<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 0-9756
RIGGS NATIONAL CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1217953
---------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1503 Pennsylvania Avenue, N.W., Washington, D.C. 20005
------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(202) 835-6000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or shorter periods that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X. No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practical date.
Common Stock, $2.50 par value 30,223,214 shares
----------------------------- -------------------------------
(Title of Class) Outstanding at May 16, 1994
<PAGE>
RIGGS NATIONAL CORPORATION
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C>
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three months ended March 31, 1994 and 1993 3
Consolidated Statements of Condition
March 31, 1994 and 1993, and December 31, 1993 4
Consolidated Statements of Changes in Stockholders' Equity
Three months ended March 31, 1994 and March 31, 1993 5
Consolidated Statements of Cash Flows
Three months ended March 31, 1994 and 1993 6
Financial Ratios and Other Financial Data 7
Notes to the Consolidated Statements 8-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 25
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended
(In thousands, except per share amounts) March 31,
1994 1993
==========================================================================
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans:
Taxable $45,618 $ 38,154
Tax-Exempt 1,505 1,334
- - --------------------------------------------------------------------------
Total Interest and Fees on Loans 47,123 39,488
- - --------------------------------------------------------------------------
Interest and Dividends on Securities
Available for Sale 6,461 1,032
Interest on Securities
Held-to-Maturity:
Taxable 6,455 17,036
Tax-Exempt 33 33
- - --------------------------------------------------------------------------
Total Interest on Securities
Held-to-Maturity 6,488 17,069
- - --------------------------------------------------------------------------
Interest on Money Market Assets:
Time Deposits with Other Banks 2,630 5,823
Federal Funds Sold and Resale
Agreements 1,196 4,372
- - --------------------------------------------------------------------------
Total Interest on Money Market
Assets 3,826 10,195
- - --------------------------------------------------------------------------
Total Interest Income 63,898 67,784
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 4,758 5,253
Money Market Deposit Accounts 6,290 7,995
Time Deposits in Domestic Offices 6,019 7,382
Time Deposits in Foreign Offices 2,809 8,193
- - --------------------------------------------------------------------------
Total Interest on Deposits 19,876 28,823
- - --------------------------------------------------------------------------
Interest on Short-Term Borrowings and
Long-Term Debt:
Federal Funds Purchased and
Repurchase Agreements 594 957
U.S. Treasury Demand Notes and Other
Short-Term Borrowings 628 431
Long-Term Debt 5,841 3,618
- - --------------------------------------------------------------------------
Total Interest on Short-Term
Borrowings and Long-Term Debt 7,063 5,006
- - --------------------------------------------------------------------------
Total Interest Expense 26,939 33,829
- - --------------------------------------------------------------------------
Net Interest Income 36,959 33,955
Less: Provision for Loan Losses 2,100 14,200
- - --------------------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses 34,859 19,755
NONINTEREST INCOME
Trust Income 7,457 6,552
Service Charges and Fees 10,767 11,549
Gain on Settlement of Mortgage
Insurance Claims 4,739 --
Other Noninterest Income 2,452 3,076
Securities Gains, Net 1,356 1,073
- - --------------------------------------------------------------------------
Total Noninterest Income 26,771 22,250
NONINTEREST EXPENSE
Salaries and Wages 16,645 18,211
Pensions and Other Employee Benefits 4,897 5,248
Occupancy Expense, Net 6,015 6,610
Furniture and Equipment Expense 2,614 3,120
Other Real Estate Owned Expense, Net 1,286 (692)
FDIC Insurance Expense 2,432 2,638
Data Processing Services 4,423 4,302
Restructuring Expense --- 13,750
Other Noninterest Expense 15,275 16,274
- - --------------------------------------------------------------------------
Total Noninterest Expense 53,587 69,461
Income (Loss) before Taxes 8,043 (27,456)
Applicable Income Tax Expense 130 165
==========================================================================
Net Income (Loss) 7,913 (27,621)
Dividends on Preferred Stock (3,345) (359)
==========================================================================
Net Income (Loss) Available for
Common Stock $ 4,568 $(27,980)
EARNINGS (LOSS) PER SHARE: $0.15 ($1.11)
</TABLE>
3
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(In thousands, except per share amounts) March 31, March 31, December 31,
(Unaudited in March 31, 1994 and 1993) 1994 1993 1993
================================================================================
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $336,771 $274,793 $210,639
Money Market Assets:
Time Deposits with Other Banks 203,632 393,101 200,946
Federal Funds Sold and Resale
Agreements 185,200 446,200 205,000
- - --------------------------------------------------------------------------------
Total Money Market Assets 388,832 839,301 405,946
- - --------------------------------------------------------------------------------
Securities Available for Sale (Market
Value: March 31, 1994, $571,146;
March 31, 1993, $1,007,760;
December 31, 1993, $708,137) 571,146 982,795 708,137
Securities Held-to-Maturity (Market
Value: March 31, 1994, $577,467;
March 31, 1993, $644,954;
December 31, 1993, $660,773) 577,434 638,785 660,062
Loans, Net of Unearned Discount,
Unamortized Premium and Net Deferred
Fees 2,641,041 2,174,015 2,528,133
Reserve for Loan Losses 86,711 91,730 86,513
- - --------------------------------------------------------------------------------
Loans, Net of Reserve for Loan Losses 2,554,330 2,082,285 2,441,620
- - --------------------------------------------------------------------------------
Premises and Equipment, Net 158,900 171,955 161,098
Accrued Interest Receivable 23,780 30,860 22,911
Customers' Acceptance Liability 540 13,327 300
Other Real Estate Owned, Net 51,403 67,983 52,803
Other Assets 118,057 134,663 116,721
================================================================================
Total Assets $4,781,193 $5,236,747 $4,780,237
LIABILITIES
Noninterest-Bearing Demand Deposits $940,180 $919,773 $864,549
Interest-Bearing Deposits:
Savings and NOW Accounts 943,249 926,746 955,711
Money Market Deposit Accounts 1,072,172 1,220,254 1,082,048
Time Deposits in Domestic Offices 598,755 726,837 643,736
Time Deposits in Foreign Offices 231,045 516,812 227,780
- - --------------------------------------------------------------------------------
Total Interest-Bearing Deposits 2,845,221 3,390,649 2,909,275
- - --------------------------------------------------------------------------------
Total Deposits 3,785,401 4,310,422 3,773,824
- - --------------------------------------------------------------------------------
Short-Term Borrowings:
Federal Funds Purchased and
Repurchase Agreements 287,921 252,032 302,330
U.S. Treasury Demand Notes and Other
Borrowed Funds 150,441 36,619 151,697
- - --------------------------------------------------------------------------------
Total Short-Term Borrowings 438,362 288,651 454,027
- - --------------------------------------------------------------------------------
Acceptances Outstanding 540 13,327 300
Other Liabilities 50,577 195,884 45,564
Long-Term Debt 217,625 213,325 213,325
- - --------------------------------------------------------------------------------
Total Liabilities 4,492,505 5,021,609 4,487,040
STOCKHOLDERS' EQUITY
Preferred Stock-$1.00 Par Value
Shares Authorized - 25,000,000 at
March 31, 1994 and 1993, and
December 31, 1993;
Liquidation Preference - $25 per share
Cumulative Convertible Series A -
764,537 shares at March 31, 1994 and 1993,
and December 31, 1993 765 765 765
Noncumulative Perpetual Series B -
4,000,000 shares at March 31, 1994
and December 31, 1993 4,000 -- 4,000
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at March
31, 1994 and 1993, and December 31, 1993;
Shares Issued-31,124,012 at March
31, 1994, 26,122,812 at March 31, 1993
and 31,122,812 at December 31, 1993 77,810 65,307 77,807
Surplus
Preferred Stock 109,473 18,232 109,541
Common Stock 156,004 131,572 156,023
Foreign Exchange Translation
Adjustments (1,579) (13,715) (1,527)
Undivided Profits (Accumulated Deficit) (26,397) 36,700 (30,965)
Unrealized Net Gain (Loss) on
Securities Available for Sale (7,665) -- 1,276
Treasury Stock-900,798 shares at
March 31, 1994 and 1993, and
December 31, 1993 (23,723) (23,723) (23,723)
- - --------------------------------------------------------------------------------
Total Stockholders' Equity 288,688 215,138 293,197
===============================================================================
Total Liabilities and Stockholders'
Equity $4,781,193 $5,236,747 $4,780,237
</TABLE>
4
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Unrealized
Net
Foreign Undivided Gain(Loss)
Preferred Common Exchange Profits on Securities Total
Stock Stock Translation (Accumulated Available Treasury Stockholders'
$1.00 Par $2.50 Par Surplus Adjustments Deficit) for Sale Stock Equity
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $765 $65,307 $149,804 $(11,413) $64,680 $ -- $(23,723) $245,420
Net Loss -- -- -- -- (27,621) -- -- (27,621)
Cash Dividends --Preferred -- -- -- -- (359) -- -- (359)
Foreign Exchange Translation
Adjustments -- -- -- (2,302) -- -- -- (2,302)
==================================================================================================================================
Balance, March 31, 1993 $765 $65,307 $149,804 $(13,715) $ 36,700 $ -- $(23,723) $215,138
Balance, December 31, 1993 $4,765 $77,807 $265,564 $(1,527) $(30,965) $1,276 $(23,723) $293,197
Net Income -- -- -- -- 7,913 -- -- 7,913
Issuance of Common Stock--
Stock Option Plan -- 3 8 -- -- -- -- 11
Cash Dividends-- Preferred -- -- -- -- (3,345) -- -- (3,345)
Unrealized Net Gain (Loss) on
Securities Available
for Sale -- -- -- -- -- (8,941) -- (8,941)
Foreign Exchange Translation
Adjustments -- -- -- (52) -- -- -- (52)
Other -- -- (95) -- -- -- -- (95)
==================================================================================================================================
Balance, March 31, 1994 $4,765 $77,810 $265,477 $(1,579) $(26,397) $(7,665) $(23,723) $288,688
</TABLE>
5
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
(In thousands) Three Months Ended
March 31,
Increase (decrease ) in cash and cash equivalents 1994 1993
=================================================================================
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $7,913 ($27,621)
Adjustments to Reconcile Net Income (Loss) to Cash
Provided By (Used In) Operating Activities:
Provisions for Loan Losses 2,100 14,200
Provisions for Other Real Estate Owned Writedowns 1,317 19
Depreciation Expense and Amortization of Leasehold
Improvements 3,073 3,361
Amortization of Purchase Accounting Adjustments 966 1,038
Restructuring Charges -- 13,750
(Gains) Losses on Securities Sales (1,356) (1,073)
(Gains) Losses on Sales from Other Real Estate Owned (222) (420)
(Increase) Decrease in Accrued Interest Receivable (869) (4,127)
(Increase) Decrease in Other Assets (2,302) 11,812
Increase (Decrease) in Other Liabilities (1,145) 7,819
- - ---------------------------------------------------------------------------------
Total Adjustments 1,562 46,379
- - ---------------------------------------------------------------------------------
Net Cash Provided By (Used In) By Operating Activities 9,475 18,758
Cash Flows from Investing Activities:
Net (Increase) Decrease In Time
Deposits with Other Banks (2,686) 255,351
Proceeds from Securities Available for Sale 173,465 17,545
Purchase of Securities Available for Sale (24,319) (401,964)
Proceeds from the Maturity of
Securities Held-to-Maturity 468,999 175,322
Purchase of Securities Held-to-Maturity (397,147) (314,139)
Net (Increase) Decrease in Loans (118,493) 1,692
Proceeds from Sales and Other
Repayments of Other Real Estate Owned 5,488 19,992
Net (Increase) Decrease in Premises and Equipment (875) (922)
Other, Net (556) 540
- - ---------------------------------------------------------------------------------
Net Cash Provided by (Used In) Investing Activities 103,876 (246,583)
Cash Flows from Financing Activities:
Net Increase (Decrease) in:
Demand, NOW, Savings and Money Market Deposit Accounts 53,293 (31,229)
Time Deposits (41,716) (95,947)
Federal Funds Purchased and Repurchase Agreements (14,409) 199,611
U.S. Treasury Demand Notes and
Other Short-Term Borrowings (1,256) (51,460)
Net Proceeds From the Issuance of Long-Term Debt 121,250 --
Repayment of Long-Term Debt (120,700) --
Net Proceeds From the Issuance of Common Stock 11 --
Dividend Payments (3,345) (359)
Other, Net (95) --
- - ---------------------------------------------------------------------------------
Net Cash Provided by (Used In) Financing Activities (6,967) 20,616
Effect of Exchange Rate Changes (52) (2,302)
- - ---------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 106,332 (209,511)
Cash and Cash Equivalents at Beginning of Period 415,639 930,504
=================================================================================
Cash and Cash Equivalents at End of Period $521,971 $720,993
Supplemental Schedule of Noncash
Investing and Financing Activities:
Loans Transferred to Other Real Estate Owned $3,601 $20,295
Loans to Finance the Sale of Other Real
Estate Owned Sales -- 21,544
Supplemental Disclosures:
Interest Paid (Net of Amount Capitalized) $23,422 $32,554
Income Tax Payments (Refund) (4,417) 115
</TABLE>
6
<PAGE>
RIGGS NATIONAL CORPORATION
Financial Ratios and Other Financial Data
(Unaudited)
<TABLE>
<CAPTION>
Three month period ended March 31, 1994 1993
====================================================================
<S> <C> <C>
Performance:
Net Income (Loss) to Average Assets 0.69% (2.19%)
Net Income (Loss) to Average
Earning Assets 0.77% (2.50%)
Net Income (Loss) to Average
Stockholders' Equity 10.91% (46.04%)
Net Income (Loss) Available to
Common Stock to Average Common
Equity 10.30% (50.59%)
Net Interest Income to Average
Earning Assets 3.70% 3.22%
Asset Quality:
Nonaccrual Loans as a % of Average
Loans 4.23% 11.18%
Nonperforming Assets as a % of
Total Loans and OREO 6.44% 14.35%
Nonaccrual and Renegotiated Loans
as a % of Total Loans 4.61% 11.67%
Net Charge offs as a % of Average
Loans 0.08% 0.31%
Reserve for Loan Losses as a % of
Total Loans 3.28% 4.22%
Reserve for Loan Losses as a % of
Nonaccrual and Renegotiated Loans 71.15% 36.14%
Per Common Share:
Net Income (Loss) $0.15 $(1.11)
Book Value (at period end) $5.77 $7.78
Common Shares Outstanding (at
period end) 30,223,214 25,222,014
Average Common Shares Outstanding 30,222,107 25,222,014
Capital Ratios at Period End:
Tier I 10.84% 7.22%
Combined Tier I and Tier II 17.53% 13.09%
Leverage 6.15% 3.91%
</TABLE>
7
<PAGE>
RIGGS NATIONAL CORPORATION
Notes to the Consolidated Financial Statements (Unaudited)
(In thousands, except per share amounts)
Note 1. Basis of Presentation
---------------------
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, of a normal recurring nature, necessary to present
fairly, in conformity with generally accepted accounting principles applied on
a consistent basis, the Corporation's consolidated financial position at March
31, 1994 and 1993, and December 31, 1993 (audited), and the related changes in
stockholders' equity, the consolidated statements of income and cash flows for
the three months ended March 31, 1994, and 1993. These statements should be
read in conjunction with the financial statements and accompanying notes
included in the Corporation's latest annual report. Certain reclassifications
have been made to prior period amounts to conform with the current year's
presentation. The results of operations for the first three months of 1994
are not necessarily indicative of the results to be expected for the full 1994
year.
Note 2. Common Shares
-------------
Primary earnings per share are calculated using the weighted average number of
shares of common stock outstanding during the period. The weighted average
shares outstanding were 30,222,107 for the first quarter of 1994, and
25,222,014 for the same period in 1993. The weighted average number of shares
of common stock outstanding does not include shares granted under the 1993
Riggs National Corporation Stock Option Plan (the "Plan"). Under the Plan,
options to purchase up to 1,250,000 shares of common stock may be granted to
key employees of the Corporation. As of March 31, 1994, options to purchase
1,172,000 shares had been granted at prices ranging from $8.125 to $9.88 per
share and are currently not dilutive.
Note 3. Reserve for Loan Losses
-----------------------
Changes in the reserve for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1994 1993
==========================================================
<S> <C> <C>
Balance, beginning of period $86,513 $84,155
Provision for loan losses 2,100 14,200
Loans charged-off:
Domestic 2,038 5,001
Foreign 2,505 2,380
- - ----------------------------------------------------------
Total loans charged-off 4,543 7,381
Recoveries on charged-off loans:
Domestic 1,990 778
Foreign 570 4
- - ----------------------------------------------------------
Total recoveries on charged-off loans 2,560 782
Net loans charged-off 1,983 6,599
Foreign exchange translations
adjustments 81 (26)
==========================================================
Balance, end of period $86,711 $91,730
</TABLE>
8
<PAGE>
Notes to Consolidated Financial Statements, Continued
Note 4. Other Real Estate Owned
-----------------------
Changes in other real estate owned, net of reserves, are summarized as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1994 1993
============================================================
<S> <C> <C>
Balance, beginning of period $52,803 $89,389
Additions 3,601 20,295
Deductions:
Sales and repayments 3,727 39,636
Charge-offs 1,317 2,900
Other -- (981)
- - ------------------------------------------------------------
Total Deductions 5,044 41,555
Foreign exchange translation adjustments 43 (146)
============================================================
Balance, end of period $51,403 $67,983
</TABLE>
Changes in the reserve for other real estate owned are summarized as follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
1994 1993
============================================================
<S> <C> <C>
Balance, beginning of period $3,716 $6,637
Additions:
Provision for OREO 1,317 19
Other Additions 30 127
- - ------------------------------------------------------------
Total Additions 1,347 146
Deductions:
Charge-offs 1,295 2,900
Loss on sale of OREO and selling
expenses 359 124
Other -- --
- - ------------------------------------------------------------
Total Deductions 1,654 3,024
Foreign exchange translation adjustments 9 --
============================================================
Balance, end of period $3,418 $3,759
</TABLE>
9
<PAGE>
Notes to the Consolidated Financial Statements, Continued
Note 5. New Financial Accounting Standards
----------------------------------
At December 31, 1993, the Corporation implemented a narrower definition of In-
Substance Foreclosure as required by regulatory agencies. Under previous
financial accounting guidelines, a nonaccrual loan was transferred from loans
to other real estate owned when foreclosure was probable or the loan was
considered in-substance foreclosed, which by definition in the Securities and
Exchange Commission's Financial Reporting Release No. 28 meant that the
borrower had little or no equity in the property, proceeds for repayment of
the loan could be expected to come only from the operation or sale of the
collateral, and the debtor had either abandoned control of the collateral or
it was doubtful that the debtor would be able to rebuild equity in the
collateral or otherwise repay the loan in the foreseeable future. Loans
considered in-substance foreclosed must be recorded at the lower of cost or
fair value.
