<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1994
REGISTRATION NO. 33-51567
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RIGGS NATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-1217953
(I.R.S. EMPLOYER
(STATE OR OTHER IDENTIFICATION NUMBER)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
1503 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20005
(202) 835-6000
(ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DAVID LESSER, ESQ. GENERAL COUNSEL RIGGS NATIONAL CORPORATION 800 17TH STREET,
N.W. WASHINGTON, D.C. 20006 (202) 835-5345
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
DAVID B. HARMS, ESQ. LEE MEYERSON, ESQ.
SULLIVAN & CROMWELL SIMPSON THACHER & BARTLETT
125 BROAD STREET 425 LEXINGTON AVENUE
NEW YORK, N.Y. 10004 NEW YORK, N.Y. 10017
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
From time to time after the effective date of this registration statement.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT +
+CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL +
+THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 13, 1994
PROSPECTUS
$125,000,000
RIGGS NATIONAL CORPORATION
SUBORDINATED DEBT SECURITIES
Riggs National Corporation (the "Company") may offer from time to time
subordinated debt securities in one or more series (the "Debt Securities") at
an aggregate initial offering price not to exceed $125,000,000, on terms to be
determined at the time of sale. The specific title, aggregate principal amount,
maturity, rate and time of payment of interest (if any), purchase price, any
terms for redemption and any other special terms of a specific offering of Debt
Securities ("Offered Debt Securities") will be set forth in a supplement to
this Prospectus ("Prospectus Supplement"). If so indicated in the applicable
Prospectus Supplement, Offered Debt Securities may be represented in whole or
in part by one or more global securities ("Global Securities") registered in
the name of The Depository Trust Company (the "Depository") or a nominee
thereof.
The Debt Securities will be subordinated to all existing and future Senior
Indebtedness and, under certain circumstances, Other Financial Obligations of
the Company (as such terms are defined herein). Unless otherwise indicated in
the applicable Prospectus Supplement, the maturity of the Debt Securities will
be subject to acceleration only in the case of certain events of bankruptcy,
insolvency or reorganization of the Company. See "Description of Debt
Securities."
The Debt Securities may be sold to underwriters (which may include Dillon,
Read & Co. Inc. and Friedman, Billings, Ramsey & Co., Inc.) for public offering
pursuant to terms of offering described in the applicable Prospectus
Supplement. In addition, the Debt Securities may be sold to purchasers directly
by the Company or through agents designated from time to time by the Company.
If any underwriters or agents are involved in the sale of the Offered Debt
Securities, their names and any applicable fee, commission or discount
arrangements with them will be set forth in the applicable Prospectus
Supplement. See "Plan of Distribution."
SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN
FACTORS TO BE CONSIDERED BY POTENTIAL INVESTORS IN THE DEBT SECURITIES.
-----------
THE DEBT SECURITIES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT IN-
SURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
This Prospectus may not be used to consummate sales of Offered Debt
Securities unless accompanied by a Prospectus Supplement.
The date of this Prospectus is January , 1994
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. In addition, such reports, proxy and
information statements and other information can be inspected and copied at the
aforementioned public reference facilities and at the Commission's regional
offices at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New
York 10048.
The Company has filed with the Commission a Registration Statement on Form S-
3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Debt Securities offered hereby. This Prospectus,
which forms a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated by reference in and made part of this
Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1992, as
amended by Forms 10-KA dated July 2, 1993, September 21, 1993, October
4, 1993 and October 26, 1993;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, as
amended by Forms 10-QA dated July 2, 1993, September 21, 1993 and
October 27, 1993;
(3) Proxy Statement for the Annual Meeting of Shareholders dated April 19,
1993;
(4) Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, as
amended by Forms 10-QA dated September 21, 1993 and October 27, 1993;
(5) Current Reports on Form 8-K dated October 27, 1993 and December 21,
1993; and
(6) Quarterly Report on Form 10-Q for the quarter ended September 30, 1993,
amended by Form 10-QA dated December 7, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the completion of the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date such documents are filed. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such earlier statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the information incorporated herein by reference other
than exhibits to such information (unless such exhibits are specifically
incorporated by reference into such information). Written or oral requests
should be directed to Alexander C. Baker, Secretary, Riggs National
Corporation, 808 17th Street, N.W., Washington, D.C. 20006, telephone number
(202) 835-4987.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the more detailed information appearing elsewhere, or incorporated
by reference, in this Prospectus.
THE COMPANY
Riggs National Corporation is a multi-bank holding company with consolidated
assets of $4.7 billion, consolidated deposits of $3.9 billion and consolidated
stockholders' equity of $158 million as of September 30, 1993. Based on total
assets at June 30, 1993, the Company is the 88th largest bank holding company
in the United States and the largest bank holding company headquartered in
Washington, D.C.
The Company, through its bank and non-bank subsidiaries, provides banking,
trust, investment advisory and other financial services to selected domestic
and international markets. The Company serves the metropolitan Washington, D.C.
area through its three bank subsidiaries in Washington, D.C., Maryland and
Virginia. Its principal subsidiary, The Riggs National Bank of Washington, D.C.
("Riggs-Washington"), had consolidated assets of $4.1 billion as of September
30, 1993. The Company also has subsidiaries in Miami, London, Paris, Hong Kong,
Nassau, Gibraltar and Geneva.
Riggs-Washington is the only independent commercial bank with assets in
excess of $4 billion that is headquartered in Washington, D.C. As of March 31,
1993, Riggs-Washington had the largest share of commercial bank deposits in
Washington, D.C., at approximately 37%, based upon a recent study by the
graduate school of business administration at the University of Virginia, which
included the pro forma effects of the announced and pending mergers between
banks in the Washington, D.C. area. The Company believes that it enjoys a
highly respected position in Washington, D.C. because of its local management,
name recognition and commitment to the community, which has resulted in its
leading deposit share. In addition, the Company has developed an international
business serving foreign embassies and missions and significant trust/private
banking operations in the Washington, D.C. area.
RECENT DEVELOPMENTS
OCTOBER EQUITY SALE
On October 21, 1993, as part of the strategic initiatives announced by the
Company in the second quarter of 1993 and described herein, the Company issued
and sold 4,000,000 shares of its 10.75% Noncumulative Perpetual Preferred
Stock, Series B (the "Series B Preferred Stock") and 5,000,000 shares of its
Common Stock, par value $2.50 per share ("Common Stock"), to certain investors
in transactions exempt from the registration requirements of the Securities Act
(the "October Equity Sale"). The shares of Series B Preferred Stock and Common
Stock were sold for $25 per share and $7.75 per share, respectively. The net
proceeds to the Company from the October Equity Sale (after deducting placement
agent fees and related estimated expenses) were approximately $132 million.
Adjusted for the estimated net proceeds from the transaction, the Company's pro
forma risk-based capital and leverage ratios at September 30, 1993 were as
follows: Tier 1--10.85%, Combined Tier 1 and Tier 2--16.98% and Leverage--
5.73%.
1993 FOURTH QUARTER
For the quarter ending December 31, 1993, the Company reported net income of
$3.1 million (compared to a loss of $24.1 million for the fourth quarter of
1992). These results were attributable largely to reduced provisions for loan
losses during the quarter ($2.1 million compared to $27.3 million during the
fourth quarter of 1992). The Company also reported that, between September 30
and December 31, 1993, nonperforming assets declined by $60 million. More than
half of the fourth quarter reduction in nonperforming assets resulted from
repayments. As of December 31, 1993, the Company's nonperforming assets were at
their lowest level in more than three years.
3
<PAGE>
RECENT STRATEGIC INITIATIVES
The Company has responded to recent financial difficulties by undertaking a
series of strategic initiatives that management believes will restore the
Company to financial soundness and profitability (although there can be no
assurance that such initiatives will achieve these goals). These measures
include: (1) the appointment of Paul M. Homan as President and Chief Executive
Officer of Riggs-Washington and the addition of other experienced senior
management; (2) the announcement and implementation of a financial
restructuring plan which includes increased reserves to facilitate the
disposition of problem assets as well as exiting unprofitable lines of
business; (3) the raising of approximately $132 million of new equity in the
October Equity Sale; (4) a restructuring of the Company's London operations to
address the potential risk in the loan and other real estate owned portfolios;
(5) the creation of a Special Assets Group to focus on problem assets; (6) the
implementation of "BankStart '93," a comprehensive, corporate-wide project
designed to make the Company more cost efficient and operationally effective;
and (7) the implementation of a broad strategy designed to create a "Super
Community Bank" that will grow banking operations, redeploy liquid assets into
higher yielding loans and enhance long-term profitability. See "Risk Factors
and Special Considerations."
THE OFFERING
The Debt Securities........... The Debt Securities will be obligations of the
Company limited to $125,000,000 in aggregate
initial offering price, and may be issued in
one or more series pursuant to the Indenture
described below. The Debt Securities may be
offered for sale in a single offering or from
time to time in more than one offering.
General Terms................. The specific title, aggregate principal amount,
maturity, rate and time of payment of interest
(if any), purchase price, any terms for
redemption, any foreign currency of payment or
denomination and other special terms of a
specific series of Offered Debt Securities will
be set forth in a Prospectus Supplement
relating to such securities. If so indicated in
the applicable Prospectus Supplement, Offered
Debt Securities may be represented in whole or
in part by one or more Global Securities
registered in the name of the Depository or a
nominee thereof.
Rank.......................... Unless otherwise indicated in the applicable
Prospectus Supplement, the Debt Securities will
be unsecured and subordinated in right of
payment to all existing and future Senior
Indebtedness of the Company and, in certain
circumstances, all existing and future Other
Financial Obligations of the Company. As of
September 30, 1993, the Company had no Senior
Indebtedness and no Other Financial Obligations
outstanding. In addition, the Debt Securities
will be effectively subordinated in right of
payment to all indebtedness of the Company's
subsidiaries. The Indenture (as defined below)
will contain no limitation on the incurrence of
additional indebtedness (including additional
Senior Indebtedness and Other Financial
Obligations) by the Company or on the
incurrence of additional indebtedness by its
subsidiaries. See "Description of the Debt
Securities--Subordination."
4
<PAGE>
Limited Rights of
Acceleration.................. Unless otherwise indicated in the applicable
Prospectus Supplement, payment of the principal
of the Debt Securities may be accelerated only
in the case of certain events involving the
bankruptcy, insolvency or reorganization of the
Company. There is no right of acceleration in
the case of default in the performance of any
obligation of the Company under the Indenture
or the Debt Securities, including any
obligation to pay principal or interest. See
"Description of the Debt Securities--Events of
Default and Limited Rights of Acceleration."
Indenture..................... The Debt Securities are to be issued under the
Indenture (the "Indenture"), to be dated as of
January 1, 1994, between the Company and The
Bank of New York, as Trustee (the "Trustee").
USE OF PROCEEDS
The Company currently intends to use the net proceeds from the sale of the
Debt Securities to redeem approximately $120.7 million of outstanding
subordinated debt of the Company. See "Use of Proceeds."
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Debt Securities involves substantial risks which should
be considered by prospective purchasers of the Debt Securities. See "Risk
Factors and Special Considerations."
5
<PAGE>
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ---------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
----------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
INCOME:
Interest Income........ $ 195,035 $ 258,350 $ 327,540 $ 474,815 $ 649,010 $ 621,200 $ 505,625
Interest Expense....... 95,384 152,531 189,604 319,719 476,397 442,099 342,146
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income.... 99,651 105,819 137,936 155,096 172,613 179,101 163,479
Less: Provision for
Loan Losses........... 59,141 23,462 49,789 43,525 105,508 5,588 1,176
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income
after Provision for
Loan Losses........... 40,510 82,357 88,147 111,571 67,105 173,513 162,303
Noninterest Income
Excluding Securities
Gains................. 67,486 68,123 96,200 92,961 78,179 65,144 56,861
Securities Gains
(Losses), Net......... 23,925 34,798 34,213 13,692 1,263 8,285 (96)
Provision for Losses on
Accelerated
Disposition of Real
Estate Assets......... -- -- -- 49,800 -- -- --
Noninterest Expense.... 223,655 182,398 240,681 240,501 237,177 189,910 165,326
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) before
Taxes and
Extraordinary Item.... (91,734) 2,880 (22,121) (72,077) (90,630) 57,032 53,742
Applicable Income Tax
(Benefit) Expense..... 5,558 (129) (1,069) (6,130) (29,413) 17,609 16,726
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) before
Extraordinary Item,
Net of Taxes.......... (97,292) 3,009 (21,052) (65,947) (61,217) 39,423 37,016
Extraordinary Item--Net
of Taxes(1)........... -- -- -- 2,486 4,569 -- --
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss)...... $ (97,292) $ 3,009 $ (21,052) $ (63,461) $ (56,648) $ 39,423 $ 37,016
=========== ========== ========== ========== ========== ========== ==========
PER COMMON SHARE:
Net Income (Loss)...... $ (3.90) $ 0.12 $ (0.86) $ (4.61) $ (4.11) $ 2.86 $ 2.54
Book Value (at period
end).................. 5.50 10.13 8.98 14.88 20.16 24.85 23.41
Average Shares Out-
standing(2)........... 25,222,014 24,303,072 24,534,063 13,777,014 13,777,014 13,777,014 14,594,131
CONSOLIDATED BALANCES AT
PERIOD END:
Total Assets........... $ 4,672,922 $5,357,251 $5,077,522 $5,535,803 $7,050,602 $7,337,187 $7,001,910
Reserve for Loan Loss-
es.................... 80,869 74,520 83,307 103,674 108,887 39,863 49,038
Nonaccrual and Renego-
tiated Loans.......... 158,274 165,220 173,880 231,836 158,789 4,504 24,950
Other Real Estate
Owned................. 112,732 134,450 131,892 99,275 120,207 37,963 787
----------- ---------- ---------- ---------- ---------- ---------- ----------
Total Nonperforming As-
sets(3)............... 271,006 299,670 305,772 331,111 278,996 42,467 25,737
Loans, Net of Unearned
Discount and Deferred
Fees.................. 2,105,572 2,354,609 2,137,706 2,992,693 3,791,256 3,808,760 3,562,831
Total Deposits......... 3,934,289 4,630,312 4,437,598 4,912,372 6,110,594 5,976,934 5,537,275
Long-Term Debt......... 213,325 213,325 213,325 232,127 245,897 308,914 223,175
Stockholders' Equity... 157,673 274,565 245,420 204,979 277,697 342,332 322,476
RATIO OF EARNINGS TO
FIXED CHARGES(4):
Including Interest on
Deposits.............. -- 1.02x -- -- -- 1.13x 1.16x
Excluding Interest on
Deposits.............. -- 1.19x -- -- -- 1.84x 2.12x
CAPITAL RATIOS AT PERIOD
END:
Combined Tier 1 and
Tier 2 Risk-Weighted.. 11.01% 15.05% 14.70% 10.46% 10.79% N/A N/A
Tier 1 Risk-Weighted... 5.78 8.60 8.31 5.23 5.39 N/A N/A
Leverage............... 3.02 4.93 4.60 3.57 3.80 N/A N/A
SELECTED PRO FORMA DATA
AT SEPTEMBER 30, 1993(5):
Book Value Per Common
Share................. $ 5.81
Number of Shares Out-
standing.............. 30,222,014
Capital Ratios:
Combined Tier 1 and
Tier 2 Risk-Weighted.. 16.98%
Tier 1 Risk-Weighted... 10.85
Leverage............... 5.73
Stockholder's Equity to
Total Assets.......... 6.03
</TABLE>
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(1) During 1991 and 1990, the Company purchased, on the open market at a
discount, $13.2 million and $33.5 million principal amount of its
subordinated long-term debt, which resulted in extraordinary gains.
