other applicable law,
such invalidity or unenforceability shall not invalidate the
entire Agreement. In that case, this Agreement shall be construed
so as to limit any term or provision so as to make it enforceable
or valid within the requirements of applicable law, and, in the
event such term or provisions cannot be so limited, this
Agreement shall be construed to omit such invalid or
unenforceable provisions. If it shall be determined by a court of
competent jurisdiction that any provision relating to the
distributions and allocations of the Company or to any fee
payable by the Company is invalid or unenforceable, this
Agreement shall be construed or interpreted so as (a) to make it
enforceable or valid and (b) to make the distributions and
allocations as closely equivalent to those set forth in this
Agreement as is permissible under applicable law.
Section 16.5 Filings. Following the execution and
delivery of this Agreement, the Board of Directors shall cause to
be promptly prepared any documents required to be filed and
recorded under the Delaware Act, and the Board of Directors shall
cause to be promptly filed and recorded each such document in
accordance with the Delaware Act and, to the extent required by
local law, to be filed and recorded or notice thereof to be
published in the appropriate place in each jurisdiction in which
the Company may hereafter establish a place of business. The
Board of Directors shall also promptly cause to be filed,
recorded and published such statements of fictitious business
name and any other notices, certificates, statements or other
instruments required by any provision of any applicable law of
the United States or any state or other jurisdiction which
governs the conduct of its business from time to time.
Section 16.6 Power of Attorney. Each Preferred
Securityholder does hereby constitute and appoint each Person
specifically authorized by the Board of Directors to act as its
true and lawful representative and attorney-in-fact, in its name,
place and stead to make, execute, sign, deliver and file (a) any
amendment of the Certificate required because of any amendment to
this Agreement made in accordance with the terms hereof or in
order to effectuate any change in the ownership of the Securities
of the Company, (b) any amendments to this Agreement made in
accordance with the terms hereof and (c) all such other
instruments, documents and certificates which may from time to
time be required by the laws of the United States of America, the
State of Delaware or any other jurisdiction, or any political
subdivision or agency thereof, to
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effectuate, implement and continue the valid and subsisting
existence of the Company or to dissolve the Company made in
accordance with the terms hereof or for any other purpose
consistent with this Agreement and the transactions contemplated
hereby.
The power of attorney granted hereby is coupled with
an interest and shall survive and not be affected by the
subsequent death, incapacity, disability, dissolution,
termination or bankruptcy of the Preferred Securityholder
granting the same or the transfer of all or any portion of such
Preferred Securityholder's successors, assigns and legal
representatives.
Section 16.7 Exculpation.
(a) No Director or Officer shall have personal
liability to the Company or the Securityholders for monetary
damages for breach of, in the case of a Director, such Director's
fiduciary duty (if any) or, in the case of a Director or an
Officer, for any act or omission performed or omitted by such
Director or Officer in good faith on behalf of the Company,
except for such Director's or Officer's gross negligence or
willful misconduct.
(b) Each Director and Officer shall be fully protected
in relying in good faith upon the records of the Company and upon
such information, opinions, reports or statements presented to
the Company by any Person as to matters that such Director or
Officer reasonably believes are within such other Person's
professional or expert competence and who has been selected with
reasonable care by or on behalf of the Company, including
information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other
facts pertinent to the existence and amount of assets from which
distributions to Securityholders might properly be paid.
Section 16.8 Indemnification. To the fullest extent
permitted by applicable law, each Director and Officer shall be
entitled to indemnification from the Company for any loss, damage
or claim incurred by such Director or Officer by reason of any
act or omission performed or omitted by such Director or Officer
in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such
Director or Officer by this Agreement, except with respect to any
act or omission determined by a court of competent jurisdiction
to have constituted gross negligence or willful misconduct of
such Director or Officer; provided, however, that any indemnity
under this Section 16.8 shall be provided out of and to the
extent of Company assets only, and no Securityholder shall have
any personal liability on account thereof.
Section 16.9 Additional Documents. Each Preferred
Securityholder, upon the request of the Board of Directors,
agrees to perform all further acts and execute, acknowledge and
deliver any documents that may be reasonably necessary to carry
out the provisions of this Agreement.
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Section 16.10 Notices. All notices provided for in
this Agreement shall be in writing, duly signed by the party
giving such notice, and shall be delivered, telecopied or mailed
by registered or certified mail, as follows:
(i) If given to the Company, at the Company's mailing
address set forth below;
BNP U.S. FUNDING L.L.C.
c/o Banque Nationale de Paris, New York Branch
499 Park Avenue
New York, New York 10022
Facsimile: (212) 415-9629
Attention: Secretary
(ii) If given to any Securityholder, at the address
set forth on the records of the Company maintained by or on
behalf of the Company.
Subject to Section 7.3 of this Agreement, each such notice,
request or other communication shall be effective (a) if given by
telecopier, when transmitted to the number specified in such
registration books and the appropriate confirmation is received,
(b) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (c) if given by any other means, when
delivered at the address specified in such registration books.
* * *
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IN WITNESS WHEREOF, the Common Securityholder has
executed this Agreement under seal as of the date and year first
above written:
Banque Nationale de Paris,
acting through its
New York Branch
By: /s/ Eric Deudon
----------------------------
Name: Eric Deudon
Title: Senior Vice-President
By: /s/ Jean-Pierre Beck
----------------------------
Name: Jean-Pierre Beck
Title: Executive Vice-President
BY-LAWS
OF
BNP U.S. FUNDING L.L.C.
These By-Laws have been established as the By-Laws of
BNP U.S. FUNDING L.L.C., a Delaware limited liability company
(the "Company") pursuant to the Amended and Restated Limited
Liability Company Agreement, dated as of December 5, 1997 (as
from time to time amended, modified or supplemented, the
"Agreement"), pursuant to which the Company's existence has been
continued, and, together with the Agreement and the other annexes
thereto, are deemed to be the limited liability company agreement
of the Company for purposes of the Delaware Act. In the event of
any inconsistency between the Agreement and these By-Laws, the
provisions of the Agreement shall control.
Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
ARTICLE I
Securityholders
Section 1.1. Regular Meetings. A regular meeting of
Securityholders shall be held upon the expiration of the term of
office of the Directors, including the Independent Director or
Directors, for the purpose of electing replacement Directors or
Independent Directors, as the case may be. Regular meetings shall
be held at such date, time and place either within or without the
State of Delaware as determined by the Board of Directors from
time to time. Any other proper business may be transacted at a
regular meeting.
Section 1.2. Special Meetings. Special meetings of
Securityholders may be called at any time by the Chairman of the
Board, if any, the President, the Board of Directors or a
majority of the Independent Directors, to be held at such date,
time and place either within or without the State of Delaware as
may be stated in the notice of the meeting. A special meeting of
Securityholders shall be called by the Secretary upon the written
request, stating the purpose of the meeting, of (i)
Securityholders who together own of record a majority of the
Securities entitled to vote at such meeting (ii) or holders of at
least 25% in Liquidation Preference of the
<PAGE>
outstanding Series A Preferred Securities, voting together as
class with any outstanding Parity Securities upon which
equivalent voting rights shall have been conferred. Upon receipt
of such written request, the Chairman shall fix a date and time
for such meeting which such date shall be within fifteen Business
Days of the proposed date specified in the written request.
Section 1.3. Notice of Meetings. Whenever
Securityholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which
shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the
meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more
than sixty days before the date of the meeting to each
Securityholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the Securityholder at
such Securityholder's address as it appears on the records of the
Company.
Section 1.4. Adjournments. Any meeting of
Securityholders, regular or special, may be adjourned from time
to time, to reconvene at the same or some other place, and notice
need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which adjournment
is taken. At the adjourned meeting the Company may transact any
business which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be
given to each Securityholder of record entitled to vote at the
meeting.
Section 1.5. Quorum. At each meeting of
Securityholders, except where otherwise provided by law or the
Agreement or these By-Laws, the holders of at least 50% of the
Securities entitled to vote on a matter at the meeting, present
in person or represented by proxy, shall constitute a quorum. In
the absence of a quorum of the holders of Securities entitled to
vote on a matter, the holders of a majority of the Securities
present or represented may adjourn such meeting from time to time
in the manner provided by Section 1.4 of these By-Laws until a
quorum shall be so present or represented. Except at special
meetings called by the holders of Preferred Securities (or any
class thereof) and at regular meetings called for the purpose,
among others, of electing an Independent Director or Directors,
securities other than Common Securities belonging on the record
date for the meeting to the Company or an Affiliate of the
Company shall neither be entitled to vote nor be counted for
quorum purposes.
Section 1.6. Organization. Meetings of Securityholders
shall be presided over by the Chairman of the Board, if any, or
in the absence of the Chairman of the Board by the President, or
in the absence of the President by a Vice President, or in the
absence of the foregoing persons, by a chairman designated by the
Board of Directors, or in the absence of such designation, by a
chairman chosen at the meeting. The Secretary, or in the absence
of the Secretary, an Assistant Secretary, shall act as secretary
of the meeting, but in the absence of the Secretary and any
Assistant Secretary, the chairman of the meeting may appoint any
person to act as secretary of the meeting.
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Section 1.7. Voting Proxies. Unless otherwise provided
in the Agreement, each Securityholder entitled to vote at any
meeting of Securityholders shall have voting power proportionate
to the outstanding amount, based on initial issue price, of the
Securities held by such Securityholder that have voting power
upon the matter in question. Each Securityholder entitled to vote
at a meeting of Securityholders or to express consent or dissent
to action in writing without a meeting may authorize another
person or persons to act for such Securityholder by proxy, but no
such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law of support an irrevocable power,
regardless of whether the interest with which it is coupled is an
interest in the Securities themselves or an interest in the
Company generally. A Securityholder may revoke any proxy which is
not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another
duly executed proxy hearing a later date with the Secretary of
the Company. Voting at meetings of Securityholders need not be by
written ballot unless the holders of a majority of the
outstanding Securities entitled to vote thereon present in person
or represented by proxy at such meeting shall so determine.
Directors shall be designated, removed and replaced as provided
in the Agreement and Article II hereof. Other than in the case of
any matter expressly set forth in the Agreement for which a
higher vote is required, the affirmative vote of the holders of a
majority of the Securities present in person or represented by
proxy at the meeting and entitled to vote on the subject matter
shall be the act of the Securityholders.
Section 1.8. Fixing Date for Determination of
Securityholders of Record. In order that the Company may
determine the Securityholders entitled to notice of or to vote at
any meeting of Securityholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which record date
shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining Securityholders
entitled to notice of or to vote at a meeting of Securityholders
shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the
meeting is held. A determination of Securityholders of record
entitled to notice of or to vote at a meeting of Securityholders
shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the
adjourned meeting.
In order that the Company may determine the
Securityholders entitled to consent to action in writing without
a meeting (as provided in Section 1.11 hereof), the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be
more than ten days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If
no record date has been fixed by the Board of Directors, the
record date for determining Securityholders entitled to consent
to action in writing without a meeting, when no prior action by
the Board of Directors is required by law, shall be the first
date on which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the
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Company by delivery to (a) its registered office in the State of
Delaware, (b) its principal place of business, or (c) an Officer
or agent of the Company having custody of the book in which
proceedings of meetings of Securityholders are recorded. Delivery
made to the Company's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by law, the record
date for determining Securityholders entitled to consent to
action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Company may determine the
Securityholders entitled to receive payment of any distribution
or allotment of any rights, or for the purpose of any other
lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining
Securityholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the
resolution relating thereto.
Section 1.9. List of Securityholders Entitled to Vote.
The Secretary shall prepare and make, at least ten days before
every meeting of Securityholders, a complete list of the
Securityholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each
Securityholder and the amount of Securities registered in the
name of each Securityholder. Such list shall be open to the
examination of any Securityholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be
produced and kept at the time and place of meeting during the
whole time thereof and may be inspected by any Securityholder who
is present.
Section 1.10. Advance Notice.
(a) Removal and Nomination of Independent Directors.
Removal and nomination of Independent Directors may be made at
any regular meeting of Securityholders, or at any special meeting
of Securityholders called at any time for the purpose of removing
and subsequently electing Independent Directors by the holders of
at least 25% in Liquidation Preference of the outstanding Series
A Preferred Securities and any Parity Securities upon which
equivalent voting rights shall have been conferred (x) who are
Securityholders of record on the date of the giving of the notice
provided for in Sub-Section 1.10(c) and on the record date for
the determination of Securityholders entitled to vote at such
meeting and (y) who comply with the notice procedures set forth
in Sub-Section 1.10(c).
(b) Nomination of Independent Director in Cases other
than Removal. Nomination of an Independent Director (except the
initial Independent Director) in all cases other than removal of
an Independent Director may be made at any regular meeting of
Securityholders, or any special meeting of Securityholders called
for that purpose pursuant to Section 7.3(f) of the Agreement, by
the holders of at least 25% in Liquidation Preference of the
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outstanding Series A Preferred Securities and any such Parity
Securities (x) who are Securityholders of record on the date of
the giving of the notice provided for in SubSection 1.10(c) and
on the record date for the determination of Securityholders
entitled to vote at such meeting and (y) who comply with the
notice procedures set forth in Sub-Section 1.10(c).
(c) Notice Procedures. In addition to any other
applicable requirements, for (x) a removal and nomination
pursuant to Sub-Section 1.10(a) or (y) a nomination pursuant to
SubSection 1.10(b) to be made by the holders of at least 25% in
Liquidation Preference of the outstanding Series A Preferred
Securities and any such Parity Securities, such Securityholders
must have given timely notice thereof in proper written form to
the Secretary of the Company.
To be timely, a Securityholders' notice to the
Secretary must be delivered to or mailed and received at the
principal offices of the Company not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of
the immediately preceding regular meeting of the Securityholders;
provided, however, that (i) in the event that the regular meeting
is called for a date that is not within thirty (30) days before
or after such anniversary date, notice by the Securityholders in
order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which
such notice of the date of the regular meeting was mailed for
such public disclosure of the date of the regular meeting was
made, whichever first occurs; and (ii) in the case of a special
meeting of Securityholders called for the purpose of removing and
subsequently electing any Independent Director, not later than
the close of business on the tenth (10th) day following the day
on which notice of the date of the special meeting was mailed or
public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a Securityholders'
notice to the Secretary must set forth (x) the name of the
Independent Director(s) whom the Securityholders proposes to
remove in the case of removal, (y) as to each person whom the
Securityholders propose to nominate for election as an
Independent Director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of
securities of the Company which are owned beneficially or of
record by the person and (iv) during any such time as a
Registration Statement is effective, any other information
relating to the person that would be required to be disclosed in
a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act, and the
rules and regulations promulgated thereunder; and (z) as to the
Securityholders giving the notice (i) the name and record address
of such Securityholders, (ii) the series and number of Securities
which are owned beneficially (as determined pursuant to Rule
13d-3 of the Exchange Act) or of record by such Securityholders,
(iii) a description of all arrangements or understandings between
such Securityholders and each proposed nominee and any other
person or persons (including their names) pursuant to which the
nomination(s) are to be made by such Securityholders, (iv) a
representation that such Securityholders intend to appear in
person or by proxy at the meeting to nominate the persons named
in its notice and (v) during any such time as a Registration
Statement is effective, any other information relating to such
Securityholders that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies
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for election of directors pursuant to Section 14 of the Exchange
Act and the rules and regulations promulgated thereunder. Such
notice must be accompanied by a written consent of each proposed
nominee to being named as a nominee and to serve as an
Independent Director if elected.
No person shall be eligible for election as an
Independent Director of the Company unless nominated in
accordance with the procedures set forth in this Section 1.10. If
the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman
shall declare to the meeting that the nomination was defective
and such defective nomination shall be disregarded.