Under the revised regulatory accounting guidelines, a loan is recognized as an
in-substance foreclosure when the Corporation has possession of an asset prior
to obtaining legal title. This definition is consistent with Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan." This change in treatment impacts only the
classification of accounts in the financial statements and does not result in
a change in the accounting policy related to the determination of the assets'
carrying value. The consolidated statements of condition, income and cash
flows and the related notes to the consolidated financial statements reflect
these reclassifications.
Note 6. Income Taxes
------------
The provision for income taxes is based on income reported for consolidated
financial statement purposes and includes deferred taxes resulting from the
recognition of certain revenues and expenses in different periods for tax
reporting purposes.
Income (loss) before income taxes relating to the operations of domestic
offices and foreign offices for the three months ended March 31, 1994 and
1993, were as follows:
<TABLE>
<CAPTION>
March 31,
1994 1993
======================================================================
<S> <C> <C>
Domestic Offices $ 236 $(20,534)
Foreign Offices 7,807 (6,922)
======================================================================
Total $8,043 $(27,456)
</TABLE>
The provision for income taxes for the three months ended March 31, 1994 and
1993 consisted of the following:
<TABLE>
<CAPTION>
March 31,
1994 1993
======================================================================
<S> <C> <C>
Current Provision:
Federal $ -- $ (12)
State 77 123
Foreign 53 54
======================================================================
Total Current Provision 130 165
Deferred Provision:
Federal -- --
State -- --
Foreign -- --
======================================================================
Total Deferred Provision -- --
Applicable Income Tax Expense $ 130 $ 165
</TABLE>
10
<PAGE>
Notes to Consolidated Financial Statements, Continued
Note 7. Commitments and Contingent Liabilities
--------------------------------------
In the normal course of business, various commitments and contingent
liabilities arise, including commitments to extend credit, standby letters of
credit, interest rate swaps, forward contracts, futures, options on financial
futures, and interest rate caps, collars and floors. The following table
summarizes the Corporation's exposure to these off-balance sheet commitments
and contingent liabilities at March 31, 1994:
<TABLE>
<CAPTION>
Contractual or Notional
Value at March 31, 1994
=================================================================
<S> <C>
Commitments to Extend Credit:
Commercial $241,792
Real Estate 257,161
Consumer 65,656
=================================================================
Total Commitments to Extend Credit $564,609
Letters of Credit:
Commercial $98,061
Standby-Financial 32,215
Standby-Performance 45,439
=================================================================
Total Letters of Credit $175,715
Financial Instruments with off-balance
sheet market risk:
Interest rate swap agreements $266,380
Foreign exchange contracts:
Commitments to purchase 24,309
Commitments to sell 203,905
</TABLE>
The Corporation's management believes, if used responsibly, financial
derivatives can be an important element of prudent balance sheet management.
Interest-rate swaps, caps, collars and floors are entered into as hedges
against fluctuations in the interest rate of specifically identified assets or
liabilities. There is no effect on total assets or liabilities of the
Corporation. Interest-rate swaps involve the contractual exchange of fixed
and variable interest payment obligations based upon an underlying notional
principal amount. Entering into interest rate swap agreements involves not
only the risk of dealing with counterparties and their ability to meet the
terms of the contacts but also the interest rate risk of unmatched positions.
Credit risk is managed through limits and monitoring procedures. Net
receivables or payables under agreements designated as hedges are recorded as
adjustments to interest income or interest expense related to the hedged asset
or liability. Related fees are deferred and amortized over the life of the
agreements.
Other than swaps entered into for customers, the Corporation's only
other involvement with derivative financial instruments has been a $200
million interest rate swap agreement, entered into in July 1993, to hedge
money market assets against the possibility of declining interest rates.
Since inception, this swap agreement has had a positive contribution to the
net interest margin. As interest rates began to rise in early 1994, the
market value of the swap agreement (the gain or loss recognized if the
transaction was terminated) has fluctuated from a gain of $0.9 million at the
end of the fourth quarter of 1993, to a loss of approximately $7.0 million at
March 31, 1994. Based on the possibility of further increases in interest
rates, in April 1994, the Corporation purchased a separate instrument known as
a corridor to mitigate the impact of rising interest rates on the swap
agreement.
11
<PAGE>
Notes to Consolidated Financial Statements, Continued
Note 8. Recent Developments
-------------------
On February 1, 1994, the Corporation sold $125 million of 8.5% subordinated
notes due February 1, 2006. The notes were sold at par and are not callable
for five years. The notes were sold under a shelf registration statement
declared effective on January 13, 1994. The net proceeds from the sale
totaled $121.3 million and were used to redeem approximately $51.5 million of
subordinated notes and $69.2 million of subordinated capital notes, both
bearing an interest rate of 5.25% and maturing in 1996.
On May 9, 1994, the Corporation announced that Paul M. Homan had decided to
end his association with the Corporation as President, Chief Executive Officer
and a director of The Riggs National Bank of Washington, D.C., and as Vice
Chairman of the Corporation. Joe L. Allbritton, Chairman of the Corporation,
has assumed, on an interim basis, Mr. Homan's responsibilities of President
and Chief Executive Officer of The Riggs National Bank of Washington, D.C.
Note 9. Regulatory Matters
------------------
On May 14, 1993, the Corporation entered into a Memorandum of Understanding
with the Federal Reserve Bank of Richmond ("Federal Reserve") and The Riggs
National Bank of Washington, D.C. ("Riggs-Washington") entered into a Written
Agreement with the Office of the Comptroller of the Currency (the "OCC"). The
Memorandum of Understanding and the Written Agreement were the result of
regulatory concern over financial and operational weaknesses and continued
losses related primarily to the Corporation's domestic and United Kingdom
commercial real estate exposure. Under the terms of the Memorandum of
Understanding, the Corporation will notify the Federal Reserve Bank in advance
of dividend declarations, the issuance and/or redemption of long-term debt and
use of cash assets in certain circumstances. The Corporation is also required
to submit plans and reports to the Federal Reserve Bank relating to capital,
asset quality, loan loss reserves and operations, including contingency
measures if projected operational results do not occur.
In accordance with the terms of the Written Agreement, a committee of the
Board of Directors of Riggs-Washington monitors and coordinates compliance
with the Written Agreement, implementation of recommendations previously made
by an independent management consultant, and implementation of the action plan
and work plan previously adopted by Riggs-Washington.
The Corporation and Riggs-Washington are in substantial compliance with the
provisions and requirements of the Memorandum of Understanding and the Written
Agreement, as of March 31, 1994.
12
<PAGE>
RIGGS NATIONAL CORPORATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Earnings Summary
The Corporation reported consolidated net income of $7.9 million ($0.15 per
share) for the first quarter of 1994 compared to a loss of $27.6 million
($1.11 per share) for the same quarter a year earlier. The first quarter
performance in 1994 is the Corporation's third consecutive profitable quarter.
Two factors contributing to the 1993 loss were a $14.2 million provision for
loan losses and a one-time charge of $13.8 million for the cost of
implementing BankStart '93, the Corporation's strategic program to improve
efficiency. The 1993 first quarter provision for loan losses related to
domestic commercial loans and foreign (primarily United Kingdom) corporate
loans. Results for the first quarter of 1994 reflect the benefit of a $4.7
million (pretax) gain from the settlement of mortgage insurance claims related
to other real estate owned in the United Kingdom and gains on the sale of
securities available for sale of $1.4 million.
The provision for loan losses in the first quarter of 1994 was $2.1 million.
The reduced provision in 1994 when compared to the prior year was the result
of improvement in asset quality as nonperforming assets were reduced over 46%
from $321.8 million at the end of the first quarter of 1993 to $173.3 million
at the end of the first quarter of 1994. The March 31, 1994 level of
nonperforming assets is the lowest since the third quarter of 1990. The
Corporation's overall asset quality continues to improve as a result of
collection and asset-management efforts as well as improved economic
conditions domestically and in the United Kingdom.
Assets totaled $4.78 billion at March 31, 1994, level with total assets at
year-end 1993 and a decrease of $455.6 million from March 31, 1993. The
decrease in total assets from March 31, 1993 is attributable to decreases in
securities and money market assets of $923.5 million, offset by an increase in
net loans of $467.0 million. The decrease in short-term, lower-yielding
assets combined with the increase in higher-yielding, longer-term assets is
part of an overall asset/liability strategy implemented in 1993 and ongoing in
1994 to improve the Corporation's overall interest margin performance.
Deposits at March 31, 1994 totaled $3.79 billion, an increase of $11.6 million
from year-end 1993 and a decrease of $525.0 million from March 31, 1993. The
decrease over the last twelve months is primarily due to reductions in foreign
time deposits of $285.8 million as the Corporation exited from certain deposit
gathering businesses in foreign operations combined with decreases in domestic
time deposits of $128.1 million. Total liabilities decreased slightly during
the first quarter of 1994 ($5.5 million) and decreased $529.1 million from a
year ago. The decrease over the preceding year is due to the aforementioned
decline in deposits.
Performance Enhancing Strategies
During the first quarter of 1994, the Corporation continued to see the
positive impact of several self-evaluation and redefinition strategies of the
Corporation's goals and market position that began in several stages during
1993. These initiatives included BankStart '93, financial restructurings of
domestic and certain foreign operations and other improvement strategies.
BankStart '93 was initiated in January 1993 and is a corporation-wide project
to improve efficiency and increase operational effectiveness. In the first
quarter of 1993, the Corporation took a restructuring charge of $13.8 million,
representing management's estimate of the cost of implementing the program.
At March 31, 1994, $4.0 million of these expenses remained in the accrual and
are expected to be paid by mid-year 1994.
At the end of the second quarter of 1993, the Corporation announced a
financial restructuring of its domestic and certain foreign subsidiaries,
which included enhancing certain lines of business domestically and exiting
unprofitable lines of business in the United Kingdom, reducing its investments
in certain foreign subsidiaries and increasing reserves against problem assets
in order to facilitate their disposition. At March 31, 1994, the restructurings
were substantially complete, with reductions of current problem assets
expected to continue throughout 1994, as discussed in the "Asset Quality"
section. Accrued and unpaid restructuring expenses totaled $2.1 million at
March 31, 1994, with related disbursements expected to be made during the
remainder of 1994.
13
<PAGE>
Securities
Schedules detailing securities held-to-maturity and securities available for
sale follow:
<TABLE>
<CAPTION>
Held-To-Maturity March 31, 1994 March 31, 1993
(In Thousands) Book Value Market Value Book Value Market Value
=======================================================================================
<S> <C> <C> <C> <C>
U.S. Treasury Securities $563,493 $563,470 $113,226 $115,532
Obligations of States &
Political Subdivisions -- -- 1,999 2,035
Mortgage-Backed Securities -- -- 484,040 485,484
Other Securities 13,941 13,997 39,520 41,903
=======================================================================================
Total $577,434 $577,467 $638,785 $644,954
</TABLE>
<TABLE>
<CAPTION>
March 31, 1994 March 31, 1993
Available for Sale Amortized Market/ Amortized Cost Market
(In Thousands) Cost Book Value Book Value Value
=======================================================================================
<S> <C> <C> <C> <C>
U.S. Treasury Securities $45,703 $45,438 $982,795 $1,007,760
Mortgage-Backed Securities 519,574 512,175 -- --
Other Securities 13,533 13,533 -- --
=======================================================================================
Total $578,810 $571,146 $982,795 $1,007,760
</TABLE>
Investment securities and securities held for sale for 1993 are presented in the
held-to-maturity and available for sale categories, respectively, in the tables
above. Effective December 31, 1993, the Corporation adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115
requires that all unrealized gains and losses from the securities available for
sale portfolio be included, net, in stockholders' equity until realized. This
treatment is contrary to previous accounting policy, which required such
securities to be carried at the lower of cost or market with any unrealized
gains and losses included in earnings. SFAS No. 115 may not be applied
retroactively to prior years' financial statements.
The weighted-average maturities and yields for securities held-to-maturity was
less than one year and 3.40% at March 31 1994, compared with maturities and
yields of less than one year and 4.75% at December 31, 1993. The weighted-
average maturities and yields for securities available for sale was
approximately 6 years and 5.17% at March 31, 1994, compared with approximately 6
years and 4.43% at December 31, 1993. Total securities held-to-maturity and
available for sale decreased $219.6 million (16.1%) during the first quarter of
1994, while decreasing $473.0 million (29.2%) since March 31, 1993. The large
decrease in securities during the past year occurred as proceeds from maturities
and sales were invested in longer-term mortgage loans, as part of an overall
asset/liability strategy to improve earnings.
14
<PAGE>
Loans
The following table reflects loans by type for the periods indicated.
<TABLE>
<CAPTION>
March 31, March 31, December 31,
Loan Type (In thousands) 1994 1993 1993
===========================================================================================================
<S> <C> <C> <C>
Commercial and Financial $466,050 $416,597 $412,006
Real Estate -Commercial/Construction 358,987 515,251 388,442
Residential Mortgage 1,292,496 552,107 1,149,363
Home Equity 219,069 266,264 234,049
Consumer 74,606 96,543 82,819
Foreign 223,065 330,733 255,396
- - -----------------------------------------------------------------------------------------------------------
Total Loans 2,634,273 2,177,495 2,522,075
Less: Unearned Discount (Unamortized
Premium) and Net Deferred Fees (6,768) 3,480 (6,058)
===========================================================================================================
Total $2,641,041 $2,174,015 $2,528,133
</TABLE>
At March 31, 1994, total loans outstanding (net of premiums/discounts) were
$2.64 billion, compared with $2.53 billion at December 31, 1993, and $2.17
billion at March 31, 1993. The increase in loans from March 31, 1993, was
attributable to purchases of approximately $526 million in residential mortgage
loans during 1993 and the first quarter of 1994, combined with local area
originations of residential mortgage loans. The increase in residential
mortgages is part of an overall asset/liability strategy to improve earnings
(see "Securities" above). The increase from December 31, 1993, which totaled
$112.9 million, is due to residential loan purchases of $90 million during the
period combined with local area originations.
Real Estate-Commercial/Construction Loans
<TABLE>
<CAPTION>
Geographic Distribution By Type
March 31, 1994
(In thousands) Geographic Location
District of United
Project Type Columbia Virginia Maryland Kingdom Other Total
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Land $16,710 $33,839 $29,011 $ --- $ --- $79,560
Construction:
Single-Family Residential 10,500 18,448 7,588 --- 253 36,789
Office Buildings 36,682 18,558 19,883 --- 4,493 79,616
Multifamily Residential 1,061 3,674 --- --- 837 5,572
Industrial/Warehouse Loans --- 3,189 7,591 --- --- 10,780
Shopping Centers --- 9,184 18,536 --- --- 27,720
Hotels 4,633 5,731 --- --- --- 10,364
Other 1,405 2,305 140 --- --- 3,850
- - ------------------------------------------------------------------------------------------------------------------------------
Total Land and Construction 70,991 94,928 82,749 --- 5,583 254,251
Commercial Mortgages 26,436 48,047 31,016 158,631 1,211 265,341
==============================================================================================================================
Total Real Estate-Commercial/Construction Loans $97,427 $142,975 $113,765 $158,631 $6,794 $519,592
</TABLE>
15
<PAGE>
Loans, Continued
At March 31, 1994, the Corporation had no cross-border outstandings exceeding 1%
of its total assets to countries experiencing difficulties in repaying their
external debt. The table below details those countries in which the Corporation
had total outstandings in excess of 1% of its total assets. The Corporation did
not have any cross-border outstandings between .75% and 1% at March 31, 1994,
December 31, 1993 or March 31, 1993.
Cross-Border Outstandings Which Exceed 1% of Total Assets
(In millions)
<TABLE>
<CAPTION>
90 Days
% of or More Potential
Amount Total Assets Nonaccrual Renegotiated Past Due Problem
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994
United Kingdom $186.1 3.9% $29.9 $ .8 $-- $12.4
December 31, 1993
United Kingdom 186.8 3.9% 37.7 -- -- 8.9
March 31, 1993
United Kingdom 266.1 5.1% 51.9 1.6 -- 18.2
Italy 76.1 1.5% -- -- -- --
</TABLE>
16
<PAGE>
Asset Quality
Nonperforming assets, including nonaccrual loans, renegotiated loans and other
real estate owned (net of reserves), totaled $173.3 million at March 31, 1994, a
$40.0 million (18.8%) decrease from the year-end 1993 total of $213.3 million
and a $148.5 million (46.1%) decrease from the March 31, 1993 total. The decline
in nonperforming assets during the first quarter of 1994 is due to paydowns and
payoffs of nonaccrual and renegotiated loans of $27.3 million, and an aggregate
decrease of $17.3 million resulting from writedowns, sales of other real estate
owned, exchange rate fluctuations and nonaccrual loans returning to accrual
status. These decreases were partially offset by net additions to nonaccrual
loans of $4.6 million during the quarter.