(2) The Company purchased 900,798 shares of its common stock in the fourth
quarter of 1988.
(3) Nonperforming assets consist of nonaccrual loans, renegotiated loans, other
real estate owned (net of reserves) and, for the period from September 30,
1991 through the second quarter of 1992, assets subject to accelerated
disposition (net of reserves).
(4) Earnings include the consolidated earnings of the national banking
subsidiaries, which may not be available (due to legal limitations on the
sources and amount of dividends national banks are permitted to pay their
parent companies) to cover fixed charges of the holding company. See "Risk
Factors and Special Considerations--Holding Company Liquidity" Fixed
charges include interest on long-term debt of the holding company. During
the nine month period ended September 30, 1993 and the years ended December
31, 1992, 1991 and 1990, earnings were insufficient to cover fixed charges
(including interest on deposits) and preferred stock dividend requirements
by $92.8 million, $22.8 million, $72.1 million and $90.6 million,
respectively.
(5) Adjusted to give effect, as of September 30, 1993, to the October Equity
Sale and the investment of the net proceeds thereof (approximately $132
million) in short-term money market assets, which have been risk-weighted
at 20% for purposes of capital ratio calculations. No effect is given to
any offering of Debt Securities or any repayment of outstanding
subordinated debt. See "Capitalization."
6
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
An investment in the Company involves substantial risks, including those
described below, and other considerations that should be carefully reviewed by
investors prior to the purchase of the Debt Securities offered hereby.
CONTINUED LOSSES AND NONPERFORMING ASSETS
The Company has experienced and continues to experience serious financial
and operational difficulties, principally as a result of deterioration in its
domestic commercial real estate portfolio (which is concentrated in the
greater Washington, D.C. metropolitan area) and in the commercial real estate
and corporate loan portfolios of Riggs AP Bank Limited ("Riggs AP") and the
London branch of Riggs-Washington (collectively, the "London Operations"). The
Company reported net losses of $56.6 million in 1990, $63.5 million in 1991,
$21.1 million in 1992 and $97.3 million for the nine months ended September
30, 1993. These results included provisions for loan losses of $105.5 million
in 1990, $43.5 million in 1991, $49.8 million in 1992 and $59.1 million in the
nine months ended September 30, 1993. During these same periods, the Company
had net charge-offs of $37.5 million, $35.6 million, $67.0 million and $61.6
million, respectively. Of the total net charge-offs for these periods of
$201.7 million, $65.6 million was associated with the London Operations.
Nonperforming assets, which include nonaccrual loans, renegotiated loans,
other real estate owned (net of reserves) and, for the period from September
30, 1991 through the second quarter of 1992, real estate assets subject to
accelerated disposition (net of reserves), increased from $279.0 million at
December 31, 1990 to $331.1 million at December 31, 1991 (net of $46.8 million
of reserves for real estate assets subject to accelerated disposition), before
decreasing to $305.8 million at December 31, 1992 and $271.0 million at
September 30, 1993. (Changes in the level of nonperforming assets are the
function of a number of factors, including sales, charge-offs and new
nonperforming assets.) Because of the reduction in the size of the Company's
loan portfolio since December 31, 1991, nonperforming assets have continued to
increase as a percentage of total loans and other real estate owned from 7.1%
at December 31, 1990 to 10.7% at December 31, 1991 and 13.5% at December 31,
1992, before decreasing to 12.2% at September 30, 1993. At September 30, 1993,
the Company's ratio of reserve for loan losses to nonaccrual, renegotiated and
past due loans was 49.8% compared to 47.5% and 44.1% at December 31, 1992 and
1991, respectively. Although the Company has taken steps to reduce
nonperforming assets (see "Recent Developments"), there can be no assurance
that such actions will be successful, particularly if economic conditions
should continue to have an adverse impact on these assets.
The high levels of nonperforming assets that the Company has experienced
over the past several years, together with the shift in the Company's assets
from loans toward money market assets for capital and liquidity reasons, has
significantly and adversely affected the Company's earnings. Improvement in
the Company's earnings will depend in part on increases in the size of the
Company's loan portfolio. There can be no assurance that the Company will be
able to generate sufficient loan growth to improve earnings. See "--Holding
Company Liquidity," "Recent Developments--Financial Difficulties and Recent
Strategic Initiatives--Further Revenue Enhancements: Increased Loan to Deposit
Ratio" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company has recently purchased, or agreed to purchase, in the open
market approximately $520 million of residential mortgage loans. Substantially
all of these loans were recently originated, have original maturities of 15 or
30 years, bear interest at fixed rates and are secured by properties located
in various regions throughout the United States. See "Recent Developments--
Financial Difficulties and Recent Strategic Initiatives--Further Revenue
Enhancements: Increased Loan to Deposit Ratio."
Improvements in asset quality, particularly with respect to loans secured by
commercial real estate, will depend on economic conditions in the Company's
principal markets and their impact on nonaccrual loans, the disposition of
other real estate owned and past due loan levels of the Company. The Company
is unable to predict when, or at what rate, economic conditions in these areas
will begin to improve on a sustainable basis. Due to cyclical lagging factors,
high levels of charge-offs could continue even if general business
7
<PAGE>
conditions start to improve. The Company's earnings will continue to be
restrained by the high levels of nonperforming assets, expenses associated with
the collection of problem commercial real estate loans, the carrying expenses
of other real estate owned and, if necessary, additional provisions and
writedowns. Consequently, there can be no assurance as to whether the Company
will at any time have sufficient resources to make principal and interest
payments on the Debt Securities.
COMMERCIAL REAL ESTATE MARKETS
At September 30, 1993, $562.8 million, or 26.7%, of the Company's loan
portfolio consisted of loans secured by commercial real estate, approximately
70.0% and 29.7% of which were secured by properties located in the Washington
D.C. area and in the United Kingdom, respectively. Of the $229 million of loans
attributable to the London Operations at September 30, 1993, 73.8% were secured
by real estate. The Company had an additional $113 million in other real estate
owned, net at September 30, 1993, 84.1% of which was located in the Washington,
D.C. metropolitan area and 10.1% of which was located in the United Kingdom. At
September 30, 1993, the twelve largest borrower relationships represented
$189.9 million, or 65.2%, of the Company's total domestic commercial real
estate loans. The commercial real estate markets in these areas have been
experiencing deteriorating economic trends, including declining occupancy and
rental rates and property values. These trends have resulted in substantial
increases in the delinquency and default rates on the Company's commercial real
estate loan portfolio and, because of the deterioration in the value of the
associated collateral, significant losses to the Company. At September 30,
1993, approximately $107.7 million, or 19.1%, of the Company's commercial real
estate and construction loans were 90 days or more past due. Virtually all past
due loans were on nonaccrual status at September 30, 1993. See "Recent
Developments--Financial Difficulties and Recent Strategic Initiatives" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
In light of current economic conditions in the United States and the United
Kingdom, and the possibility of further deterioration in commercial real estate
values in the Washington, D.C. area and the United Kingdom and increases in
interest rates in the United Kingdom, significant additional provisions and
writedowns are possible and nonperforming assets (as well as the cost of
carrying nonperforming assets) could increase. However, given the uncertainties
created by current economic conditions both domestically and in the United
Kingdom, such additional provisions and writedowns cannot be reasonably
estimated at this time, and the extent to which they may be required in the
future will depend on future economic conditions and their impact on specific
borrowers' operations and liquidity.
HOLDING COMPANY LIQUIDITY
The Company's cash flows are affected by its ongoing operations, including
the provision of support to its subsidiary banks, and its investing and
financing activities. At September 30, 1993, the Company had, on a parent
company only basis, liquid assets (consisting of cash, deposits in other banks
and securities purchased subject to resale ("repos")) of $30.2 million,
compared to $78.4 million at December 31, 1992 and $31.4 million at December
31, 1991. On a pro forma basis after giving effect to the October Equity Sale,
the Company, on a parent company only basis, would have had liquid assets of
approximately $160 million as of September 30, 1993. Liquid assets at the
parent company level may be substantially reduced from time to time if capital
contributions to the subsidiary banks are deemed to be necessary. For example,
the Company made capital contributions of cash to Riggs-Washington of
approximately $38 million during the first nine months of 1993. Although the
Company has no current plans to make any substantial capital contributions to
its subsidiary banks through 1994, its plans are subject to change in light of
economic, financial and regulatory considerations.
As a holding company, the Company conducts its operations principally through
its subsidiaries and, therefore, its principal source of cash, other than its
investing and financing activities, is dividends from Riggs-Washington and the
Company's other subsidiary banks. However, there are legal limitations on the
source and amount of dividends that national banks are permitted to pay their
parent companies. See "Supervision and Regulation." A national bank may pay
dividends only to the extent that retained net profits (including the portion
transferred to surplus) exceed bad debts (as defined by regulation). Moreover,
unless a national bank's surplus fund equals its common capital, dividends may
be paid only after 10 percent of its net profits (as defined) for the specified
preceding period have been transferred to the bank's surplus fund. In addition,
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prior approval of the Office of the Comptroller of the Currency (the "OCC") is
required if the total of all dividends declared by a national bank in any
calendar year will exceed the sum of that bank's net profits (as defined) for
that year and its retained net profits for the preceding two calendar years,
less any required transfers to either surplus or any fund for retirement of any
preferred stock. Riggs-Washington and The Riggs National Bank of Maryland
("Riggs-Maryland") had net losses (as defined) of $154 million and $208
thousand, respectively, for the combined periods of 1991, 1992 and the first
nine months of 1993. Thus, neither bank would be able to pay dividends to the
Company in the current year unless it generated earnings in excess of such
losses. The Riggs National Bank of Virginia ("Riggs-Virginia") had net income
(as defined) of $7.5 million for the combined periods of 1991, 1992 and the
first nine months of 1993. The payment of dividends by the Company's national
bank subsidiaries may also be affected by other factors, such as requirements
for the maintenance of adequate capital. In addition, the OCC is authorized to
determine, under certain circumstances relating to the financial condition of a
national bank, whether the payment of dividends would be an unsafe or unsound
banking practice and to prohibit payment thereof. In accordance with its
written agreement with the OCC (described below), Riggs-Washington may pay
dividends to the Company only when it is in compliance with its approved
capital program and with prior written notification to the OCC. See
"Supervision and Regulation" for a further discussion of dividend restrictions
and the policy of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") regarding bank holding company support for its
subsidiary banks.
The Company has outstanding two series of floating rate subordinated notes
totalling approximately $147 million in principal amount, which mature in
September 1996. The Company intends to redeem approximately $120.7 million of
these notes with the net proceeds from the sale of Debt Securities. In order to
meet its obligations to repay the remaining portion of these notes at their
maturity, the Company may need to access the capital markets or otherwise
refinance the notes. There is no assurance that the Company will be able to do
so on favorable terms.
The Company's estimated cash needs, on a parent company only basis, over the
twelve month period commencing October 1, 1993 (before giving effect to
interest on the Debt Securities offered hereby or any repayment of outstanding
debt) include $14.1 million of interest payments on outstanding subordinated
debt, $12.2 million of dividends on outstanding preferred stock (assuming the
preferred stock sold in the October Equity Sale was outstanding on October 1,
1993) and other expenses related to payroll, benefits, occupancy and other
noninterest expenses of $6.6 million. These cash outflows will be partially
offset by anticipated interest income and other cash inflows aggregating $6.1
million, resulting in an estimated annual aggregate cash outflow for the parent
company of approximately $26.8 million (before giving effect to interest on the
Debt Securities offered hereby or any repayment of outstanding debt).
The Company expects that the offering and sale of the Debt Securities and the
use of the net proceeds thereof to redeem a substantial portion of its
outstanding subordinated debt (which currently bears interest at a floating
rate equal to 5 1/4% per annum) will result in increased annual interest
expense for the parent company. The amount of such additional interest expense
will depend on the interest rate in effect on the debt to be redeemed and on
the terms of the Debt Securities, which will not be set until the time of
issuance and will reflect market conditions and the Company's financial
position at that time.