Section 1.11. Consent of Securityholders in Lieu of
Meeting. Unless otherwise provided in the Agreement or by law,
any action required by law to be taken at any regular or special
meeting of Securityholders of the Company, or any action which
may be taken at any regular or special meeting of such
Securityholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders
of outstanding Securities having not less than the minimum number
of votes that would be necessary to authorize or take such action
at a meeting at which all Securities entitled to vote thereon
were present and voted and shall be delivered to the Company by
delivery to (a) its registered office in the State of Delaware by
hand or by certified mail or registered mail, return receipt
requested, (b) its principal place of business, or (c) an Officer
or agent of the Company having custody of the book in which
proceedings of meetings of Securityholders are recorded. Every
written consent shall bear the date of signature of each
Securityholder who signs the consent and no written consent shall
be effective to take the action referred to therein unless, with
sixty days of the earliest dated consent delivered in the manner
required by these By-Laws to the Company, written consents signed
by holders representing a sufficient amount of Securities to take
action are delivered to the Company by delivery to (a) its
registered office in the State of Delaware by hand or by
certified or registered mail, return receipt requested, (b) its
principal place of business, or (c) an Officer or agent of the
Company having custody of the book in which proceedings of
meetings of Securityholders are recorded. Prompt notice of the
taking of the action without a meeting by less than unanimous
written consent shall be given to those Securityholders who have
not consented in writing.
ARTICLE II
Board of Directors
Section 2.1. Number; Powers; By-Laws. The business and
affairs of the Company shall be managed by or under the direction
of a Board composed of not less than three nor more than seven
Directors, at least one of whom shall at all times be an
Independent Director. The Board shall manage the business and
affairs of the Company and may exercise all powers in connection
therewith, except for such powers as are required to be exercised
by Securityholders, all in accordance with the Agreement, these
By-Laws and applicable law. Except to the extent that the Board
or the Securityholders confer such authority on a Director, no
Director shall have the authority to bind the Company.
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Section 2.2. Voting Power. Each Director shall, in the
consideration of any matter by the Board, have a single vote at
the time such vote is taken or made (whether at a meeting or by
written consent). Except where a greater percentage approval may
be provided for herein or in the Agreement or by law or except
where the Agreement provides that an action requires approval of
a majority of the Independent Directors, an action shall be
deemed approved by the Board only if it has been approved by a
majority of the Directors. With respect to actions that under the
Agreement require approval of a majority of the Independent
Directors, the Independent Directors may act by a written consent
signed by a majority of the Independent Directors or at a meeting
of the Independent Directors duly held in the manner provided for
in these By-Laws with respect to a meeting of the Board.
Section 2.3. Quorum. At all meetings of the Board, the
presence of at least a majority of Directors shall constitute a
quorum for the transaction of business. In the case at any
meeting of the Board a quorum shall not be present, any Director
present may adjourn the meeting from time to time until a quorum
shall be present.
Section 2.4. Designation; Resignation. The Directors
will serve three-year terms (five years in the case of
Independent Directors), subject to earlier resignation, removal
or termination pursuant to Sub-Sections 7.3(f)(ii) and (iii) of
the Agreement or Section 2.5 of these By-Laws. Any Director may
resign at any time upon written notice to the Board of Directors
or to the President or the Secretary of the Company. Such
resignation shall take effect at the time specified therein, and
unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective.
Section 2.5. Removal; Replacement.
(a) Independent Directors. The Series A Preferred
Securityholders, voting together as a class with the holders of
any Parity Securities upon which the same voting rights as those
of the Series A Preferred Securities have been conferred, will
have the right to remove any Independent Director at any time
with or without cause. Removal of, and election of a replacement
for, any Independent Director requires the vote of Series A
Preferred Securityholders (voting together as a class with any
such Parity Securities) holding a Majority in Liquidation
Preference of the outstanding Series A Preferred Securities and
any such Parity Securities. During any Shift Period or so long as
full dividends on the Series A Preferred Securities shall not
have been paid for two consecutive Series A Dividend Periods, (i)
any vacancy in the office of any Independent Director may be
filled (except as provided in the following clause (ii)) by an
instrument in writing signed by any such remaining Independent
Director and filed with the Company, and (ii) in the case of the
removal of any such Independent Director, the vacancy may be
filled by vote of the holders of a Majority in Liquidation
Preference of the outstanding Series A Preferred Securities and
such Parity Securities entitled to vote, voting together as a
single class without regard to series, at the same meeting at
which such removal shall be voted.
(b) Other Directors. Any Director who is not an
Independent Director may be removed, with or without cause by
majority vote of the remaining Directors. In the event of the
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resignation, removal or death of a Director, such Director shall
be replaced by another person designated by majority vote of the
remaining Directors.
Section 2.6. Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without
the State of Delaware and at such times as the Board may from
time to time determine, and if so determined notice thereof need
not be given.
Section 2.7. Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or
without the State of Delaware whenever called by the Chairman of
the Board, by the President, by any two Directors or, in
circumstances which entitle the Series A Preferred
Securityholders to elect an additional Independent Director, an
Independent Director. Reasonable notice thereof shall be given by
the person or persons calling the meeting.
Section 2.8. Participation in Meetings by Conference
Telephone Permitted. Unless otherwise restricted by the Agreement
or these By-Laws, the Board of Directors, or any committee
designated by the Board, may participate in a meeting of the
Board or of such committee, as the case may be, by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to these By-Laws
shall constitute presence in person at such meeting.
Section 2.9. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, or
in the absence of the Chairman of the Board by the President, or
in their absence, by a chairman chosen at the meeting. The
Secretary, or in the absence of the Secretary, an Assistant
Secretary, shall act as secretary of the meeting, but in the
absence of the Secretary and any Assistant Secretary, the
chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.10. Action by Directors Without a Meeting.
Unless otherwise restricted by the Agreement or these By-Laws,
any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken
without a meeting if all of the Board or of such committee, as
the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board
or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may,
by resolution of the Board adopted by majority vote, designate
one or more committees, each committee to consist of one or more
of the Directors of the Company. Any such committee, to the
extent provided in the resolution of the Board of Directors or in
these By-Laws, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Company, and may authorize the seal
of the Company to be affixed to all papers which may require it;
but no such committee shall have the power or authority in
reference to amending the
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Certificate of Formation, adopting an agreement of merger,
consolidation or conversion, recommending to the Securityholders
the sale, lease or exchange of all or substantially all of the
Company's property and assets, recommending to the
Securityholders a dissolution of the Company or a revocation of a
dissolution, amending these By-Laws or, unless such Committee
consists of all of the Independent Directors and no persons who
are not Independent Directors, with respect to any matter
reserved to the Independent Directors pursuant to Section 6.2(c)
of the Agreement or relating to the duties of the Independent
Directors under Section 6.8 of the Agreement; and, unless the
resolution, these By-Laws or the Agreement expressly so provides,
no such committee shall have the power or authority to authorize
the issuance of Securities, to adopt a certificate of ownership
and merger, consolidation or conversion or to remove or indemnify
Officer or Directors.
Section 3.2 Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board or a
provision in the rules of such committee to the contrary, a
majority of the members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in
other respects each committee shall conduct its business in the
same manner as the Board conducts its business pursuant to
Article II of these By-Laws.
ARTICLE IV
Officers
Section 4.1. Officers: Election. The names of the
initial Officers are set forth in Annex C to the Agreement. In
addition, the Board of Directors may elect one or more Vice
Presidents one or more Assistant Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers and
such other Officers as the Board may deem desirable or
appropriate and may give any of them such further designations or
alternate titles as it considers desirable. Any number of offices
may be held by the same person unless the Agreement or these
By-Laws otherwise provide.
Section 4.2. Term of Office; Resignation; Removal;
Vacancies. Unless otherwise provided in the resolution of the
Board of Directors electing any Officer, each Officer shall hold
office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. Any Officer may
resign at any time upon written notice to the Board or to the
President or the Secretary of the Company. Such resignation shall
take effect at the time specified therein, and unless otherwise
specified there no acceptance of such resignation shall be
necessary to make it effective. The Board may remove any Officer
with or without cause at any time. Any such removal shall be
without prejudice to the contractual rights of such Officer, if
any, with the Company, but the election of an Officer shall not
of itself create contractual rights. Any vacancy occurring in any
office of the Company by death, resignation, removal or otherwise
may be filled by the Board at any regular or special meeting.
Section 4.3. Powers and Duties. The Officers of the
Company shall have such
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powers and duties in the management of the Company as shall be
stated in these By-Laws or in a resolution of the Board of
Directors which is not inconsistent with these By-Laws and, to
the extent not so stated, as generally pertain to comparable
offices in a corporation organized under the General Corporation
Law of the State of Delaware, subject to the control of the
Board. The Secretary shall have the duty to record the
proceedings of the meetings of the Securityholders, the Board of
Directors and any committees in a book to be kept for that
purpose. The Board may require any Officer, agent or employee to
give security for the faithful performance of his or her duties.
ARTICLE V
Securities
Section 5.1. Certificates for Securities. The
Preferred Securities in the Company shall be registered in
certificated form. If such certificate is manually countersigned
by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. In case any Officer who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such Officer before such
certificate is issued, it may be issued by the Company with the
same effect as if such person were such Officer at the date of
issue.
Section 5.2 Lost, Stolen or Destroyed Certificates,
Issuance of New Certificates. The Company may issue a new
certificate representing Securities in the place of any
certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Company may require the owner of the
lost, stolen or destroyed certificate, or such owner's legal
representative, to give the Company a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or
uncertificated Securities.
ARTICLE VI
Miscellaneous
Section 6.1. Seal. The Company may have a company seal
which shall have the name of the Company inscribed thereon and
shall be in such form as may be approved from time to time by the
Board of Directors. The company seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 6.2. Waiver of Notice of Meetings of
Securityholders, Directors and Committees. Whenever notice is
required to be given by law or under any provision of the
Agreement or these By-Laws, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the Securityholders, Directors or a committee of Directors
need be specified in any written waiver of
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notice unless so required by the Agreement or these By-Laws.
Section 6.3. Indemnification of Directors, Officers
and Employees. The Company shall indemnify to the full extent
permitted under the Delaware Act any person made or threatened to
be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was
Director, Officer or employee of the Company or serves or served
at the request of the Company any other enterprise as a Director,
director, officer or employee except for such Director's or
Officer's gross negligence or willful misconduct. Expenses,
including attorneys' fees, incurred by any such person in
defending any such action, suit or proceeding shall be paid or
reimbursed by the Company promptly upon receipt by it of an
undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be
indemnified by the Company. The rights provided to any person by
these ByLaws shall be enforceable against the Company by such
person who shall be presumed to have relied upon it in serving or
continuing to serve as a Director, Officer or employee as
provided above. No amendment of these By-Laws shall impair the
rights of any person arising at any time with respect to events
occurring prior to such amendment. For purposes of these By-Laws,
the term "Company" shall include any predecessor of the Company
and any constituent company (including any constituent of a
constituent) absorbed by the Company in a consolidation or
merger; the term "other enterprise" shall include any limited
liability company, corporation, partnership, joint venture, trust
or employee benefit plan; service "at the request of the company"
shall include service as a Director, Officer or employee of the
Company which imposes duties on, or involves services by, such
Director, Officer or employee with respect to an employee benefit
plan, its participants or beneficiaries; any excise taxes
assessed on a person with respect to an employee benefit plan
shall be deemed to be indemnifiable expenses; and action by a
person with respect to an employee benefit plan which such person
reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not
opposed to the best interests of the Company. The rights
conferred on any Person by this Section 6.3 shall not be
exclusive of any other rights which such Person may have or
hereafter acquire under any statute, provision of these By-Laws,
the Agreement, any other agreement, vote of Securityholders or
disinterested Directors or otherwise. The Company's obligation,
if any, to indemnify any Person who was or is serving at its
request as a director, officer, employee or agent of any other
enterprise shall be reduced by any amount such Person may collect
as indemnification from such other enterprise. Any repeal or
modification of the foregoing provisions of this Section 6.4
shall not adversely affect any right of protection hereunder of
any Person in respect of any act or omission occurring prior to
the time of such repeal or modification.
Section 6.4. Interested Directors; Quorum. No contract
or transaction between the Company and one or more of its
Directors or Officers, or between the Company and any other
limited liability company, corporation, partnership, association
or other organization in which one or more of its Directors or
Officers are Directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely
because the Director or Officer is present at or participates in
the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or
her or their votes are counted for
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such purpose, if: (1) the material facts as to his or her
relationship or interest and as to the contract or transaction
are disclosed or are known to the Board or the committee, and the
Board or committee in good faith authorizes to contract or
transaction by the affirmative votes of disinterested Directors,
even though the disinterested Directors be less than a quorum; or
(2) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known
to the Securityholders entitled to vote of the Securityholders;
or (3) the contract or transaction is fair as to the Company as
of the time it is authorized, approved or ratified, by the Board,
a committee thereof or the Securityholders. Common or interested
Directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
Section 6.5. Form of Records. Any records maintained
by the Company in the regular course of its business, including
its Securities ledger, books of account and minute books, may be
kept on, or be in the form of, punch cards, magnetic tape or
disk, photographs, microphotographs or any other information
storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The
Company shall so convert any records so kept upon the request of
any person entitled to inspect the same.
Section 6.6. Amendment of By-Laws. These By-Laws may
be amended or repealed, and new by-laws adopted, by the Board of
Directors in accordance with the Agreement.
* * *
12
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to BNP U.S. FUNDING L.L.C. or its agent for
registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. (or in
such other name as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
THE ISSUER OF THE SERIES A PREFERRED SECURITIES EVIDENCED HEREBY
HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940
AND SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A
PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A PERSON WHO IS A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, AND, IN EACH CASE, IN COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.
Each registered holder and beneficial owner of the Series A
Preferred Securities evidenced hereby is deemed to have
acknowledged, represented to and agreed with the Company and the
Bank (each as defined below) and the initial purchasers from the
Company of such Securities as to the matters set forth in the
section entitled "Notice to Investors" in the Company's Offering
Memorandum dated December 1, 1997, including the matters in the
legend set forth in the immediately preceding paragraph.
<PAGE>
Certificate Number A-1 Aggregate Liquidation Preference
CUSIP NO. 05562EAA6 [$_________]
CERTIFICATE FOR SERIES A PREFERRED SECURITIES OF
BNP U.S. FUNDING L.L.C.
Noncumulative Preferred Securities, Series A
(liquidation preference $10,000
per Series A Preferred Security)
BNP U.S. FUNDING L.L.C., a limited liability company
formed under the laws of the State of Delaware (the "Company"),
hereby certifies that Cede & Co. (the "Securityholder") is the
registered owner of $___________ aggregate liquidation preference
of Series A Preferred Securities of the Company representing
preferred limited liability company interests in the Company,
which are designated the Noncumulative Preferred Securities,
Series A, liquidation preference $10,000 per Series A Preferred
Security (the "Series A Preferred Securities"). The Series A
Preferred Securities are fully paid and are nonassessable
preferred limited liability company interests in the Company, as
to which the Securityholders of the Company who hold the Series A
Preferred Securities (the "Securityholders"), in their capacities
as such, have no liability in excess of their obligations to make
payments provided for in the L.L.C. Agreement (as defined below)
and their share as provided in the L.L.C. Agreement of the
Company's assets and undistributed profits (subject to their
obligation to repay any funds wrongfully distributed to them),
and are transferable on the books and records of the Company, in
person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer and
otherwise in accordance with the provisions of the L.L.C.