Nonperforming and Past Due Loans
<TABLE>
<CAPTION>
(In thousands)
March 31, March 31, December 31,
1994 1993 1993
==============================================================================================================================
<S> <C> <C> <C>
Nonperforming Assets:
Nonaccrual Loans: (1)
Domestic $74,576 $163,853 $85,075
Foreign 35,392 77,969 45,099
- - ------------------------------------------------------------------------------------------------------------------------------
Total Nonaccrual Loans 109,968 241,822 130,174
- - ------------------------------------------------------------------------------------------------------------------------------
Renegotiated Loans: (2)
Domestic 11,148 10,406 29,465
Foreign 755 1,556 834
- - ------------------------------------------------------------------------------------------------------------------------------
Total Renegotiated Loans 11,903 11,962 30,299
- - ------------------------------------------------------------------------------------------------------------------------------
Other Real Estate Owned, Net:
Domestic 44,414 49,135 45,049
Foreign 6,989 18,848 7,754
- - ------------------------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net 51,403 67,983 52,803
==============================================================================================================================
Total Nonperforming Assets $173,274 $321,767 $213,276
Past Due Loans: (3)
Domestic $2,184 $1,749 $3,315
Foreign -- -- 4
==============================================================================================================================
Total Past Due Loans $2,184 $1,749 $3,319
</TABLE>
(1) - Loans (other than consumer) that are in default in either principal or
interest for 90 days or more that are not well-secured and in the process
of collection.
(2) - Loans for which terms have been renegotiated to provide a reduction of
interest or principal as a result of a deterioration in the financial
position of the borrower in accordance with Statement of Financial
Accounting Standard No. 15. Renegotiated loans do not included $9.3
million in loans renegotiated at market terms that have returned to
accrual status.
(3) - Loans contractually past due 90 days or more in principal or interest that
are well-secured and in the process of collection.
17
<PAGE>
Asset Quality, Continued
At March 31, 1994, nonaccrual loans, including both domestic and foreign loans,
were $110.0 million, or 4.16% of total loans, compared with $130.2 million, or
5.2% of total loans at year-end 1993 and $241.8 million, or 11.1% of total loans
at March 31, 1993. Loans are generally placed on nonaccrual status when, in
management's judgment, there is doubt as to the ability to collect either
principal or interest, or when interest or principal is 90 days or more past due
and the loan is not well-secured and in the process of collection. The decrease
during the first quarter of 1994 is due to paydowns and payoffs of nonaccrual
loans of $26.2 million during the quarter, in addition to writedowns and other
reductions of $6.0 million. These reductions were partially offset by net
additions of $4.6 million and a transfer of a renegotiated loan of $7.4 million
to nonaccrual status. Of the $26.2 million in paydowns and payoffs during the
quarter, 32% related to foreign nonaccrual loans and 68% related to domestic
nonaccrual loans. Renegotiated loans decreased $18.4 million during the first
quarter of 1994, with paydowns and payoffs totaling $1.2 million, combined with
writedowns and transfers back to accrual status of $9.8 million and the
aforementioned $7.4 million transfer to nonaccrual status during the quarter.
Nonaccrual And Renegotiated Real Estate-Commercial/Construction Loans
Geographic Distribution By Type
March 31, 1994
<TABLE>
<CAPTION>
(In thousands) Geographic Location
District of United
Project Type Columbia Virginia Maryland Kingdom Other Total
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Land $ -- $9,755 $16,041 $ -- $ -- $25,796
Construction:
Single-Family Residential -- 2,238 6,171 -- 253 8,662
Office Buildings 414 2,285 13,384 -- 4,493 20,576
Multifamily Residential 610 -- -- -- 837 1,447
Warehouse Loans -- 1,668 1,194 -- -- 2,862
Shopping Centers -- -- -- -- -- --
Hotels -- 2,104 -- -- -- 2,104
Other 524 -- 140 -- -- 664
Commercial Mortgages -- -- -- 17,940 -- 17,940
=================================================================================================================================
Total Nonaccrual and Renegotiated Real-Estate
Commercial/Construction Loans $1,548 $18,050 $36,930 $17,940 $5,583 $80,051
</TABLE>
Other real estate owned, net of reserves, declined to $51.4 million at March 31,
1994, from $52.8 million at December 31, 1993 and $68.0 million at the end of
the first quarter of 1993. The decrease during the first quarter of 1994 is the
result of paydowns and sales of $3.8 million and writedowns of $1.3
million, partially offset by net additions of $3.6 million. At March 31, 1994,
residential and commercial land composed 70% of other real estate owned with
office, industrial, retail and other categories accounting for the remainder of
the portfolio.
Other Real Estate Owned - (1)
Geographic Distribution By Type
March 31, 1994
<TABLE>
<CAPTION>
(In thousands) Geographic Location
District of United
Project Type Columbia Virginia Maryland Kingdom Total
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Land $703 $27,455 $5,031 $ -- $33,189
Single-Family Residential 307 563 3,709 -- 4,579
Office Buildings/Retail 389 971 3,242 2,306 6,908
Multifamily Residential 91 -- -- -- 91
Warehouse Loans -- 1,953 -- 3,130 5,083
Shopping Centers -- -- -- 1,553 1,553
Other -- -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------------
Total Other Real Estate Owned, Net $1,490 $30,942 $11,982 $6,989 $51,403
</TABLE>
(1) - Balances are net of valuation reserves totaling $2.1 million.
18
<PAGE>
Asset Quality, Continued
Past due loans consist predominantly of residential real estate and consumer
loans that are well-secured and in the process of collection and that are
accruing interest. Past due loans decreased $1.1 million during the first
quarter of 1994 to $2.2 million, while increasing $435 thousand from the first
quarter of 1993.
At March 31, 1994, the Corporation had identified approximately $15.3 million in
potential problem loans that are currently performing but that management
believes have certain attributes that may lead to nonaccrual or past due status
in the foreseeable future. These loans consisted of $2.4 million of domestic
loans and $12.9 million of commercial property and corporate loans originated in
the United Kingdom.
The Corporation's banking subsidiaries maintain reserves for loan losses that
are available to absorb potential losses in the current loan portfolio. The
reserve for loan losses is based on management's assessment of existing
conditions and reflects potential losses determined to be probable and subject
to reasonable estimation. The reserve for loan losses was $86.7 million, or
3.28% of total loans (net of premiums/discounts) at March 31, 1994, compared
with $86.5 million, or 3.42% of total loans at December 31, 1993, and $91.7
million, or 4.22% of total loans at March 31, 1993. The decrease in the reserve
for loan losses as a percentage of total loans is due to the increase in total
loans during the periods, primarily in residential mortgage type loans. The
Corporation's coverage ratio was 71.2% at quarter-end 1994, 53.9% at year-end
1993 and 36.1% at quarter-end 1993. The increase in the coverage ratio during
the past quarter and the last year is primarily the result of decreases in total
nonperforming assets during the periods.
Deposits, Short-Term Borrowings and Long-Term Debt
Deposits, which are offered through several banking subsidiaries of the
Corporation, are the primary and most stable source of funds for the
Corporation. Deposits totaled $3.79 billion at March 31, 1994, a slight increase
from the year-end 1993 deposit total and a decrease of $525.0 million (12.2%)
from the March 31, 1993 deposit total. The decrease from last year's balance was
consistent with the general decline in bank deposits, the result of the low
interest rate environment.
Short-term borrowings decreased $15.7 million (3.5%) during the first quarter of
1994, while increasing $149.7 million (51.9%) since the first quarter of 1993.
The increase in short-term borrowings over the last year is attributable to the
replacement of a portion of the decrease in total deposits during the period
with short-term borrowings.
On February 1, 1994, the Corporation sold $125 million of 8.5% Subordinated
Notes, due February 2006. The notes were priced at par and are not callable for
five years. The notes were sold under a shelf registration statement declared
effective on January 13, 1994. The Corporation has used the net proceeds from
the offering, approximately $121 million, to redeem floating-rate subordinated
notes and subordinated capital notes due in 1996. The proceeds were placed in
short-term investments prior to the redemption of the floating-rate notes in
March 1994. The balance of long-term debt at March 31, 1994 was $217.6 million,
up slightly from the balance at year-end and March 31, 1993 of $213.3 million.
The increase from the year-end balance reflects the difference between the gross
proceeds from the sale of the subordinated notes in February 1994 ($125 million)
and the amount of debt redeemed in March 1994 ($120.7 million).
19
<PAGE>
Liquidity
The Corporation maintains liquidity to meet the needs of depositors, borrowers
and creditors, at a reasonable cost and without undue stress on the operations
of the Corporation and its banking subsidiaries. The Corporation's Asset-
Liability Committee actively analyzes and manages liquidity in coordination with
other areas of the organization (see Interest Rate Risk Management).
At March 31, 1994, the Corporation's liquid assets, on a consolidated basis,
which includes cash and due from banks, U.S. Treasury securities and Government
obligations, trading account securities, federal funds sold, resale agreements
and time deposits at other banks, totaled $1.8 billion (38.6% of total assets).
This compares with $1.8 billion (36.9%) at December 31, 1993 and $2.7 billion
(51.4%) at March 31, 1993. The decrease in the percentage of liquid assets to
total assets from March 31, 1993, is the result of the Corporation's strategic
objective of improving earnings by increasing its loan-to-deposit ratio. The
Corporation expects liquid assets to remain at approximately the March 31, 1994
level for the foreseeable future.
Interest Rate Risk Management
Financial institutions manage the inherently different maturity and repricing
characteristics of the lending and deposit-taking lines of business to achieve a
desired interest rate sensitivity position and to limit their exposure to
interest rate risk. These risks are managed by the Corporation's Asset-Liability
Committee, comprised of senior executives of the Corporation, which in turn
reports to the Executive Committee of the Board of Directors. Policies have been
established and approved related to acceptable levels of interest rate risk.
As a result of the recent low interest rate environment, the Corporation's
interest sensitivity gap has turned liability sensitive. Thus, increases in
interest rates would tend to moderately decrease the Corporation's net interest
income while downward movements would tend to moderately increase net interest
income. The one-year interest sensitivity gap is currently liability sensitive
by approximately $605 million, or 13% of total assets at March 31, 1994.
The sensitivity gap position reflects the impact of the off balance sheet
transactions the Corporation has entered into to help manage its interest rate
risk. The Corporation uses off balance sheet instruments to manage interest rate
risk when such instruments present a cost effective alternative to traditional
on-balance sheet methods. The Corporation is not a dealer in off balance sheet
instruments, nor is it entering into off balance sheet positions as a part of
its trading account activities.
20
<PAGE>
Capital
Total stockholders' equity at March 31, 1994 was $288.7 million, down $4.5
million from the year-end 1993 total and up $73.6 million from March 31, 1993.
The decrease was the result of earnings totaling $7.9 million being more than
offset by $8.9 million of unrealized losses in the Corporation's securities
available for sale portfolio, combined with dividends on preferred stock of $3.3
million. The increase in stockholders' equity over the preceding year is
attributable to the issuance of common and preferred stock in October 1993,
which resulted in proceeds of $132.3 million, which were only partially offset
by net losses recorded during the period and dividend payments on preferred
stock outstanding.
Capital adequacy is an important indicator of financial stability and overall
performance. The Corporation's capital position at March 31, 1994 remains solid
with a ratio of equity to assets of 6.04%, compared with ratios of 6.13% and
4.11% at December 31, 1993 and March 31, 1993, respectively. The Corporation's
total (combined Tier I and Tier II) and core (Tier I) capital ratios were
17.53% and 10.84%, respectively, at March 31, 1994, compared with 16.81% and
10.76% at December 31, 1993 and 13.09% and 7.22% at March 31, 1993,
respectively. The Federal Reserve Board's risk-based capital guidelines for
bank holding companies require the Corporation to meet a minimum ratio of
qualifying total (combined Tier I and Tier II) capital to risk-weighted assets
of 8.00%, at least half of which must be composed of core (Tier I) capital
elements. The Federal Reserve Board has established an additional capital
adequacy guideline-the leverage ratio, which measures the ratio of Tier I
capital to quarterly average assets. The most highly rated bank holding
companies are required to maintain a minimum leverage ratio of 3.00%. However,
most bank holding companies, including the Corporation, are expected to
maintain an additional cushion of at least 100 to 200 basis points above the
3.00% minimum. The actual required ratio for individual bank holding companies
is based on the Federal Reserve Board's assessment of the applicable company's
asset quality, earnings performance, interest-rate risk and liquidity. The
Federal Reserve Board has not advised the Corporation of a specific leverage
ratio requirement. The Corporation's leverage ratio was 6.15% at March 31,
1994, compared with leverage ratios of 6.03% and 3.91% at December 31, 1993
and March 31, 1993, respectively.
In December 1992, new federal regulations were adopted to implement the prompt
corrective action provisions of the Federal Deposit Insurance Corporation
Improvement Act (FDICIA), which group FDIC-insured institutions into
categories based on certain capital ratios and other criteria. The categories
are "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." Based on
the numerical capital levels specified in the implementation regulations, each
of the Corporation's insured banking subsidiaries would be classified as "well-
capitalized." However, because the regulations provide that, irrespective of
numerical capital levels, an institution is not considered "well-capitalized"
if it is subject to a formal agreement requiring the maintenance of a specific
level of capital, thus Riggs-Washington is classified as "adequately
capitalized" (see "Capital Ratios" below). The Corporation ensures that its
operating subsidiaries are capitalized in accordance with regulatory
guidelines. The three national bank subsidiaries of the Corporation are
subject to minimum capital ratios prescribed by the Office of the Comptroller
of the Currency, which are generally the same as those of the Federal Reserve
Board. The following table details the actual and required minimum ratios for
the Corporation and its national bank subsidiaries.
CAPITAL RATIOS
<TABLE>
<CAPTION>
Mar. 31, Dec. 31, Mar. 31, Required
1994 1993 1993 Minimums
===============================================================================================================================
<S> <C> <C> <C> <C>
Riggs National Corporation:
Tier I 10.84% 10.76% 7.22% 4.00%
Combined Tier I and Tier II 17.53 16.81 13.09 8.00
Leverage 6.15 6.03 3.91 3.00
The Riggs National Bank of Washington, D.C.*:
Tier I 11.17 10.69 10.98 6.00
Combined Tier I and Tier II 12.45 11.97 12.26 10.00
Leverage 6.34 6.13 6.02 5.00
The Riggs National Bank of Virginia:
Tier I 17.01 17.05 16.49 4.00
Combined Tier I and Tier II 18.26 18.31 17.74 8.00
Leverage 9.25 8.94 8.23 3.00
The Riggs National Bank of Maryland:
Tier I 12.16 11.46 11.40 4.00
Combined Tier I and Tier II 13.41 12.74 12.65 8.00
Leverage 6.62 6.69 6.26 3.00
</TABLE>
* Under the terms of the Written Agreement, Riggs-Washington has committed to
the OCC to maintain a Tier I ratio of 6.00%, a Combined ratio of 10.00% and
a leverage ratio of 5.00%.
21
<PAGE>
Net Interest Income
Net interest income on a tax-equivalent basis (net interest income plus an
amount equal to the tax savings on tax-exempt interest) totaled $38.1 million in
the first quarter of 1994, up $1.9 million from the fourth quarter of 1993, and
up $2.5 million from the first quarter of 1993. The net interest margin (net
interest income on a tax-equivalent basis divided by average earning assets) was
3.70% (see schedule of the following page), an increase of 27 basis points from
3.43% for the fourth quarter of 1993 and 48 basis points from 3.22% at March 31,
1993. The positive impact of lower interest rates paid on deposits and
borrowings in 1993 was partially offset by decreases in earning assets and lower
rates earned on assets. Adding to the improvement in net interest income and
margin was a decrease in nonperforming assets, combined with a shift to longer-
term, higher-yielding assets from short-term investments (see "Securities"). In
1993, the Corporation established a goal of increasing its loan-to-deposit ratio
to approximately 70% in 1994. The loan-to-deposit ratio stood at 69.8% at March
31, 1994. The goal was largely accomplished through the purchase in the open
market of approximately $526 million of residential mortgages in 1993 and the
first quarter of 1994. The ratio of loans to average earning assets was 62.4% at
March 31, 1994, compared with ratios of 57.2% and 48.3% for the fourth quarter
of 1993 and the first quarter of 1993, respectively.
Interest lost on nonaccrual loans totaled $2.1 million for the quarter ended
March 31, 1994, which had the effect of reducing the net interest margin by
approximately 21 basis points. For the fourth quarter of 1993 and the first
quarter of 1993, net interest lost totaled $1.7 million and $4.4 million,
respectively, with a 16 basis points and 40 basis points impact on the net
interest margin.