In connection with its memorandum of understanding (the "Memorandum of
Understanding") with the Federal Reserve Bank of Richmond (the "Reserve Bank")
described under "--Regulatory Developments" below, the Company submitted a
capital plan, which it revises periodically, to the Reserve Bank. On a regular
basis, the Reserve Bank monitors the Company's financial condition and results
of operations in light of the capital plan on a consolidated basis. The Company
will submit to the Reserve Bank for its review a modified capital plan that
provides for increased revenues from loan growth, which, if achieved, would
offset the increased interest expense resulting from the issuance of the Debt
Securities, net of interest expense reductions due to the redemption of
outstanding subordinated notes. Such loan growth would be in addition to the
approximately $520 million of recent and pending purchases of residential
mortgage loans (see "Recent Developments--Financial Difficulties and Recent
Strategic Initiatives--Further Revenue Enhancements: Increased Loan to Deposit
Ratio"). The Company currently expects to pursue such additional growth
principally through the origination of new business and consumer loans in its
local community market. The amount of loan growth necessary to offset the
increased interest expense will depend on a number of factors, including the
terms and amount of any Debt Securities issued, the amount of subordinated debt
redeemed and the performance of its existing loan portfolio. The Company's
ability to achieve its loan growth targets
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will depend on various economic, financial and regulatory factors, many of
which are beyond the Company's control. In the Company's primary markets,
growth in demand for new loans has been relatively limited and competition
among lenders has increased in recent years. See "--Competition." Consequently,
there is no assurance that this additional loan growth can be achieved or as to
the effect of such growth on the Company's results of operations or financial
condition. In addition, the Reserve Bank will review the financial condition
and results of operations of the Company in light of the Company's ability to
achieve the operating results projected in the modified capital plan.
Although management currently believes that the parent company's liquid
assets, including the estimated approximately $132 million of net proceeds from
the October Equity Sale, will be sufficient to meet its cash needs for the next
several years, unanticipated contingencies could reduce its liquidity and,
thus, impair or limit its ability to make interest and principal payments on
the Debt Securities. For example, the parent company could use a portion of its
liquid assets, including the net proceeds from the October Equity Sale, to make
investments in or loans to its banking subsidiaries if it determined such use
was necessary to strengthen the capital base of any of those banks, or if
required to do so by regulatory authorities. Moreover, the ability of the
parent company to meet its cash needs beyond the next several years will depend
on the ability of its subsidiary banks to begin generating earnings in amounts
sufficient to permit substantial dividend payments to the parent and on its
ability to successfully refinance by 1996 any of its subordinated debt that
remains outstanding. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Interest Rate Sensitivity and Liquidity"
and "Supervision and Regulation."
REGULATORY DEVELOPMENTS
On May 14, 1993, the Company entered into the Memorandum of Understanding
with the Reserve Bank and Riggs-Washington entered into a written agreement
(the "Written Agreement") with the OCC. The Written Agreement and the
Memorandum of Understanding were the result of regulatory concern over
financial and operational weaknesses and continued losses primarily related to
the Company's domestic and United Kingdom commercial real estate exposure.
The Company's and Riggs-Washington's respective regulators have broad powers
under current law and, if the Company or Riggs-Washington fails to comply with
any material provisions of the Memorandum of Understanding or the Written
Agreement, such regulators may take further supervisory action, including
possible further constraints on operations, limitations on the payment of
principal, interest or dividends and more severe regulatory oversight. The
powers of the regulatory authorities and the potential adverse impact on
holders of Debt Securities increase significantly if the subsidiary banks are
not adequately capitalized. Such supervisory action could impair the Company's
ability to make principal and interest payments on the Debt Securities. See
"Supervision and Regulation."
REGULATORY CAPITAL REQUIREMENTS
The Company and each of its banking subsidiaries are subject to regulatory
capital guidelines. At September 30, 1993, each of the Company's banking
subsidiaries was in compliance with applicable regulatory capital requirements,
including, in the case of Riggs-Washington, the capital targets set forth in
the Written Agreement. The Company, at that date, had a total capital to risk-
weighted assets ratio of 11.01% and a Tier 1 capital to risk-weighted assets
ratio of 5.78%, both above the minimum requirements of 8.0% and 4.0%,
respectively. The Company's leverage ratio at that date was 3.02% or, on a pro
forma basis after giving effect to the October Equity Sale, 5.73%.
Although the minimum leverage ratio requirement is 3.00%, most bank holding
companies, including the Company, are expected to maintain an additional
cushion of at least 100 to 200 basis points above the minimum. However, the
Federal Reserve Board may assign a specific capital ratio to an individual bank
holding company, including the Company, based on its assessment of asset
quality, earnings performance, interest-rate risk and liquidity. As of the date
of this Prospectus, the Federal Reserve Board has not advised the Company of a
specific leverage ratio requirement. Pursuant to the Memorandum of
Understanding, on July 13, 1993, the Company submitted a capital plan to the
Reserve Bank which projected an improvement in the Company's leverage ratio to
approximately 5.00% by year-end 1993, which, as noted above, has been exceeded
as a result of the October Equity Sale. The Memorandum of Understanding does
not require the Company's capital plan to be approved by the Reserve Bank;
however, the Company's plan was submitted to
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and reviewed without objection by the Reserve Bank. A modified capital plan
will be formally submitted to the Reserve Bank in early 1994. See "--Holding
Company Liquidity." Riggs-Washington's capital plan has been approved by the
OCC but a modified capital plan will be formally submitted to the OCC in early
1994.
There can be no assurance that the Company will continue to be able to meet
all the capital projections in its capital plan or that Riggs-Washington will
continue to meet the minimum capital ratios to which it is committed under the
Written Agreement. In the event that the Company is unable to meet the
projections in its capital plan, or any of its banking subsidiaries falls
below the minimum capital requirements described above, the agencies may take
additional regulatory action including, in the case of subsidiary banks that
fail to meet capital requirements, "prompt corrective action." Such actions
could impair the Company's ability to make principal and interest payments on
the Debt Securities. See "Supervision and Regulation."
SUBORDINATION
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company
and, in certain circumstances, to all existing and future Other Financial
Obligations (as defined herein) of the Company. See "Description of the Debt
Securities--Subordination." As of September 30, 1993, the Company had no
Senior Indebtedness and no Other Financial Obligations outstanding. In
addition, the Company is a holding company that conducts substantially all of
its operations through its subsidiaries, and claims of creditors of the
Company's subsidiaries generally will have priority as to the assets of such
subsidiaries over the claims of the Company and its creditors, including
holders of the Debt Securities. The Indenture under which the Debt Securities
are to be issued does not limit or prohibit the incurrence of additional
Senior Indebtedness, Other Financial Obligations or any other indebtedness by
the Company, or the incurrence of any indebtedness by its subsidiaries, nor
does the Indenture contain any provisions which would protect the holders of
the Debt Securities (or any beneficial interest therein) against a decline in
credit quality resulting from takeovers, recapitalizations or other similar
restructurings. See "Description of the Debt Securities--Subordination."
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of the principal of the Debt Securities may be accelerated only in the case of
certain events involving the bankruptcy, insolvency or reorganization of the
Company. Unless otherwise indicated in the applicable Prospectus Supplement,
there is no right of acceleration in the case of a default in the performance
of any obligation of the Company under the Indenture or the Debt Securities,
including any obligation to pay principal or interest on the Debt Securities.
See "Description of the Debt Securities--Events of Default and Limited Rights
of Acceleration."
COMPETITION
The Company competes with commercial banks, thrift institutions, mortgage
banks, credit unions, insurance companies and other institutions. Such
competition is primarily based on the scope and type of services offered,
interest rates paid on deposits, pricing of loans and number and locations of
branches, among other things. In addition, during the past few years,
significant consolidation among financial institutions in the Washington, D.C.
metropolitan area has occurred. Competition has intensified and is expected to
continue to intensify in the Washington, D.C. metropolitan area as a result of
the merger of C&S/Sovran Corporation into NCNB Bancorporation (now known as
NationsBank Corporation), the recently completed acquisitions of First
American Metro Corp. and Dominion Bankshares Corporation by First Union
Corporation and the pending acquisition of MNC Financial, Inc. (the parent
company of American Security Bank, N.A.) by NationsBank Corporation. These
competitors and certain other competitors of the Company have substantially
greater resources than the Company. Although management believes the Company
has been able to compete effectively in its market areas, there can be no
assurance that it will be able to continue to do so.
TRADING MARKET FOR THE DEBT SECURITIES
The Company does not intend to apply for listing of the Debt Securities on
any national securities exchange or to have the Debt Securities approved for
quotation on any interdealer quotation system. The liquidity of, and the
trading market for, the Debt Securities may be adversely affected by declines
in the market for high yield securities generally. Such a decline may
adversely affect such liquidity and trading markets independent of the
financial performance of, and prospects for, the Company. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, the
Debt Securities.
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THE COMPANY
Riggs National Corporation is a multi-bank holding company registered under
the Bank Holding Company Act of 1956, as amended (the "BHCA"), and incorporated
in the State of Delaware. Based on total assets as of June 30, 1993, the
Company is the 88th largest bank holding company in the United States and the
largest bank holding company headquartered in Washington, D.C. As of September
30, 1993, the Company had consolidated assets of $4.7 billion, consolidated
deposits of $3.9 billion and consolidated stockholders' equity of $158 million
($289.9 million after giving effect to the October Equity Sale).
The Company, through its bank and non-bank subsidiaries, provides banking,
trust, investment advisory and other financial services to selected domestic
and international markets. The Company currently has banking subsidiaries in
Washington, D.C.; Virginia; Maryland; Miami, Florida; London, England; Paris,
France; and Nassau, Bahamas. Additionally, the Company provides investment
advisory services domestically through a subsidiary registered under the
Investment Advisers Act of 1940 and internationally through a subsidiary in
Geneva, Switzerland. In addition to its domestic trust services, the Company
provides trust services through two subsidiaries in Gibraltar.
The primary market for the Company is the Washington, D.C. metropolitan area,
which it serves through three subsidiary banks: Riggs-Washington, Riggs-
Virginia and Riggs-Maryland. The number of branches, deposits, assets and
equity for each of these banking subsidiaries at September 30, 1993 are shown
in the table below:
<TABLE>
<CAPTION>
BRANCHES DEPOSITS ASSETS EQUITY
-------- -------- ------ ------
(dollars in millions)
<S> <C> <C> <C> <C>
Riggs-Washington............................ 34 $3,455 $4,079 $266
Riggs-Virginia.............................. 17 306 338 31
Riggs-Maryland.............................. 11 175 188 13
</TABLE>
The consolidation currently underway in the local banking industry has left
Riggs-Washington as the only independent commercial bank with assets in excess
of $4 billion headquartered in Washington, D.C. As of March 31, 1993, Riggs-
Washington had the largest share of commercial bank deposits in Washington,
D.C. at approximately 37%, based upon a recent study by the graduate school of
business administration at the University of Virginia, which included the pro
forma effects for the announced and pending mergers between banks in the
Washington, D.C. area. The Company believes that it enjoys a highly respected
position in Washington, D.C. because of its local management, name recognition
and commitment to the community, which has resulted in this leading deposit
share. In addition, the Company has developed an international business serving
foreign embassies and missions and significant trust/private banking operations
in the Washington, D.C. area.
The location of its headquarters in Washington, D.C. has provided the Company
with a unique opportunity to develop banking relationships with foreign
embassies and missions located in Washington, D.C. and their employees.
Currently, Riggs-Washington has a dominant share of this business, serving
embassies or missions for 158 of the 168 countries represented by embassies or
missions in Washington, D.C. by providing a variety of services including
deposit products, foreign exchange, cash management, letters of credit, private
banking and credit assistance with U.S. Government programs. The embassy and
mission business is complemented by the Company's international private
banking, foreign correspondent banking and advisory services.
Riggs-Washington's Financial Services Group provides domestic trust,
investment management and private banking services. At September 30, 1993, the
Trust Division had $9.1 billion in assets under administration, with
discretionary investment management responsibility for over $4.7 billion of
that amount. In recent years, the Trust Division has expanded its investment
management advisory services. As a result, assets under management grew at an
annual compounded rate of 16.0% for the five years ended December
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31, 1992 and trust revenue grew at an annual compounded rate of 12.5% during
the same period. Trust revenues of $21.6 million for the first nine months of
1993 were slightly greater than those for the same period a year earlier as the
reduction in corporate custodial business was offset by increased fees for
trust and investment advisory services. Assets under management declined
slightly from September 30, 1992 to September 30, 1993.
Management believes that the Company, as the largest commercial bank holding
company headquartered in the nation's capital, has a unique position in the
center of an affluent market combining significant public and private sector
customers. The Company's primary mission is to provide a full range of quality
banking services throughout the greater Washington, D.C. community. In order to
capitalize on its strong market position, deposit share and reputation in the
Washington, D.C. area, the Company is implementing a strategy which emphasizes
its ability to offer loan, deposit and investment advisory services as a "Super
Community Bank." As part of this strategy, the Company will offer its customers
a breadth of financial products typical of a regional bank with the
personalized service and local decision-making of a community bank. The Company
believes that its size will allow it to offer a broader product line than its
smaller competitors, while its personalized service and local decision-making
will give the Company a distinct advantage over its larger regional
competitors. Local decision-making and a commitment to the community will be
the key to retaining its existing customers and building new relationships.
The address of the principal executive offices of the Company is 1503
Pennsylvania Avenue, N.W., Washington, D.C. 20005. The telephone number is
(202) 835-6000.