Agreement. The powers, preferences and special rights and
limitations of the Series A Preferred Securities are set forth
in, and this certificate and the Series A Preferred Securities
represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated
Limited Liability Company Agreement of the Company dated as of
December 5, 1997, as the same may be amended from time to time in
accordance with its terms (the "L.L.C. Agreement"), authorizing
the issuance of the Series A Preferred Securities and determining
the powers, preferences and other special rights and limitations,
regarding dividends, voting, return of capital and otherwise, and
other matters relating to the Series A Preferred Securities.
Capitalized terms used herein but not defined herein shall have
the meaning given them in the L.L.C. Agreement. The Company will
furnish a copy of the L.L.C. Agreement and the Contingent Support
Agreement between the Company and BANQUE NATIONALE DE PARIS, a
French societe anonyme (limited liability company), dated as of
December 5, 1997 to the Securityholder without charge upon
written request to the Company at its principal place of
business.
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The Securityholder, by accepting this certificate, is
deemed to have agreed to be bound by the provisions of the L.L.C.
Agreement. Upon receipt of this certificate, the Securityholder
is admitted to the Company as a Preferred Securityholder, is
bound by the L.L.C. Agreement and is entitled to the benefits
thereunder.
IN WITNESS WHEREOF, this certificate has been executed
on behalf of the Company by a duly authorized officer as of this
fourth day of December 1997.
BNP U.S. FUNDING L.L.C.
By:_____________________________
Name: Eric Deudon
Title: President and Director
By:_____________________________
Name: Jean-Pierre Beck
Title: Director
3
EXECUTION COPY
TRUST AGREEMENT
Trust Agreement, dated as of December 1, 1997 between
Citibank N.A., a national banking association (the "Bank" and, in
its capacity as trustee, the "Trustee"), having an office at 111
Wall Street, New York, New York, 10005, and BNP U.S. Funding
L.L.C., a limited liability company organized under the laws of
Delaware, having an office at 499 Park Avenue, New York, New York
10022 (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is selling on the date hereof its
common and preferred securities to the purchasers thereof and
applying the proceeds of such sale to acquire securities;
WHEREAS, the Company and the Trustee desire to establish
the trust created hereby (the "Trust") to hold for the benefit of
the Company and the holders of the Company's common and preferred
securityholders (collectively, the "Securityholders") securities,
including the securities listed on Annex 1 hereto and each
additional security purchased by or on behalf of the Company and
held by the Trustee hereunder, and such funds and other property
of the Company as may be held from time to time by the Trustee
hereunder (collectively, the "Trust Property"); and
WHEREAS, the Company will instruct the Trustee in all cases
as provided herein as to the application of funds included in the
Trust Property, including with respect to the purchase of
additional securities with principal or interest payments
received by the Trustee or other dispositions thereof.
NOW, THEREFORE, in consideration of the premises and of the
agreements hereinafter set forth, the parties hereby agree as
follows:
1. APPOINTMENT AND ACCEPTANCE.
The Company hereby establishes the Trust and appoints the
Trustee as trustee of the Trust Property, and the Trustee agrees
to act as such upon the terms and conditions hereinafter
provided. The Company represents that it is authorized (a) to
establish the Trust and to open and maintain a Trust Account (the
"Trust Account") with the Trustee to hold the Trust Property
including, but not limited to, the securities ("Securities")
owned by the Company, (b) to enter into this Agreement, and (c)
to direct all actions and effect all transactions contemplated
hereunder. The Company further represents that it is duly formed,
and in good standing under the laws of the state of its formation
and the consummation of the transactions contemplated hereby or
directed by it hereunder will not violate any applicable laws,
regulations or orders.
It is the intention of the Company and the Trustee that the
Company assign and transfer hereunder to the Trustee in trust an
ownership interest in the Trust Property valid against third
parties. If, notwithstanding such intention, the assignment and
transfer of the Trust Property to the Trustee pursuant to this
Agreement is held or deemed to be a pledge of security, the
<PAGE>
Company intends that the rights and obligations of the parties
shall be established pursuant to the terms of this Agreement and
that, in such event, (i) the Company shall be deemed to have
granted and does hereby grant to the Trustee in trust a first
priority security interest in the entire right, title and
interest of the Company in and to the Trust Property and all
proceeds thereof, and (ii) this Agreement shall constitute a
security agreement under applicable law to the extent necessary
to establish such security interest.
2. DELIVERY; SAFEKEEPING.
The Company has heretofore delivered, or will deliver or
cause to be delivered, Trust Property to the Trustee, which Trust
Property the Trustee agrees to hold in trust in accordance with
the express provisions hereof. The Trustee shall not surrender
possession of Trust Property except upon properly authorized
Instructions (as hereinafter defined) of the Company or as may be
required by due process of applicable law.
3. IDENTIFICATION AND SEGREGATION OF ASSETS.
(a) Except as otherwise provided in this Agreement, the
Trustee will separately identify on its books and, to the extent
practicable, segregate all Trust Property held pursuant to this
Agreement by the Trustee or any other entity authorized to hold
Trust Property in accordance with Section 6 hereof.
(b) The Trustee shall supply to the Company from time to time
as mutually agreed upon a written statement with respect to all
Trust Property in the Trust Account. In the event that the
Company does not inform the Trustee in writing of any exceptions
or objections within thirty (30) days after the date of such
statement, the Company shall be deemed to have approved such
statement.
4. STANDARD OF CARE.
(a) The Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement. The
Trustee shall exercise such of the rights and powers vested in it
by this Agreement, 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 such person's own affairs.
(b) No provision of this Agreement 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;
provided, however, that:
(i) the Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Agreement, no implied
covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of
bad faith on the part of the Trustee, the 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
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Trustee and appearing on their face to conform to the
requirements of this Agreement;
(ii) the Trustee shall not be personally liable
for an error of judgment made in good faith by the
Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be personally liable
with respect to any action taken, suffered or omitted
to be taken by it in good faith in accordance with the
direction of the Company relating to exercising any
trust or power conferred upon the Trustee under this
Agreement.
(c) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial liability in the
performance of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds
or adequate indemnity against such risk or liability is not
reasonably assured to it.
(d) 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,
statements, notices, requests or other documents furnished to the
Trustee and reasonably believed by it to be genuine and to have
been presented to it pursuant to this Agreement; but in the case
of any such certificates, statements, notices, requests or other
documents which 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 as to form as to the requirements of this Agreement.
(e) The Trustee may consult with counsel of its choice and any
opinion of counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted
by it hereunder in good faith and in accordance with such opinion
of counsel.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement at the
request, order or direction of the Company, pursuant to the
provisions of this Agreement, unless the Company shall have
offered to the Trustee satisfactory security or indemnity against
the costs, expenses and liabilities which may be incurred therein
or thereby.
(g) The Trustee may exercise any of the trusts or powers under
this Agreement or perform any duties under this Agreement either
directly or by or through agents or attorneys or a custodian.
(h) Except as otherwise expressly provided herein, the Trustee
shall not be liable, in its individual capacity, for any action
taken, suffered or omitted by it in good faith and believed by it
in good faith to be authorized or within the discretion or rights
or powers conferred upon it by this Agreement.
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(i) In selecting and appointing U.S. Depositories (as
hereinafter defined), and other agents (except as otherwise
provided in this Section 4), as authorized by Section 6 of this
Agreement, the Trustee shall use reasonable care and shall be
responsible only for negligence in the selection thereof.
(j) Notwithstanding the above, neither the Trustee nor the
Bank, its parent nor any of its branches, subsidiaries or
affiliates is responsible for any losses or damages resulting
from reasons or causes beyond its control, including, without
limitation, nationalization, expropriation, currency
restrictions, act of war, terrorism, insurrection, revolution,
civil unrest, riots or strikes, nuclear fusion or fission or acts
of God.
(k) The Trustee is not under any duty to supervise the
investments of the Company, or to advise or make any
recommendation to the Company with respect to the purchase or
sale of any Securities or the investment of any funds. The
Company shall have the sole and exclusive responsibility for
directing the Trustee with respect to the investment of Trust
Property held hereunder.
5. PERFORMANCE BY THE TRUSTEE.
(a) General:
The Trustee's performance of its duties hereunder and the
day-to-day operations of the Trust Account shall be in accordance
with written service standards as may be furnished to the Company
by the Trustee from time to time. Such service standards, as may
be amended from time to time, are incorporated herein by
reference.
(b) Receipt, Delivery and Disposal of Securities:
The Trustee shall, or shall instruct any other entity
authorized to hold Trust Property in accordance with Section 6
hereof to, receive or deliver Securities and credit or debit the
Trust Account, in accordance with properly authorized
Instructions from the company. The Trustee or such authorized
entity shall also receive in custody all stock dividends, rights
and similar securities issued in connection with Securities held
hereunder, shall surrender for payment, in a timely manner, all
items maturing or called for redemption and shall take such other
action as the Company may direct in properly authorized
Instructions.
(c) Trade Execution:
The Company may from time to time direct the Trustee to buy
or sell Securities held or to be held in the Trust Account, the
brokers and dealers through which and the times and prices at
which such transactions should be effected and the Trustee shall
have no liability or responsibility whatsoever for any error,
neglect, or default of any such broker or dealer or for
mutilations, interruptions, omissions, errors or delays occurring
in the mails, or on the part of any telegraph, cable or wireless
company, or any employee of such company, or by reason of any
cause beyond the Trustee's control. The Company agrees to provide
specific Instructions regarding the deposit or delivery of all
such Securities to the Trust Account.
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(d) Registration:
Securities held hereunder may be registered in the name of
the Trustee, any entity authorized to hold Trust Property in
accordance with Section 6 hereof or a nominee of the Trustee or
any such authorized entity, and the Company shall be informed
upon request of all such registrations. Securities in registered
form will be transferred upon request of the Company into such
names or registrations as it may specify in properly authorized
Instructions.
(e) Cash:
(i) All cash received or held by the Trustee as
interest, dividends, proceeds from transfer, and other
payments for or with respect to Securities shall be
held in (x) the Trust Account in accordance with
properly authorized Instructions of the Company
received by the Trustee or (y) if specified in the
Company's Instructions, such other account as the
Company may direct. All such cash shall be received
and remitted by the Trustee in U.S. dollars and will
not require any currency conversion.
(ii) The Company agrees, with respect to the
payment for all purchases of Securities to be
deposited in the Trust Account, that funds for
settlement will be on deposit by the settlement date
at the location of settlement, in good available funds
and in the currency of settlement. The Company
acknowledges that nothing in this Agreement shall
obligate the Trustee or the Bank to extend credit,
grant financial accommodation or otherwise advance
moneys to the Company for the purpose of making any
such payments or part thereof or otherwise carrying
out any Instructions.
(f) Reports:
(i) If the Trustee has in place a system for
providing telecommunications access or other means of
electronic access by trust customers to the Trustee's
reporting system for Trust Property in the Trust
Account, then, at the Company's election, the Trustee
may agree to provide the Company with such
instructions and passwords as may be necessary in
order for the Company to have such direct access
through the Company's terminal device. Such electronic
access shall be restricted to information relating to
the Trust Account. If electronic access to such
reporting system is requested by the Company, the
Company agrees to assume full responsibility for the
consequences of the use, including any misuse or
unauthorized use of the terminal device, instructions
or passwords referred to above and agrees to defend
and indemnify the Trustee and hold the Trustee
harmless from and against any and all liabilities,
losses, damages, costs, counsel fees, and other
expenses of every nature suffered or incurred by the
Trustee by reason of, or in connection with, such use
by the Company or others of such terminal device,
unless such liabilities, losses, damages, costs,
counsel fees and other expenses can be shown to be the
result of negligent or wrongful acts of the Trustee.
Further, in the event the Company elects to have
electronic access,
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the Trustee shall provide the Company on each business
day a report of the preceding business day's
transactions relating to the Trust Account and of the
closing or net balances for each business day. If the
Company should not choose to have electronic access,
the Trustee shall provide the Company with such
reports of transactions in the Trust Account by such
means as may be mutually agreed upon.
(ii) The Trustee agrees to use reasonable efforts
to furnish the Company with such information regarding
Trust Property held hereunder as the Company may
reasonably request in connection with its complying
with requests of any regulatory authorities having
jurisdiction over the Company.
(iii) The Trustee shall also, subject to
restrictions under applicable law, seek to obtain from
any entity with which the Trustee maintains the
physical possession of any Trust Property in the Trust
Account such records of such entity relating to the
Trust Account as may be required by the Company or its
agents in connection with an internal examination by
the Company of its own affairs. Upon a reasonable
request from the Company, the Trustee shall use its
best efforts to furnish to the Company such reports
(or portions thereof) of the external auditors of each
such entity as relate directly to such entity's system
of internal accounting controls applicable to its
duties under its agreement with the Trustee.
(g) Access:
During the Trustee's regular banking hours and upon receipt
of reasonable notice directly from the Company, any officer or
employee of the Company, any independent accountant(s) selected
by the Company and any person designated by any regulatory
authority having jurisdiction over the Company shall be entitled
to examine on the Trustee's premises Trust Property held by the
Trustee on its premises and the Trustee's records regarding Trust
Property held hereunder or deposited with entities authorized to
hold Trust Property in accordance with Section 6 hereof, but only
upon furnishing the Trustee with properly authorized Instructions
to that effect, provided such examination shall be consistent
with the Trustee's obligations of confidentiality to other
parties.
The Trustee's costs and expenses in facilitating such
examinations shall be borne by the Company, provided that such
costs and expenses shall not be deemed to include the Trustee's
costs in providing to the Company: (i) the "single audit report"
of the independent certified public accountants engaged by the
Bank and (ii) such reports and documents as this Agreement
contemplates that the Trustee shall furnish routinely to the
Company.
(h) Voting and Other Actions:
(i) The Trustee will transmit to the Company upon
receipt, and will instruct any entities authorized to
hold Trust Property in accordance with Section 6
hereof to transmit to the Company upon receipt, all
financial reports, securityholder communications,
notices, proxies and proxy soliciting materials
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received from issuers of Securities, and all
information relating to exchange or tender offers
received from offerors with respect to Securities.
Proxies will be executed by the registered holder if
the registered holder is other than the Company, but
the manner in which the Securities are to be voted
will not be indicated. Neither the Trustee nor any
such authorized entity shall vote any Securities or
authorize the voting of any Securities or give any
consent or take any other action with respect thereto,
except as otherwise provided herein.
(ii) In the event of a tender offer, the Company
shall hand deliver, telecopy or transmit via tested
telex Instructions to the Trustee, as to the action to
be taken with respect thereto, designating such
Instructions as being related to a tender offer. The
Company shall hold the Trustee harmless from any
adverse consequences of the Company's use of any other
method of transmitting Instructions relating to a
tender offer.
(iii) The Company agrees that, if it gives an
Instruction for the performance of an act on the last
permissible date of a period established by the tender
offer or otherwise to act, the Company shall hold the
Trustee harmless from any adverse consequences in
connection with acting upon or failing to act upon
such Instruction.
(iv) The Trustee is authorized to accept and open
on the Company's behalf all mail or communications
received by it or directed in its care.
6. AUTHORIZED USE OF U.S. DEPOSITORIES.
The Company authorizes the Trustee, for any Securities held
hereunder, to use the services of any United States central
securities depository it deems appropriate, including, but not
limited to, the Depository Trust Company, the Participants Trust
Company and the Federal Reserve Book Entry System ("U.S.
Depositories"). The Trustee will deposit Securities held
hereunder with a U.S. Depository only in an account which holds
exclusively the assets of customers of the Bank.