INTEREST INCOME ON NONACCRUAL AND
RENEGOTIATED LOANS (1)
<TABLE>
<CAPTION>
(In Thousands) March 31,
1994
- - ------------------------------------------------------------------------------------------------------
<S> <C>
Interest Income at Original Terms:
Nonaccrual Loans:
Domestic Loans $1,972
Foreign Loans 1,022
Renegotiated Loans 227
- - ------------------------------------------------------------------------------------------------------
Total $3,221
Actual Interest Income Recognized:
Nonaccrual Loans:
Domestic Loans $ 542
Foreign Loans 446
Renegotiated Loans 140
- - ------------------------------------------------------------------------------------------------------
Total $1,128
</TABLE>
(1) - For loans on nonaccrual and a renegotiated status at March 31, 1994, the
table shows total interest income at original terms and actual income
recognized for the three months ended March 31, 1994.
22
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1994 March 31, 1993
(Tax-equivalent basis) (1) Average Income/ Average Income/
(In thousands) Balance Expense Rate Balance Expense Rate
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans: (2)
Commercial - Taxable $ 358,892 $ 5,850 6.61 % $ 283,216 $ 4,943 7.08 %
Commercial - Tax-Exempt 76,017 1,474 7.86 89,351 2,099 9.53
Real Estate - Commercial/Construction 385,028 7,801 8.22 518,020 7,871 6.16
Residential Mortgage 1,254,138 22,116 7.15 537,799 11,056 8.34
Home Equity 228,842 3,891 6.90 272,402 4,736 7.05
Consumer 77,737 2,257 11.77 98,988 2,971 12.17
Foreign 217,873 4,582 8.53 362,953 6,577 7.35
- - ----------------------------------------------------------------------------------------------------------------------------
Total Loans (Including Fees) 2,598,527 47,971 7.49 2,162,729 40,253 7.55
- - ----------------------------------------------------------------------------------------------------------------------------
Securities Available for Sale 638,849 6,461 4.10 158,569 1,032 2.64
Securities Held-to-Maturity:
U.S. Treasury Securities 579,997 6,090 4.26 755,670 12,184 6.54
Obligations of States and Political Subdivisions 1,977 52 10.67 1,999 52 10.55
Mortgage-Backed Securities ---- ---- ---- 311,585 4,901 6.38
Other Securities 16,323 589 14.63 40,428 731 7.33
- - ----------------------------------------------------------------------------------------------------------------------------
Total Securities Held-to-Maturity 598,297 6,731 4.56 1,109,682 17,868 6.53
- - ----------------------------------------------------------------------------------------------------------------------------
Time Deposits with Other Banks 184,599 2,630 5.78 486,267 5,823 4.86
Federal Funds Sold and Resale Agreements 147,188 1,196 3.30 561,290 4,372 3.16
- - ----------------------------------------------------------------------------------------------------------------------------
Total Earning Assets and Average Rate Earned 4,167,460 64,989 6.32 4,478,537 69,348 6.28
- - ----------------------------------------------------------------------------------------------------------------------------
Less: Reserve for Loan Losses 86,944 85,065
Cash and Due from Banks 240,987 291,233
Premises and Equipment, Net 160,295 173,196
Other Assets 186,007 256,608
============================================================================================================================
Total Assets $4,667,805 $5,114,509
Liabilities And Stockholders' Equity
Interest-Bearing Deposits:
Savings and NOW Accounts $ 939,044 $ 4,758 2.05 % $ 941,405 $ 5,253 2.26 %
Money Market Deposit Accounts 1,061,281 6,290 2.40 1,235,321 7,995 2.62
Time Deposits in Domestic Offices 843,596 6,019 2.89 738,028 7,382 4.06
Time Deposits in Foreign Offices 218,690 2,809 5.21 658,762 8,193 5.04
- - ----------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Deposits 3,062,611 19,876 2.63 3,573,516 28,823 3.27
- - ----------------------------------------------------------------------------------------------------------------------------
Borrowed Funds:
Federal Funds Purchased and Repurchase
Agreements 80,439 594 2.99 152,600 957 2.54
U.S. Treasury Notes and Other Borrowed Funds 86,459 628 2.95 61,926 431 2.82
Long-Term Debt 279,128 5,841 8.49 213,325 3,618 6.88
- - ----------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Funds and Average Rate
Paid 3,508,637 26,939 3.11 4,001,367 33,829 3.43
- - ----------------------------------------------------------------------------------------------------------------------------
Demand Deposits 817,792 832,557
Other Liabilities 47,233 37,267
Stockholders' Equity 294,143 243,318
============================================================================================================================
Total Liabilities and Stockholders' Equity $4,667,805 $5,114,509
============================================================================================================================
Net Interest Income and Margin $38,050 3.21 % $35,519 2.85 %
============================================================================================================================
Net Interest Yield on Earning Assets 3.70 % 3.22 %
</TABLE>
(1) - Income and rates are computed on a tax-equivalent basis using a Federal
income tax rate of 34% and local tax rates as applicable.
(2) - Nonperforming loans are included in average balances used to determine
rates.
23
<PAGE>
Noninterest Income
Noninterest income for the first quarter of 1994 was $26.8 million, compared
with $21.2 million for the fourth quarter of 1993 and $22.3 million for the
first quarter of 1993. The $5.6 million increase from the fourth quarter of 1993
is primarily attributable to a settlement of mortgage insurance claims relating
to other real estate owned properties in the United Kingdom that totaled $4.7
million pretax. The remaining increase resulted from increases in securities
gains of $1.2 million. The $4.5 million increase from the first quarter of 1993
resulted from the previously mentioned mortgage insurance settlement and an
increase of $283 thousand in securities gains. Increased trust income of $905
thousand, the result of growth and increased market value of assets under
management, was offset by a decrease of $782 in service charges and other fee
income.
Noninterest Expense
Noninterest expense for the first quarter of 1994 was $53.6 million, an increase
of $2.5 million when compared with the fourth quarter of 1993 and a decrease of
$15.9 million when compared with the first quarter of 1993. The increase during
the first quarter of 1994 is attributable to an increase of $1.1 million in
recruiting and other benefit related expenses, combined with an increase of $1.3
million in consulting and outsourcing fees during the quarter.
The decrease in noninterest expense year-to-year is primarily due to the
restructuring expense totaling $13.8 million recorded in the first quarter of
1993 for BankStart '93 (See "Performance Enhancing Strategies"). The remaining
decrease is due to decreases in salaries and benefits of $1.9 million, the
result of staff reductions between the periods. In addition, an increase in
other real estate owned expense of $2.0 million was offset by decreases in
occupancy related expense, advertising expense, FDIC insurance premiums and
other operating expense reductions of $2.2 million.
Taxes
The Corporation's provision for income taxes includes both federal and state
income taxes. The provision for income taxes totaled $130 thousand for the
quarter ended March 31, 1994, compared with provisions of $82 thousand and $165
thousand for the quarters ended December 31, 1993 and March 31, 1993. The
provision for income taxes in 1994 is less than the amount determined by
application of the Federal statutory income tax rate principally because of tax
preference items and the Corporation's ability to carryback net operating losses
(see Note 6).
24
<PAGE>
RIGGS NATIONAL CORPORATION
Exhibits and Signatures
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
(4.4)- Indenture dated as of January 1, 1994 with respect to $125
million, 8.5% Subordinated Debentures due 2006.
(b) Reports on Form 8-K
-------------------
On May 9, 1994, the Corporation filed a Form 8-K announcing that
Mr. Paul M. Homan, Vice Chairman of the Corporation and President
and Chief Executive Officer of The Riggs National Bank of
Washington, D.C., has decided to end his association with the
Corporation and The Riggs National Bank of Washington, D.C.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: May 16, 1994 /s/ Timothy C. Coughlin
-------------------- -----------------------
Timothy C. Coughlin
President
Date: May 16, 1994 /s/ John L. Davis
-------------------- -----------------------
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
25
<PAGE>
RIGGS NATIONAL CORPORATION
Exhibits and Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Riggs National Corporation
--------------------------
(Registrant)
Date: May 31, 1994 By /s/John L. Davis
------------ ---------------------------
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
26
<PAGE>
EXECUTION COPY
--------------
================================================================================
RIGGS NATIONAL CORPORATION
TO
THE BANK OF NEW YORK,
Trustee
---------------
SUBORDINATED DEBT SECURITIES
---------------
INDENTURE
Dated as of January 1, 1994
______________
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
---------
Page
<S> <C> <C>
RECITALS OF THE COMPANY......................... 1
ARTICLE I
Definitions and Other Provisions
of General Application............................... 1
Section 1.1 Definitions.............................................. 1
-----------
Section 1.2 Compliance Certificates and Opinions..................... 9
------------------------------------
Section 1.3 Form of Documents Delivered to Trustee................... 10
--------------------------------------
Section 1.4 Acts of Holders; Record Dates............................ 11
-----------------------------
Section 1.5 Notices, Etc., to Trustee and Company.................... 12
-------------------------------------
Section 1.6 Notice to Holders; Waiver................................ 13
-------------------------
Section 1.7 Conflict with Trust Indenture Act........................ 13
---------------------------------
Section 1.8 Effect of Headings and Table of Contents................. 13
----------------------------------------
Section 1.9 Successors and Assigns................................... 13
----------------------
Section 1.10 Separability Clause..................................... 13
-------------------
Section 1.11 Benefits of Indenture................................... 14
---------------------
Section 1.12 Governing Law........................................... 14
-------------
Section 1.13 Legal Holidays.......................................... 14
--------------
ARTICLE II
Security Forms.................................... 14
Section 2.1 Forms Generally.......................................... 14
---------------
Section 2.2 Form of Face of Security................................. 15
------------------------
Section 2.3 Form of Reverse of Security.............................. 17
---------------------------
Section 2.4 Form of Legend for Global Securities..................... 21
------------------------------------
Section 2.5 Form of Trustee's Certificate of
Authentication...................................... 22
--------------
ARTICLE III
The Securities.................................... 22
Section 3.1 Amount Unlimited; Issuable in Series..................... 22
------------------------------------
Section 3.2 Denominations............................................ 26
-------------
Section 3.3 Execution, Authentication, Delivery
and Dating.......................................... 26
----------
Section 3.4 Temporary Securities..................................... 28
--------------------
Section 3.5 Registration, Registration of
Transfer and Exchange............................... 28
-----------------------------
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities................................... 31
-----------------
Section 3.7 Payment of Interest; Interest
Rights Preserved.................................... 31
----------------
</TABLE>
- - ---------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
-i-
<PAGE>
INDENTURE, dated as of January 1, 1994, between RIGGS NATIONAL
CORPORATION, a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office
at 800 17th Street, N.W., Washington, D.C. 20074 and THE BANK OF NEW YORK, a
New York banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein
called the "Securities"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof,
as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.1 Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation;
<PAGE>
2
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Authorized Officer" means any officer of the Company designated by a
resolution of the Board of Directors to take certain actions as specified
in this Indenture.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, or by action of an Authorized Officer
designated as such pursuant to a resolution of the Board of Directors, and
to be in full force and effect on the date of such cer-tification, and
delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in that Place of Payment are authorized or
obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such
Commission is
<PAGE>
3
not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" means any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Company and which is not subject to redemption by the Company and includes
the common stock, $2.50 par value per share, of the Company as the same
exists at the date of this Indenture or as such stock may be constituted
from time to time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, its Chief Financial Officer or a Vice
President, and by its Controller, an Assistant Controller, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Conversion Price" means, with respect to any series of Securities
which are convertible into Common Stock, the price per share of Common
Stock at which the Securities of such series are so convertible as set
forth in the Board Resolution with respect to such series (or in any
supplemental indenture entered into pursuant to Section 9.1(10) with
respect to such series), as the same may be adjusted from time to time in
accordance with Section 15.5 (or such supplemental indenture).
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office as of the date hereof is located at 101 Barclay
Street, Floor 21W, New York, New York 10286.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
"Covenant Defeasance" has the meaning specified in Section 14.3.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Defeasance" has the meaning specified in Section 14.2.
<PAGE>
4
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary for such series by the
Company pursuant to Section 3.1, which Person shall be a clearing agency
registered under the Securities Exchange Act of 1934, as amended.
"Entitled Person" means any person entitled to payment pursuant to the
terms of Other Financial Obligations.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Proceeds" has the meaning specified in Section 13.15.
"Exchange Act" means the Securities Exchange Act of 1934 as it may be
amended and any successor statute thereto.
"Global Security" means a Security bearing the legend prescribed in
Section 2.4 evidencing all or part of a series of Securities, authenticated
and delivered to the Depositary for such series or its nominee, and
registered in the name of such Depositary or nominee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof, including, for all purposes of this instrument and any such
supplemental indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively. The term "Indenture" shall also include the terms
of particular series of Securities established as contemplated by Section
3.1.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an instalment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated
Maturity or by
<PAGE>
5
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President, the Chief Financial
Officer or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Controller, an Assistant Controller, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 10.4
shall be the principal executive, financial or accounting officer of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of accel-eration of the Maturity thereof pursuant to
Section 5.2.
"Other Financial Obligations" means, unless otherwise determined with
respect to any series of Securities pursuant to Section 3.1 and whether
outstanding on the date of execution of this Indenture or thereafter
created, assumed or incurred, all obligations of the Company (including
guarantees of obligations of others) to make payment pursuant to the terms
of financial instruments, such as (i) securities contracts and currency and
foreign exchange contracts and (ii) derivative instruments, such as swap
agreements (including interest rate and currency and foreign exchange rate
swap agreements), cap agreements, floor agreements, collar agreements,
interest rate agreements, foreign exchange agreements, options, commodity
future contracts and commodity options contracts, other than (x)
obligations on account of Senior Indebtedness and (y) obligations on
account of indebtedness for money borrowed which by their terms expressly
rank pari passu with or subordinate to the Securities.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated
<PAGE>
6
in trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; provided that, if such
--------
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
(iv) Securities which have been defeased pursuant to Section
14.2 hereof; and
(v) Securities converted into Common Stock pursuant hereto and,
for purposes of selection for redemption, Securities not deemed
outstanding pursuant to Section 11.3.
provided, however, that in determining whether the Holders of the requisite
-------- -------
principal amount of the Outstanding Secu-rities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, (i)
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof pursuant to Section 5.2, (ii) the
principal amount of a Security denominated in one or more foreign
currencies or currency units shall be the U.S. dollar equivalent,
determined in the manner and as of the time provided as contemplated by
Section 3.1, of the principal amount (or, in the case of an Original Issue
Discount Security, of the amount determined as provided in (i) above) of
such Security, (iii) if, as of such date, the principal amount payable at
the Stated Maturity of a Security is not determinable, the principal amount
of such Security which shall be deemed to be Outstanding shall be the
amount as specified or determined as contemplated by Section 3.1, and (iv)
Securities owned by the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which
the Trustee knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding
if the pledgee
<PAGE>
7
establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any Affiliate of the Company or
of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium
and interest on the Securities of that series are payable as specified as
contemplated by Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or
in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed
to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that
purpose as contemplated by Section 3.1.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors,
the chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
senior trust officer, trust officer or assistant trust officer, the
controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed
<PAGE>
8
by any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Indebtedness" means, unless otherwise determined with respect
to any series of Securities pursuant to Section 3.1, the principal of (and
premium, if any) and interest on (a) all indebtedness of the Company for
money borrowed or indebtedness purchased (including indebtedness of others
for money borrowed or indebtedness purchased by others and guaranteed by
the Company), whether outstanding on the date of execution of this
Indenture or thereafter created, assumed or incurred other than (i) the
Securities, whether outstanding on the date of this Indenture or thereafter
issued, (ii) the Company's Floating Rate Subordinated Notes due 1996,
Floating Rate Subordinated Capital Notes due 1996 and 9.65% Subordinated
Debentures due 2009, and (iii) such other indebtedness of the Company as by
its terms is expressly stated to be not superior in right of payment to the
Securities or to rank pari passu in right of payment with the Securities
and (b) amendments, renewals, extensions, modifications and refundings of
any such Senior Indebtedness. For the purposes of this definition,
"indebtedness for money borrowed" when used with respect to the Company
means (i) any obligation of, or any obligation guaranteed by, the Company
for the repayment of borrowed or purchased money, whether or not evidenced
by bonds, debentures, notes or other written instruments, and direct credit
substitutes (ii) any deferred payment obligation of, or any such obligation
guaranteed by, the Company for the payment of the purchase price of
property or assets evidenced by a note or similar instrument, and (iii) any
obligation of, or any such obligation guaranteed by, the Company for the
payment of rent or other amounts under a lease of property or assets which
obligation is required to be classified and accounted for as a capitalized
lease on the balance sheet of the Company under generally accepted
accounting principles.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
instalment of principal thereof or interest thereon, means the date
specified in such Security as the
<PAGE>
9
fixed date on which the principal of such Security or such instalment of
principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or
by one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such
voting power by reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder, and if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean
the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided,
--------
however, that in the event the Trust Indenture Act of 1939 is amended after
-------
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"U.S. Government Obligation" has the meaning specified in Section
13.4.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president (but shall not include any assistant vice
president), whether or not designated by a number or a word or words added
before or after the title "vice president".
"Wholly-owned Subsidiary" means any Subsidiary all of whose
outstanding voting stock (other than directors' qualifying shares) shall at
the time be owned by the Company or one or more of its Wholly-owned
Subsidiaries.
Section 1.2 Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and
<PAGE>
10
shall comply with the requirements of the Trust Indenture Act and any other
requirements set forth in this Indenture.