RECENT DEVELOPMENTS
OCTOBER EQUITY SALE
On October 21, 1993, as part of the strategic initiatives announced by the
Company in the second quarter of 1993 and described below, the Company issued
and sold 4,000,000 shares of its Series B Preferred Stock and 5,000,000 shares
of its Common Stock to certain investors in transactions exempt from the
registration requirements of the Securities Act. The shares of Series B
Preferred Stock and Common Stock were sold for $25 per share and $7.75 per
share, respectively. The net proceeds to the Company from the October Equity
Sale (after deducting placement agent fees and related estimated expenses) were
approximately $132 million. Adjusted for the estimated net proceeds from the
transaction, the Company's pro forma risk-based capital and leverage ratios at
September 30, 1993 were as follows: Tier 1--10.85%, Combined Tier 1 and Tier 2
- --16.98% and Leverage--5.73%.
All of the Series B Preferred Stock and 2,924,000 shares of the Common Stock
sold in the October Equity Sale have been registered for resale by the
investors referred to above (and their permitted assigns) pursuant to a
separate shelf registration statement, which was recently filed with the
Commission and is to be maintained in effect for a period of three years. The
Company will not receive any of the proceeds from such resales.
1993 FOURTH QUARTER
For the quarter ending December 31, 1993, the Company reported net income of
$3.1 million (compared to a loss of $24.1 million for the fourth quarter of
1992). These results were attributable largely to reduced provisions for loan
losses during the quarter ($2.1 million compared to $27.3 million during the
fourth quarter of 1992). The Company also reported that, between September 30
and December 31, 1993, nonperforming assets declined by $60 million. More than
half of the fourth quarter reduction in nonperforming assets resulted from
repayments. As of December 31, 1993, the Company's nonperforming assets were at
their lowest level in more than three years.
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<PAGE>
FINANCIAL DIFFICULTIES AND RECENT STRATEGIC INITIATIVES
Since 1990, the Company has experienced significant and continuing losses
totalling (as of September 30, 1993) in excess of $238 million, principally as
a result of deterioration in its domestic commercial real estate portfolio in
the Washington, D.C. metropolitan area and in the commercial real estate and
corporate loan portfolios of the Company's London Operations. See "Risk Factors
and Special Considerations." In its initial response to these difficulties, the
Company took a number of steps in 1991 and 1992, as discussed in the next
section. In 1993, largely under the direction of new senior management, the
Company implemented a series of integrated strategic initiatives intended to
restore the Company to financial soundness and profitability. These new
initiatives include:
. NEW MANAGEMENT TEAM. In June 1993, Paul M. Homan was appointed President
and Chief Executive Officer of Riggs-Washington and Vice-Chairman of the
Company. From August 1991 through December 1992, Mr. Homan served as
president and chief executive officer of First Florida Banks, Inc. of Tampa
(assets of $5.8 billion at December 31, 1991) during which time the bank
implemented restructuring programs to address asset quality problems and
returned to profitability within six months. From 1985 to 1987, Mr. Homan
was executive vice president of Continental Bank Corporation with
responsibility for corporate finance, strategic planning, capital planning
and government relations. Prior to joining Continental Bank Corporation, he
was chairman and chief executive officer of Nevada National Bank, which
also returned to profitability during his tenure. Prior to these bank
management positions, Mr. Homan worked at the OCC from 1966 to 1983, rising
to the position of senior deputy comptroller for bank supervision, the
OCC's top career position. As such, he supervised 4,700 national banks. He
also served as senior adviser to the Comptroller of the Currency in 1990
and 1991.
In addition to the appointment of Mr. Homan, the Company has
significantly strengthened its senior management team since early 1993 with
the appointment of a new Chief Financial Officer, a new head of its General
Banking Group and new heads of its Retail, Corporate and Commercial
Lending, Commercial Real Estate Lending, Loan Review, Audit and Appraisal
Services Divisions and its newly created Risk Management Division. Each of
the new Division Heads has extensive banking experience. In addition to the
large number of changes throughout the management team which have already
occurred, other steps may be taken to strengthen senior management before
year-end 1993. See "Management."
. FINANCIAL RESTRUCTURING. At the end of the second quarter of 1993, the
Company announced a financial restructuring designed to facilitate its
return to profitability. The steps taken included charging off the doubtful
portions of all loans, 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. These actions led to second quarter provisions for loan losses
of $44.2 million, restructuring charges of $20.8 million and expenses for
other real estate owned of $21.9 million. Of the $44.2 million in
provisions for loan losses, $19.7 million related to commercial real estate
in the Washington, D.C. area and $24.5 million related to commercial
property loans and corporate loans in the United Kingdom. See also "--
Restructuring of London Operations."
. NEW CAPITAL. Concurrently with the announcement of its financial
restructuring plan, the Company announced plans to raise approximately $100
million in new equity. As part of this plan, the Company completed the
October Equity Sale, in which it raised equity totalling approximately $132
million. After taking account of the October Equity Sale, the Company's pro
forma consolidated leverage ratio as of September 30, 1993 was 5.73%. See
"Capitalization" and "Supervision and Regulation."
. RESTRUCTURING OF LONDON OPERATIONS. During the second quarter of 1993,
the Company adopted a plan to address the potential risk in the loan and
other real estate owned portfolios of its London Operations, to facilitate
the disposition of certain of its troubled assets in the United Kingdom and
to exit unprofitable lines of business in the United Kingdom. The London
Operations have been reorganized on a basis consistent with the Company's
strategy domestically to segregate its ongoing banking business from the
management of problem assets. Continued ongoing business lines are now
centered on financing
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<PAGE>
income-producing commercial real estate properties in the United Kingdom as
well as financing international trade transactions, primarily for mid-sized
corporations based in the United Kingdom. Management of the London
Operations has been strengthened with the recent addition of individuals
with specific experience in real estate appraisals, workouts and regulatory
compliance issues, who have joined a Managing Director and Chief Credit
Officer posted to London from Riggs-Washington within the last two years.
Over the last two years, the Company has substantially completed its
withdrawal
from certain business activities in the United Kingdom including commercial
leasing, corporate banking, corporate finance and trading in foreign
exchange and money market instruments.
. SPECIAL ASSETS GROUP. In order to improve the Company's ability to work
out or liquidate problem assets, the Company has consolidated the majority
of its nonperforming and other problem assets in the domestic and United
Kingdom markets and transferred them into a Special Assets Group. The
Special Assets Group now handles problem assets throughout the Company. The
Special Assets Group is managed by dedicated personnel experienced in real
estate and problem asset disposition strategies and led by a senior officer
with an extensive banking background in loan and other real estate owned
workouts. The Company believes that maintaining the separation of the
workout function from the ongoing banking business will enable it to
concentrate more efficiently on resolution of its nonperforming and other
problem assets and at the same time focus attention on its "Super Community
Bank" strategy in building new business. Since 1991, Riggs-Washington has
had a Special Assets Committee to approve workout strategies for problem
assets.
. BANKSTART '93. In January 1993, the Company initiated BankStart '93, a
comprehensive, corporate-wide project designed to make the Company more
cost-efficient and operationally effective. Through BankStart '93, the
Company reexamined each of its lines of business in order to identify
opportunities to improve efficiencies and reduce costs. The goal of the
project was to identify revenue enhancements, productivity advances,
expense reductions and product line modifications needed to facilitate the
Company's return to consistent profitability. A portion of the expense
reductions is expected to come from reduced staffing. When the program
began, the authorized number of full-time positions for the Company's
domestic subsidiaries was 2,060. It was expected that approximately 550
positions would be eliminated as a result of BankStart '93, although the
number of actual layoffs was expected to be considerably less due to normal
turnover and attrition. At November 30, 1993, the number of full time
equivalent domestic employees was approximately 1,650. After giving effect
to further implementation of BankStart 93' and staff increases recently
determined to be needed to implement the Company's Super Community Bank
strategy, the Company currently anticipates that its authorized complement
for 1994 will be approximately level with its number of full-time
equivalent domestic employees at November 30, 1993.
In the first quarter of 1993, the Company took a restructuring charge of
$13.8 million, representing management's best estimate of the cost of
implementing BankStart '93. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Income--Nine Months 1993 vs.
Nine Months 1992." While all of this charge was accrued in the first
quarter, approximately $7.8 million of the actual expenses had been paid by
September 30, 1993, and the remaining $6.0 million is expected to be paid
between that date and the time when the program is fully implemented.
BankStart '93 is expected to be substantially implemented by mid-year 1994.
This estimate of the implementation cost is evaluated by management on an
ongoing basis and, as adjustments become known, will be revised
accordingly.
. FURTHER REVENUE ENHANCEMENTS: INCREASED LOAN TO DEPOSIT RATIO. As the
Company placed increasing emphasis on its liquidity in the past few years,
its loan to deposit ratio decreased from 62.0% as of December 31, 1990 to
53.5% as of September 30, 1993. This reduced ratio has had a negative
impact on net interest income. The Company's goal is to improve its loan to
deposit ratio to levels that currently are not expected to exceed
approximately 77% (although this level could be exceeded depending on
economic, financial and regulatory factors). The Company has moved toward
that goal in the short term
15
<PAGE>
by increasing residential mortgage loans through open market purchases of
approximately $340 million of first mortgages through November 1993. In
addition, the Company has entered into agreements to purchase approximately
$180 million of residential mortgage loans which are expected to be
acquired by February 1994. Substantially all of the mortgage loans acquired
and to be acquired bear interest at fixed rates, were recently originated,
have original maturities of 15 or 30 years and are secured by properties
located in various regions throughout the United States. The Company
intends further to pursue this goal over the longer term through a
combination of new loan underwriting initiatives for consumer and business
loans and a reduction of shorter-term assets. The Company believes this
strategy, combined with its aforementioned strategy to become a "Super
Community Bank," will have a significant positive impact on net interest
income and will be an important component of the plan to increase
profitability. Whether these lending goals will be achieved and
profitability enhanced as currently intended will depend on a variety of
economic, financial and regulatory factors, many of which are beyond the
Company's control. In particular, in the Company's primary markets, growth
in demand for new loans has been relatively limited and competition among
lenders has increased in recent years. Consequently, there is no assurance
that the Company will be successful in achieving its lending goals. See
"Recent Developments and Special Considerations--Holding Company
Liquidity."
INITIAL RESPONSES TO FINANCIAL DIFFICULTIES
Before implementing the strategic initiatives described in the preceding
section, the Company took a number of initial steps in 1990, 1991 and 1992 in
response to its financial difficulties. These initial steps were intended to
restore the Company's capital and regulatory capital ratios to adequate levels,
reduce the burden of nonperforming assets, control noninterest expense and
improve its systems and controls for managing its loan and real estate
portfolios. The Company believes that these initial steps were important in
addressing its continuing financial difficulties as they developed and in
establishing the foundation for the recently announced strategic initiatives.
These initial actions included:
. ASSET REDUCTION. During 1991 and 1992, the Company sought to maintain its
regulatory capital ratios and improve liquidity by reducing assets and
shifting a greater proportion of its assets from loans into money market
assets. Such assets generally carry a lower risk-weighting for capital
purposes, although they typically generate lower yields than the Company's
lending activities. Over this period, the as Company reduced its total
assets by approximately $2.0 billion, or 28%, while liquid assets increased
as a percentage of total assets from 37.3% at December 31, 1990 to 48.7% at
December 31, 1992. By September 30, 1993 total assets had declined by an
additional $405 million, with liquid assets representing 46.6% of total
assets.
. NEW CAPITAL. In a further move to improve capital levels and ratios, in
January 1992, the Company raised $49.1 million in new common equity through
a fully subscribed rights offering to its stockholders. This offering was
followed in June 1992 by the private issuance of $19.0 million of the
Company's 7.5% Cumulative Convertible Preferred Stock, Series A (the
"Series A Preferred Stock") in exchange for certain outstanding debt. The
Company also conserved capital by eliminating the payment of dividends on
its Common Stock following the first quarter of 1991.
. REDUCED EXPOSURE TO COMMERCIAL REAL ESTATE. The Company significantly
curtailed all new commercial real estate lending in the United States and
the United Kingdom beginning in 1990 and 1991, respectively. As a result of
these actions, as well as charge-offs, repayments and transfers to other
real estate owned, commercial real estate-related loans (both foreign and
domestic) decreased from $1.19 billion, or 17% of total assets, at December
31, 1990 to $687.6 million, or 14% of total assets, at December 31, 1992.
(At September 30, 1993, these loans totalled $562.8 million, or 12% of
total assets.)
. DISPOSITION OF CERTAIN PROBLEM ASSETS. During the third quarter of 1991,
the Company initiated a program to accelerate the disposition of $191.0
million of domestic problem commercial real estate assets. Through June 30,
1992, when this program was discontinued, the Company had reduced these
program assets by $146.3 million (or 77%) through sales, the return of
loans to performing status and writedowns. The Company continues its
efforts to dispose of problem assets as appropriate. During the second half
of 1992 and the first nine months of 1993, the Company has offset
substantial additions to
16
<PAGE>
non-performing assets with reductions of $162.3 million through sales and
repayments and $135.5 million through charge-offs, writedowns, provisions
for other real estate owned and the return of loans to performing status.
. IMPROVED CREDIT ANALYSIS AND RISK MANAGEMENT. In early 1991, the Company
began to refine (i) its underwriting methodology, (ii) its procedures for
ongoing risk evaluation (including the estimation of reserves) and (iii)
its process for determining workout strategies for criticized assets. In
addition, an internal appraisal department was formed, loan policy manuals
were rewritten and an enhanced commercial real estate lending policy manual
was created. These manuals strengthened underwriting standards for the
subsidiary banks to include requirements for cross-collateralization,
personal guarantees, and sales release provisions as requirements for
future commitments, renewals and workouts. In addition, the limit for
senior loan committee approval was lowered from $1 million to $500,000. A
Special Assets Committee consisting of managers with real estate and
workout experience was also formed to approve workout strategies for
problem assets. In 1991 and 1992, several consultants were retained to
assist the Company in improving its appraisal review, documentation
tracking and risk-rating procedures and systems. In late 1992, the Company
began to allocate additional resources to the loan review process, doubling
the size of this department, including a new manager of loan review and
adding professionals with real estate experience.