7. USE OF AGENTS.
The Trustee may, subject to applicable laws, rules and
regulations, appoint agents, whether in its name or that of the
Company, to perform any of the duties of the Trustee hereunder,
and the Trustee may delegate to any such agent so appointed any
of its functions under this Agreement.
8. INSTRUCTIONS.
(a) The Trustee is authorized to rely and act upon written
instructions ("Instructions") which are signed by persons
("Authorized Persons") named in a list provided to the Trustee
from time to time, which list must be certified by the Company's
Secretary and include authenticated specimen signatures of all
Authorized Persons. Such list shall separately designate those
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Authorized Persons who may authorize the withdrawal of Securities
free of payment, those Authorized Persons who may authorize the
unconditional transfer of funds and those Authorized Persons who
may give Instructions by electronic access as provided hereunder.
(b) The Company agrees that the Trustee is authorized to
rely and act upon such Instructions in accordance with this
Section 8 and the Manual Transmission Authorization attached
hereto and incorporated herein by reference (including the Manual
Transmission Procedures attached thereto) and to debit or credit
the applicable account(s) of the Company accordingly and that
such Manual Transmission Authorization and method(s) of
transmission are commercially reasonable.
(c) The Trustee shall be entitled to rely upon the
continued authority of any Authorized Person to give Instructions
until the Trustee receives notice from the Company to the
contrary; and the Trustee shall be entitled to rely upon any
Instructions it believes in good faith to have been given by an
Authorized Person.
(d) The Trustee is further authorized to rely upon any
Instructions received by any other means and identified as having
been given or authorized by any Authorized Person, regardless of
whether such Instructions shall in fact have been authorized or
given by any of such Authorized Persons, provided that the
Trustee and the Company shall have agreed upon the means of
transmission and the method of identification for such
Instructions. Instructions received by any other means shall
include but shall not be limited to verbal Instructions only in
connection with delivery against payment or receipt against
payment transactions and transfers from one account within the
Trust Account to another account within the Trust Account and
provided that such verbal Instructions are promptly confirmed in
writing by the Company. Notwithstanding the foregoing, in the
event that verbal Instructions are not subsequently confirmed in
writing as provided above, the Company agrees to hold the Trustee
harmless and without liability for any claims or losses in
connection with such verbal Instructions.
(e) The Company agrees to be bound by any Instruction,
whether or not authorized, given to the Trustee in its name and
accepted by the Trustee in accordance with the provisions hereof
(including but not limited to the Funds Transfer Procedures) and
further agrees to indemnify and hold the Trustee harmless from
and against any loss, liability, claim or expense (including
legal fees and expenses) associated with the Trustee's acting
upon such Instructions as provided herein, except such as may
arise from the Trustee's own negligence, bad faith or willful
misconduct.
(f) If the Company should choose to have telecommunications
or other means of electronic access to the Trustee's reporting
system for Trust Property in the Trust Account, pursuant to
paragraph (f) of Section 5, the Trustee is also authorized to
rely and act upon any Instructions received by it through a
terminal device, provided that such Instructions are accompanied
by code words which the Trustee has furnished to the Company or
an Authorized Person by any method mutually agreed to by the
Trustee and the Company, and provided that the Trustee has not
been notified by the Company or any such Authorized Person to
cease to
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recognize such code words, regardless of whether such
Instructions shall in fact have been given or authorized by the
Company or any such Authorized Person.
9. FEES AND EXPENSES AND INDEMNITY.
(a) Fees and expenses for the services rendered under this
Agreement shall be as separately agreed upon by the parties by
letter agreement. The Trustee shall be entitled to debit the
Trust Account for such fees and expenses.
(b) The Trustee and its agents shall be indemnified by the
Company from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims,
and reasonable and documented costs, expenses or disbursements of
any kind whatsoever which may at any time be imposed on, incurred
by or asserted against the Trustee or such agents in any way
relating to or arising out of this Agreement or any documents
contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted by the Trustee
and its agents under or in connection with any of the foregoing;
provided, however, that the Company shall not be liable for the
payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from an act of negligence, bad
faith or willful misconduct of the Trustee or its agent. This
Section 9 shall survive the termination of this Agreement and/or
the resignation or removal of the Trustee.
10. LIEN.
The Trustee shall have a lien on the Trust Property in the
Trust Account to secure payment of such fees and expenses of the
services rendered under this Agreement. If the Trustee or its
nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the
performance of its duties hereunder, except such as may arise
from its or its nominee's negligent action, negligent failure to
act or willful misconduct, any Trust Property at any time held
for the Trust Account shall be security therefor and the Company
hereby grants to the Trustee a security interest therein. The
Company shall promptly reimburse the Trustee for any such advance
of cash or Securities or any such taxes, charges, expenses,
assessments, claims or liabilities upon request for payment, but
should the Company fail to reimburse the Trustee, the Trustee
shall be entitled to dispose of such Trust Property to the extent
necessary to obtain reimbursement. The Trustee shall be entitled
to debit and/or charge the Trust Account and/or the Company, as
the case may be, in connection with any such advance and any
interest on such advance as the Trustee deems reasonable.
11. TAX STATUS/WITHHOLDING TAXES.
(a) The Company's U.S. Tax Identification Number is 133972207.
(b) The Company may be required from time to time to file
such proof of taxpayer status or residence, to execute such
certificates and to make such representations and warranties, or
to provide any other information or documents, as the Trustee may
deem necessary or proper to fulfill the Trustee's obligations
under applicable law. The Company shall provide the Trustee, in a
timely manner, with copies of originals if necessary and
appropriate, or any such proofs of
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residence, taxpayer status, beneficial ownership and any other
information or documents which the Trustee may reasonably
request.
(c) If any tax or other governmental charge or assessment
shall become payable with respect to any payment due to the
Company ("Taxes"), such Taxes shall be withheld from such payment
in accordance with applicable law. The Trustee may withhold any
interest, any dividends or other distributions or securities
receivable in respect of Securities, proceeds from the sale or
distribution of Securities ("Payments"), or may sell for the
account of the Company any part thereof or all of the Securities,
and may apply such Payment in satisfaction of such Taxes, the
Company remaining liable for any deficiency. If any Taxes shall
become payable with respect to any payment made to the Company by
the Trustee in a prior year, the Trustee may withhold Payments in
satisfaction of such prior year's Taxes. The Company shall
indemnify and hold harmless the Trustee, its officers, employees,
agents and affiliated companies against any Taxes, penalties,
additions to tax, and interest, and costs and expenses related
thereto, arising out of claims against the Trustee by any
governmental authority for failure to withhold Taxes or arising
out of any reclaim or refund of taxes or other tax benefit
obtained by the Trustee for the Company.
(d) This Section 11 shall survive the termination of this
Agreement and continue in force until the time for assessment of
all Taxes expires.
12. AMENDMENT
This Agreement may not be amended except by mutual written
agreement between both parties hereto.
13. ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
The Trustee hereunder shall at all times be a "bank" as
defined in the United States Investment Company Act of 1940, as
amended, having a corporate trust office in the United States and
organized and doing business under the laws of the United States
or any state of the United States, authorized under applicable
law to exercise corporate trust powers, and having an aggregate
capital, surplus and undivided profits of at least $50,000,000
and subject to supervision or examination by United States
Federal or state authorities. Such bank shall maintain a banker's
blanket bond or similar insurance coverage against loses arising
out of the infidelity of its employees engaged in trust or other
fiduciary capacities of the type and in the amount and with the
deductibles that are customary for its business and size. If such
bank 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 13,
the aggregate capital, surplus and undivided profits of such
corporation shall be deemed to be its aggregate capital, surplus
and undivided profits as set forth in its most recent report of
condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provision of this
Section 13, the Trustee shall resign immediately in the manner
and with the effect specified in Section 14.
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14. TERMINATION
(a) The Trustee may at any time resign upon 90 days'
written notice thereof to the Company or be removed with cause
from the Trust upon 90 days' written notice thereof from the
Company. Before such resignation or removal shall become
effective, the Company shall appoint a successor Trustee by
written instrument, one copy of which instrument shall be
delivered to each of the resigning Trustee and the successor
Trustee. If no successor Trustee shall have been so appointed and
have accepted appointment within 90 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.
(b) If at any time the Trustee shall cease to be eligible
with respect to the Trust in accordance with the provisions of
Section 13 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustee shall be
legally unable to act, 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 purposes of
rehabilitation, conservation or liquidation, then the Company may
remove the Trustee. In the event the Trustee demonstrates itself
unwilling to fulfill its duties hereunder, the Company may remove
the Trustee. If the Trustee is removed under the authority of
either of the two immediately preceding sentences, the Company
shall promptly appoint a successor Trustee (other than the
outgoing Trustee) by written instrument, one copy of which
instrument shall be delivered to each of the Trustee so removed
and the successor Trustee. If no successor Trustee shall have
been appointed and have accepted appointment within 90 days after
a determination to remove the Trustee, the Trustee whose removal
is sought may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
(c) Any resignation or removal of the Trustee and
appointment of a successor Trustee pursuant to any of the
provisions of this Section 14 shall not become effective until
acceptance of appointment by the successor Trustee and transfer
of the Trust Property to the successor Trustee as provided in
Section 14(d).
(d) Any successor Trustee appointed as provided in this
Section 14 shall execute, acknowledge and deliver to the Company
and to its predecessor Trustee an instrument accepting such
appointment under this Agreement and the transfer of the property
of the Trust to such successor Trustee and thereupon the
resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without further act, deed
or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor under this
Agreement and with like effect as if originally named as Trustee.
The predecessor Trustee shall deliver or cause to be delivered to
the successor Trustee or its designee the Securities, any other
Trust Property and any related documents and statements held by
it under this Agreement, and the Company and the predecessor
Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all
such rights, powers, duties and obligations. No successor Trustee
shall accept appointment as provided in this Section 14(d) unless
at the time of such acceptance such successor Trustee is eligible
under the provisions of Section 13.
-11-
<PAGE>
(e) The obligations of the Trustee hereunder and the Trust
created by this Agreement shall terminate upon receipt by the
Trustee of a written certification from the Company certifying
that the Company has redeemed all of its outstanding preferred
securities, provided, however, that in no event shall the Trust
created by this Agreement continue beyond the expiration of 21
years from the death of the last survivor of the descendants of
Joseph Kennedy, late Ambassador to the Court of St. James
(England), living on the date of this Agreement. Upon a
termination of the Trust pursuant to this Section 14(e), the
Trustee shall transfer all Trust Property to the Company.
15. CONFIDENTIALITY.
Subject to the foregoing provisions of this Agreement and
subject to any applicable law, the Company and the Trustee shall
each use best efforts to maintain the confidentiality of matters
concerning Trust Property in the Trust Account.
16. NOTICES.
All notices and other communications hereunder, except for
Instructions and reports relating to the Trust Property which are
submitted through the Trustee's reporting system for Trust
Property in the Trust Account, shall be in writing, telex, fax or
copy, or if verbal, shall be promptly confirmed in writing, and
shall be hand-delivered, telexed, faxed, telecopied or mailed by
prepaid first class mail (except that notice of termination, if
mailed, shall be prepaid registered or certified mail) to each
party at its address set forth above, if to the Company, marked
"Attention: Treasurer" and if to the Trustee, marked Citibank as
Trustee for Securityholders of BNP U.S. Funding L.L.C.,
Attention: Fred Esposito/Account Management, 111 Wall Street,
20th floor, New York, NY 10005, or at such other address as each
party may give written notice of to the other party.
17. ASSIGNMENT.
Neither party may assign, transfer or change all or any of
its rights and benefits hereunder without the written consent of
the other. Any purported assignments made in contravention of
this Section shall be null and void and of no effect whatsoever.
18. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
ACCORDING TO, THE LAWS OF THE STATE OF NEW YORK AND THE PARTIES
AGREE THAT THE COURTS OF THE STATE OF NEW YORK SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY SUIT, ACTION OR PROCEEDING
AND TO SETTLE ANY DISPUTES WHICH MAY ARISE OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, AND, FOR SUCH PURPOSES, EACH
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH
COURTS.
-12-
<PAGE>
19. MISCELLANEOUS.
(a) This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which shall
constitute one and the same instrument.
(b) This Agreement contains the entire agreement between the
Company and the Trustee relating to the Trust Property and
supersedes all prior agreements on this subject.
(c) The captions of the various sections and subsections of
this Agreement have been inserted only for the purposes of
convenience, and shall not be deemed in any manner to modify,
explain, enlarge or restrict any of the provisions of this
Agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized.
Citibank N.A. BNP U.S. Funding L.L.C.
By: /s/ John Byrnes By: /s/ Eric Deudon
---------------------- ----------------------
Name: John Byrnes Name: Eric Deudon
Title: Vice President Title: President
By: /s/ Lisa Hermann
----------------------
Name: Lisa Hermann
Title: Treasurer
<PAGE>
ANNEX 1 to the Trust Agreement
SECURITIES SCHEDULE
Unpaid Current Stated
Series Principal Balance Coupon (%) Maturity
------- ----------------- ----------- ----------
FANNIE MAE 1993-210 FB..... 46,251,185 6.05625 10/25/2022
FHLMC-GNMA 38 F............ 8,262,208 6.250 08/25/2023
FANNIE MAE 1997-28 FA...... 27,740,856 6.02429 05/18/2027
FANNIE MAE 1996-51 FA...... 16,131,369 6.250 03/18/2025
FREDDIE MAC 1993 FR........ 8,383,363 6.250 09/15/2020
FANNIE MAE 1990-121 F...... 22,134,413 6.45625 10/25/2020
Collateralized Mortgage
Obligation Trust 66 F.... 1,627,321 6.225 09/20/2006
FREDDIE MAC 1382 LC........ 4,372,567 6.150 11/15/2018
FANNIE MAE 1992-141 FA..... 8,184,953 6.156 08/25/2007
FREDDIE MAC 1256 CA........ 6,413,824 6.450 01/15/2022
Morgan Stanley Mortgage
Trust 41 Class 1......... 7,994,598 6.275 02/20/2022
FANNIE MAE 1993-155 FG..... 5,300,309 6.15625 06/25/2023
FREDDIE MAC 1040 H......... 23,113,008 6.700 02/15/2021
FANNIE MAE 1997-37 F....... 32,112,088 6.150 06/18/2027
FANNIE MAE 1997-52 F....... 9,544,000 6.21875 02/20/2024
FANNIE MAE 1997-42 F....... 9,451,590 6.250 12/18/2027
FANNIE MAE 1997-44 F....... 9,780,304 6.150 07/18/2027
FANNIE MAE 1997-56 PE...... 46,839,000 6.500 06/18/2026
FANNIE MAE 1997-67 FB...... 21,518,739 6.150 10/18/2012
FN 394850.................. 37,138,904 6.064 07/01/2027
FN 397901.................. 46,070,931 5.888 08/01/2027
FH 846384.................. 15,097,384 6.795 12/01/2026
FN 374773.................. 13,403,266 5.839 03/01/2027
<PAGE>
Unpaid Current Stated
Series Principal Balance Coupon (%) Maturity
------- ----------------- ----------- ----------
FN 374711............ 9,008,132 5.716 07/01/2027
FH 410544............ 6,439,952 5.908 09/01/2027
FH 610727............ 12,404,856 5.735 05/01/2027
G2 080094............ 49,648,042 6.000 07/20/2027
FN 313242............ 8,533,007 7.718 11/01/2026
FN 367349............ 13,584,491 5.929 12/01/2026
FN 313311............ 8,123,100 7.408 12/01/2026
FN 363057............ 10,889,625 5.450 02/01/2027
FN 313190............ 8,498,927 7.909 09/01/2026
FN 363070............ 6,397,026 5.495 03/01/2027
FN 313377............ 25,102,809 6.105 02/01/2027
FN 370479............ 9,880,086 5.329 03/01/2027
FN 378243............ 4,269,516 6.221 07/01/2027
FN 313432............ 34,625,349 5.954 02/01/2027
FN 370478............ 10,420,918 5.353 02/01/2027
FN 396355............ 8,761,919 5.797 08/01/2027
FN 374774............ 8,274,399 5.427 03/01/2027
FN 391247............ 21,832,800 6.560 04/01/2027
FN 345856............ 17,147,762 6.859 08/01/2036
FN 374138............ 17,770,190 6.349 03/01/2027
FN 361370............ 48,860,336 7.556 07/01/2026
FN 397136............ 13,193,288 7.756 06/01/2027
FN 361372............ 69,995,932 7.880 07/01/2026
FN 312824............ 9,226,576 7.375 06/01/2025
Tnote 6.625 05/15/07. 70,000,000 6.625 05/15/2007
Tnote 6.5 10/15/06... 70,000,000 6.500 10/15/2006
----------
EXECUTION COPY
- -----------------------------------------------------------------
PORTFOLIO SECURITIES
PURCHASE AGREEMENT
BNP U.S. Funding L.L.C.,
as Purchaser
Banque Nationale de Paris, acting through its New York Branch,
as Seller
--------------------
Dated as of December 1, 1997
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. Definitions...........................................1
SECTION 2. Agreement to Purchase.................................3
SECTION 3. Purchase Price........................................3
SECTION 4. Conveyance from Seller to Purchaser...................3
SECTION 5. Representations, Warranties and
Covenants of the Seller...............................4
SECTION 6. Closing...............................................7
SECTION 7. Closing Documents.....................................8
SECTION 8. Costs.................................................8
SECTION 9. Notices...............................................8
SECTION 10. Severability Clause..................................9
SECTION 11. Counterparts.........................................9
SECTION 12. Governing Law........................................9
SECTION 13. Successors and Assigns; Assignment
of Purchase Agreement................................9
SECTION 14. Waivers.............................................10
SECTION 15. Exhibits............................................10
SECTION 16. Further Agreements..................................10
EXHIBITS
EXHIBIT A FORM OF SELLER ASSIGNMENT AND RECEIPT
EXHIBIT B FORM OF PURCHASER ASSIGNMENT AND RECEIPT
EXHIBIT C SECURITIES SCHEDULE
<PAGE>
PORTFOLIO SECURITIES PURCHASE AGREEMENT
---------------------------------------
This PORTFOLIO SECURITIES PURCHASE AGREEMENT (the
"Agreement"), dated as of December 1, 1997, by and between BNP
U.S. Funding L.L.C., a Delaware limited liability company (the
"Purchaser"), and Banque Nationale de Paris, a societe anonyme,
or limited liability corporation organized under the laws of The
Republic of France, acting through its New York Branch (the
"Seller").