Every certificate or opinion (other than the Officers' Certificate
delivered under Section 10.4 hereof) with respect to compliance with a condition
or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3 Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
<PAGE>
11
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.4 Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
Without limiting the generality of the foregoing, a Holder, including
a Depositary that is a Holder of a Global Security, may make, give or take, by a
proxy, or proxies, duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted in this Indenture to be made, given or taken by Holders, and a
Depositary that is a Holder of a Global Security may provide its proxy or
proxies to the beneficial owners of interest in any such Global Security.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Securities of any series entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by Holders of
Securities of such series. If not set by the Company
<PAGE>
12
prior to the first solicitation of a Holder of Securities of such series made by
any Person in respect of any such action, or, in the case of any such vote,
prior to such vote, the record date for any such action or vote shall be the
30th day (or, if later, the date of the most recent list of Holders required to
be provided pursuant to Section 7.1) prior to such first solicitation or vote,
as the case may be. With regard to any record date for action to be taken by
the Holders of one or more series of Securities, only the Holders of Securities
of such series on such date (or their duly designated proxies) shall be entitled
to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(f) Without limiting the foregoing, a Holder entitled hereunder to
give or take any action hereunder with regard to any particular Security may do
so with regard to all or any part of the principal amount of such Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any different part of such principal amount.
Section 1.5 Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company, Attention: Corporate
Secretary.
<PAGE>
13
Section 1.6 Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 1.7 Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 1.8 Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.9 Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.10 Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the
<PAGE>
14
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 1.11 Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than (a) the parties hereto and their successors
hereunder, (b) the holders of Senior Indebtedness (c) the Holders, and (d)
subject to Section 13.15, Entitled Persons in respect of Other Financial
Obligations, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 1.12 Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of law rules of such State.
Section 1.13 Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of the Securities of any series which specifically
states that such provision shall apply in lieu of this Section)) payment of
interest or principal (and premium, if any) need not be made at such Place of
Payment on such date, but may be made on the next succeeding Business Day at
such Place of Payment with the same force and effect as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity, provided that no
--------
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
ARTICLE II
Security Forms
Section 2.1 Forms Generally.
---------------
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of the
<PAGE>
15
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Section 2.2 Form of Face of Security.
------------------------
This Security is not a deposit and is not insured by the Federal
Deposit Insurance Corporation or any Federal or other governmental agency.
[Insert any legend required by the Internal Revenue Code of 1986, as
-------------------------------------------------------------------
amended, and the regulations thereunder.]
- - ---------------------------------------
RIGGS NATIONAL CORPORATION
.................................................
No........... $ ........
[CUSIP No.......]
Riggs National Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to
........................................... , or registered assigns, the
principal sum of.................. ................... Dollars on.............
................................. [if the Security is to bear interest prior to
--------------------------------------------
Maturity, insert --, and to pay interest thereon from ............. or from the
- - ----------------
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on ............ and ............ in each year,
commencing .........., at the rate of ....% per annum, until the principal
hereof is paid or made available for payment [if applicable, insert -- , and (to
---------------------
the extent that the payment of such interest shall be legally enforceable) at
the rate of ....% per annum on any overdue [principal and] premium and on any
overdue instalment of interest]. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the ....... or ....... (whether or
not a Business Day), as the case
<PAGE>
16
may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert --
------------------------------------------------ ----------------
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of ....% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or duly
provided for. Interest on any overdue principal shall be payable on demand.
Any interest on any overdue principal shall bear interest at the rate of .....%
per annum (to the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such default in payment to the
date payment of such interest has been made or duly provided for, and such
interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
--------------
insert -- any such] interest on this Security will be made at the office or
- - ------
agency of the Company maintained for that purpose in [the Borough of Manhattan,
The City of New York], in such coin or currency of [the United States of
America] [insert other currency, if applicable] as at the time of payment is
legal tender for payment of public and private debts [if applicable, insert -- ;
---------------------
provided, however, that at the option of the Company payment of interest may be
- - -------- -------
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE>
17
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
RIGGS NATIONAL CORPORATION
By............................
Attest:
.........................................
Section 2.3 Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of _______________, 1994 (herein called the
"Indenture," which term shall have the meaning assigned to it in such
instrument), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, the holders of
Senior Indebtedness, Entitled Persons and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof[,
limited in aggregate principal amount to $ ...........].
[If applicable, insert -- The Securities of this series are subject to
---------------------
redemption upon not less than 30 days' notice by mail, [if applicable, insert --
---------------------
(1) on ........... in any year commencing with the year ...... and ending with
the year ...... through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time and
from time to time [on or after ..........., 19..], as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [on or before
................, ___%, and if redeemed] during the 12-month period beginning
............. of the years indicated,
Redemption Redemption
Year Price Year Price
- - ---- ----- ---- -----
<PAGE>
18
and thereafter at a Redemption Price equal to ....% of the principal amount,
together in the case of any such redemption [if applicable, insert -- (whether
---------------------
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert -- The Securities of this series are subject to
---------------------
redemption upon not less than 30 days' notice by mail, (1) on ............ in
any year commencing with the year .... and ending with the year .... through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time and from
time to time [on or after ............], as a whole or in part, at the election
of the Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below: If redeemed during the 12-month period beginning
............ of the years indicated,
Redemption Price Redemption Price For
For Redemption Redemption Otherwise
Through Operation Than Through Operation
Year of the Sinking Fund of the Sinking Fund
- - ---- ------------------- ----------------------
and thereafter at a Redemption Price equal to .....% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to
.............., redeem any Securities of this series as contemplated by [Clause
(2) of] the preceding paragraph as a part of, or in anticipation of, any
refunding operation by the application, directly or indirectly, of moneys
borrowed having an interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than .....% per annum.]
[The sinking fund for this series provides for the redemption on
........... in each year beginning with the year ....... and ending with the
year ...... of [not less than $.......... ("mandatory sinking fund") and not
more than]
<PAGE>
19
$......... aggregate principal amount of Securities of this series. Securities
of this series acquired or redeemed by the Company otherwise than through
[mandatory] sinking fund payments may be credited against subsequent [mandatory]
sinking fund payments otherwise required to be made [in the inverse order in
which they become due].]
[If the Security is subject to redemption, insert -- In the event of
------------------------------------------------
redemption of this Security in part only, a new Security or Securities of this
series and of like tenor for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert -- The Indenture contains provisions for
---------------------
Defeasance at any time of [(a)] [the entire indebtedness evidenced by this
Security] [and (b)] [certain restrictive covenants and Events of Default,] [in
each case] upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Security.]
[If the Security is convertible, insert applicable conversion
------------------------------------------------------------
provisions]
- - ----------
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. This Security is also
issued subordinate and subject to the provisions of the Indenture regarding
prior payment in full to Entitled Persons in respect of Other Financial
Obligations. The Indenture also provides that if, upon the occurrence of
certain events of bankruptcy or insolvency relating to the Company, there
remains, after giving effect to such subordination provisions, any amount of
cash, property or securities available for payment or distribution in respect of
Securities of this series (as defined in the Indenture, "Excess Proceeds"), and
if, at such time, any Entitled Person (as defined in the Indenture) has not
received payment in full of all amounts due or to become due on or in respect of
Other Financial Obligations (as defined in the Indenture), then such Excess
Proceeds shall first be applied to pay or provide for the payment in full of
such Other Financial Obligations before any payment or distribution may be made
in respect of Securities of this series. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination and payment of Excess
Proceeds as provided in the Indenture and (c) appoints the Trustee his attorney-
in-fact for any and all such purposes.
[If the Security is not an Original Issue Discount Security, insert --
------------------------------------------------------------------
The principal of this Security may not be declared due and payable upon the
occurrence of an Event of
<PAGE>
20
Default, except an Event of Default relating to certain events involving the
bankruptcy, insolvency or reorganization of the Company. If an Event of Default
with respect to Securities of this series relating to certain events involving
the bankruptcy, insolvency or reorganization of the Company shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- The
--------------------------------------------------------------
principal of this Security may not be declared due and payable upon the
occurrence of an Event of Default, except an Event of Default relating to
certain events involving the bankruptcy, insolvency or reorganization of the
Company. If an Event of Default with respect to Securities of this series
relating to certain events involving the bankruptcy, insolvency or
reorganization of the Company shall occur and be continuing, an amount of
principal of the Securities of this series may be declared due and payable in
the manner and with the effect provided in the Indenture. Such amount shall be
equal to -- insert formula for determining the amount. Upon payment [if
----------------------------------------- --
applicable, insert -- (i)] of the amount of principal so declared due and
- - ------------------
payable [if applicable, insert -- and (ii) of interest on any overdue principal
---------------------
and overdue interest (in each case to the extent that the payment of such
interest shall be legally enforceable)], all of the Company's obligations in
respect of the payment of the principal of and interest, if any, on the
Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this
<PAGE>
21
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $....... and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Section 2.4 Form of Legend for Global Securities.
------------------------------------
Any Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a
Depositary or a nominee thereof. This Security may not be transferred to,
or registered or exchanged for Securities registered in
<PAGE>
22
the name of, any Person other than the Depositary or a nominee thereof or a
successor of such Depositary or a nominee of such successor and no such
transfer may be registered, except in the limited circumstances described
in the Indenture. Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, this
Security shall be a Global Security subject to the foregoing, except in
such limited circumstances."
Section 2.5 Form of Trustee's Certificate of
Authentication.
--------------------------------
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: THE BANK OF NEW YORK,
As Trustee
By...........................
Authorized Signatory
ARTICLE III
The Securities
Section 3.1 Amount Unlimited; Issuable in Series.
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The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.4, 3.5, 3.6, 9.6, 11.7 or
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15.3 and except for any Securities which, pursuant to Section 3.3, are
deemed never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(4) the date or dates on which the principal of the Securities of the
series is payable;
(5) the rate or rates at which the Securities of the series shall
bear interest, if any, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for any interest payable on any
Interest Payment Date;
(6) the place or places in addition to the Borough of Manhattan, The
City of New York, where the principal of and any premium and interest on
Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(10) the currency, currencies or currency units in which payment of
the principal of and any premium and interest on any Securities of the
series shall be payable if other than the currency of the United States of
America and the manner of determining the equivalent thereof in the
currency of the United States of America (including the time as of which
such determination is to be made) for purposes of the definition of
"Outstanding" in Section 1.1;
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(11) if the amount of payments of principal of or any premium or
interest on any Securities of the series may be determined with reference
to an index or formula, the manner in which such amounts shall be
determined;
(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or a Holder
thereof, in one or more currencies or currency units other than that or
those in which the Securities are stated to be payable, the currency,
currencies or currency units in which payment of the prin-cipal of and any
premium and interest on Securities of such series as to which such election
is made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made;
(13) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
5.2;
(14) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall
be due and payable upon any Maturity other than the Stated Maturity or
which shall be deemed to be Outstanding as of any date prior to the Stated
Maturity (or, in any such case, the manner in which such amount deemed to
be the principal amount shall be determined);
(15) the application, if any, of either or both of Section 14.2 and
Section 14.3 to the Securities of the series (including, in the case of
Section 14.3, the covenants and any Events of Default not specified therein
that are subject thereto) and, if other than by a Board Resolution, the
manner in which any election pursuant to such Sections by the Company shall
be evidenced;
(16) whether the Securities of the series shall be issuable in whole
or in part in the form of one or more Global Securities and, in such case,
the Depositary or Depositaries for such Global Security or Global
Securities and any circumstances other than those set forth in Section 3.5
in which any such Global Security may be transferred to, and registered and
exchanged for Securities registered in the name of, a Person other than the
Depositary for such Global Security or a nominee thereof and in which any
such transfer may be registered;
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(17) if to be applicable, the application of Article XV to the
Securities of the series and any addition to, change in or elimination of
the provisions of Article XV to be applicable to such Securities;
(18) if other than as specified in Section 5.1, the Events of Default
applicable with respect to the Securities of the series;
(19) the Events of Default set forth in Section 5.1 applicable with
respect to the Securities of the series, if fewer than all of the Events of
Default set forth in Section 5.1;
(20) if other than as specified in Section 5.2, the Events of Default
the occurrence of which would permit the declaration of the acceleration of
Maturity pursuant to Section 5.2;
(21) the Events of Default the occurrence of which would permit the
declaration of the acceleration of Maturity pursuant to Section 5.2, if
fewer than all of the Events of Default set forth in Section 5.2;
(22) any other covenant or warranty included for the benefit of
Securities of the series in addition to (and not inconsistent with) those
included in this Indenture for the benefit of Securities of all series, or
any other covenant or warranty included for the benefit of Securities of
the series in lieu of any covenant or warranty included in this Indenture
for the benefit of Securities of all series (including any covenant
contained in Article X hereof), or any provision that any covenant or
warranty included in this Indenture for the benefit of Securities of all
series (including any covenant contained in Article X hereof) shall not be
for the benefit of Securities of such series, or any change to or
combination of the provisions of any such covenant or warranty included in
this Indenture for the benefit of Securities of all series (including any
covenants contained in Article X hereof) which applies to the Securities of
such Series;
(23) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee
or the requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 502;
(24) if other than as specified in Article XIII, the subordination
provisions applicable with respect to the Securities of the series,
including a different definition of the terms "Senior Indebtedness,"
"Entitled Persons" or "Other Financial Obligations"; and
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(25) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 9.1(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 3.3) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
Unless otherwise provided with respect to the Securities of any
series, at the option of the Company, interest on the Securities of any series
that bears interest may be paid by mailing a check to the address of the person
entitled thereto as such address shall appear in the Security Register.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 3.2 Denominations.
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The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 3.1. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 3.3 Execution, Authentication, Delivery
and Dating.
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The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
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authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established in or
pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 6.1) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such form
has been established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities (or the manner of determining
such terms) have been established by or pursuant to Board Resolution as
permitted by Section 3.1, that such terms (or the manner of determining
such terms) have been established in conformity with the provisions of this
Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents are
delivered at or prior to the authentication upon original issuance of the first
Security of such series to be issued.
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Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
Section 3.4 Temporary Securities.
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Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and tenor. Until so exchanged the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.
Section 3.5 Registration, Registration of
Transfer and Exchange.
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The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office or in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any
series at the office or agency of the Company in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of a like
aggregate principal amount and tenor.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section
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11.3 and ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.
Notwithstanding the foregoing and except as otherwise specified or
contemplated by Section 3.1, if at any time the Depositary for the Securities of
a series notifies the Company that it is unwilling or unable to continue as a
Depositary for the Securities of such series or if at any time the Depositary
for Securities of a series shall no longer be registered or in good standing
under the Securities Exchange Act of 1934, as amended, or other applicable
statute or regulation, the Company shall appoint a successor Depositary with
respect to the Securities of such series. If a successor Depositary for the
Securities of such series is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, the Company
will execute, and the Trustee, upon Company Request (which shall include notice
to the Trustee that a successor Depositary for the Securities of such series has
not been appointed), will authenticate and deliver, Securities of such series in
definitive form in an aggregate principal amount equal to the principal amount
of the Global Security or Global Securities representing Securities of such
series in exchange for such Global Security or Global Securities.
In the event that (i) the Company at any time and in its sole
discretion determines that the Securities of any series issued in the form of
one or more Global Securities shall no longer be represented by such Global
Security or Global Securities or (ii) there shall have occurred and be
continuing an Event of Default or an event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default with respect to the
Securities of any series, the Company will execute, and the Trustee, upon
Company Request, will authenticate and deliver, Securities of such series in
definitive form and in an aggregate principal amount equal to the principal
amount of the Global Security or Global Securities representing such series in
exchange for such Global Security or Global Securities.
Upon the occurrence in respect of any Global Security of any series of
any one or more of the conditions specified in the preceding two paragraphs or
such other conditions as may be specified as contemplated by Section 3.1 for
such series, such Global Security may be exchanged for Securities registered in
the names of, and the transfer of such Global Security may be registered to,
such Persons (including Persons other than the Depositary with respect to such
series and its nominees) as such Depositary shall direct. Notwithstanding any
other provision of this Indenture, any Security authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, any Global
Security shall also be a Global Security and shall bear the legend specified in
Section 2.4 except for any Security authenticated and delivered in exchange for,
or upon registration
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of transfer of, a Global Security pursuant to the preceding sentence.
Section 3.6 Mutilated, Destroyed, Lost and
Stolen Securities.
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If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.7 Payment of Interest; Interest
Rights Preserved.
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Except as otherwise provided as contemplated by Section 3.1 with
respect to any series of Securities, interest on any
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Security which is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of Securities of
such series at his address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following Clause (2).
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(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 3.8 Persons Deemed Owners.
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Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 3.7) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
No holder of any beneficial interest in any Global Security registered
in the name of a Depositary or a nominee thereof shall have any rights under
this Indenture with respect to such Global Security, and such Depositary or
nominee, as the case may be, may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the owner of such Global Security for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by a Depositary or a nominee thereof pursuant hereto.
Section 3.9 Cancellation.
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All Securities surrendered for payment, conversion, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly cancelled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold, and all
Securities so delivered shall be promptly cancelled by the Trustee. No
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Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Securities held by the Trustee shall be promptly
disposed of by the Trustee in accordance with its ordinary procedures.
Section 3.10 Computation of Interest.
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Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
Section 3.11 CUSIP Numbers.
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The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
--------
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE IV
Satisfaction and Discharge
Section 4.1 Satisfaction and Discharge of Indenture.
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This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 10.3) have
been delivered to the Trustee for cancellation; or
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(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of
such deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations (if
any) of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of Clause
(1) of this Section, the obligations of the Trustee under Section 4.2 and the
last paragraph of Section 10.3 shall survive.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of all series as to which it is Trustee and if the other conditions
thereto are met. In the event there are two or more Trustees hereunder, then
the effectiveness of any such instrument shall be conditioned upon receipt of
such instruments from all Trustees hereunder.
Section 4.2 Application of Trust Money.
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Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
Money deposited and held in trust pursuant to this Section shall not be subject
to claims of the holders of Senior Indebtedness or of Entitled Persons under
Article XIII.
ARTICLE V
Remedies
Section 5.1 Events of Default.