IMPLEMENTATION OF INTERAGENCY GUIDANCE ON REPORTING OF IN-SUBSTANCE
FORECLOSURES
At December 31, 1993, the Company implemented the narrower definition of In-
Substance Foreclosure required by the March 10, 1993 Interagency Policy
Statement on Credit Availability and the June 10, 1993 Interagency Guidance on
Reporting of In-Substance Foreclosures. Under previous financial accounting
guidelines, nonaccrual loans were transferred from loans receivable to other
real estate owned when foreclosure was probable or the loan was considered in-
substance foreclosed, which by definition in the Commission's Financial
Reporting Release No. 28 means that the borrower has little or no equity in the
property, proceeds for repayment of the loan can be expected to come only from
the operation or sale of the collateral, and the debtor has either abandoned
control of the collateral or it is doubtful that the debtor will 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 current regulatory accounting guidelines, loans
receivable are recognized as in-substance foreclosures when the Company 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" which will be required for
fiscal years beginning after December 15, 1994. This change in treatment only
impacts the classification of accounts in the financial statements and does not
result in a change in the accounting policy related to the carrying value
determination of these assets. The impact of this change in definition of in-
substance foreclosures on certain categories in the Company's Consolidated
Statements of Condition and Statements of Income for the nine month periods
ended September 30, 1993 and 1992, and the years ended December 31, 1992
through 1988 is presented in the following table.
ADJUSTMENTS TO IMPLEMENT NEW DEFINITION OF IN-SUBSTANCE FORECLOSURES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------ ------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
CONDITION
Loans Receivable, Net... $ 61,463 $ 32,735 $ 43,351 $ 13,774 $ 47,125 $ 31,861 $ --
Reserve for Loan Losses. 2,603 -- 848 -- -- -- --
Other Real Estate Owned,
Net.................... (58,860) (32,735) (42,503) (13,774) (47,125) (31,861) --
-------- -------- -------- -------- -------- -------- --------
Net Affect on Total As-
sets................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
======== ======== ======== ======== ======== ======== ========
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -----------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------------------------- ------- -------- ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME
Provision for Loan Loss-
es...................... $ 8,024 $ 1,350 $ 2,278 $ 130 $ 900 $ -- $ --
Other Real Estate Owned
Exp., Net............... (8,024) (1,350) (2,278) (130) (900) -- --
--------- -------- ------- ------- -------- ------ ------
Net Affect on Pretax
Income.................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
========= ======== ======= ======= ======== ====== ======
Provision for Loan Losses
As Reported............ $59,141 $23,462 $49,789 $43,525 $105,508 $5,588 $1,176
As Adjusted............ 67,165 24,812 52,067 43,655 106,408 5,588 1,176
Other Real Estate Owned
Exp., Net
As Reported............ $ 20,231 $ 16,986 $17,981 $14,370 $ 13,353 $1,208 $ (99)
As Adjusted............ 12,207 15,636 15,703 14,240 12,453 1,208 (99)
</TABLE>
The impact of the change in definition of in-substance foreclosures on
nonperforming assets for the nine month periods ended September 30, 1993 and
1992 and the years ended December 31, 1992 through 1988 is presented in the
following table. Nonperforming assets under the previous definition of in-
substance foreclosure are disclosed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Nonperforming Assets and Past
Due Loans."
NONPERFORMING ASSETS AND PAST DUE LOANS--AS ADJUSTED
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual Loans(1),(3). $ 210,290 $ 183,439 $ 205,425 $ 245,610 $ 205,914 $ 36,365 $ 24,116
Renegotiated Loans(2)... 9,447 14,515 11,806 0 0 0 834
Other Real Estate Owned,
Net(3)................. 53,872 101,716 89,389 85,501 73,082 6,102 787
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Nonperforming As-
sets, Net............. $ 273,609 $ 299,670 $ 306,620 $ 331,111 $ 278,996 $ 42,467 $ 25,737
========== ========== ========== ========== ========== ========== ==========
Total Loans, Net of Un-
earned Discount and Net
Deferred Fees.......... $2,167,035 $2,387,344 $2,181,057 $3,006,467 $3,838,381 $3,840,621 $3,562,831
Ratio of Nonaccrual
Loans to Total Loans... 9.70% 7.68% 9.42% 8.17% 5.36% 0.95% 0.68%
Ratio of Nonperforming
Assets to Total Loans
and Other Real Estate
Owned, Net............. 12.32% 12.04% 13.50% 10.71% 7.13% 1.10% 0.72%
</TABLE>
- --------
(1) Loans 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 or
deferral of interest or principal as a result of a deterioration in the
financial position of the borrower in accordance with Financial Accounting
Standards Board Statement No. 15. Extensions of loans, at market terms, are
not considered renegotiated for purposes of this Schedule.
(3) Balance includes Assets Subject to Accelerated Disposition, net of
reserves, of $5,507 and $37,104 related to nonaccrual loans and other real
estate owned, net, respectively, for the year ended December 31, 1991.
The impact of the change in definition of in-substance foreclosures on the
reserve for loan losses for the nine month periods ended September 30, 1993 and
1992 and the years ended December 31, 1992 through 1988 is presented in the
following table. The reserve for loan losses under the previous definition of
in-substance foreclosure is disclosed in "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Reserve for Loan Losses and
Summary of Charge-offs and Recoveries."
18
<PAGE>
RESERVE FOR LOAN LOSSES AND SUMMARY OF CHARGE-OFFS AND RECOVERIES--AS ADJUSTED
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------- --------------------------------------------
1993 1992 1992 1991 1990 1989 1988
------- -------- -------- -------- -------- ------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Beginning of
Period................. $84,155 $103,674 $103,674 $108,887 $ 39,863 $49,038 $66,415
Additions:
Provision for Loan
Losses............... 67,165 24,812 52,067 43,655 106,408 5,588 1,176
Deductions:
Loans Charged-Off..... 70,321 54,352 73,708 39,379 39,226 15,291 22,050
Recoveries on Charged-
Off Loans............ 2,457 1,940 5,313 3,659 865 1,039 3,619
------- -------- -------- -------- -------- ------- -------
Net Charge-offs....... 67,864 52,412 68,395 35,720 38,361 14,252 18,431
Other:
Reserve Transferred to
Real Estate Assets
Subject to Accelerated
Disposition............ -- -- -- 13,165 -- -- --
Foreign Exchange
Translation
Adjustments............ 16 (1,554) (3,191) 17 977 (511) (122)
------- -------- -------- -------- -------- ------- -------
Balance, End of Period.. $83,472 $ 74,520 $ 84,155 $103,674 $108,887 $39,863 $49,038
======= ======== ======== ======== ======== ======= =======
</TABLE>
USE OF PROCEEDS
The Company expects to use the net proceeds of the offering made hereby,
estimated at $120.7 million (assuming all the Debt Securities are sold, at
par), to redeem approximately $51.5 million of its Floating Rate Subordinated
Notes due 1996 (the "Floating Rate Subordinated Notes"), which have an
outstanding principal amount of $51.5 million, and approximately $69.2 million
of its Floating Rate Subordinated Capital Notes due 1996 (the "Subordinated
Capital Notes"), which have an outstanding principal amount of $95.3 million.
The Floating Rate Subordinated Notes mature in September 1996 and accrue
interest at an adjustable annual rate equal to the London interbank offered
rate for three-month Eurodollar deposits ("LIBOR"), which is determined
quarterly, plus 1/4% (subject to a minimum annual rate of 5 1/4%). The
Subordinated Capital Notes mature in September 1996 and accrue interest at an
adjustable annual rate equal to LIBOR, which is determined quarterly, plus
3/16% (subject to a minimum annual rate of 5 1/4%). As of September 30, 1993,
the interest rates in effect for the Floating Rate Subordinated Notes and the
Subordinated Capital Notes were 5 1/4% per annum and 5 1/4% per annum,
respectively.
Any proceeds from the sale of Debt Securities that are held pending
redemption of the subordinated notes described above will be invested in short-
term money market assets.
19
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1993, (i) as adjusted to give effect to the
October Equity Sale and the investment of the net proceeds thereof in short-
term money market assets, and (ii) as adjusted to give effect to the October
Equity Sale, the investment of the net proceeds thereof in short-term money
market assets, the issuance and sale of all the Debt Securities (at par) and
the use of the proceeds from such issuance to redeem approximately $120.7
million of outstanding subordinated debt. See "Use of Proceeds." The table
should be read in conjunction with the detailed information and consolidated
financial statements and related notes contained elsewhere in this Prospectus
and incorporated by reference herein. See "Incorporation of Certain Documents
by Reference."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1993
---------------------------------
AS ADJUSTED
AS ADJUSTED FOR THE OCTOBER
FOR THE OCTOBER EQUITY SALE AND
EQUITY SALE (1) THE OFFERINGS (2)
--------------- -----------------
(dollars in thousands)
<S> <C> <C>
LONG-TERM DEBT
Floating Rate Subordinated Notes due 1996. $ 51,500 $ --
Floating Rate Subordinated Capital Notes
due 1996................................. 95,300 26,050
9.65% Subordinated Debentures due 2009.... 66,525 66,525
Subordinated Debt Securities offered here-
by....................................... -- 125,000
-------- --------
Total Long-Term Debt.................... 213,325 217,575
STOCKHOLDERS' EQUITY
Preferred Stock--$1.00 Par Value
Shares Authorized--25,000,000 shares
Shares Issued--
7.5% Cumulative Convertible Preferred
Stock, Series A (liquidation prefer-
ence $25.00 per share)--764,537...... 765 765
10.75% Noncumulative Perpetual Pre-
ferred Stock, Series B (liquidation
preference $25.00 per share)--
4,000,000............................ 4,000 4,000
Class B Common Stock--$2.50 Par Value
Shares Authorized--20,000,000
Shares Issued--None..................... -- --
Common Stock--$2.50 Par Value (3)
Shares Authorized--50,000,000
Shares Issued--31,122,812............... 77,807 77,807
Surplus
Preferred Stock......................... 109,541 109,541
Common Stock............................ 156,022 156,022
Foreign Exchange Translation Adjustments.. (792) (792)
Undivided Profits......................... (33,688) (34,362)
Treasury Stock--900,798 shares............ (23,723) (23,723)
-------- --------
Total Stockholders' Equity.............. 289,932 289,258
-------- --------
Total Long-Term Debt and Stockholders'
Equity................................. $503,257 $506,833
======== ========
CAPITAL RATIOS (4)
Combined Tier 1 and Tier 2 Risk-Weighted.. 16.98% 17.51%
Tier 1 Risk-Weighted...................... 10.85% 10.82%
Leverage Ratio............................ 5.73% 5.72%
</TABLE>
- --------
(1) Adjusted to give effect to the October Equity Sale and the investment of
the net proceeds thereof (approximately $132 million) in short-term money
market assets, which have been risk-weighted at 20% for purposes of
capital ratio calculations.
(2) Adjusted to give effect to the October Equity Sale and the investment of
the net proceeds thereof as described in note (1) above, the assumed
issuance and sale of all the Debt Securities at par and the use of the net
proceeds of the Debt Securities (estimated at $120.7 million) to redeem
outstanding subordinated debt of the Company.
(3) Excludes shares which may be issued upon exercise of options now or
hereafter granted under the 1993 Riggs National Corporation Stock Option
(the "Plan"). Under the Plan, options to purchase 400,000 shares of Common
Stock (at an exercise price of $8.125 per share) were granted to Paul M.
Homan in June 1993 and options to purchase an additional 342,000 shares of
Common Stock (at an exercise price of $9.00 per share) were granted to
other officers (including options to purchase 185,000 shares which were
granted to executive officers) in November 1993. Of the options to
purchase 508,000 shares of Common Stock still available under the Plan,
the Company currently estimates that options to purchase up to 108,000
additional shares of Common Stock may be granted to current or new
officers of the Company in the near future. See "Management--Contract of
New Chief Executive Officer of Riggs-Washington." Also excludes 2,002,141
shares initially reserved for issuance upon conversion of the Series A
Preferred Stock.
(4) After adjustment as described in note (1) above, Tier 1 Capital and
Combined Tier 1 and Tier 2 Capital would have been $279.6 million and
$437.7 million, respectively, at September 30, 1993. After adjustment as
described in note (2) above, Tier 1 Capital and Combined Tier 1 and Tier 2
Capital would have been $279.0 million and $451.3 million, respectively,
at September 30, 1993.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following summary and related footnotes should be read in conjunction
with, and are qualified in their entirety by, the detailed information and
consolidated financial statements and related notes included in and
incorporated by reference into this Prospectus. The information set forth below
for the nine months ended as of September 30, 1992 and 1993 has been derived
from unaudited condensed consolidated financial statements of the Company. In
the opinion of management, the unaudited financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for these
periods. The results for the nine months ended September 30, 1993 are not
necessarily indicative of the results for a full fiscal year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." At
December 31, 1993, the Company implemented the Interagency Guidance on
Reporting of In-Substance Foreclosures. See "Recent Developments--
Implementation of Interagency Guidance on Reporting of In-Substance
Foreclosures."