WITNESSETH:
-----------
WHEREAS, the Seller desires to sell to the Purchaser,
and the Purchaser desires to purchase from the Seller on the
Closing Date, certain securities; and
WHEREAS, the Purchaser and the Seller wish to
prescribe the manner of the conveyance and control of such
securities.
NOW, THEREFORE, in consideration of the promises and
mutual agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Purchaser and the Seller agree as
follows:
SECTION 1. Definitions.
For purposes of this Agreement, the following
capitalized terms shall have the respective meanings set forth
below.
"Affiliate" means, with respect to any specified
Person, any other Person controlling or controlled by or under
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.
"Agreement" means this Portfolio Securities Purchase
Agreement and all amendments hereof and supplements hereto.
"Business Day" means any day other than (i) a Saturday
or Sunday, or (ii) a day on which banking institutions in the
State of New York are authorized or obligated by law or executive
order to be closed.
"Closing Date" means December 5, 1997 or such other
date as is mutually agreed upon by the parties.
"Damage Payment" means, with respect to any Security,
the excess, if any, of (i) the higher of the unpaid principal
balance plus accrued and unpaid interest and the market value of
such Security, as if such Security were not impaired by a breach
of one or more of the representations and warranties set forth in
Subsection 5.01, over (ii) the market value of the
<PAGE>
Purchaser's interest in such Security given the occurrence of
such breach, in each case as of the date the Damage Payment is
made.
"Deleted Security" means a Security purchased by the
Purchaser hereunder that is subsequently repurchased or replaced
by the Seller with a Qualified Substitute Security in accordance
with the terms of this Agreement.
"Offering Memorandum" means the Final Offering
Memorandum in respect of the Purchaser's Series A Preferred
Securities, dated December 1, 1997.
"Person" means any individual, corporation,
partnership, joint venture, association, joint stock company,
trust, limited liability company, unincorporated organization,
government or any agency or political subdivision thereof.
"Principal Amount" means, with respect to any Security
or Qualified Substitute Security and as of any relevant date, the
outstanding unpaid principal amount of such Security or Qualified
Substitute Security as of the most recent Principal Date for such
Security or Qualified Substitute Security as announced by the
issuer of such Security or Qualified Substitute Security (or an
authorized Person acting on behalf of the issuer), plus accrued
and unpaid interest on such Security or Qualified Substitute
Security as of such relevant date.
"Principal Date" means, with respect to any Security
or Qualified Substitute Security which is subject to payments or
prepayments of principal (whether scheduled or unscheduled) prior
to a final stated maturity, the most recent date as of which the
issuer of such Security or Qualified Substitute Security (or an
authorized Person acting on behalf of the issuer) has announced
the outstanding unpaid principal amount of such Security or
Qualified Substitute Security or released information permitting
holders of such Security or Qualified Substitute Security to
calculate its outstanding unpaid principal amount. The respective
"Principal Dates" of the Securities are indicated on the
Securities Schedule.
"Purchase Price" means the price to be paid by the
Purchaser to the Seller in exchange for the Securities as set
forth in Section 3 of this Agreement.
"Purchaser" means BNP U.S. Funding L.L.C. or its
successor in interest or assigns or any successor to the
Purchaser under this Agreement as herein provided.
"Qualified Substitute Security" means a security to be
substituted by the Seller for a Deleted Security pursuant to
Subsection 5.02, which must, on the date of such substitution,
(i) be an "Eligible Security" as such term is defined in the
Offering Memorandum, that is issued by the same issuer as the
Deleted Security; (ii) have a Principal Amount (or, in the case
of the substitution of more than one security for a Deleted
Security, an aggregate Principal Amount) that is not greater than
and not more than 5% less than the Principal Amount of the
Deleted Security; (iii) calculate interest in the same manner as
the Deleted Security (i.e., either a floating or fixed rate of
interest), use the same underlying index in the case of a
floating rate of interest, and at the time of substitution have a
pass-through interest rate or interest rate not less than and not
more than 1.0% greater than the pass-through rate or interest
rate of the Deleted Security; (iv)
2
<PAGE>
have a remaining estimated weighted average term to maturity not
greater than and not more than one year less than that of the
Deleted Security; and (v) comply with the representations and
warranties set forth in Subsection 5.01 hereof.
"Repurchase Price" means, with respect to any
Security, a price equal to the higher of its Principal Amount and
the market value of such Security in each case, as of the date of
repurchase.
"Seller" means Banque Nationale de Paris, acting
through its New York Branch or its successors in interest and
assigns.
"Securities Schedule" means the schedule of securities
attached hereto as Exhibit C.
"Security" means any security listed on the Securities
Schedule and purchased by the Purchaser from the Seller pursuant
to this Agreement.
"Trust Agreement" means the Trust Agreement, dated as
of December 1, 1997, between the Purchaser and Citibank, N.A., as
Trustee, as such Trust Agreement may be amended, modified or
supplemented from time to time.
"Trustee" means Citibank, N.A., as trustee under the
Trust Agreement.
SECTION 2. Agreement to Purchase.
The Seller agrees to sell and the Purchaser agrees to
purchase on the Closing Date the Securities described in the
Securities Schedule.
SECTION 3. Purchase Price.
The Purchase Price for the Securities sold hereunder
on the Closing Date shall be $ 1,030,110,000. The Purchase Price
for the Securities purchased hereunder shall be paid to the
Seller on the Closing Date by either wire transfer or intrabank
transfer of immediately available funds.
SECTION 4. Conveyance from Seller to Purchaser.
Subsection 4.01. Conveyance of Securities.
-------------------------
The Seller hereby agrees to sell, transfer, assign, set
over and convey to the Purchaser on the Closing Date, pursuant to
the form of assignment annexed hereto as Exhibit A, without
recourse, but subject to the terms of this Agreement, all right,
title and interest of the Seller in and to the Securities (and
any documents related hereto), together with an amount of cash
equal to the sum of (i) all interest payments paid in respect of
the Securities from the date hereof to and including the Closing
Date and (ii) all payments or prepayments of principal paid in
respect of any of the Securities (whether scheduled or
unscheduled) from their respective Principal Dates as shown on
the Securities Schedule to and including the Closing Date. The
3
<PAGE>
Purchaser hereby agrees, forthwith upon such assignment, to
assign all its right, title and interest in such Securities, and
such amounts, to the Trustee pursuant to the form of assignment
annexed hereto as Exhibit B and in accordance with the terms of
the Trust Agreement.
Any amounts received by the Seller following the
Closing Date in respect of interest (including, without
limitations, payments of interest accrued from their respective
Principal Dates) or payment or prepayment of principal (whether
scheduled or unscheduled) on or in connection with any of the
Securities shall be held in trust for the benefit of the
Purchaser and promptly paid over to the Purchaser or its
designee.
Subsection 4.02. Books and Records.
------------------
Record title to each Security as of the Closing Date
shall be in the name of the Trustee. All rights arising out of
the Securities including, but not limited to, all funds received
by the Seller after the Closing Date on or in connection with a
Security shall be vested in the Purchaser acting through the
Trustee.
SECTION 5. Representations, Warranties and Covenants of
the Seller; Remedies for Breach.
Subsection 5.01. Representations and Warranties of the Seller.
---------------------------------------------
The Seller represents, warrants and covenants to the
Purchaser that as of the date hereof and as of the Closing Date:
(a) Due Organization and Authority; Enforceability. The
Seller is a societe anonyme (limited liability corporation) duly
organized, validly existing and in good standing under the laws
of The Republic of France, acting through its New York Branch
which is duly licensed as a branch of a foreign bank by the
Superintendent of Banks of the State of New York; the Seller has
the corporate power, authority and legal right to hold, transfer
and convey the Securities and to execute and deliver this
Agreement and to perform its obligations hereunder; the
execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this
Agreement) by the Seller and the consummation of the transaction
contemplated hereby have been duly and validly authorized; this
Agreement has been duly executed and delivered and constitutes
the valid, legal, binding and enforceable obligation of the
Seller subject to bankruptcy laws and other similar laws of
general application affecting rights of creditors and subject to
the application of the rules of equity, including those
respecting the availability of specific performance, none of
which will materially interfere with the realization of the
benefits provided thereunder, regardless of whether such
enforcement is sought in a proceeding in equity or at law; and
all requisite corporate action has been taken by the Seller to
make this Agreement and all agreements contemplated hereby valid
and binding upon the Seller in accordance with their terms;
(b) No Conflicts. Neither the execution and delivery of
this Agreement, the sale of the Securities to the Purchaser, the
consummation of the transaction contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of
this Agreement, will conflict
4
<PAGE>
with or result in a breach of any of the terms, conditions or
provisions of the Seller's statuts (by-laws) or any legal
restriction or any agreement or instrument to which the Seller is
now a party or by which it is bound and which is material to its
operations taken as a whole, or constitute a default or result in
an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree
to which the Seller or its property is subject, or result in the
creation or imposition of any lien, charge or encumbrance that
would have an adverse effect upon any of its properties pursuant
to the terms of any mortgage, contract, deed of trust or other
instrument, or impair the ability of the Purchaser to realize on
the Securities or impair the value of the Securities;
(c) Ability to Perform; Solvency. The Seller does not
believe, nor does it have any reason or cause to believe, that it
cannot perform each and every covenant contained in this
Agreement. The Seller is solvent and the sale of the Securities
will not cause the Seller to become insolvent. The sale of the
Securities is not undertaken with the intent to hinder, delay or
defraud any of the Seller's creditors;
(d) No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the
Seller, before any court, administrative agency or other tribunal
asserting the invalidity of this Agreement, seeking to prevent
the consummation of any of the transaction contemplated by this
Agreement or which would draw into question the validity of this
Agreement or any of the Securities or of any action taken or to
be taken in connection with the obligations of the Seller
contemplated herein, or which would be likely to impair
materially the ability of the Seller to perform under the terms
of this Agreement;
(e) No Consent Required. No consent, approval,
authorization or order of, or registration or filing with, or
notice to any court or governmental agency or body is required
for the execution, delivery and performance by the Seller of or
compliance by the Seller with this Agreement, or if required,
such approval has been obtained prior to the Closing Date;
(f) Initial Portfolio. The aggregate characteristics of
the Securities are substantially the same as described under the
heading "Business and Strategy--Description of the Initial
Portfolio" in the Offering Memorandum;
(g) Securities as Described. The information set forth
in the Securities Schedule is true and correct in all material
respects.
(h) Absence of Liens. Delivery of the Securities
hereunder from the Seller to the Purchaser shall pass title
therein to the Purchaser free and clear of any liens, charges and
encumbrances.
Subsection 5.02. Remedies for Breach of Representations
and Warranties.
--------------------------------------
It is understood and agreed that the representations
and warranties set forth in Subsection 5.01 shall survive the
sale of the Securities to the Purchaser and shall inure to the
benefit of the Purchaser. Upon discovery by either the Seller or
the Purchaser of a breach of any of the foregoing representations
and warranties which adversely affects the value of any of the
5
<PAGE>
Securities or the interest of the Purchaser, the party
discovering such breach shall give prompt written notice to the
other, including the details thereof.
Within sixty (60) days of the earlier of either
discovery by or notice to the Seller of any breach of a
representation or warranty set forth in subsection 5.01 with
respect to one or more specific Securities, the Seller shall use
its best efforts promptly to cure such breach in all material
respects and, if such breach cannot be cured, the Seller shall,
at its option, (i) repurchase such Security at the Repurchase
Price, (ii) substitute a Qualified Substitute Security for such
Security pursuant to this Subsection or (iii) pay to the
Purchaser the Damage Payment with respect to such Security.
Within sixty (60) days of the earlier of either discovery by or
notice to the Seller of any breach of a representation or
warranty set forth in subsection 5.01 which affects all or
substantially all of the Securities, the Seller shall at its
option, (i) repurchase all of the Securities at the Repurchase
Price, or (ii) pay to the Purchaser an amount equal to the Damage
Payment with respect to all of the Securities. Any repurchase of
a Security pursuant to the foregoing provisions of this
Subsection 5.02 shall be accomplished by direct remittance of the
Repurchase Price to the Purchaser or its designee in accordance
with the Purchaser's instructions.
At the time of any repurchase or substitution, the
Purchaser and the Seller shall arrange for the reassignment of
the Deleted Security to the Seller and the delivery to the Seller
of any documents held by the Purchaser or its designee relating
to the Deleted Security. In connection with any such
substitution, the Seller shall deliver an officer's certification
to the Purchaser and the Trustee certifying that the
representations and warranties set forth in this Agreement apply
to such Qualified Substitute Security except that all such
representations and warranties set forth in this Agreement shall
be deemed made as of the date of such substitution. The Seller
shall effect such substitution by delivering to the Trustee any
documents for such Qualified Substitute Security.