-----------------
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default, whether it shall be occasioned by the provisions of Article
XIII and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of series of Securities other than
that series), and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 25% in principal amount of the Outstanding Securities of
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37
that series a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) the entry by a court or a governmental authority having
jurisdiction in the premises of (A) a decree or order for relief in respect
of the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or (B) a decree or order adjudging the Company a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company,
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or substantially all of its assets, or ordering the
winding up or liquidation of the affairs of the Company, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive days; or
(6) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or substantially all of its assets, or to an order
for the winding up or liquidation of the affairs of the Company; or
(7) any other Event of Default provided with respect to Securities of
that series.
Section 5.2 Acceleration of Maturity;
Rescission and Annulment.
------------------------
If an Event of Default specified in Sections 5.1(5) or 5.1(6) with
respect to Securities of any series at the time Outstanding occurs and is
continuing, then in every such case the
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38
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
any of the Securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such Securities as may be specified in
the terms thereof) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and any interest thereon at the rate or rates
prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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39
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee.
------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof, or
(3) default is made in the making or satisfaction of any sinking fund
payment or analogous obligation when the same becomes due pursuant to the
terms of any Security,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 5.4 Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
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40
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
--------
however, the Trustee may vote on behalf of the Holders for the election of a
- - -------
trustee in bankruptcy or similar official and may be a member of a creditors' or
other similar committee.
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities.
----------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 5.6 Application of Money Collected.
------------------------------
Subject to Article XIII, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal or any premium or interest, upon presentation of the Securities and
the notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively.
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41
Section 5.7 Limitation on Suits.
-------------------
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest and to Enforce
--------------
Conversion Rights.
-----------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 3.7)
any interest on such Security on the Stated Maturity or Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date), or, if
applicable, to convert such Security as provided in Article XV, and to institute
suit for the enforcement of any such payment or for the enforcement of any such
right to convert, and
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42
such rights shall not be impaired without the consent of such Holder.
Section 5.9 Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 5.10 Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.6, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12 Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
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43
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow any such direction if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceeding so directed would involve the Trustee in personal
liability.
Section 5.13 Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Securities
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.14 shall not apply to any suit instituted by
the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities of any series, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of
(or premium, if any) or interest on any Securities on or after the Stated
Maturity or Maturities
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44
expressed in such Securities (or, in the case of redemption, on or after the
Redemption Date).
Section 5.15 Waiver of Usury, Stay or Extension Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
The Trustee
Section 6.1 Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 6.2 Notice of Defaults.
------------------
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series notice
of such default known to it as and to the extent provided by the Trust Indenture
Act; provided, however, that in the case of any default of the character
-------- -------
specified in Section 5.1(4) with respect to Securities of such series, no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities of such series.
Section 6.3 Certain Rights of Trustee.
-------------------------
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Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
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46
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered or
omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Indenture.
Section 6.4 Not Responsible for Recitals
or Issuance of Securities.
----------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 6.5 May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
Section 6.6 Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
Section 6.7 Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
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47
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith;
(3) to indemnify each of the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim, liability
or expense incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of the trust
or trusts hereunder, including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder;
(4) to secure the Company's obligations under this Section, the
Trustee shall have a lien prior to the Securities upon all money or
property held or collected by the Trustee in its capacity as Trustee,
except for such money and property which is held in trust to pay principal
(and premium, if any) or interest on particular Securities;
(5) when the Trustee incurs any expenses or renders any services
after the occurrence of an Event of Default specified in Section 5.1(5) or
(6), such expenses and the compensation for such services are intended to
constitute expenses of administration under the United States Bankruptcy
Code (Title 11 of the United States Code) or any similar Federal or State
law for the relief of debtors; and
(6) the provisions of this Section 6.7 shall survive the termination
of this Indenture.
Section 6.8 Disqualification; Conflicting Interests.
---------------------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by the Trust Indenture Act, the Trustee shall not be deemed to have a
conflicting interest by virtue of being a trustee under this Indenture with
respect to Securities of more than one series.
<PAGE>
48
Section 6.9 Corporate Trustee Required;
Eligibility.
---------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes of
this Section (and to the extent permitted by the Trust Indenture Act), the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 6.10 Resignation and Removal;
Appointment of Successor.
------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
<PAGE>
49
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all securities, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the instrument of acceptance by a successor Trustee required by
Section 6.11 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation or removal, the Trustee resigning or
being removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 6.11. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
6.11, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any Series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 6.11, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(g) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
to all Holders of Securities of such series in the manner provided in Section
1.6. Each notice shall include the name of the successor Trustee with
<PAGE>
50
respect to the Securities of such series and the address of its Corporate Trust
Office.
Section 6.11 Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or
<PAGE>
51
any successor Trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business.
---------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 6.13 Preferential Collection of Claims
Against Company.
---------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 6.14 Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents (which may
be an affiliate of the Company) with respect to one or more series of Securities
which shall be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon original issue and upon exchange,
registration of transfer or partial redemption or conversion thereof or pursuant
to Section 3.6, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and
<PAGE>
52
obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by Federal or State authority. If such Authenticating Agent publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
<PAGE>
53
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
Unless the Authenticating Agent has been appointed by the Trustee at
the request of the Company, the Trustee agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its services under this
Section, and the Trustee shall be entitled to be reimbursed for such payments,
subject to the provisions of Section 6.7.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
As Trustee
By
-----------------------
As Authenticating Agent
By
-----------------------
Authorized Signatory
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders.
--------------------------------
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than June 30 and December 31 in each
year, a list for each series, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Securities of such
series as of the preceding June 15 or December 15, as the case may be, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
<PAGE>
54
excluding from any such list names and addresses received by the Trustee in
- - ---------
its capacity as Security Registrar.
Section 7.2 Preservation of Information;
Communications to Holders.
----------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 7.3 Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
To the extent that any such report is required by the Trust Indenture Act with
respect to any 12-month period, such report shall cover the 12-month period
ending January 15 and shall be transmitted (in accordance with the Trust
Indenture Act) by the next succeeding March 15.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will promptly notify the Trustee when any Securities are listed on any
stock exchange.
Section 7.4 Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
--------
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities
<PAGE>
55
Exchange Act of 1934 shall be filed with the Trustee within 15 days after the
same is so required to be filed with the Commission.
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms.
------------------------------
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership, trust or
other entity, shall be organized and validly existing under the laws of the
United States of America, any State thereof or the District of Columbia and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest on all
the Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and
<PAGE>
56
that all conditions precedent herein provided for relating to such
transaction have been complied with;
provided, however, the Company may, without the consent of the Holder or Holders
- - -------- -------
of any series of Securities, convey or transfer its assets substantially as an
entirety to any Person in connection with a transfer that is assisted or
sponsored by a Federal bank regulatory authority, and in such case the Company's
obligations under the Indenture need not be assumed by the entity acquiring such
assets.
Section 8.2 Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 8.1, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE IX
Supplemental Indentures
Section 9.1 Supplemental Indentures Without
Consent of Holders.
-------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
<PAGE>
57
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events
of Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any
--------
such addition, change or elimination (i) shall neither (A) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (B) modify the
rights of the Holder of any such Security with respect to such provision or
(ii) shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 6.11(b); or
(9) to add to, change or eliminate any of the provisions of Article
XIII in respect of any series of Securities, including Outstanding
Securities, provided that any such action pursuant to this clause (9) shall
--------
not adversely affect the interests of the Holders of Securities of any
series in any material respect; or
(10) to provide for the terms and conditions of conversion into
Common Stock, securities or other property of the Securities of any series
which are convertible into Common Stock, securities or other property to
the extent such terms and conditions differ from those set forth in Article
XV; or
<PAGE>
58
(11) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action pursuant
--------
to this clause (11) shall not adversely affect the interests of the Holders
of Securities of any series in any material respect.
Notwithstanding any provision in this Indenture or otherwise, the
rights of creditors in respect of Other Financial Obligations under this
Indenture and otherwise in respect of the Securities may, at any time and from
time to time, be reduced or eliminated by a supplemental indenture entered into
by the Company and the Trustee, which supplemental indenture will not require
the consent of Holders of Securities or any creditor in respect of Other
Financial Obligations.
Section 9.2 Supplemental Indentures with
Consent of Holders.
----------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
-------- -------
that no such supplemental indenture entered into pursuant to this Section 9.2
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal of, or any instalment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security or any other Security that would be due
and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 5.2, or adversely affect any right of repayment at the
option of the Holder of any Security, or reduce the amount of, or postpone
the date fixed for, the payment of any sinking fund payment or analogous
obligation, or change any Place of Payment where, or the coin or currency
in which, any Security or any premium or interest thereon is payable, or
impair the conversion rights of any Holder of Securities of a series
entitled to the conversion rights set forth in Article XV hereof, or impair
the right to institute suit for the enforcement of any such
<PAGE>
59
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date) or modify the provisions of
this Indenture with respect to the subordination of the Securities of any
series in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver of compliance with the provisions of this Indenture or
defaults hereunder and their consequences provided for in this Indenture,
or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.8, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, provided, however, that this clause shall not be deemed to require
-------- -------
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 6.11(b) and
9.1(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 9.3 Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
<PAGE>
60
Section 9.4 Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.5 Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 9.6 Reference in Securities to
Supplemental Indentures.
--------------------------
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE X
Covenants
Section 10.1 Payment of Principal, Premium
and Interest.
-----------------------------
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
Section 10.2 Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment or conversion, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office
<PAGE>
61
or agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-------- -------
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 10.3 Money for Securities Payments
to Be Held in Trust.
-----------------------------
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (i) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
<PAGE>
62
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
-------- -------
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 10.4 Statement by Officers as to Default.
-----------------------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate (one of the signers of which shall be the principal executive
officer, principal financial officer or principal accounting officer of the
Company), stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge. The Company will deliver to the Trustee written
notice of the occurrence of any Event of Default within ten Business Days of the
Company becoming aware of any such Event of Default.
<PAGE>
63
Section 10.5 Existence.
---------
Subject to Article VIII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
-------- -------
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 10.6 Maintenance of Properties.
-------------------------
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
-------- -------
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
Section 10.7 Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- - -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which adequate provision is made.
Section 10.8 Waiver of Certain Covenants.
---------------------------
The Company may, with respect to the Securities of any series, omit in
any particular instance to comply with any term, provision or condition set
forth in Sections 10.5 to 10.7, inclusive, or in any covenant provided pursuant
to Section 3.1(18), 9.1(2) or 9.1(7) for the benefit of the Holders of such
series, if before the time for such compliance the Holders of a majority in
principal amount of the Outstanding Securities of
<PAGE>
64
such series shall, by act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
Section 10.9 Calculation of Original Issue Discount.
--------------------------------------
If the Company has Outstanding any Original Issue Discount Securities,
and upon written request of the Trustee, the Company shall file with the Trustee
within a reasonable time after the end of each calendar year a written notice
specifying the amount of original issue discount (including daily rates and
accrual periods) accrued on Outstanding Securities as of the end of such year.
ARTICLE XI
Redemption of Securities
Section 11.1 Applicability of Article.
------------------------
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.1 for Securities of any series)
in accordance with this Article.
Section 11.2 Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or in another manner specified as contemplated
by Section 3.1 for such Securities. In case of any redemption at the election
of the Company, the Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date, of the principal amount of
Securities of such series to be redeemed and, if applicable, of the tenor of the
Securities to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish the
Trustee with an Officers' Certificate evidencing compliance with such
restriction.
<PAGE>
65
Section 11.3 Selection by Trustee of Securities
to Be Redeemed.
----------------------------------
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series and of a specified tenor are to be
redeemed or such series is comprised of a single Security), the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to the minimum authorized denomination for Securities of that
series or any integral multiple thereof) of the principal amount of Securities
of such series of a denomination larger than the minimum authorized denomination
for Securities of that series. If less than all of the Securities of such
series and of a specified tenor are to be redeemed (unless such series is
comprised of a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed. The
provisions of the preceding paragraph and this paragraph shall not apply with
respect to the redemption of a series of Securities comprised of a single
Security, whether such Security is to be redeemed in whole or in part. In the
case of any such redemption in part, the unredeemed portion of the principal
amount of the Security shall be in an authorized denomination (which shall not
be less than the minimum authorized denomination) of such Security. If any
Security selected for partial redemption is surrendered for conversion after
such selection, the converted portion of such Security shall be deemed (so far
as may be) to be the portion selected for redemption. Upon any redemption of
less than all the Securities of a series, for purposes of selection for
redemption, the Company and the Trustee may treat as Outstanding Securities
surrendered for conversion during the period of 15 days next preceding the
mailing of a notice of redemption, and need not treat as Outstanding any
Security authenticated and delivered during such period in exchange for the
unconverted portion of any Security converted in part during such period.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
<PAGE>
66
Section 11.4 Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and accrued interest, if any,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption of
any Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price and accrued
interest, if any, will become due and payable upon each such Security to be
redeemed and, if applicable, that interest thereon will cease to accrue on
and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any,
(6) that the redemption is for a sinking fund, if such is the case,
(7) the CUSIP numbers, if any, of the Securities to be redeemed, and
(8) if the Securities to be redeemed are convertible pursuant to
Article XV,the Conversion Price then in effect with respect to such
Securities, the procedure for presenting such Securities for conversion and
the date on which the right to convert such Securities will expire.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Section 11.5 Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay
<PAGE>
67
the Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are to be redeemed
on that date (other than those theretofore surrendered for conversion into
Common Stock). If any Security called for redemption is converted pursuant
hereto, any money deposited with the Trustee or any Paying Agent or so held in
trust with respect to such Securities shall be paid to the Company on the
Company's request, or, if then held by the Company, shall be discharged from
such trust.
Section 11.6 Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. In addition, such
Securities shall, if convertible by their terms into Common Stock, cease from
and after the date fixed for redemption (unless an earlier date shall be
specified in a Board Resolution, Officers' Certificate or executed supplemental
indenture referred to in Sections 2.1 and 3.1 by or pursuant to which the terms
of the Securities of such series were established) to be convertible into Common
Stock (unless the Company shall default in the payment of the Redemption Price).
Upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided, however, that,
-------- -------
unless otherwise specified as contemplated by Section 3.1, installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security. In addition, such Security shall, if convertible by its terms
into Common Stock, remain convertible into Common Stock until the principal (and
premium, if any) of such Security shall have been paid or duly provided for.
Section 11.7 Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall
<PAGE>
68
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of the same series
and of like tenor, of any authorized denomination as requested by such Holder,
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.
ARTICLE XII
Sinking Funds
Section 12.1 Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 3.1 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 12.2. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities.
----------------------------
The Company (1) may deliver Securities of a series (other than any
previously called for redemption) and (2) may apply as a credit Securities of a
series which theretofore have been redeemed by the Company either at the
election of the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the terms of
such Securities, or have been otherwise acquired by the Company as permitted by
such Securities, in each case in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
--------
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
<PAGE>
69
Section 12.3 Redemption of Securities for
Sinking Fund.
----------------------------
Not less than 90 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 12.2 and the basis for such credit and will also deliver to
the Trustee any Securities to be so delivered. Not less than 30 days before
each such sinking fund payment date the Trustee shall select the Securities to
be redeemed upon such sinking fund payment date in the manner specified in
Section 11.3 and cause notice of the redemption thereof to be given in the name
of and at the expense of the Company in the manner provided in Section 11.4.
Such notice having been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in Sections 11.6 and 11.7.
The Company's obligation to make a mandatory or optional sinking fund
payment shall automatically be reduced by an amount equal to the sinking fund
Redemption Price allocable to any Securities or portions thereof called for
redemption pursuant to Article XI hereof on any sinking fund payment date and
converted into Common Stock; provided that, if the Trustee is not the conversion
agent for the Securities, the Company or such conversion agent shall give the
Trustee written notice prior to the date fixed for redemption of the principal
amount of Securities or portions thereof so converted.
ARTICLE XIII
Subordination of Securities
Section 13.1 Securities Subordinate to
Senior Indebtedness.
-------------------------
The Company covenants and agrees, and each Holder of a Security of any
series, by his acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article (subject to the
provisions of Article XIV), the indebtedness represented by the Securities of
such series and the payment of the principal of (and premium, if any) and
interest on each of all of the Securities of such series are hereby expressly
made subordinate and subject in right of payment to the prior payment in full of
all Senior Indebtedness and, as provided in Section 13.15, of all Other
Financial Obligations.
<PAGE>
70
Section 13.2 Payment Over of Proceeds Upon
Dissolution, Etc.
-----------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment in money or
money's worth, before the Holders of the Securities of any series are entitled
to receive any payment on account of principal of (or premium, if any) or
interest on the Securities of such series or on account of the purchase or other
acquisition of Securities of such series, other than payment made in Common
Stock (or cash in lieu of fractional shares thereof) upon conversion effected
pursuant to Article XV, and to that end the holders of Senior Indebtedness shall
be entitled to receive, for application to the payment hereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Securities of any series
in any such case, proceeding, dissolution, liquidation or other winding up or
event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security of any series (or any Person
on its behalf) shall have received any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities,
before all Senior Indebtedness is paid in full or payment thereof provided for,
and if such fact shall, at or prior to the time of such payment or distribution
have been made known to the Trustee or, as the case may be, such Holder, then
and in such event such payment or distribution shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, in each case, which
are subordinated in right of payment to all Senior Indebtedness which
<PAGE>
71
may at the time be outstanding to the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article VIII shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshalling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance,
transfer or lease such properties and assets substantially as an entirety, as
the case may be, shall, as a part of such consolidation, merger, conveyance,
transfer or lease, comply with the conditions set forth in Article VIII.