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands, except per share amounts)
CONSOLIDATED SUMMARY OF
INCOME:
Interest Income........ $ 195,035 $ 258,350 $ 327,540 $ 474,815 $ 649,010 $ 621,200 $ 505,625
Interest Expense....... 95,384 152,531 189,604 319,719 476,397 442,099 342,146
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income.... 99,651 105,819 137,936 155,096 172,613 179,101 163,479
Less: Provision for
Loan Losses........... 59,141 23,462 49,789 43,525 105,508 5,588 1,176
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Interest Income
after Provision for
Loan Losses........... 40,510 82,357 88,147 111,571 67,105 173,513 162,303
Noninterest Income Ex-
cluding Securities
Gains................. 67,486 68,123 96,200 92,961 78,179 65,144 56,861
Securities Gains (Loss-
es), Net.............. 23,925 34,798 34,213 13,692 1,263 8,285 (96)
Provision for Losses on
Accelerated
Disposition of Real
Estate Assets......... -- -- -- 49,800 -- -- --
Noninterest Expense.... 223,655 182,398 240,681 240,501 237,177 189,910 165,326
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) before
Taxes and
Extraordinary Item.... (91,734) 2,880 (22,121) (72,077) (90,630) 57,032 53,742
Applicable Income Tax
(Benefit) Expense..... 5,558 (129) (1,069) (6,130) (29,413) 17,609 16,726
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) before
Extraordinary Item,
Net of Taxes.......... (97,292) 3,009 (21,052) (65,947) (61,217) 39,423 37,016
Extraordinary Item--Net
of Taxes(1)........... -- -- -- 2,486 4,569 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss)...... $ (97,292) $ 3,009 $ (21,052) $ (63,461) $ (56,648) $ 39,423 $ 37,016
========== ========== ========== ========== ========== ========== ==========
PER COMMON SHARE:
Net Income (Loss)...... $ (3.90) $ 0.12 $ (0.86) $ (4.61) $ (4.11) $ 2.86 $ 2.54
Book Value (at period
end).................. 5.50 10.13 8.98 14.88 20.16 24.85 23.41
Average Shares Out-
standing(2)........... 25,222,014 24,303,072 24,534,063 13,777,014 13,777,014 13,777,014 14,594,131
CONSOLIDATED BALANCES AT
PERIOD END:
Total Assets........... $4,672,922 $5,357,251 $5,077,522 $5,535,803 $7,050,602 $7,337,187 $7,001,910
Reserve for Loan Loss-
es.................... 80,869 74,520 83,307 103,674 108,887 39,863 49,038
Nonaccrual and
Renegotiated Loans.... 158,274 165,220 173,880 231,836 158,789 4,504 24,950
Other Real Estate
Owned................. 112,732 134,450 131,892 99,275 120,207 37,963 787
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Nonperforming As-
sets(3)............... 271,006 299,670 305,772 331,111 278,996 42,467 25,737
Loans, Net of Unearned
Discount and Deferred
Fees.................. 2,105,572 2,354,609 2,137,706 2,992,693 3,791,256 3,808,760 3,562,831
Total Deposits......... 3,934,289 4,630,312 4,437,598 4,912,372 6,110,594 5,976,934 5,537,275
Long-Term Debt......... 213,325 213,325 213,325 232,127 245,897 308,914 223,175
Stockholders' Equity... 157,673 274,565 245,420 204,979 277,697 342,332 322,476
</TABLE>
21
<PAGE>
SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1992 1992 1991 1990 1989 1988
----------- ------ ----- ------ ------ ------ ------
(dollars in thousands, except per share amounts)
SELECTED RATIOS:
PERFORMANCE RATIOS:
Return on Average As-
sets.................. (2.59)% 0.07% (.40)% (1.04)% (0.80)% 0.60% 0.59%
Return on Average
Stockholders' Equity.. (63.06) 1.54 (7.99) (25.19) (16.63) 11.90 11.10
Net Interest Yield on
Average Earning
Assets................ 3.16 3.20 3.15 3.04 2.86 3.23 3.16
Ratio of Earnings to
Fixed Charges(4):
Including Interest on
Deposits.............. -- 1.02x -- -- -- 1.13x 1.16x
Excluding Interest on
Deposits.............. -- 1.19x -- -- -- 1.84x 2.12x
CAPITAL RATIOS AT PERIOD
END:
Combined Tier 1 and
Tier 2 Risk-Weighted.. 11.01% 15.05% 14.70% 10.46% 10.79% N/A N/A
Tier 1 Risk-Weighted... 5.78 8.60 8.31 5.23 5.39 N/A N/A
Leverage............... 3.02 4.93 4.60 3.57 3.80 N/A N/A
Stockholders' Equity to
Total Assets.......... 3.37 5.13 4.83 3.70 3.94 4.67% 4.61%
ASSET QUALITY RATIOS AT
PERIOD END:
Nonperforming Assets as
a Percent of Period-
End Loans and Other
Real Estate Owned(3).. 12.22 12.04 13.47 10.71 7.13 1.10 0.72
Nonaccrual Loans as a
Percent of Period-End
Total Loans........... 7.07 6.40 7.58 7.75 4.19 0.12 0.70
Nonperforming Assets as
a Percent of Total
Assets................ 5.80 5.59 6.02 5.98 3.96 0.58 0.37
Net Charge-offs as a
Percent of Average
Loans................. 2.92 1.93 2.64 1.05 0.93 0.38 0.55
Reserve for Loan Losses
as a Percent of
Period-End Loans...... 3.84 3.16 3.90 3.46 2.87 1.05 1.38
Reserve for Loan Losses
as a Percent of
Nonaccrual,
Renegotiated and Past
Due Loans............. 49.76 44.68 47.52 44.05 50.82 237.82 156.13
SELECTED PRO FORMA DATA AT SEPTEMBER 30, 1993(5):
Book Value Per Common
Share................. $5.81
Number of Shares
Outstanding........... 30,222,014
Capital Ratios:
Combined Tier 1 and
Tier 2 Risk-Weighted.. 16.98%
Tier 1 Risk-Weighted... 10.85
Leverage............... 5.73
Stockholder's Equity to
Total Assets.......... 6.03
</TABLE>
- --------
(1) During 1991 and 1990, the Company purchased, on the open market at a
discount, $13.2 million and $33.5 million principal amount of its
subordinated long-term debt, which resulted in extraordinary gains.
(2) The Company purchased 900,798 shares of its common stock in the fourth
quarter of 1988.
(3) Nonperforming assets consist of nonaccrual loans, renegotiated loans,
other real estate owned (net of reserves) and, for the period from
September 30, 1991 through the second quarter of 1992, assets subject to
accelerated disposition (net of reserves).
(4) Earnings include the consolidated earnings of the national banking
subsidiaries, which may not be available (due to legal limitations on the
sources and amount of dividends national banks are permitted to pay their
parent companies) to cover fixed charges of the holding company. Fixed
charges include interest on long-term debt of the holding company. See
"Risk Factors and Certain Considerations--Restrictions on Ability to Pay
Dividends." During the nine month period ended September 30, 1993 and the
years ended December 31, 1992, 1991 and 1990, earnings were insufficient
to cover fixed charges (including interest on deposits) and preferred
stock dividend requirements by $92.8 million, $22.8 million, $72.1 million
and $90.6 million, respectively.
(5) Adjusted to give effect, as of September 30, 1993, to the October Equity
Sale and the investment of the net proceeds thereof (approximately $132
million) in short-term money market assets, which have been risk-weighted
at 20% for purposes of capital ratio calculations. No effect is given to
any offering of Debt Securities or any redemption of any outstanding
subordinated debt.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
INCOME
Nine Months 1993 vs Nine Months 1992
For the first nine months of 1993, the Company reported a consolidated net
loss of $97.3 million or $3.90 per share as compared to a net income of $3.0
million or $.12 per share for the first nine months of 1992. Included in the
first nine months' results were provisions for loan losses of $59.1 million and
provisions, writedowns and other expenses related to other real estate owned of
$20.2 million. Also contributing to the loss were restructuring charges of
$34.6 million. In the first quarter of 1993, a restructuring charge of $13.8
million was taken representing the cost of implementing BankStart '93. The
$13.8 million of restructuring expenses related to BankStart '93 consisted of
$7.0 million in consulting fees, $4.0 million in severance related costs, $1.0
million of occupancy related costs and $1.8 million of other costs. The costs
represent management's best estimate of the costs of implementing BankStart
'93. Implementation of BankStart '93 is expected to be mid-1994. The items were
accrued in the first quarter of 1993 upon adoption of the BankStart '93 plan.
During the first nine months of 1993, $7.8 million of these expenses were paid
while the remaining $6.0 million are expected to be paid over the
implementation period. The estimate of the implementation cost is evaluated by
management on an ongoing basis and, as adjustments become known, will be
revised accordingly.
In the second quarter of 1993, a restructuring charge of $20.8 million was
taken related to Riggs AP. The $20.8 million of restructuring expenses in the
second quarter of 1993 consisted of $1.6 million in severance expenses, a $5.0
million writeoff of fixed assets, $2.2 million in writeoffs of service
contracts, $544 thousand related to goodwill directly associated with
terminated business lines and a $11.5 million writeoff of the foreign exchange
translation accounts related to the Company's investment in Riggs AP Bank. As
of September 30, 1993, $15.9 million of the second quarter restructuring
expense had been paid leaving $4.9 million to be paid. These negative factors
were partially offset by securities gains of $23.9 million. For the same period
a year earlier, provisions for loan losses totaled $23.5 million and
provisions, writedowns and other expenses related to other real estate owned
were $17.0 million, which were partially offset by securities gains of $34.8
million.
For the third quarter of 1993, the Company reported net income of $3.0
million or $.10 per share compared to net income of $5.2 million or $.21 per
share for the third quarter of 1992. Provisions for loan losses during the
third quarter of 1993 totaled $2.0 million. In the third quarter of 1992,
earnings were negatively impacted by provisions for loan losses of $5.5 million
and provisions, writedowns and other expenses related to other real estate
owned of $13.6 million, which were offset by securities gains of $22.1 million.
1992 vs 1991
The Company reported a net loss of $21.1 million for 1992 or $.86 per share,
compared to a net loss of $63.5 million or $4.61 per share for 1991. Reflected
in the 1992 results were $65.7 million of provisions for loan losses and
provisions and writedowns related to problem assets compared to provisions of
$101.5 million a year earlier. Provisions and writedowns during 1992 primarily
related to commercial real estate and corporate loans in the United Kingdom and
commercial real estate loans in the Washington, D.C. area. Partially offsetting
these provisions were securities gains of $34.2 million in 1992 and $13.7
million in 1991. Additionally, 1992 results included $5.9 million of
nonrecurring interest income related to a tax receivable, while 1991 results
included extraordinary gains of $4.2 million from the purchase by the Company
of its subordinated debt at a discount.
NET INTEREST INCOME
Nine Months 1993 vs Nine Months 1992
In the first nine months of 1993, net interest income on a tax-equivalent
basis (net interest income plus an amount equal to the tax savings on tax-
exempt interest) was $103.4 million, down $7.4 million from the
23
<PAGE>
$110.8 million earned during the first nine months of 1992, as the effect of a
$261.8 million decrease in average earning assets was compounded by an
unfavorable change in the mix of earnings assets. Loans were 48.3% of average
earning assets during the first nine months of 1993 as compared to 57.0% during
the same period in 1992. The net interest yield (net interest income on a tax-
equivalent basis divided by average earning assets) was 3.16% during the first
nine months of 1993, down 4 basis points from the 3.20% for the same period of
1992, due to a decrease in demand deposits and an increase in nonperforming
assets. Interest not included in income on nonaccrual loans ($7.8 million) had
the effect of reducing the net interest yield by approximately 27 basis points
during the first nine months of 1993. Net interest spread (the difference
between the average tax-equivalent rate received on earning assets and the
average rate paid on interest-bearing liabilities) for the first nine months
was 2.84%, up 10 basis points over the 2.74% for the same period of 1992.
Net interest income on a tax-equivalent basis during the third quarter of
1993 was $33.3 million, down $2.3 million from the $35.7 million earned during
the third quarter of 1992, as the negative effect of a $412 million decrease in
average earning assets was partially offset by a 7 basis point increase in the
net interest yield. Loans were 49.0% of average earning assets during the third
quarter of 1993 as compared to 52.8% during the same quarter last year. The net
interest yield was 3.11% during the third quarter of 1993, up slightly over the
3.04% for the same period in 1992. The net interest spread for the third
quarter of 1993 was 2.82%, up 18 basis points over the 2.64% for the third
quarter of 1992.
As described above, one of the Company's strategic objectives is to increase
its loan to deposit ratio, from 53.5% at September 30, 1993 to approximately
77%. The Company has moved toward this goal in the short term by increasing
residential mortgage loans through open market purchases of approximately $340
million of predominantly fixed-rate, long-term first mortgages through November
1993. In addition, the Company has entered into agreements to purchase
approximately $180 million of predominantly fixed-rate mortgage loans which are
expected to be acquired by February 1994. The Company intends further to pursue
this goal over the longer term through a combination of new loan underwriting
initiatives for consumer and business loans and a reduction of shorter-term
assets. The Company believes this strategy, combined with its aforementioned
strategy to become a "Super Community Bank," will have a significant positive
impact on net interest income. Whether this lending goal or increased interest
income will be achieved will depend on a variety of economic, financial and
regulatory factors, many of which are beyond the Company's control, and there
is no assurance that the Company will be successful in this regard. See "Recent
Developments--Financial Difficulties and Recent Strategic Initiatives--Further
Revenue Enhancements: Increased Loan to Deposit Ratio."
1992 vs 1991
Net interest income on a tax-equivalent basis totalled $144.4 million during
1992, down $17.8 million or 11.0% below the $162.2 million earned in 1991 as
the positive impact of an improved net interest spread was more than offset by
the effect of a $745 million decrease in the volume of average earning assets
and, to a lesser extent, a reduced benefit of noninterest bearing funds in a
declining rate environment. The net interest yield was 3.15% during 1992, up
from 3.04% for 1991. Net interest spread for 1992 was 2.71%, a 30 basis point
improvement over 1991.
Average earning assets during 1992 decreased $745 million or 14.0% to $4.59
billion. This decline reflected both weak loan demand due to unfavorable
economic conditions and management's desire to improve asset quality and
further reduce the size of the Company to enhance capital ratios. During 1992,
the loan portfolio declined primarily due to loan payments. Average loans were
$2.54 billion during 1992, down $853 million or 25.1% below the average for
1991.