If the Seller substitutes a Qualified Substitute
Security for a Deleted Security, the Seller and the Purchaser
shall determine the amount (if any) by which the aggregate
Principal Amount of all Qualified Substitute Securities as of the
date of substitution is less than the aggregate Principal Amount
as of such date, and the amount of any shortfall shall be paid in
cash by the Seller directly to the Purchaser or its designee in
accordance with the Purchaser's instructions at the time of such
substitution.
In the case of any Deleted Security, the Purchaser
shall promptly pay over to the Seller (i) any interest in respect
of such Deleted Security that is received by the Purchaser
following the date of repurchase or substitution, as the case may
be, and (ii) any payment or prepayment of principal in respect of
such Deleted Security (whether scheduled or unscheduled) that is
received by the Purchaser following the Principal Date for such
Deleted Security. In the case of any Qualified Substitute
Security, the Seller shall promptly pay over to the Purchaser (i)
any interest in respect of such Qualified Substitute Security
that is received by the Seller following the date of
substitution, and (ii) any payment or prepayment of principal in
respect of such Qualified Substitute Security (whether scheduled
or unscheduled) that is received by the Seller following the
Principal Date for such Qualified Substitute Security .
6
<PAGE>
In addition to the foregoing obligations of the Seller
with respect to repurchase, substitution or Damage Payments, the
Seller shall indemnify the Purchaser and hold it harmless against
any losses, damages, penalties, fines, forfeitures, reasonable
and necessary legal fees and related costs, judgments and other
costs and expenses resulting from any claim, demand, defense or
assertion based on or grounded upon, or resulting from, a breach
of the Seller's representations and warranties contained in this
Agreement. It is understood and agreed that the obligations of
the Seller set forth in this Subsection 5.02 to cure, substitute
for or repurchase a defective Security and to indemnify the
Purchaser as provided in this Subsection 5.02 constitute the sole
remedies of the Purchaser respecting a breach of the foregoing
representations and warranties.
Any cause of action against the Seller relating to or
arising out of the breach of any representations and warranties
made in Subsection 5.01 shall accrue as to any Security upon (i)
discovery of such breach by the Purchaser or notice thereof by
the Seller to the Purchaser, (ii) failure by the Seller to cure
such breach or repurchase, substitute for, or make the Damage
Payment with respect to, such Security as specified above, and
(iii) demand upon the Seller by the Purchaser for compliance with
this Agreement.
SECTION 6. Closing.
The closing for the purchase and sale of the
Securities shall take place on the Closing Date. At the
Purchaser's option, the closing shall be either: by telephone,
confirmed by letter or wire as the parties shall agree, or
conducted in person, at such place as the parties shall agree.
The closing shall be subject to each of the following
conditions:
(a) all of the representations and warranties of the
Seller under this Agreement (both as to the
Seller and with respect to each Security, as
specified herein) shall be true and correct as of
the Closing Date and no event shall have occurred
which, with notice or the passage of time, would
constitute a default under this Agreement;
(b) the Purchaser shall have received, or the
Purchaser's attorneys shall have received in
escrow, all closing documents as specified in
Section 7 of this Agreement, in such forms as are
agreed upon and acceptable to the Purchaser, duly
executed by all signatories other than the
Purchaser as required pursuant to the terms
hereof;
(c) the Seller shall have delivered and released to
the Purchaser or its designee the documents, if any,
related to each Security; and
(d) all other terms and conditions of this Agreement
shall have been complied with.
7
<PAGE>
Subject to the foregoing conditions, the Purchaser
shall pay to the Seller on the Closing Date the Purchase Price by
wire transfer of immediately available funds to the account
designated by the Seller.
SECTION 7. Closing Documents.
The closing documents for the Securities to be
purchased on the Closing Date shall consist of fully executed
originals of the following documents:
1. an assignment, in the form of Exhibit A hereto, including
all attachments thereto; and
2. an assignment, in the form of Exhibit B hereto, including
all attachments thereto.
The Seller shall bear the risk of loss of the closing
documents until such time as they are received by the Purchaser
or its attorneys.
SECTION 8. Costs.
All costs and expenses, including the legal fees and
expenses of the Purchaser's counsel in preparing this Agreement,
incurred in connection with the transfer and delivery of the
Securities shall be paid by the Seller.
SECTION 9. Notices.
All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given
when received by the other party at the address as follows:
(i) if to the Seller:
Banque Nationale de Paris, New York Branch
499 Park Avenue
New York, New York 10022
Attention: Robert Coghlan
Telephone Number: (212) 415-9458
Facsimile Number: (212) 415-9477
(ii) if to the Purchaser:
BNP U.S. Funding L.L.C.
499 Park Avenue
New York, New York 10022
Attention: Lisa Hermann
Telephone Number: (212) 415-9622
Facsimile Number: (212) 415-9797
8
<PAGE>
or such other address as may hereafter be furnished to
the other party by like notice.
SECTION 10. Severability Clause.
Any part, provision, representation or warranty of
this Agreement which is prohibited or unenforceable or is held to
be void or unenforceable in any jurisdiction shall be
ineffective, as to such jurisdiction, to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction as to any Security shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the
parties hereto waive any provision of law which prohibits or
renders void or unenforceable any provision hereof. If the
invalidity of any part, provision, representation or warranty of
this Agreement shall deprive any party of the economic benefit
intended to be conferred by this Agreement, the parties shall
negotiate, in good faith, to develop a structure the economic
effect of which is nearly as possible the same as the economic
effect of this Agreement without regard to such invalidity.
SECTION 11. Counterparts.
This Agreement may be executed simultaneously in any
number of counterparts. Each counterpart shall be deemed to be an
original, and all such counterparts shall constitute one and the
same instrument.
SECTION 12. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 13. Successors and Assigns; Assignment of Purchase
Agreement.
This Agreement shall bind and inure to the benefit of
and be enforceable by the Seller and the Purchaser and the
respective permitted successors and assigns of the Seller and the
successors and assigns of the Purchaser. This Agreement shall not
be assigned, pledged or hypothecated by the Seller to a third
party without the consent of the Purchaser.
SECTION 14. Waivers.
No term or provision of this Agreement may be waived
or modified unless such waiver or modification is in writing and
signed by the party against whom such waiver or modification is
sought to be enforced.
SECTION 15. Exhibits.
The exhibits to this Agreement are hereby incorporated
and made a part hereof and are an integral part of this
Agreement.
9
<PAGE>
SECTION 16. Further Agreements.
The Seller and the Purchaser each agree to execute and
deliver to the other such reasonable and appropriate additional
documents, instruments or agreements as may be necessary or
appropriate to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement under seal as of the date and year first above written:
BNP U.S. Funding L.L.C.
(the Purchaser)
By: /s/ Jean-Pierre Beck
---------------------------
Name: Jean-Pierre Beck
Title: Executive Vice-President
By: /s/ Eric Deudon
---------------------------
Name: Eric Deudon
Title: Senior Vice-President
Banque Nationale de Paris, acting through its
New York Branch (the Seller)
By: /s/ Bruno DiNardo
---------------------------
Name: Bruno DiNardo
Title: Senior Vice-President
By: /s/ Patrick Saurat
---------------------------
Name: Patrick Saurat
Title: Senior Vice-President and Chief
Administrative Officer
10
<PAGE>
EXHIBIT A
Seller Assignment and Receipt
- -----------------------------
Banque Nationale de Paris, acting through its New York Branch
(the "Branch"), as Seller under the Portfolio Securities Purchase
Agreement, dated December 1, 1997 (the "Agreement"), between the
Branch and BNP U.S. Funding L.L.C. (the "Company"), as Purchaser,
hereby transfers and conveys all right, title and interest of the
Branch in and to the securities and other assets listed in
Schedule I hereto (the "Transferred Interests") to the Company in
accordance with the terms and conditions of the Agreement. The
Branch hereby acknowledges receipt from the Company of aggregate
amount of $1,030,110,000 ($530,110,000 which has been paid by the
issuance by the Company to the Branch of 53,011 common securities
of the Company, liquidation preference U.S.$ 10,000 per security)
representing payment in full for the Transferred Interests.
BNP U.S. Funding L.L.C., as Purchaser under the
Agreement, hereby acknowledges receipt from the Branch of the
Transferred Interests.
BNP U.S. Funding L.L.C.
(the Purchaser)
By:-------------------------
Name: Jean-Pierre Beck
Title: Director
By:-------------------------
Name: Eric Deudon
Title: President and Director
Banque Nationale de Paris, acting through its
New York Branch (the Seller)
By:------------------------
Name: Jean-Pierre Beck
Title: Executive Vice-President
By:------------------------
Name: Eric Deudon
Title: Senior Vice-President
<PAGE>
EXHIBIT B
Purchaser Assignment and Receipt
- --------------------------------
BNP U.S. Funding L.L.C. (the "Company"), pursuant to the terms of
the Trust Agreement, dated as of December 1, 1997 (the "Trust
Agreement"), between the Company and Citibank, N.A., as trustee
(the "Trustee"), hereby transfers and conveys in trust all right,
title and interest of the Company to the securities and other
assets listed in Schedule I hereto (the "Transferred Interests")
to the Trustee, not in its individual capacity but solely as
Trustee, in accordance with the terms and conditions of the Trust
Agreement.
Citibank, N.A., as Trustee under the Trust Agreement, hereby
acknowledges receipt from the Company of the Transferred
Interests, to be held in trust for the Company in accordance with
the terms and conditions of the Trust Agreement.
BNP U.S. Funding L.L.C.
By:----------------------
Name: Jean-Pierre Beck
Title: Director
By:----------------------
Name: Eric Deudon
Title: President and Director
Citibank, N.A.
not in its individual capacity but
solely as Trustee
By:----------------------
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT C
SECURITIES SCHEDULE
Unpaid Principal Estimated Current Stated
Series Principal Balance Date Market Value Coupon (%) Maturity
------- ----------------- ---- ------------ ----------- --------
FANNIE MAE 1993-210 FB 46,251,185 October 31, 1997 46,556,636 6.05625 10/25/2022
FHLMC-GNMA 38 F ............ 8,262,208 October 31, 1997 8,343,683 6.250 08/25/2023
FANNIE MAE 1997-28 FA ...... 27,740,856 October 31, 1997 27,937,267 6.02429 05/18/2027
FANNIE MAE 1996-51 FA ...... 16,131,369 October 31, 1997 16,250,114 6.250 03/18/2025
FREDDIE MAC 1993 FR ........ 8,383,363 October 31, 1997 8,419,676 6.250 09/15/2020
FANNIE MAE 1990-121 F ...... 22,134,413 October 31, 1997 22,547,627 6.45625 10/25/2020
Collateralized Mortgage
Obligation Trust 66 F .... 1,627,321 October 31, 1997 1,635,102 6.225 09/20/2006
FREDDIE MAC 1382 LC ........ 4,372,567 October 31, 1997 4,400,488 6.150 11/15/2018
FANNIE MAE 1992-141 FA ..... 8,184,953 October 31, 1997 8,265,452 6.156 08/25/2007
FREDDIE MAC 1256 CA ........ 6,413,824 October 31, 1997 6,498,941 6.450 01/15/2022
Morgan Stanley Mortgage
Trust 41 Class 1 ......... 7,994,598 October 31, 1997 8,115,433 6.275 02/20/2022
FANNIE MAE 1993-155 FG ..... 5,300,309 October 31, 1997 5,329,249 6.15625 06/25/2023
FREDDIE MAC 1040 H ......... 23,113,008 October 31, 1997 23,766,031 6.700 02/15/2021
FANNIE MAE 1997-37 F ....... 32,112,088 October 31, 1997 32,270,575 6.150 06/18/2027
FANNIE MAE 1997-52 F ....... 9,544,000 October 31, 1997 9,637,327 6.21875 02/20/2024
FANNIE MAE 1997-42 F ....... 9,451,590 October 31, 1997 9,538,558 6.250 12/18/2027
FANNIE MAE 1997-44 F ....... 9,780,304 October 31, 1997 9,857,609 6.150 07/18/2027
FANNIE MAE 1997-56 PE ...... 46,839,000 October 31, 1997 47,123,919 6.500 06/18/2026
FANNIE MAE 1997-67 FB ...... 21,518,739 October 31, 1997 21,624,943 6.150 10/18/2012
FN 394850 .................. 37,138,904 October 31, 1997 38,204,052 6.064 07/01/2027
FN 397901 .................. 46,070,931 October 31, 1997 47,247,841 5.888 08/01/2027
FH 846384 .................. 15,097,384 October 31, 1997 17,522,211 6.795 12/01/2026
FN 374773 .................. 13,403,266 October 31, 1997 13,833,001 5.839 03/01/2027
<PAGE>
Unpaid
Principal Principal Estimated Current Stated
Series Balance Date Market Value Coupon (%) Maturity
------- ------- ---- ------------ ----------- --------
FN 374711............ 9,008,132 October 31, 1997 9,193,158 5.716 07/01/2027
FH 410544............ 6,439,952 October 31, 1997 6,886,025 5.908 09/01/2027
FH 610727............ 12,404,856 October 31, 1997 13,073,410 5.735 05/01/2027
G2 080094............ 49,648,042 October 31, 1997 50,502,856 6.000 07/20/2027
FN 313242............ 8,533,007 October 31, 1997 8,832,359 7.718 11/01/2026
FN 367349............ 13,584,491 October 31, 1997 14,076,375 5.929 12/01/2026
FN 313311............ 8,123,100 October 31, 1997 8,427,277 7.408 12/01/2026
FN 363057............ 10,889,625 October 31, 1997 11,192,241 5.450 02/01/2027
FN 313190............ 8,498,927 October 31, 1997 8,810,564 7.909 09/01/2026
FN 363070............ 6,397,026 October 31, 1997 6,566,070 5.495 03/01/2027
FN 313377............ 25,102,809 October 31, 1997 25,890,410 6.105 02/01/2027
FN 370479............ 9,880,086 October 31, 1997 10,168,959 5.329 03/01/2027
FN 378243............ 4,269,516 October 31, 1997 4,389,929 6.221 07/01/2027
FN 313432............ 34,625,349 October 31, 1997 35,798,768 5.954 02/01/2027
FN 370478............ 10,420,918 October 31, 1997 10,727,467 5.353 02/01/2027
FN 396355............ 8,761,919 October 31, 1997 8,993,211 5.797 08/01/2027
FN 374774............ 8,274,399 October 31, 1997 8,513,209 5.427 03/01/2027
FN 391247............ 21,832,800 October 31, 1997 22,493,047 6.560 04/01/2027
FN 345856............ 17,147,762 October 31, 1997 17,647,043 6.859 08/01/2036
FN 374138............ 17,770,190 October 31, 1997 18,026,388 6.349 03/01/2027
FN 361370............ 48,860,336 October 31, 1997 50,948,705 7.556 07/01/2026
FN 397136............ 13,193,288 October 31, 1997 13,800,905 7.756 06/01/2027
FN 361372............ 69,995,932 October 31, 1997 73,184,020 7.880 07/01/2026
FN 312824............ 9,226,576 October 31, 1997 9,504,029 7.375 06/01/2025
Tnote 6.625 05/15/07 70,000,000 October 31, 1997 73,996,840 6.625 05/15/2007
Tnote 6.5 10/15/06 70,000,000 October 31, 1997 73,546,875 6.500 10/15/2006
----------
Total 999,755,218
</TABLE>
EXECUTION COPY
- -----------------------------------------------------------------
SERVICES
AGREEMENT
Between
BNP U.S. Funding L.L.C.
and
Banque Nationale de Paris,
acting through its New York Branch
----------------
Dated as of December 5, 1997
- -----------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.................................... -1-
Section 2. Duties of Administrator........................ -2-
Section 3. Compensation................................... -3-
Section 4. Records........................................ -4-
Section 5. Tax Status and Compliance...................... -4-
Section 6. Representations, Warranties and Covenants
of Company..................................... -4-
Section 7. Representations and Warranties of
Administrator.................................. -5-
Section 8. Other Activities of the Administrator.......... -7-
Section 9. Binding Effect; Assignment..................... -7-
Section 10. Liability and Indemnity of the Administrator... -7-
Section 11. No Joint Venture or Partnership................ -7-
Section 12. Notices........................................ -7-
Section 13. Severability................................... -8-
Section 14. Governing Law.................................. -8-
i
<PAGE>
SERVICES AGREEMENT
THIS AGREEMENT is made as of this December 5, 1997
between BNP U.S. Funding L.L.C., a Delaware limited liability
company (the "Company"), and Banque Nationale de Paris, acting
through its New York Branch (the "Administrator"). Capitalized
terms used herein shall have the meanings set forth in Section 1
of this Agreement.