Section 13.3 Prior Payment to Senior Indebtedness
Upon Acceleration of Securities.
------------------------------------
In the event that any Securities of any series are declared due and
payable before their Stated Maturity, then and in such event the holders of
Senior Indebtedness shall be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness, or provision
shall be made for such payment in cash, before the Holders of the Securities of
such series are entitled to receive any payment of the principal of, premium, if
any, or interest on the Securities of such series or on account of the purchase
or other acquisition of Securities of such series other than payment made in
Common Stock (or cash in lieu of fractional shares thereof) upon conversion
effected pursuant to Article XV.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or to or on behalf of the Holder of any Security
of any series prohibited by the foregoing provisions of this Section, and if
such fact shall, at or prior to the time of such payment, have been made known
to the Trustee or, as the case may be, such Holder, then and in such event such
payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 13.2 would be applicable.
Section 13.4 No Payment When Senior Indebtedness
Default.
-----------------------------------
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period with respect thereto, or in the
event that any event of default with respect to any Senior Indebtedness shall
have
<PAGE>
72
occurred and be continuing permitting the holders of such Senior Indebtedness
(or a trustee on behalf of the holders thereof) to declare such Senior
Indebtedness due and payable prior to the date on which it would otherwise have
become due and payable, unless and until such event of default shall have been
cured or waived or shall have ceased to exist and any such acceleration shall
have been rescinded or annulled, or (b) in the event any judicial proceeding
shall be pending with respect to any such default in payment, or event of
default, then no payment shall be made by the Company on account of principal of
(or premium, if any) or interest on the Securities of any series or on account
of the purchase or other acquisition of Securities of any series other than
payment made in Common Stock (or cash in lieu of fractional shares thereof) upon
conversion effected pursuant to Article XV.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or to or on behalf of the Holder of any Security
of any series prohibited by the foregoing provisions of this Section, and if
such fact shall, at or prior to the time of such payment, have been made known
to the Trustee or, as the case may be, such Holder, then and in such event such
payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 13.2 would be applicable.
Section 13.5 Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities of any series shall prevent (a) the Company, at any time
except during the pendency of any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshalling
of assets and liabilities of the Company referred to in Section 13.2 or under
the conditions described in Section 13.3 or 13.4, from making payments at any
time of principal of (and premium, if any) or interest on the Securities of any
series, or (b) the application by the Trustee of any money deposited with it
hereunder to the payment of or on account of the principal of (and premium, if
any) or interest on the Securities of any series or the retention of such
payment by the Holder, if, at the time of such application by the Trustee, it
did not have actual knowledge that such payment would have been prohibited by
the provisions of this Article.
Section 13.6 Subrogation to Rights of Holders
of Senior Indebtedness.
--------------------------------
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities of a series shall be subrogated to the extent of the payments
or distributions made to the holders of such Senior Indebtedness pursuant to the
<PAGE>
73
provisions of this Article to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Securities of such series shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities of a series or the Trustee would be entitled
except for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness by Holders of
the Securities of a series or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities of such series, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
Section 13.7 Provisions Solely to Define
Relative Rights.
---------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities of a
series on the one hand and the holders of Senior Indebtedness (and, in the case
of Section 13.15, Entitled Persons in respect of Other Financial Obligations) on
the other hand. Nothing contained in this Article or elsewhere in this
Indenture or in the Securities of any series is intended to or shall (a) impair,
as among the Company, its creditors other than holders of Senior Indebtedness
and the Holders of the Securities of any series, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under this
Article of the holders of Senior Indebtedness and the rights under Section 13.15
of Entitled Persons in respect of Other Financial Obligations, is intended to
rank equally with all other obligations of the Company), to pay to the Holders
of the Securities of a series the principal of (and premium, if any) and
interest on the Securities of such series as and when the same shall become due
and payable in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities of a series and creditors
of the Company other than the holders of Senior Indebtedness or Entitled Persons
in respect of Other Financial Obligations or any trustee therefor; or (c)
prevent the Trustee or the Holder of any Security of any series from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Indebtedness, and under Section 13.15 of Entitled Persons in respect of
Other Financial Obligations, to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
<PAGE>
74
Section 13.8 Trustee to Effectuate Subordination.
-----------------------------------
Each holder of a Security of any series by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee his attorney-in-fact for any and all such
purposes.
Section 13.9 No Waiver of Subordination Provisions.
-------------------------------------
No right of any present or future holder of any Senior Indebtedness or
an Entitled Person in respect of Other Financial Obligations to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any
failure to act, in good faith, by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness or an Entitled Person in respect of Other
Financial Obligations may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities of any
series, without incurring responsibility to the Holders of the Securities of any
series and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of the Securities to the
holders of Senior Indebtedness or an Entitled Person in respect of Other
Financial Obligations, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness or Other Financial Obligations, or otherwise amend or
supplement in any manner Senior Indebtedness or Other Financial Obligations or
any instrument evidencing the same or any agreement under which Senior
Indebtedness or Other Financial Obligations is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness or Other Financial Obligations; (iii) release any
Person liable in any manner for the collection of Senior Indebtedness or Other
Financial Obligations; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
Section 13.10 Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities of any series. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts
<PAGE>
75
which would prohibit the making of any payment to or by the Trustee in respect
of the Securities of a series, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness or
any Entitled Person in respect of Other Financial Obligations or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 6.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
-------- -------
Trustee shall not have received the notice provided for in this Section at least
three Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the payment
of the principal (and premium, if any) or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) or an Entitled Person in respect of Other Financial Obligations or a
trustee therefor to establish that such notice has been given by a holder of
Senior Indebtedness (or a trustee therefor) or an Entitled Person in respect of
Other Financial Obligations or a trustee therefor. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness or an Entitled
Person in respect of Other Financial Obligations to participate in any payment
or distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness or Other Financial Obligations held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
Section 13.11 Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities of any series shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in
<PAGE>
76
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities of such series, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company and the Entitled Persons in respect of Other Financial Obligations,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
Section 13.12 Trustee Not Fiduciary for Holders
of Senior Indebtedness or
Entitled Persons.
----------------
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness or Entitled Persons with respect to Other
Financial Obligations and shall not be liable to any such holders or creditors
if it shall in good faith mistakenly pay over or distribute to Holders of
Securities of any series or to the Company or to any other Person cash, property
or securities to which any holders of Senior Indebtedness or Entitled Persons
with respect to Other Financial Obligations shall be entitled by virtue of this
Article or otherwise. With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants or
obligations as are specifically set forth in Article XIII and no implied
covenants or obligations with respect to holders of Senior Indebtedness shall be
read into this Indenture against the Trustee.
Section 13.13 Rights of Trustee as Holder of
Senior Indebtedness or Entitled Person;
Preservation of Trustee's Rights.
--------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it and with respect to any Other Financial
Obligations owed to the Trustee as the Entitled Person, to the same extent as
any other holder of Senior Indebtedness or Entitled Person in respect of Other
Financial Obligations, as the case may be, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder or Entitled Person.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7.
Section 13.14 Article Applicable to
Paying Agents.
---------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article
<PAGE>
77
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that Section 13.13
-------- -------
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as Paying Agent.
Section 13.15 Payment of Proceeds in Certain Cases.
------------------------------------
(a) Upon the occurrence of any of the events specified in clauses
(a), (b) and (c) of the first paragraph of Section 13.2, the provisions of that
Section shall be given effect to determine the amount of cash, property or
securities which may be payable or deliverable as between the holders of Senior
Indebtedness, on the one hand, and the Holders of Securities, on the other hand.
(b) If, after giving effect to the provisions of Section 13.2 and
Section 13.6, any amount of cash, property or securities shall be available for
payment or distribution in respect of the Securities ("Excess Proceeds"), and
any Entitled Persons in respect of Other Financial Obligations shall not have
received payment in full of all amounts due or to become due on or in respect of
such Other Financial Obligations (and provision shall not have been made for
such payment in money or money's worth), then such Excess Proceeds shall first
be applied (ratably with any amount of cash, property or securities available
for payment or distribution in respect of any other indebtedness of the Company
that by its express terms provides for the payment over of amounts corresponding
to Excess Proceeds to Entitled Persons in respect of Other Financial
Obligations) to pay or provide for the payment of the Other Financial
Obligations remaining unpaid, to the extent necessary to pay all Other Financial
Obligations in full, after giving effect to any concurrent payment or
distribution to or for Entitled Persons in respect of Other Financial
Obligations. Any Excess Proceeds remaining after the payment (or provisions for
payment) in full of all Other Financial Obligations shall be available for
payment or distribution in respect of the Securities.
(c) In the event that, notwithstanding the foregoing provisions of
subsection (b) of this Section, the Trustee or Holder of any Security shall have
received any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, before all Other Financial
Obligations are paid in full or payment thereof duly provided for, and if such
fact shall, at or prior to the time of such payment or distribution have been
made known to the Trustee or, as the case may be, such Holder, then and in such
event, subject to any obligation that the Trustee or such Holder may have
pursuant to Section 13.2, such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or
<PAGE>
78
other Person making payment or distribution of assets of the Company for payment
in accordance with subsection (b).
(d) Subject to the payment in full of all Other Financial
Obligations, the Holders of the Securities shall be subrogated (equally and
ratably with the holders of all indebtedness of the Company that by its express
terms provides for the payment over of amounts corresponding to Excess Proceeds
to Entitled Persons in respect of Other Financial Obligations and is entitled to
like rights of subrogation) to the rights of the Entitled Persons in respect of
Other Financial Obligations to receive payments and distributions of cash,
property and securities applicable to the Other Financial Obligations until the
principal of and interest on the Securities shall be paid in full. For purposes
of such subrogation, no payments or distributions to Entitled Persons in respect
of Other Financial Obligations of any cash, property or securities to which
Holders of the Securities or the Trustee would be entitled except for the
provisions of this Section, and no payments over pursuant to the provisions of
this Section to Entitled Persons in respect of Other Financial Obligations by
Holders of Securities or the Trustee, shall, as among the Company, its creditors
other than Entitled Persons in respect of Other Financial Obligations and the
Holders of Securities, be deemed to be a payment or distribution by the Company
to or on account of the Other Financial Obligations.
(e) The provisions of subsections (b), (c) and (d) of this Section
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Securities, on the one hand, and the Entitled Persons in
respect of Other Financial Obligations, on the other hand, after giving effect
to the rights of the holders of Senior Indebtedness, as provided in this
Article. Nothing contained in subsections (b), (c) and (d) of this Section is
intended to or shall affect the relative rights against the Company of the
Holders of the Securities and (1) the holders of Senior Indebtedness or (2)
other creditors of the Company other than Entitled Persons in respect of Other
Financial Obligations.
ARTICLE XIV
Defeasance and Covenant Defeasance
Section 14.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance.
---------------------------------
If pursuant to Section 3.1 provision is made for either or both of (a)
Defeasance of the Securities of a series under Section 14.2 or (b) Covenant
Defeasance of the Securities of a series under Section 14.3, then the provisions
of such Section or Sections, as the case may be, together with the other
provisions
<PAGE>
79
of this Article XIV, shall be applicable to the Securities of such series, and
the Company may at its option by Board Resolution or in any other manner
specified as contemplated by Section 3.1, at any time, with respect to the
Securities of such series, elect to have either Section 14.2 (if applicable) or
Section 14.3 (if applicable) be applied to the Outstanding Securities of such
series upon compliance with the conditions set forth below in this Article XIV.
Section 14.2 Defeasance and Discharge.
------------------------
Upon the Company's exercise of the above option applicable to this
Section, the Company shall be deemed to have been discharged from its
obligations, and the provisions of Article XIII hereof shall cease to be
effective, with respect to the Outstanding Securities of such series on and
after the date the conditions precedent set forth below are satisfied
(hereinafter, "Defeasance"). For this purpose, such Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities of such series and to have satisfied
all its other obligations under such Securities and this Indenture, including
the provisions of Article XIII hereof, insofar as such Securities are concerned
(and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of outstanding Securities of such series to receive, solely from the
trust fund described in Section 14.4 as more fully set forth in such Section,
payments of the principal of (and premium, if any) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3 or under
Article XV and such obligations as shall be ancillary thereto, (C) the rights,
powers, trusts, duties, immunities and other provisions in respect of the
Trustee hereunder and (D) this Article XIV. Subject to compliance with this
Article XIV, the Company may exercise its option under this Section 14.2
notwithstanding the prior exercise of its option under Section 14.3 with respect
to the Securities of such series. Following a Defeasance, payment of the
Securities of such series may not be accelerated because of an Event of Default.
Section 14.3 Covenant Defeasance.
-------------------
Upon the Company's exercise of the above option applicable to this
Section and after the date the conditions set forth below are satisfied
("Covenant Defeasance"), (1) the Company shall be released from its obligations
under any covenant or warranty applicable to such Securities that is determined
pursuant to Section 3.1 to be subject to this provision, (2) the occurrence of
an event specified in Section 5.1(4) (with respect to any covenant or warranty
applicable to such Securities that is specified pursuant to Section 3.1 as being
subject to this
<PAGE>
80
provision), specified in Section 5.1(5) or (6) or determined pursuant to Section
3.1 to be subject to this provision shall not be deemed to be or result in an
Event of Default and (3) the provisions of Article XIII shall cease to be
effective, in each case with respect to the outstanding Securities of such
series. For this purpose, such Covenant Defeasance means that, with respect to
the Outstanding Securities of such series, the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such Section or Article whether directly or indirectly by reason of
any reference elsewhere herein to any such Section or Article or by reason of
any reference in any such Section to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
Section 14.4 Conditions to Defeasance or
Covenant Defeasance.
---------------------------
The following shall be the conditions precedent to application of
either Section 14.2 or Section 14.3 to the Outstanding Securities of such
series:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 6.9 and agrees to comply with the
provisions of the Indenture applicable to it as if it were the Trustee
hereunder), as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, in each case sufficient,
without reinvestment, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be applied
by the Trustee (or any such other qualifying trustee as hereinbefore
provided) to pay and discharge, the principal of (and premium, if any) and
interest on the Outstanding Securities of such series on the Maturity of
such principal, premium, if any, or interest and any mandatory sinking fund
payments or analogous payments applicable to the Outstanding Securities of
such series on the due dates thereof. Before such a deposit the Company
may make arrangements satisfactory to the Trustee for the redemption of
Securities at a future date or dates in accordance with Article XI, which
shall be given effect in applying the foregoing. For this purpose, "U.S.
Government Obligations" means
<PAGE>
81
securities that are (x) direct obligations of the United States of America
for the payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for
the account of the holder of such depository receipt, provided that (except
as required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to the Securities of
such series shall have occurred and be continuing (A) on the date of such
deposit or (B) insofar as subsections 5.1(5) and (6) are concerned, at any
time during the period ending on the 120th day after the date of such
deposit or, if longer, ending on the day following the expiration of the
longest preference period applicable to the Company under Federal or State
law in respect of such deposit (it being understood that the condition in
this Clause (B) shall not be deemed satisfied until the expiration of such
period).
(3) Such Defeasance or Covenant Defeasance shall not (A) cause the
Trustee for the Securities of such series to have a conflicting interest as
defined in Section 6.8 or for purposes of the Trust Indenture Act with
respect to any securities of the Company or (B) result in the trust arising
from such deposit to constitute, unless it is qualified as, a regulated
investment company under the Investment Company Act of 1940, as amended.
(4) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other agreement or instrument to which the Company is a party or by
which it is bound.
<PAGE>
82
(5) Such Defeasance or Covenant Defeasance shall not cause any
Securities of such series then listed on any registered national securities
exchange under the Securities Exchange Act of 1934, as amended, to be
delisted.
(6) In the case of an election under Section 14.2, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Defeasance had not occurred.
(7) In the case of an election under Section 14.3, the Company shall
have delivered to the Trustee an opinion of Counsel to the effect that the
Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred.
(8) At the time of such deposit; (A) no default in the payment of all
or a portion of principal of (or premium, if any) or interest on any Senior
Indebtedness shall have occurred and be continuing, and no event of default
with respect to any Senior Indebtedness shall have occurred and be
continuing and shall have resulted in such Senior Indebtedness becoming or
being declared due and payable prior to the date on which it would
otherwise have become due and payable and (B) no other event of default
with respect to any Senior Indebtedness shall have occurred and be
continuing permitting (after notice or the lapse of time, or both) the
holders of such Senior Indebtedness (or a trustee on behalf of the holders
thereof) to declare such Senior Indebtedness due and payable prior to the
date on which it would otherwise have become due and payable, or, in the
case of either Clause (A) or Clause (B) above, each such default or event
of default shall have been cured or waived or shall have ceased to exist.
(9) Such Defeasance or Covenant Defeasance shall be effected in
compliance with any additional terms,
<PAGE>
83
conditions or limitations which may be imposed on the Company in connection
therewith pursuant to Section 3.1.
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Defeasance under Section 14.2
or the Covenant Defeasance under Section 14.3 (as the case may be) have
been complied with.
Section 14.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.
-----------------------------------
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 14.6, the Trustee and any such other qualifying trustee are
referred to collectively as the "Trustee") pursuant to Section 14.4 in respect
of the Outstanding Securities of such series shall be held in trust and applied
by the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (but not
including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law. Money and U.S. Government Obligations so held in trust shall not be
subject to the provisions of Article XIII.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 14.4 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of Outstanding Securities.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 14.4 which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent Defeasance or Covenant Defeasance.
<PAGE>
84
Section 14.6 Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 14.5 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article XIV until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 14.5; provided, however, that if
-------- -------
the Company makes any payment of principal of (and premium, if any) or interest
on any such Security following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money held by the Trustee or the Paying Agent.