Net interest income in 1992 continued to be affected by a high level of
nonperforming assets. Interest not included in income on nonaccrual loans
during 1992 amounted to $16.6 million compared to interest of $29.6 million not
included in income during 1991. Nonaccrual loans had the effect of reducing
both the net interest yield and the net interest spread by approximately 36
basis points during 1992.
Over the last two years, the Company has experienced a favorable shift in the
mix of its deposit base as a decline in higher cost foreign and domestic time
deposits was partially offset by an increase in lower cost savings and NOW
accounts as a percentage of total deposit liabilities. Average demand, savings
and NOW accounts were 37.0% of average total deposits during 1992 compared to
31.6% during 1991 and 25.7% during 1990.
24
<PAGE>
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES(1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------
1993 1992
--------------------------- ---------------------------
AVERAGE AVERAGE
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCES EXPENSE RATES BALANCES EXPENSE RATES
---------- -------- ------- ---------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:
Commercial-Taxable....... $ 274,308 $ 13,994 6.82% $ 403,955 $ 22,690 7.50%
Commercial-Tax-Exempt.... 85,570 5,902 9.22 105,197 8,743 11.10
Real Estate-
Commercial/Construction. 455,894 22,824 6.69 503,300 29,080 7.72
Residential Mortgage..... 603,107 36,023 7.99 646,153 45,243 9.35
Home Equity.............. 266,971 13,865 6.94 305,678 17,547 7.67
Consumer................. 92,278 8,516 12.34 130,074 12,379 12.71
Foreign.................. 334,275 18,431 7.37 547,926 45,650 11.13
---------- -------- ----- ---------- -------- -----
Total Loans (Including
Fees).................... 2,112,403 119,555 7.57 2,642,283 181,332 9.17
Securities Held for Sale.. 469,143 14,908 4.25 276,251 14,868 7.19
Investment Securities:
U.S. Treasury Securities. 327,435 14,817 6.05 551,429 26,669 6.46
Obligations of States and
Political Subdivisions.. 1,999 154 10.30 1,999 154 10.29
Mortgage-Backed Securi-
ties.................... 402,665 17,549 5.83 24,542 1,618 8.81
Other Securities......... 39,763 2,708 9.11 75,153 4,310 7.66
---------- -------- ----- ---------- -------- -----
Total Investment Securi-
ties..................... 771,862 35,228 6.10 653,123 32,751 6.70
Time Deposits with Other
Banks.................... 434,536 15,454 4.75 531,888 19,296 4.85
Federal Funds Sold and Re-
sale Agreements.......... 581,873 13,592 3.12 528,065 15,122 3.83
---------- -------- ----- ---------- -------- -----
Total Earning Assets and
Average Rate Earned...... 4,369,817 198,737 6.08 4,631,610 263,369 7.60
Less: Reserve for Loan
Losses................... 86,618 86,026
Cash and Due from Banks... 291,473 300,995
Premises and Equipment,
Net...................... 170,025 185,368
Other Assets.............. 273,656 296,414
---------- ----------
Total Assets.............. $5,018,353 $5,328,361
========== ==========
LIABILITIES AND STOCKHOLD-
ERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts. $ 928,278 $ 14,757 2.13% $ 858,073 $ 21,074 3.28%
Money Market Deposit Ac-
counts.................. 1,203,172 22,345 2.48 1,227,695 33,503 3.65
Time Deposits in Domestic
Offices................. 829,165 22,259 3.59 1,023,170 34,505 4.50
Time Deposits in Foreign
Offices(2).............. 514,552 20,127 5.23 720,916 48,234 8.94
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing De-
posits................... 3,475,167 79,488 3.06 3,829,854 137,316 4.79
Borrowed Funds:
Federal Funds Purchased
and Repurchase Agree-
ments................... 169,962 3,425 2.69 97,154 2,133 2.93
U.S. Treasury Demand
Notes and Other Borrowed
Funds................... 74,096 1,550 2.80 40,728 997 3.27
Long-Term Debt........... 213,325 10,921 6.84 225,213 12,085 7.17
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing
Funds and Average Rate
Incurred................. 3,932,550 95,384 3.24 4,192,949 152,531 4.86
Demand Deposits........... 834,705 846,116
Other Liabilities......... 44,810 29,087
Stockholders' Equity...... 206,288 260,209
---------- -------- ----- ---------- -------- -----
Total Liabilities and
Stockholders' Equity..... $5,018,353 $5,328,361
========== ==========
Net Interest Income and
Spread................... $103,353 2.84% $110,838 2.74%
======== ===== ======== =====
Net Interest Yield on
Earning Assets........... 3.16% 3.20%
</TABLE>
- --------
(1) Where applicable, income and rates are computed on a tax-equivalent basis
using a federal income tax rate of 34% and applicable local tax rates.
Loan amounts include nonaccrual and renegotiated loans. Average foreign
assets, excluding net pool funds provided, were 15.9% and 26.3% of average
total assets for the periods presented, respectively. Average foreign
liabilities were 19.1% and 30.2% of average total liabilities for the
periods presented, respectively.
(2) The relatively high average rate on time deposits in foreign offices is
primarily due to the inclusion of deposits at the Company's London
Operations, which are predominantly sterling-based, a currency whose
interest rates have been higher than for U.S. dollars.
25
<PAGE>
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES(1)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
-------------------------------------------------------
1992 1991
--------------------------- ---------------------------
AVERAGE AVERAGE
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCES EXPENSE RATES BALANCES EXPENSE RATES
---------- -------- ------- ---------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans:
Commercial-Taxable....... $ 314,575 $ 22,721 7.22% $ 574,522 $ 45,488 7.92%
Commercial-Tax-Exempt.... 102,809 11,148 10.84 115,613 13,649 11.81
Real Estate-
Commercial/Construction. 567,358 41,581 7.33 688,413 58,737 8.53
Residential Mortgage..... 619,384 57,076 9.21 770,882 72,988 9.47
Home Equity.............. 300,509 22,602 7.52 337,562 33,963 10.06
Consumer................. 125,016 15,762 12.61 198,486 22,700 11.44
Foreign.................. 510,827 54,438 10.66 707,516 85,933 12.15
---------- -------- ----- ---------- -------- -----
Total Loans (Including
Fees).................... 2,540,478 225,328 8.87 3,392,994 333,458 9.83
Securities Held for Sale.. 242,890 15,985 6.58 25,807 1,942 7.53
Investment Securities:
U.S. Treasury Securities. 559,502 35,847 6.41 595,930 45,973 7.71
Obligations of States and
Political Subdivisions.. 1,999 205 10.26 10,359 936 9.04
Mortgage-Backed Securi-
ties.................... 54,109 3,725 6.88 78,738 7,544 9.58
Other Securities......... 70,505 5,347 7.58 104,654 8,862 8.47
---------- -------- ----- ---------- -------- -----
Total Investment Securi-
ties..................... 686,115 45,124 6.58 789,681 63,315 8.02
Time Deposits with Other
Banks.................... 524,902 26,033 4.96 592,880 52,259 8.81
Federal Funds Sold and Re-
sale Agreements.......... 596,165 21,520 3.61 533,778 30,927 5.79
---------- -------- ----- ---------- -------- -----
Total Earning Assets and
Average Rate Earned...... 4,590,550 333,990 7.28 5,335,140 481,901 9.03
Less: Reserve for Loan
Losses................... 82,498 109,117
Cash and Due from Banks... 296,893 321,018
Premises and Equipment,
Net...................... 183,080 182,325
Other Assets.............. 287,930 345,845
---------- ----------
Total Assets.............. $5,275,955 $6,075,211
========== ==========
LIABILITIES AND STOCKHOLD-
ERS' EQUITY
Interest-Bearing Deposits:
Savings and NOW Accounts. $ 871,347 $ 27,045 3.10% $ 775,107 $ 31,876 4.11%
Money Market Deposit Ac-
counts.................. 1,241,790 42,730 3.44 1,292,361 65,805 5.09
Time Deposits in Domestic
Offices................. 991,130 42,774 4.32 1,198,124 80,301 6.70
Time Deposits in Foreign
Offices(2).............. 693,560 57,659 8.31 1,134,981 112,790 9.94
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing De-
posits................... 3,797,827 170,208 4.48 4,400,573 290,772 6.61
Borrowed Funds:
Federal Funds Purchased
and Repurchase Agree-
ments................... 87,339 2,502 2.86 99,120 5,058 5.10
U.S. Treasury Demand
Notes and Other Borrowed
Funds................... 40,235 1,278 3.18 91,395 4,929 5.39
Long-Term Debt........... 222,162 15,616 7.03 235,263 18,960 8.06
---------- -------- ----- ---------- -------- -----
Total Interest-Bearing
Funds and Average Rate
Incurred................. 4,147,563 189,604 4.57 4,826,351 319,719 6.62
Demand Deposits........... 845,584 895,455
Other Liabilities......... 19,210 101,423
Stockholders' Equity...... 263,598 251,982
---------- -------- ----- ---------- -------- -----
Total Liabilities and
Stockholders' Equity..... $5,275,955 $6,075,211
========== ==========
Net Interest Income and
Spread................... $144,386 2.71% $162,182 2.41%
======== ===== ======== =====
Net Interest Yield on
Earning Assets........... 3.15% 3.04%
</TABLE>
- --------
(1) Where applicable, income and rates are computed on a tax-equivalent basis
using a federal income tax rate of 34% and applicable local tax rates.
Loan amounts include nonaccrual and renegotiated loans. Average foreign
assets, excluding net pool funds provided, were 21.5% and 23.4% of average
total assets for the periods presented, respectively. Average foreign
liabilities were 23.9%, and 29.8% of average total liabilities for the
periods presented, respectively.
(2) The relatively high average rate on time deposits in foreign offices is
primarily due to the inclusion of deposits at the Company's London
Operations, which are predominantly sterling-based, a currency whose
interest rates have been higher than for U.S. dollars.
26
<PAGE>
INTEREST RATE SENSITIVITY AND LIQUIDITY
A key element of banking is the monitoring and management of liquidity and
interest rate risk. The process of planning and controlling asset and liability
mixes, volumes and maturities to stabilize the net interest margin is referred
to as asset and liability management. The goal of the asset and liability
management process is to manage the structure of the balance sheet to maximize
net interest income while maintaining acceptable levels of risk to changes in
market rates of interest. This creates a balance between credit risk,
profitability and liquidity. The Asset Liability Committee generally meets
biweekly to monitor and manage the structure of the balance sheet, control
interest rate exposure and evaluate pricing strategies for the Company and its
domestic banking subsidiaries.
Liquidity is managed by the Company through controls over credit and market
risk and through its asset and liability management process which ensures the
maintenance of sufficient funds to meet expected and potential demand from both
depositors and borrowers. Liquidity can be provided by the sale or maturity of
assets or by the acquisition of funds in the form of deposits or other
borrowings, such as repurchase agreements. During 1992 and the first nine
months of 1993, the Company continued to maintain a relatively high level of
liquidity. At year-end 1992 and September 30, 1993, liquid assets totalled
$2.48 billion, or 48.7%, of total assets and $2.18 billion, or 46.6%, of total
assets, respectively. Liquid assets consist of cash and due from banks, U.S.
Treasury securities and Government obligations, trading account securities,
Federal funds sold, resale agreements and time deposits with other banks. In
light of the Company's strategic objective of increasing its loan to deposit
ratio from 53.5% at September 30, 1993 to approximately 77%, the Company
expects that its liquid assets, as a percentage of its total assets, will
continue to decline for the foreseeable future. See "Recent Developments--
Financial Difficulties and Recent Strategic Initiatives--Further Revenue
Enhancements; Increased Loan to Deposit Ratio."
The Company's core deposits provide a relatively stable source of funds which
enhances the overall liquidity position of the Company. Total average core
deposits, which consist of total deposits in domestic offices, excluding
negotiable certificates of deposit, averaged $3.73 billion during the first
nine months of 1993 compared with $3.89 billion during 1992 and $4.10 billion
in 1991.
On a consolidated basis, the Company seeks to maintain sufficient liquidity
to meet customer credit requirements and depositor withdrawals. The Company's
cash flows are impacted by its ongoing operations and its investing and
financing activities. During the third quarter of 1993, cash and cash
equivalents decreased $25 million as $460 million of net cash provided by
investing activities more than offset $252 million used in financing activities
and partially offset the $234 million of net cash used in operating activities.
For a discussion of the Company's cash needs and its ability to meet them,
see "Risk Factors and Special Considerations--Holding Company Liquidity."
INTEREST RATE RISK MANAGEMENT
The Company's asset and liability management process closely monitors and
manages, among other things, the balance sheet's interest rate sensitivity,
investments, and funding and liquidity needs. All of these factors, as well as
projected growth, current and potential pricing actions, competitive
influences, national monetary and fiscal policy, and the national and regional
economic environment, are considered in the asset and liability management
decision process.
At September 30, 1993, the Company had interest-bearing liabilities subject
to repricing in less than one year in excess of its earning assets subject to
repricing within the same period. This liability-sensitive position was $111
million or 2.4% of total assets at September 30, 1993. At December 31, 1992,
the Company had earning assets subject to repricing in less than one year in
excess of its interest-bearing liabilities. This asset- sensitive position was
$195 million or 3.8% of total assets at December 31, 1992. The change in the
Company's position from asset-sensitive to liability-sensitive between December
31, 1992 and September 30, 1993 is primarily attributable to an increase in the
Company's outstanding interest rate swaps and futures contracts combined with
an increase in the percentage of residential mortgage loans to total loans
during the period, which percentage increased from 24.4% at December 31, 1992
to 28.6% at September 30, 1993. The increase in the Company's interest rate
swaps and futures contracts position was effected to hedge the Company's
current investments in money market related assets. Thus, as of September 30,
1993, upward movements in interest rates would tend to moderately decrease the
Company's net interest income while downward movements would tend to moderately
increase net interest income.