WHEREAS, the Company desires to obtain the
administrative and managerial assistance as provided for herein;
and
WHEREAS, the Administrator desires to provide the
administrative and managerial assistance for the Company subject
to the control and supervision of the Board of Directors, on the
terms and conditions hereinafter set forth;
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. As used herein, the following
terms shall have the respective meanings set forth below:
"Administrator" has the meaning set forth in the
forepart of this Agreement.
"Agreement" means this Services Agreement, as amended,
modified and supplemented from time to time.
"Company's Charter" means the Amended and Restated
Limited Liability Company Agreement of BNP U.S. Funding L.L.C.,
including the by-laws attached as an annex thereto, dated as of
December 5, 1997.
"Code" means the United States Internal Revenue Code
of 1986, as amended.
"Company" has the meaning set forth in the forepart of
this Agreement.
"Person" means and includes individuals, corporations,
limited partnerships, general partnerships, joint stock companies
or associations, limited liability companies, joint ventures,
associations, consortia, companies, trusts, banks, trust
companies, land trusts, common law trusts, business trusts or
other entities, governments and agencies and political
subdivisions thereof.
"Securities" means any securities purchased by the
Company.
Section 2. Duties of Administrator. The Administrator
shall provide the following services:
(a) at any time when the Series A Preferred Securities
are not registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), maintain the Company's portfolio of
securities in
<PAGE>
accordance with the Base Investment Guidelines and
the Additional Investment Guidelines (as set forth
in the Company's Charter);
(b) at any time when the Series A Preferred Securities
are registered under Section 12(g) of the Exchange
Act, manage the Company's portfolio of securities in
accordance with the Base Investment Guidelines;
(c) assist the Company, at its request, in establishing
and providing necessary services for the Company,
including executive, administrative, accounting,
stockholder relations, secretarial, recordkeeping,
copying, telephone, mailing and distribution
facilities;
(d) provide the Company with office space, conference
room facilities, office equipment and personnel
necessary for the services to be performed by the
Administrator hereunder;
(e) assist the Company, at its request, in arranging for
insurance for the Company including liability
insurance, errors and omissions policies and
officers and directors policies which shall cover
and insure the Company, members of the Board of
Directors and the officers of the Company in amounts
and with deductibles and insurers approved by the
Board of Directors;
(f) assist the officers of the Company (i) in
maintaining proper books and records of the
Company's affairs and (ii) furnishing or causing to
be furnished to the Board of Directors such periodic
reports and accounting information as may be
required from time to time by the Board of
Directors, including, but not limited to, quarterly
reports of all income and expenses of and dividends
and other distributions by the Company; and
(g) as reasonably requested by the officers of the
Company, make reports to the Company of its
performance of the foregoing services and furnish
administration with respect to other aspects of the
business of the Company.
Section 3. Compensation. The Administrator shall be
entitled to an annual fee of $ 50,000 for the services provided
by it hereunder. The Administrator shall not be entitled to
reimbursement for overhead or other expenses incurred by it. The
Company shall bear directly all out-of-pocket expenses incurred
by it.
Section 4. Records. The Administrator shall maintain
appropriate books of account and records relating to services
performed hereunder, and such books of account and records shall
be accessible for inspection by the Board of Directors or
representatives of the Company at all times.
Section 5. Tax Status and Compliance. The
Administrator shall consult and work with the Company's legal
counsel in maintaining the Company's status as a partnership for
U.S. federal income tax purposes. Notwithstanding any other
provisions of this Agreement to
3
<PAGE>
the contrary, the Administrator shall refrain from any action
which, in its reasonable judgment or in the judgment of the Board
of Directors (of which the Administrator has received written
notice), would adversely affect the Company's tax status or which
would violate any law, rule or regulation of any governmental
body or agency having jurisdiction over the Company or its
securities, or which would otherwise not be permitted by the
Company's Charter. Furthermore, the Administrator shall take any
action which, in the judgment of the Board of Directors (of which
the Administrator has received written notice), may be necessary
to maintain the Company's tax status or prevent the violation of
any law or regulation of any governmental body or agency having
jurisdiction over the Company or its securities.
Section 6. Representations, Warranties and Covenants
of Company. As of the date hereof, the Company warrants and
represents to, and covenants and agrees with, the Administrator
as follows:
(a) Due Organization and Authority. The Company is a
limited liability company duly formed, validly existing and in
good standing under the laws of the state of Delaware. The
Company has full power and authority to execute and deliver this
Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been
duly and validly authorized; this Agreement has been duly
executed and delivered and constitutes the valid, legal, binding
and enforceable obligation of the Company subject to bankruptcy
laws and other similar laws of general application affecting
rights of creditors and subject to the application of the rules
of equity, including those respecting the availability of
specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder,
regardless of whether such enforcement is sought in a proceeding
in equity or at law; and all requisite action has been taken by
the Company to make this Agreement valid and binding upon the
Company in accordance with its terms.
(b) No Conflicts. Neither the execution and delivery
of this Agreement, nor the fulfillment of or compliance with the
terms and conditions of this Agreement, will conflict with or
result in a breach of any of the terms, conditions or provisions
of the Company's Charter or any legal restriction or any
agreement or instrument to which the Company is now a party or by
which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree
to which the Company or its property is subject.
(c) Ability to Perform. The Company does not believe,
nor does it have any reason or cause to believe, that it cannot
perform each and every covenant made by it in this Agreement.
(d) No Consent Required. No consent, approval,
authorization or order of any court or governmental agency or
body is required for the execution, delivery and performance by
the Company of, or compliance by the Company with, this Agreement
as evidenced by the consummation of the transactions contemplated
by this Agreement, or if required, such approval has been
obtained prior to the date hereof.
4
<PAGE>
(e) Assistance. To the extent reasonably practicable,
the Company shall cooperate with and assist the Administrator as
reasonably requested by the Administrator, in carrying out
Administrator's covenants, agreements, duties and
responsibilities hereunder and in connection therewith shall
execute and deliver all such papers, documents and instruments as
may be necessary and appropriate in furtherance thereof.
Section 7. Representations and Warranties of
Administrator. As of the date hereof, the Administrator warrants
and represents to, and covenants and agrees with, the Company as
follows:
(a) Due Organization and Authority. The Administrator
is a societe anonyme (limited liability corporation) duly
organized, validly existing and in good standing under the laws
of The Republic of France, acting through its New York Branch
which is duly licensed as a branch of a foreign bank by the
Superintendent of Banks of the State of New York; the
Administrator has the full power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the
execution, delivery and performance of this Agreement by the
Administrator and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, legal, binding and enforceable
obligation of the Administrator subject to bankruptcy laws and
other similar laws of general application affecting rights of
creditors and subject to the application of the rules of equity,
including those respecting the availability of specific
performance, none of which will materially interfere with the
realization of the benefits provided thereunder, regardless of
whether such enforcement is sought in a proceeding in equity or
at law; and all requisite legal action has been taken by the
Administrator to make this Agreement valid and binding upon the
Administrator in accordance with its terms.
(b) No Conflicts. Neither the execution and delivery
of this Agreement, nor the fulfillment of or compliance with the
terms and conditions of this Agreement, will conflict with or
result in a breach of any of the terms, conditions or provisions
of the Administrator's statuts (by-laws) or any legal restriction
or any agreement or instrument to which the Administrator is now
a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result
in the violation of any law, rule, regulation, order, judgment or
decree to which the Administrator or its property is subject.
(c) Ability to Perform. The Administrator does not
believe, nor does it have any reason or cause to believe, that it
cannot perform each and every covenant contained in this
Agreement.
(d) No Consent Required. No consent, approval,
authorization or order of any court or governmental agency or
body is required for the execution, delivery and performance by
the Administrator of or compliance by the Administrator with this
Agreement, or if required, such approval has been obtained prior
to the date hereof.
Section 8. Other Activities of the Administrator.
Nothing herein contained shall prevent the Administrator, an
affiliate of the Administrator or an officer, a director,
employee or stockholder of the Administrator from engaging in any
activity.
5
<PAGE>
Section 9. Binding Effect; Assignment. This Agreement
shall inure to the benefit of and shall be binding upon the
parties hereto and their respective successors and assigns.
Neither party may assign this Agreement or any of its respective
rights or obligations hereunder, not may the Administrator
delegate any of its rights or duties hereunder without the prior
written consent of the other party to this Agreement; provided
that any delegation of such rights or duties shall not release
the Administrator from its obligations hereunder and the
Administrator shall remain responsible hereunder for all acts and
omissions of any delegee as if such acts or omissions were those
of the Administrator.
Section 10. Liability and Indemnity of the
Administrator. Neither the Administrator nor any of its
affiliates, securityholders, directors, officers or employees
will have any liability to the Company, or securityholders of the
Company, or others except by reason of acts or omissions
constituting gross negligence or willful breach of any of its
material obligations under this Agreement. The Company shall
indemnify and reimburse (if necessary) the Administrator, its
securityholders, directors, officers, employees and agents for
any and all expenses (including without limitation attorneys'
fees), losses, damages, liabilities, demands and charges of any
nature whatsoever in respect of or arising from any acts or
omissions by the Administrator pursuant to this Agreement,
provided that the conduct against which the claim is made was
determined by such person, in good faith, to be in the best
interest of the Company and was not the result of gross
negligence by such person or willful breach of any of such
person's material obligations by such person. The Administrator
agrees that any such indemnification is recoverable only from the
assets of the Company and not from its securityholders.
Section 11. No Joint Venture or Partnership. Nothing
in this Agreement shall be deemed to create a partnership or
joint venture between the parties, whether for purposes of
taxation or otherwise.
Section 12. Notices. Unless expressly provided
otherwise herein, all notices, requests, demands and other
communications required or permitted under this Agreement shall
be in writing and shall be made by hand delivery, certified mail,
overnight courier service, telex or telecopier. Any notice shall
be duly addressed to the parties as follows:
If to the Company:
BNP U.S. Funding L.L.C.
499 Park Avenue
New York, New York 10022
Attention: Bruno Di Nardo, Secretary
Telephone Number: (212) 415-9645
Facsimile Number: (212) 415-9696
6
<PAGE>
If to the Administrator:
Banque Nationale de Paris, New York Branch
499 Park Avenue
New York, New York 10022
Attention: Jean-Pierre Beck
Telephone Number: (212) 415-9630
Facsimile Number: (212) 415-9629
Either party may alter the address to which
communications or copies are to be sent by giving notice of such
change of address in conformity with the provisions of this
Section 12 for the giving of notice.
Section 13. Severability. If any term or provision of
this Agreement or the application thereof with respect to any
Person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the
application of that term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term and provision of
this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
Section 14. Governing Law. This Agreement shall be
governed by and construed, interpreted and enforced in accordance
with the laws of the State of New York.
Banque Nationale de Paris, BNP U.S. Funding L.L.C.
acting through its
New York Branch
By: /s/ Bruno Di Nardo By: /s/ Eric Deudon
---------------------------- ----------------------------
Name: Bruno Di Nardo Name: Eric Deudon
Title: Senior Vice-President Title: President and Director
By: /s/ Patrick Saurat By: /s/ Jean-Pierre Beck
---------------------------- ----------------------------
Name: Patrick Saurat Name: Jean-Pierre Beck
Title: Senior Vice-President Title: Director
and Chief Administrative
Officer
7
EXECUTION COPY
CONTINGENT SUPPORT AGREEMENT
CONTINGENT SUPPORT AGREEMENT, dated as of December 5,
1997, between BANQUE NATIONALE DE PARIS, a French limited
liability corporation (societe anonyme) (the "Bank") and BNP U.S.
FUNDING L.L.C., a Delaware limited liability company (the
"Company").
W I T N E S S E T H:
WHEREAS, the Company is a subsidiary of the Bank;
WHEREAS, the Company proposes to issue and sell 50,000
Noncumulative Preferred Securities, Series A (subject to the
provisions in Section 8 hereof concerning Additional Preferred
Securities (as defined therein), the "Series A Preferred
Securities"), with an aggregate liquidation preference of
$500,000,000; and
WHEREAS, the Bank has agreed to enter into this
Contingent Support Agreement in order to induce the Company to
issue the Series A Preferred Securities;
NOW, THEREFORE, for valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and in
consideration of the mutual promises contained in this Contingent
Support Agreement, the parties agree as follows:
SECTION 1. Definitions. Terms not defined herein shall
have the meanings specified in the Amended and Restated Limited
Liability Company Agreement of the Company, dated as of December
5, 1997 and as from time to time amended, modified or
supplemented (the "Company's Charter").
SECTION 2. Maintenance of Ownership. So long as any
Series A Preferred Securities are outstanding, the Bank shall
continue to own, directly or indirectly, 100% of the outstanding
Common Securities of the Company.
SECTION 3. Obligations Following Shift Events. The
Bank hereby agrees to take the actions set forth below following
the occurrence of a Shift Event, whether or not a Shift Period
remains in effect.
(a) The Bank shall deliver to the Company, so long as
any Series A Preferred Securities are outstanding, the
Capital Adequacy Certificates as specified and at the times
indicated in Section 7.3(c)(iv)(A) of the Company's
Charter.
(b) If the Bank declares a dividend with respect to
any capital stock of the Bank constituting Tier 1 capital
("Tier 1 Capital Stock"), the Bank will (i) acquire for
cash additional Common Securities in an amount sufficient
to ensure that the Company will have cash available to pay
the full amount of dividends on the Series A Preferred
<PAGE>
Securities for the Series A Dividend Period during which
the above declaration of a dividend on the Bank's Tier 1
Capital Stock is made and the two immediately subsequent
Series A Dividend Periods (provided, that the Bank will not
be required to acquire additional Common Securities with
respect to any Series A Dividend Period in an amount
greater than (x) the amount available for distribution to
holders of the Bank's Tier 1 Capital Stock (determined as
of the date on which the relevant dividend on the Bank's
Tier 1 Capital Stock is declared and without giving effect
to the declaration of such dividend) or (y) if the Special
Dividend has been paid pursuant to Section 7.3(c)(ii) of
the Company's Charter, the amount thereof) and (ii) procure
payment by the Company to the Series A Preferred
Securityholders of dividends in the amounts, for the Series
A Dividend Periods and under the circumstances set forth in
this Section 3.2(b).