ARTICLE XV
Conversion of Securities
Section 15.1 General.
-------
If so provided in the terms of the Securities of any series
established in accordance with Section 3.1, the principal amount of the
Securities of such series shall be convertible into shares of Common Stock in
accordance with the terms of such series of Securities and this Article XV;
provided, however, that if any of the terms by which any such Security shall be
- - -------- -------
convertible into Common Stock are set forth in a supplemental indenture entered
into with respect thereto pursuant to Section 9.1(10) hereof, the terms of such
supplemental indenture shall govern.
Section 15.2 Right to Convert.
----------------
Subject to and upon compliance with the provisions of this Article,
the holder of any Security that is convertible into Common Stock shall have the
right, at such holder's option, at any time on or after the date of original
issue of such Security or such other date specified in the applicable Board
Resolution delivered pursuant to Section 3.1 and prior to the close of business
on the date set forth in such Board Resolution (or if such Security is called
for redemption, then in respect of such Security to and including but not after
the close of business on the date of redemption unless the Company shall default
in the payment due on such date) to convert the principal amount of any such
Security of any authorized denomination, or, in the case of any Security to be
converted of a denomination greater than the minimum denomination for Securities
of the applicable series, any portion of such principal which is an authorized
denomination or an integral multiple thereof, into that number of fully paid and
nonassessable shares of Common Stock obtained by dividing the
<PAGE>
85
principal amount of such Security or portion thereof surrendered for conversion
by the Conversion Price therefor by surrender of the Security so to be converted
in whole or in part in the manner provided in Section 15.3. Such conversion
shall be effected by the Company in accordance with the provisions of this
Article.
Section 15.3 Manner of Exercise of Conversion
Privilege; Delivery of Common Stock; No
Adjustment for Interest or Dividends.
------------------------------------
In order to effect a conversion, the holder of any Security to be
converted, in whole or in part, shall surrender such Security at the office or
agency maintained by the Company for such purpose as provided in Section 10.2
and shall give written notice of conversion to the Company at such office or
agency that the holder elects to convert such Security or the portion thereof
specified in said notice. The notice shall state the name or names (with
address), and taxpayer identification number, in which the certificate or
certificates for shares of Common Stock which shall be deliverable on such
conversion shall be registered, and shall be accompanied by payments in respect
of transfer taxes, if required pursuant to Section 15.6. Each Security
surrendered for conversion shall, unless the shares of Common Stock deliverable
on conversion are to be issued in the same name as the registration of such
Security, be duly endorsed by or be accompanied by instruments of transfer, in
form satisfactory to the Company, duly executed by the holder or such holder's
duly authorized attorney, and by any payment required pursuant to this Section
15.3. As promptly as practicable after the surrender of such Security and
notice, as aforesaid, the Company shall deliver or cause to be delivered at such
office or agency to such holder, or on such holder's written order, a
certificate or certificates for the number of full shares of Common Stock
deliverable upon the conversion of such Security or portion thereof in
accordance with the provisions of this Article and a check or cash in respect of
any fractional interest in respect of a share of Common Stock arising upon such
conversion as provided in Section 15.4. In case any Security of a denomination
greater than the minimum denomination for Securities of the applicable series
shall be surrendered for partial conversion, the Company shall execute and the
Trustee shall authenticate and deliver to or upon the written order of the
Company and the holder of the Security so surrendered, without charge to such
holder, a new Security or Securities of the same series in authorized
denominations in an aggregate principal amount equal to the unconverted portion
of the surrendered Security. Each conversion shall be deemed to have been
effected as of the date on which such Security shall have been surrendered
(accompanied by the funds, if any, required by the last paragraph of this
Section) and such notice received by the Company, as aforesaid, and the person
or persons in whose name or names any certificate or certificates for shares of
Common Stock shall be registrable upon such conversion shall become on said date
the holder of record of the shares represented thereby; provided,
--------
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86
however, that any such surrender on any date when the stock transfer books of
- - -------
the Company shall be closed shall constitute the person in whose name the
certificates are to be registered as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Security shall have been so surrendered.
Any Security or portion thereof surrendered for conversion during the
period from the close of business on the Regular Record Date for any Interest
Payment Date to the opening of business on such Interest Payment Date shall
(unless such Security or portion thereof being converted shall have been called
for redemption or submitted for repayment on a date during such period) be
accompanied by payment, in legal tender or other funds acceptable to the
Company, of an amount equal to the interest otherwise payable on such Interest
Payment Date on the principal amount being converted; provided, however, that no
-------- -------
such payment need be made if there shall exist at the time of conversion a
default in the payment of interest on the applicable series of Securities. An
amount equal to such payment shall be paid by the Company on such Interest
Payment Date to the holder of such Security on such Regular Record Date;
provided, however, that if the Company shall default in the payment of interest
- - -------- -------
on such Interest Payment Date, such amount shall be paid to the person who made
such required payment. Except as provided above in this Section, no adjustment
shall be made for interest accrued on any Security converted or for dividends on
any shares issued upon the conversion of such Security as provided in this
Article.
Section 15.4 Cash Payments in Lieu of
Fractional Shares.
-----------------
No fractional shares of Common Stock or scrip representing fractional
shares of Common Stock shall be delivered upon conversion of Securities. If
more than one Security shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock which shall be
deliverable upon conversion shall be computed on the basis of the aggregate
principal amount of the Securities (or specified portions thereof to the extent
permitted hereby) so surrendered. Instead of any fraction of a share of Common
Stock which would otherwise be deliverable upon the conversion of any Security,
the Company shall pay to the holder of such Security an amount in cash (computed
to the nearest cent, with one-half cent being rounded upward) equal to the
current market value of the fractional share. The current market value of a
fraction of a share shall be determined by multiplying the current market price
of a full share (determined in the manner provided in Section 15.5(a)(v)) by the
fraction.
<PAGE>
87
Section 15.5 Conversion Price Adjustments; Effect of
Reclassifications, Mergers,
Consolidations and Sales of Assets.
----------------------------------
(a) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Company shall (x) pay a dividend or make a
distribution on the Common Stock in shares of Common Stock, (y) subdivide
the outstanding Common Stock into a greater number of shares or (z) combine
the outstanding Common Stock into a smaller number of shares, the
Conversion Price shall be adjusted so that the holder of any Security
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock of the Company which such holder would
have owned or have been entitled to receive after the happening of any of
the events described above had such Security been converted immediately
prior to the record date in the case of a dividend or the effective date in
the case of subdivision or combination. An adjustment made pursuant to
this subparagraph (i) shall become effective immediately after the record
date in the case of a dividend, except as provided in subparagraph (vii)
below), and shall become effective immediately after the effective date in
the case of a subdivision or combination.
(ii) In case the Company shall issue rights or warrants to all
holders of shares of Common Stock entitling them (for a period expiring
within 45 days after the record date mentioned below) to subscribe for or
purchase shares of Common Stock at a price per share less than the current
market price per share of Common Stock (as defined for purposes of this
subparagraph (ii) in subparagraph (v) below), the Conversion Price in
effect after the record date for the determination of stockholders entitled
to receive such rights or warrants shall be determined by multiplying the
Conversion Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at such current market price, and
the denominator of which shall be the number of shares of Common Stock
outstanding on the record date for issuance of such rights or warrants plus
the number of additional shares of Common Stock receivable upon exercise of
such rights or warrants. Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become effective
immediately, except as provided in subparagraph (vii) below, after such
record date.
(iii) In case the Company shall distribute to all holders of Common
Stock any shares of capital stock of the
<PAGE>
88
Company (other than Common Stock) or evidences of its indebtedness or
assets (excluding cash dividends or distributions paid from retained
earnings of the Company or dividends payable in Common Stock) or rights or
warrants to subscribe for or purchase any of its securities (excluding
those rights or warrants referred to in subparagraph (ii) above) (any of
the foregoing being hereinafter in this subparagraph (iii) called the
"Assets"), then, in each such case, the Conversion Price shall be adjusted
so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the record date for
determination of stockholders entitled to receive such distribution by a
fraction the numerator of which shall be the current market price per share
(as defined for purposes of this subparagraph (iii) in subparagraph (v)
below) of the Common Stock at such record date for determination of
stockholders entitled to receive such distribution less the then fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive) or the portion of the Assets so distributed applicable
to one share of Common Stock, and the denominator of which shall be the
current market price per share (as defined in subparagraph (v) below) of
the Common Stock at such record date. Such adjustment shall become
effective immediately, except as provided in subparagraph (vii) below,
after the record date for the determination of stockholders entitled to
receive such distribution.
(iv) If, pursuant to subparagraph (ii) or (iii) above, the number of
shares of Common Stock into which a Security is convertible shall have
been adjusted because the Company has declared a dividend, or made a
distribution, on the outstanding shares of Common Stock in the form of any
right or warrant to purchase securities of the Company, or the Company has
issued any such right or warrant, then, upon the expiration of any such
unexercised right or unexercised warrant, the Conversion Price shall
forthwith be adjusted to equal the Conversion Price that would have applied
had such right or warrant never been declared, distributed or issued.
(v) For the purpose of any computation under subparagraphs (ii) or
(iii) above, the current market price per share of Common Stock on any date
shall be deemed to be the closing price of the Common Stock on the last
full Trading Day on the exchange or market specified in the second
following sentence prior to the Time of Determination. The term "Time of
Determination" as used herein shall be the time and date of the earlier of
(x) the determination of stockholders entitled to receive such rights,
warrants or distributions or (y) the commencement of "ex-dividend" trading
in the Common Stock on the exchange or market specified in the following
sentence. The closing price for any day shall be the reported last sales
price, regular way, or, in case no sale takes place on such day,
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89
the average of the reported closing bid and asked prices, regular way, in
either case as reported on the New York Stock Exchange Composite Tape or,
if the Common Stock is not listed or admitted to trading on the New York
Stock Exchange at such time, on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System ("NASDAQ") or, if the Common Stock is not
quoted on such National Market System, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by
NASDAQ or, if bid and asked prices for the Common Stock on such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices for such date as furnished by any New York Stock Exchange member
firm regularly making a market in the Common Stock selected for such
purpose by the Company or, if no such quotations are available, the fair
market value of the Common Stock as determined by a New York Stock Exchange
member firm regularly making a market in the Common Stock selected for such
purpose by the Company. As used herein, the term "Trading Day" with
respect to Common Stock means (x) if the Common Stock is listed or admitted
for trading on the New York Stock Exchange or another national securities
exchange, a day on which the New York Stock Exchange or such other national
securities exchange, as the case may be, is open for business or (y) if the
Common Stock is quoted on the National Market System of the NASDAQ, a day
on which trades may be made on such National Market System or (z)
otherwise, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
(vi) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of
-------- -------
this subparagraph (vi) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations
under this Section 15.5(a) shall be made to the nearest cent or to the
nearest .01 of a share, as the case may be, with one-half cent and .005 of
a share, respectively, being rounded upward. Anything in this Section
15.5(a) to the contrary notwithstanding, the Company shall be entitled to
make such reductions in the Conversion Price, in addition to those required
by this Section 15.5(a), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision of shares,
distribution of rights or warrants to purchase stock or securities, or
distribution of other assets (other than cash dividends) hereafter made by
the Company to its stockholders shall not be taxable.
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90
(vii) In any case in which this Section 15.5(a) provides that an
adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event (x) issuing
to the holder of any Security converted after such record date and before
the occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (y) paying to such holder any amount of cash
in lieu of any fractional share of Common Stock pursuant to Section 15.4.
(viii) Whenever the Conversion Price is adjusted as herein provided,
the Company shall file with the Trustee an Officers' Certificate, setting
forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment, which certificate
shall be conclusive evidence of the correctness of such adjustment;
provided, however, that the failure of the Company to file such Officers'
-------- -------
Certificate shall not affect the legality or validity of any corporate
action by the Company.
(ix) Whenever the Conversion Price for any series of Securities is
adjusted as provided in this Section 15.5(a), the Company shall cause to be
mailed to each holder of Securities of such series at its then registered
address by first-class mail, postage prepaid, a notice of such adjustment
of the Conversion Price setting forth such adjusted Conversion Price and
the effective date of such adjusted Conversion Price; provided, however,
-------- -------
that the failure of the Company to give such notice shall not affect the
legality or validity of any corporate action by the Company.
(b) (i) Notwithstanding any other provision herein to the contrary,
if any of the following events occur, namely (x) any reclassification or
change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination of the Common Stock),
(y) any consolidation, merger or combination of the Company with or into
another corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, or
(z) any sale or conveyance of all or substantially all of the assets of the
Company to any other entity as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then
appropriate provision shall be made so that (A) the holder of any
outstanding Security that is convertible into
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91
Common Stock shall have the right to convert such Security into the kind
and amount of the shares of stock and securities or other property or
assets (including cash) that would have been receivable upon such
reclassification, change, consolidation, merger, combination, sale, or
conveyance by a holder of the number of shares of Common Stock issuable
upon conversion of such Security immediately prior to such
reclassification, change, consolidation, merger, combination, sale, or
conveyance and (B) the number of shares of any such other stock or
securities into which such Security shall thereafter be convertible shall
be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the terms of adjustment provided for in
this Section, and Sections 15.2, 15.3, 15.4, 15.6, 15.7, 15.8 and 15.9
shall apply on like terms to any such other stock or securities.
(ii) In case of any reclassification or change of the Common Stock
(other than a subdivision or combination of its outstanding Common Stock,
or a change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation, merger or combination of the
Company with or into another corporation or of the sale or conveyance of
all or substantially all of the assets of the Company, the Company shall
cause to be filed with the Trustee and to be mailed to each holder of
Securities that are convertible into shares of Common Stock at such
holder's registered address, notice of the date on which such
reclassification, change, consolidation, merger, combination, sale or
conveyance is expected to become effective, and the date as of which it is
expected that holders of Common Stock shall be entitled to exchange their
Common Stock for stock, securities or other property deliverable upon such
reclassification, change, consolidation, merger, combination, sale or
conveyance.
Section 15.6 Taxes on Shares Issued.
----------------------
The delivery of stock certificates upon conversions of Securities
shall be made without charge to the holder converting a Security for any tax in
respect of the issue thereof. The Company shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
delivery of stock registered in any name other than of the holder of any
Security converted, and the Company shall not be required to deliver any such
stock certificate unless and until the person or persons requesting the delivery
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
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92
Section 15.7 Shares to be Fully Paid; Compliance
with Governmental Requirements.
------------------------------
The Company covenants that all shares of Common Stock which may be
delivered upon conversion of Securities of any series which are convertible into
Common Stock will upon delivery be fully paid and nonassessable by the Company
and free from all taxes, liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of Securities hereunder require
registration with or approval of any governmental authority under any Federal or
State law before such shares may be validly delivered upon conversion, the
Company will in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be.
Section 15.8 Responsibility of Trustee.
-------------------------
Neither the Trustee nor any conversion agent shall at any time be
under any duty or responsibility to any holder of Securities to determine
whether any facts exist which may require any adjustment of the Conversion Price
applicable to such Securities, or with respect to the nature or extent of any
such adjustment when made, or with respect to the method employed, or herein or
in any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any conversion agent shall be accountable with respect
to the validity or value (or the kind or amount) of any shares of Common Stock,
or of any securities or property, which may at any time be delivered upon the
conversion of any Security; and neither the Trustee nor any conversion agent
makes any representation with respect thereto. Neither the Trustee nor any
conversion agent shall be responsible for any failure of the Company to deliver
any shares of Common Stock or stock certificates or other securities or property
or cash upon the surrender of any Security for the purpose of conversion or for
any failure of the Company to comply with any of the covenants of the Company
contained in this Article XV.
Section 15.9 Covenant to Reserve Shares.
--------------------------
The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, such number of shares of Common Stock as shall then be deliverable
upon the conversion of all outstanding Securities of any series of Securities
which are convertible into Common Stock.
Section 15.10 Other Conversions.
-----------------
If so provided in a Board Resolution with respect to the Securities of
a series, the principal amount of the Securities of such series shall be
convertible into or exchangeable for a principal amount of other securities of
the
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93
Company (which other securities may be issued under this Indenture or
otherwise), and the issuance of such securities upon any such conversion or
exchange shall be made in accordance with the terms of such Board Resolution.
<PAGE>
94
______________
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
RIGGS NATIONAL CORPORATION
By /s/ Signature Appears Here
-----------------------------
Title: General Counsel
Attest:
By /s/ Signature Appears Here
---------------------------
Title: Secretary
THE BANK OF NEW YORK,
As Trustee
By /s/ Signature Appears Here
-----------------------------
Attest: Title: Vice President
By /s/ Signature Appears Here
---------------------------
Title: Assistant Treasurer
<PAGE>
95
CITY OF WASHINGTON )
) ss.:
DISTRICT OF COLUMBIA )
On the 31st day of January, 1994, before me personally came David
Lesser, to me known, who, being by me duly sworn, did depose and say that he
is General Counsel of Riggs National Corporation, one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
/s/ Katherine L. Buchanan
-------------------------------
KATHERINE L. BUCHANAN
Notary Public District Of Columbia
My Commission Expires: October 31, 1995
<PAGE>
96
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 28th day of January, 1994, before me personally came
W. T. Cunningham, to me known, who, being by me duly sworn, did depose and say
that he is Vice President of The Bank of New York, one of the corporations
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors
of said corporation, and that he signed his name thereto by like authority.
/s/ Robert Schneck
--------------------------------
ROBERT SCHNECK
Notary Public, State of New York
No. 4749935
Qualified in Nassau County
Certificate filed in New York County,
Commission Expires May 31, 1995