(c) Upon any liquidation of the Bank, if the
liquidator of the Bank determines, in consultation with the
French Banking Commission, that all of the Bank's
liabilities (including any debt instruments, such as titres
participatifs and prets participatifs, constituting Tier 2
risk-based capital) have been or will be paid in full,
before making any distribution to holders of its Tier 1
Capital Stock, the Bank will acquire additional Common
Securities for cash in an amount equal to the lowest of:
(i) the amount remaining to the Bank after payment of all
such liabilities, (ii) the difference, if any, between the
aggregate liquidation preference of the outstanding Series
A Preferred Securities and the net assets of the Company
immediately prior to the acquisition of such additional
Common Securities, and (iii) the aggregate amount
previously received by the Bank upon (x) the redemption of
Common Securities pursuant to Section 7.3 (c)(i)(C) of the
Company's Charter, (y) as a Special Dividend pursuant to
Section 7.3(c)(ii) of the Company's Charter and (z) a
liquidation of the Company pursuant to Section 15.2(c) of
the Company's Charter.
SECTION 4. Full Effect; Waiver of Claim. The Bank or
any successor to the Bank shall take such actions as the Company
shall reasonably request in order to give full effect to the
undertaking of the Bank set forth in Section 3(c) hereof and the
Company shall take such actions as the Bank or any successor to
the Bank shall reasonably request in order to give full effect
thereto. In particular, the Company hereby agrees to waive
(remise de dette), when appropriate to give full effect to
Section 3(c) hereof any potential claim against the Bank under
Section 3(c) hereof to the extent that the Bank's liabilities as
described in Section 3(c) hereof are not paid in full.
SECTION 5. Enforcement. The Company shall have the
sole right to enforce this Contingent Support Agreement by
instituting a suit for that purpose or otherwise and shall do so
promptly if directed by at least a majority of the Independent
Directors. Neither holders of Series A Preferred Securities, nor
holders of any other series of preferred securities or of Common
Securities of the Company, whether outstanding as of the date
hereof or issued hereafter, shall have any direct rights
whatsoever under this Contingent Support Agreement.
Neither holders of Series A Preferred Securities nor
holders of any other series of preferred securities or of Common
Securities of the Company, whether outstanding as of the date
hereof or issued hereafter, nor creditors of the Company nor any
other persons are third party
2
<PAGE>
beneficiaries of this Contingent Support Agreement or have any
direct right to enforce this Contingent Support Agreement. The
Bank and the Company do not intend to create any third party
beneficiaries, whether creditor, donee or otherwise, by entering
into this Contingent Support Agreement and do not intend that
this Contingent Support Agreement provide benefits, material or
otherwise, to anyone besides the Bank and the Company. The rights
of the Company under this Contingent Support Agreement and any
payments made to the Company pursuant hereto are not held in
trust or as agent for any persons including holders of Series A
Preferred Securities, holders of any other series of preferred
securities of the Company, if issued, and creditors of the
Company.
SECTION 6. Representations and Warranties. The Bank
and the Company (each a "Representing Party") each hereby
represents and warrants to the other party as follows:
(a) The Representing Party is duly incorporated or
formed and validly existing under the laws of the jurisdiction of
its incorporation or formation (as applicable), has all requisite
corporate or limited liability company (as applicable) power to
carry on its business as now being conducted and has all
requisite corporate or limited liability company (as applicable)
power and authority to enter into this Contingent Support
Agreement and to perform its obligations under this Contingent
Support Agreement.
(b) The execution, delivery and performance of this
Contingent Support Agreement by the Representing Party have been
duly authorized by all necessary corporate or limited liability
company (as applicable) action on the part of the Representing
Party, and this Contingent Support Agreement constitutes the
legal, valid and binding obligation of the Representing Party
enforceable against it in accordance with its terms.
(c) The execution, delivery and performance of this
Contingent Support Agreement by the Representing Party do not and
will not conflict with or violate any provision of the
Representing Party's charter or business statutes and do not and
will not conflict with, violate, result in a breach of or cause a
material default under (i) any provision of law or regulation in
The Republic of France or the United States relating to the
business or material assets of the Representing Party, (ii) any
provision of any order, arbitration award, judgment or decree of
any or other authority by which the Representing Party is bound
or by which the Representing Party or its assets may be affected,
(iii) any material provision of any material agreement or
instrument to which the Representing Party is a party or by which
the Representing Party or its assets are bound or affected or
(iv) any other restriction of any kind or character to which the
Representing Party is subject, which conflicts, violations,
breaches or defaults in each of clauses (i), (ii), (iii) and (iv)
above would, individually or in the aggregate, prohibit, delay or
restrict the transactions contemplated by this Contingent Support
Agreement or have a material adverse effect on the business,
financial condition or results of operations of the Representing
Party and its consolidated subsidiaries (in the case of the Bank)
taken as a whole.
(d) Except for prior consultation with the French
Banking Commission under certain circumstances, no approval or
consent ot, or filing or registration with, any governmental
body, or other regulatory authority (domestic or foreign) is
required in connection with the execution, delivery and
performance by the Bank of this Contingent Support Agreement.
3
<PAGE>
SECTION 7. Consent to Jurisdiction. The provisions of
this Section 7 are subject to the limitations on enforcement of
this Contingent Support Agreement set forth in Section 5 hereof,
and the Bank consents to the limitation of its rights as provided
in this Section 7 only as they relate to enforcement of this
Contingent Support Agreement by the Company. In the case of
attempts at enforcement of this Contingent Support Agreement by
any Persons other than the Company, such as holders of Series A
Preferred Securities, holders of any other series of preferred
securities of the Company, whether outstanding as of the date
hereof or issued hereafter, or creditors of the Company, this
Section 7 shall be inapplicable and shall be void with respect to
such attempt at enforcement. The Bank hereby submits to the
non-exclusive jurisdiction of any Federal District Court sitting
in the State of New York over any action or proceeding arising
out of a breach of or relating to the enforcement of this
Contingent Support Agreement, and the Bank hereby irrevocably
agrees that, at such time, all claims in respect of such action
or proceeding may be heard and determined in such Federal
District Court. The Bank hereby agrees to irrevocably waive, at
such time, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such
action or proceeding. If the Bank ceases to operate a branch in
The City of New York, the Bank hereby agrees at or prior to such
time to irrevocably designate and appoint for the term of this
Contingent Support Agreement CT Corporation System as the agent
of the Bank to receive on its behalf service of all process
brought against the Bank with respect to any such proceeding in
any such court, such service being hereby acknowledged by the
Bank to be effective and binding service on it in every respect
whether or not the Bank shall then be doing business in the State
of New York. A copy of such process so served shall, if permitted
by law, be sent by registered mail to the Bank and delivered to
it at its address in Section 11 hereof If such agent shall cease
to act, the Bank covenants that it shall appoint without delay
another such agent satisfactory to the Company. Nothing herein
shall affect the right to serve process in any other manner
permitted by any law or limit the right to institute proceedings
against the Bank in the courts of any other jurisdiction or
jurisdictions.
SECTION 8. Extension of Contingent Support Agreement.
This Contingent Support Agreement shall cover and shall apply to
each series of Preferred Securities of the Company which are
Parity Securities and which are issued subsequently to the
issuance of the Series A Preferred Securities to which this
Contingent Support Agreement initially applies (the "Additional
Preferred Securities") as if initially drafted in such manner so
that the term "Series A Preferred Securities" used herein refers
in a like manner to the Series A Preferred Securities and the
Additional Preferred Securities, if such coverage and application
is consented to by the Bank pursuant to a "Consent to Extension"
substantially in the form attached hereto as Annex A or such
other form as shall be agreed to by the parties. Such extension
of the coverage of this Contingent Support Agreement pursuant to
this Section shall not be considered a modification, amendment or
termination of this Contingent Support Agreement for purposes of
Section 9 hereof or otherwise.
SECTION 9. Modification, Amendment and Termination.
Except as otherwise provided in this Section 9, this Contingent
Support Agreement may be modified, amended or terminated only by
the written agreement of the parties. No such modification,
amendment or termination shall be effective for so long as any
Series A Preferred Security is outstanding unless the holders of
two-thirds of the Series A Preferred Securities by Liquidation
Preference voting as a class consent to the terms of such
modification, amendment or termination.
4
<PAGE>
This Contingent Support Agreement shall automatically terminate
on the date that all Series A Preferred Securities shall cease to
be outstanding.
SECTION 10. Continuing Contingent Support Agreement.
This Contingent Support Agreement is a continuing Contingent
Support Agreement and shall (a) remain in full force and effect
as long as any of the Series A Preferred Securities are
outstanding, and (b) be mutually binding upon, and inure to the
mutual benefit of, the Bank and the Company and their successors.
SECTION 11. Notices. All notices and other
communications to be given in connection herewith shall be
delivered in person sent by telex with answerback received, by
telecopy or communicated by telephone (subject in the case of
communication by telephone or telecopy to confirmation within
twenty-four hours by telex with answerback received) to the
relevant party as follows:
The Bank: Banque Nationale de Paris
Direction de la Gestion Actif/Passif
Attention: Group Treasurer
Telecopy No.: 331-4014-6122
Telephone No.: 331-4014-7055
The Company: BNP U.S. Funding L.L.C.
Attention: Secretary
Telecopy No.: (212) 415-9696
Telephone No.: (212) 415-9645
or to any other address of which such party shall have notified
the other in writing. Any notice hereunder given by telecopy
shall be deemed to be served when it would be received in the
ordinary course of transmission, subject to confirmation as
aforesaid.
SECTION 12. GOVERNING LAW. THIS CONTINGENT SUPPORT
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Contingent Support Agreement to be executed by their
attorney-in-fact or officers thereunto duly authorized as of the
date first above written.
BANQUE NATIONALE DE PARIS BNP U.S. FUNDING L.L.C.
By: /s/ Christian Aubin By: /s/ Eric Deudon
------------------------ ------------------------------
Name: Christian Aubin Name: Eric Deudon
Title:Senior Executive Title: President and Director
Vice President
By: /s/ Jean Pierre Beck
------------------------------
Name: Jean Pierre Beck
Title: Director
6
<PAGE>
Annex A
-------
FORM OF CONSENT TO EXTENSION
BNP U.S. FUNDING L.L.C.
499 Park Avenue
New York, New York 10022
BANQUE NATIONALE DE PARIS (the "Bank") hereby consents to the
coverage of and application of the contingent support agreement,
dated December 5, 1997 and as heretofore amended, modified or
supplemented (the "Contingent Support Agreement"), between the
Bank and BNP U.S. FUNDING L.L.C. (the "Company") pursuant to
Section 8 thereof to Noncumulative Preferred Securities, Series __,
with an aggregate liquidation preference of $_____ issued by the
Company pursuant to Article VII of the Amended and Restated
Limited Liability Company Agreement of BNP US. FUNDING L.L.C.
dated December 5, 1997 (the "Additional Preferred Securities").
References to "Series A Preferred Securities" in the Contingent
Support Agreement shall be understood to refer to the Company's
Noncumulative Preferred Securities, Series A, as well as to
Additional Preferred Securities.
BANQUE NATIONALE DE PARIS
By:_______________________________
Name:
Title:
7
BNP U.S. FUNDING L.L.C.
Noncumulative Preferred Securities, Series A
Registration Agreement
December 5, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
Salomon Brothers Inc
as the Initial Purchasers
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
BNP U.S. Funding L.L.C., a limited liability company
organized under the laws of the State of Delaware (the
"Company"), proposes to issue and sell to the Initial Purchasers
(as defined herein) upon the terms set forth in the Purchase
Agreement (as defined herein) 50,000 of its Noncumulative
Preferred Securities, Series A (the "Series A Preferred
Securities"). As an inducement to the Initial Purchasers to enter
into the Purchase Agreement, the Bank and the Company agree with
the Initial Purchasers for the benefit of holders (as defined
herein) from time to time of the Series A Preferred Securities as
follows:
1. Definitions. Capitalized terms used herein without
definition shall have the meanings ascribed thereto in the
Purchase Agreement. As used in this Agreement, the following
defined terms shall have the following meanings:
"Commission" means the United States Securities and
Exchange Commission.
<PAGE>
"Exchange Act" means the United States Securities
Exchange Act of 1934, as amended.
"Purchase Agreement" means the Purchase Agreement,
dated December 1, 1997, among the Initial Purchasers, the Company
and Banque Nationale de Paris, a societe anonyme, or limited
liability corporation, organized under the laws of The Republic
of France.
"Initial Purchasers" means Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and
Salomon Brothers Inc.
"Rules and Regulations" means the published rules and
regulations of the Commission promulgated under the Exchange Act,
as in effect at any relevant time.
"Registration" means a registration effected pursuant
to Section 2 hereof.
"Registration Statement" means a registration
statement on Form 10 filed under Section 12(g) of the Exchange
Act providing for the registration of all of the Series A
Preferred Securities pursuant to the provisions of Section 2 of
this Agreement and any amendments and supplements to such
registration statement, including post-effective amendments, and
all exhibits and all material incorporated by reference in such
registration statement.
2. Registration.
(a) Subject to Section 4 hereof, the Company shall
file with the Commission a Registration Statement on Form 10
relating to the Series A Preferred Securities and, thereafter,
shall use its best efforts to cause such Registration Statement
to be declared effective under Section 12(g) of the Exchange Act
by May 31, 1998.
(b) The Company shall promptly advise the Initial
Purchasers of Series A Preferred Securities:
(i) when the Registration Statement and any
amendment thereto has been filed with the
Commission and when the Registration Statement
or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or
for additional information; and
(iii) the issuance by the Commission of any stop
order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for such purpose.
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<PAGE>
(c) The Company shall use its best efforts to prevent
the issuance, and if issued to obtain the withdrawal, of any
order suspending the effectiveness of the Registration Statement
at the earliest possible time.
(d) The Company shall use its best efforts to comply
with all applicable Rules and Regulations.
(e) The Company shall enter into such customary
agreements and take all other appropriate action in order to
expedite and facilitate the Registration.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its
obligations under Section 2 hereof.
4. Condition to Company's Obligation. The Company's
obligation under Section 2 hereof will not apply if the filing
and declaration of effectiveness of the registration statement
would not, after consultation with the Initial Purchasers, in the
reasonable belief of the Company be effective to qualify for the
"publicly-offered security exemption" in the Plan Asset
Regulation (29 C.F.R. Section 2510.3-101).
5. Miscellaneous.
(a) Amendments and Waivers. This Agreement, including
this Section 5, may be amended, and waivers or consents to
departures from the provisions hereof may be given, only by a
written instrument duly executed by the Company and the Initial
Purchasers holding a majority in number and amount (by
liquidation preference) of Series A Preferred Securities. Each
Initial Purchaser shall be bound by any amendment, waiver or
consent effected pursuant to this Section 5, whether or not any
notice, writing or marking indicating such amendment, waiver or
consent appears on the Series A Preferred Securities or is
delivered to such Initial Purchaser.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be given as provided in
the Purchase Agreement.
(c) Parties in Interest. All the terms and provisions
of this Agreement shall be binding upon, shall inure to the
benefit of and shall be enforceable by the respective successors
and assigns of the parties hereto.
(d) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be
3
<PAGE>
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York, without giving effect to any provisions relating to
conflicts of laws.
(g) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstances, is held invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way
impaired or affected thereby, it being intended that all of the
rights and privileges of the parties hereto shall be enforceable
to the fullest extent permitted by law.
4
<PAGE>
Please confirm that the foregoing correctly sets forth
the agreement between the Company and you.
Very truly yours,
BNP U.S. FUNDING L.L.C.
By:/s/ Eric Deudon
------------------------------
Name: Eric Deudon
Title: President and Director
BANQUE NATIONALE DE PARIS
By:/s/ Christian Aubin
-----------------------------
Name: Christian Aubin
Title: Senior Executive
Vice President
The foregoing Registration Agreement is hereby confirmed and
accepted as of the date first above written.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
Salomon Brothers Inc
By: Merrill Lynch, Pierce, Fenner &
Smith Incorporated
By:/s/ Richard N. Doyle
---------------------------------
Name:
Title:
5