27
<PAGE>
PERIOD-END RATE SENSITIVITY
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
-----------------------------------------------------------------------------
30 DAYS 31-90 91-180 181-364 1-5 GREATER THAN TOTAL
OR LESS DAYS DAYS DAYS YEARS 5 YEARS AMOUNT
---------- --------- --------- --------- -------- ------------ ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Time Deposits with Other
Banks.................... $ 151,423 $ 73,936 $ 65,447 $ 2,116 $ -- $ -- $ 292,922
Federal Funds Sold and
Resale Agreements........ 407,100 -- 5,000 -- -- -- 412,100
Securities Held for Sale.. 181,148 162,232 148,258 141,083 107,778 13,400 753,899
Investment Securities(1):
Taxable.................. 3,805 19,948 30,203 47,947 19,172 415,293 536,368
Tax-Exempt............... -- -- -- -- -- 1,999 1,999
Loans(2).................... 909,045 70,441 106,317 135,273 451,944 432,552 2,105,572
---------- --------- --------- --------- -------- -------- ----------
Total Earning Assets...... 1,652,521 326,557 355,225 326,419 578,894 863,244 4,102,860
Cash and Due from Banks... 217,814
Less: Reserve for Loan
Losses................... 80,869
Bank Premises and
Equipment, Net........... 164,220
Other Assets.............. 268,897
---------- --------- --------- --------- -------- -------- ----------
Total Assets.............. $1,652,521 $ 326,557 $ 355,225 $ 326,419 $578,894 $863,244 $4,672,922
---------- --------- --------- --------- -------- -------- ----------
Deposits:
Savings and NOW
Accounts(3)............. $ 8,211 $ 16,783 $ 24,452 $ 50,799 $211,228 $590,827 $ 902,300
Money Market Deposits.... 1,203,867 -- -- -- -- -- 1,203,867
Other Time Deposits....... 300,728 200,033 191,432 148,246 103,332 -- 943,771
Federal Funds Purchased
and Repurchase
Agreements............... 160,460 -- -- -- -- -- 160,460
U.S. Treasury Demand Notes
and Other Borrowings..... 150,728 -- -- -- -- -- 150,728
Long-Term Debt............ -- 146,800 -- -- -- 66,525 213,325
---------- --------- --------- --------- -------- -------- ----------
Total Interest-Bearing
Liabilities.............. 1,823,994 363,616 215,884 199,045 314,560 657,352 3,574,451
Demand Deposits........... 884,351
Other Liabilities......... 56,447
Stockholders' Equity...... 157,673
---------- --------- --------- --------- -------- -------- ----------
Total Liabilities and
Stockholders' Equity..... $1,823,994 $ 363,616 $ 215,884 $ 199,045 $314,560 $657,352 $4,672,922
---------- --------- --------- --------- -------- -------- ----------
Repricing Differential.... $ (171,473) $ (37,059) $ 139,341 $ 127,374 $264,334 $205,892 $ --
Effect of Interest Rate
Swaps and Futures........ (202,449) 11,869 33,342 (12,366) 169,604 -- --
---------- --------- --------- --------- -------- -------- ----------
Adjusted Repricing
Differential............. $ (373,922) $ (25,190) $ 172,683 $ 115,008 $433,938 $205,892 $ --
========== ========= ========= ========= ======== ======== ==========
Cumulative Adjusted
Repricing................ $ (373,922) $(399,112) $(226,429) $(111,421) $322,517 $528,409 --
</TABLE>
- --------
(1) Differences between the distribution of investment securities based upon
rate sensitivity and distributions based upon maturity exist as a result
of $206 million of floating rate securities.
(2) Differences between the distribution of loans based upon rate sensitivity
and distributions based upon maturity exist as a result of certain
floating rate loans.
(3) Savings and NOW accounts have been distributed for rate sensitivity
purposes based upon the Company's historical experience and independent
studies regarding retention of such deposits. Although such accounts are
subject to immediate withdrawal, the Company's experience indicates that
they generally provide a stable source of funds.
28
<PAGE>
NONINTEREST INCOME
Nine Months 1993 vs Nine Months 1992
Noninterest income for the first nine months of 1993 was $91.4 million, down
$11.5 million or 11.2% compared to the first nine months of 1992. Excluding
securities gains of $23.9 million and $34.8 million for the first nine months
of 1993 and 1992, respectively, noninterest income was down $637 thousand or
0.9%. Trust income of $21.6 million was up $918 thousand or 4.4% as a decrease
in institutional custody fees due to a loss of corporate custodial business was
largely offset by increased fees for trust and investment services. The loss of
these corporate custodial accounts should not have a material impact on future
trust income as they provided marginal profitability. Total assets under
management by the Trust Group at September 30, 1993 were approximately $4.7
billion, down from $4.8 billion at September 30, 1992. The market value of
trust and custody assets of the Company's Trust Group decreased $12.9 billion
or 58.7% to $9.1 billion from $22.0 billion a year earlier. Service charges of
$37.2 million were up $1.5 million or 4.3% primarily due to an increase in
advisory fee income of $1.0 million. Other noninterest income of $8.6 million
was down $3.1 million, due primarily to a decrease of $1.7 million in foreign
exchange income and $747 thousand in letters of credit fees.
Noninterest income for the third quarter of 1993 was $21.9 million compared
to $45.2 million for the same period last year. Excluding securities losses of
$77 thousand and securities gains of $22.1 million for the third quarters of
1993 and 1992, respectively, noninterest income was down $1.1 million, or 4.8%
from last year. Trust income of $7.7 million was up to $937 thousand or 13.8%
primarily due to growth and increased market value of assets under management.
Service charge income of $11.7 million was down $158 thousand or 1.3%. Other
noninterest income of $2.6 million was down $1.9 million or 42.2% from 1992,
primarily due to a decrease in foreign exchange income of $1.3 million and
letter of credit fees of $346 thousand.
1992 vs 1991
Noninterest income during 1992 increased $23.8 million or 22.3% to $130.4
million. Included in noninterest income during the year were $34.2 million of
securities gains as compared to securities gains of $13.7 million for 1991.
Excluding securities transactions and $5.9 million of nonrecurring interest
income related to a tax receivable, noninterest income for the year was down
$2.7 million or 2.9% from 1991. Trust income was $27.5 million, up $235
thousand as growth in personal trust account income was partially offset by a
reduction in institutional custody account income. Total assets under
management by the Trust Group were $4.4 billion, down from $4.6 billion a year
earlier. The market value of trust and custody assets of the Company's Trust
Group decreased $19.5 billion or 50.6% to $19.0 billion from $38.5 billion a
year earlier due to the loss of corporate custodial business. The loss of these
accounts should not have a material impact on future trust income as they
provided marginal profitability.
Service charge income was $38.4 million for 1992, down $2.4 million below the
1991 level due to a decline in the volume of services provided. International
noncredit commissions and fees were $9.5 million, up $1.8 million or 23.3% over
1991. Foreign exchange income was $5.0 million, down $3.2 million or 39.1% from
1991 due to a reduced trading volume and lower margins. Other noninterest
income, which includes letter of credit fees, safe deposit income and trading
income, amounted to $9.9 million during the year, up $939 thousand or 10.5%
from 1991.
29
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ -----------------
1993 1992 1992 1991
-------- --------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Trust Income.............................. $ 21,634 $ 20,716 $ 27,530 $ 27,295
Service Charges........................... 29,914 28,730 38,436 40,859
International Advisory Fees............... 7,333 6,982 9,458 7,672
Foreign Exchange Income................... 2,262 3,968 4,993 8,194
Interest on Tax Receivable................ -- -- 5,903 --
Other Noninterest Income.................. 6,343 7,727 9,880 8,941
-------- --------- -------- --------
Noninterest Income Excluding Securities
Gains.................................... 67,486 68,123 96,200 92,961
Securities Gains, Net..................... 23,925 34,798 34,213 13,692
-------- --------- -------- --------
Total Noninterest Income.................. $ 91,411 $ 102,921 $130,413 $106,653
======== ========= ======== ========
</TABLE>
NONINTEREST EXPENSE
Nine Months 1993 vs Nine Months 1992
Noninterest expense for the first nine months of 1993 was $223.7 million
compared to $182.4 million for the first nine months of 1992.
Noninterest expense for the first nine months of 1993 included restructuring
expense of $34.6 million, of which $20.8 million related to Riggs AP. The Riggs
AP charge consists of severance of $1.6 million, the writeoff of the foreign
currency translation account associated with Riggs-Washington's investment in
Riggs AP of $11.5 million and $7.7 million of other restructuring expenses. The
$20.8 million restructuring charge included $14.2 million of noncash expenses
for the writeoff of the foreign currency translation account ($11.5 million),
the writeoff of fixed assets ($2.2 million) and the writeoff of goodwill ($500
thousand). The remaining charge of $6.6 million is for severance, excess space
and equipment leases which will be charged against the accrual as the expenses
are incurred. The $13.8 million of restructuring expense related to BankStart
'93 consisted of $7.0 million in consulting fees, $4.0 million in severance
related costs, $1.0 million of occupancy-related costs and $1.8 million of
other costs. These costs represented management's best estimate of the total
costs of implementing BankStart '93 (implementation of which is expected to be
substantially completed by May 1994) and were accrued in the first quarter of
1993. This estimate is evaluated by management on an ongoing basis and, as
adjustments become known, will be revised accordingly.
Other real estate owned expense, net of revenues, was $20.2 million, up $3.2
million over the $17.0 million recorded in the first nine months of 1992. For
the first nine months of 1992, writedowns and disposition-related losses and
expenses associated with the Company's asset-disposition program of $35.2
million were charged to program-related reserves rather than as other real
estate owned expense. Had these losses and expenses been charged as other real
estate owned expense, other real estate owned expense for the first nine months
of 1993 would have decreased $32.0 million compared to the same period in 1992.
Excluding restructuring expenses and other real estate owned expense,
noninterest expense for the first nine months of 1993 was up $3.5 million, or
2.1%, over the $165.4 million reported during the same period in 1992. Salaries
and related benefits were $67.4 million, up $692 thousand or 1.0% from the
first nine months of 1992 due to an increase in medical and life insurance
premiums, pension expense and relocation expenses. Net occupancy expense of
$19.9 million was down $1.7 million or 7.9% due to decreases in rent expense of
$997 thousand, real estate taxes of $669 thousand and repairs of $509 thousand.
These reductions in occupancy expense were partially offset by a $1.1 million
decrease in rental income. Equipment expenses of $8.7 million decreased $944
thousand or 9.8% due to decreases in equipment depreciation of $451 thousand
and a decrease in equipment rentals of $310 thousand.
FDIC insurance of $7.8 million was up $1.2 million as an increase in the
assessment rate more than offset the decrease in the deposit base. Since
January 1, 1993, FDIC insurance premiums have been based on
30
<PAGE>
a risk-based deposit insurance assessment system adopted by the FDIC. See
"Supervision and Regulation." Each institution has been assigned a capital
group and a supervisory subgroup which in turn determines each institution's
assessment rate. Data processing expense of $12.5 million was down $742
thousand from a year earlier. Other noninterest expense, which totalled $52.6
million, was up $5.0 million or 10.5%. Accounting for the majority of the
increase was $3.6 million of writeoffs related to mortgage insurance claims on
other real estate owned in the United Kingdom. Also contributing to this
unfavorable variance were increases in consultant fees of $844 thousand and an
increase in stationery and supplies of $2.1 million.
Noninterest expense for the third quarter of 1993 was $49.3 million compared
to $68.2 million for the third quarter of 1992, a decrease of $18.9 million or
27.7%. Salaries and related benefits of $21.0 million were down $1.2 million or
5.3% due to a decrease in full-time salaries of $2.3 million, which was
partially offset by an increase in pension and insurance expenses and contract
labor. Net occupancy expense of $6.4 million was down $871 thousand or 12.0%
due to decreases in rent expense of $276 thousand, repairs of $231 thousand,
real estate taxes of $228 thousand and depreciation of premises of $103
thousand. The favorable impact of these reductions in occupancy expenses was
partially offset by a decrease in rental income of $172 thousand. Equipment
expenses of $2.6 million decreased $536 thousand or 17.0% primarily due to
decreases in equipment rentals and depreciation. Revenues from other real
estate owned exceeded other real estate owned expense by $731 thousand for the
third quarter of 1993. This compares to other real estate owned expense, net of
revenues, of $13.6 million for the third quarter of 1992. During the third
quarter of 1993, the Corporation recorded gains of $2.2 million on the sale of
other real estate owned and $983 thousand in rent receipts on other real estate
owned. These revenues were partially offset by $2.5 million in writedowns and
other expenses related to other real estate owned. Data processing expense of
$3.9 million was down $187 thousand from a year earlier. FDIC insurance expense
of $2.5 million was up $354 thousand or 16.4% over the third quarter of 1992.
Other noninterest expense, which totaled $13.5 million, was down $2.2 million
or 13.9%.
1992 vs 1991
Noninterest expense for 1992 was $240.7 million, which represented a decline
of $49.6 million or 17.1% below 1991 primarily due to the nonrecurring $49.8
million reserve created in the third quarter of 1991 in connection with the
Company's program to accelerate the disposition of domestic problem commercial
real estate assets. Excluding the $49.8 million provision to create the special
reserve for problem asset dispositions, noninterest expense for 1992 was up
$180 thousand over 1991. Salaries and wages were $74.1 million, down $4.3
million or 5.5% less than 1991 due to staff reductions. The Company's full-time
equivalent employees totalled 2,147 at December 31, 1992, down from 2,187 on
the same date the previous year. Pension and other employee benefits were up
$752 thousand or 5.2% over the previous year due to increases in miscellaneous
benefits, payroll taxes, relocation expenses and placement fees.
Other real estate owned expense of $18.0 million was up $3.6 million over the
$14.4 million reported in 1991. From the fourth quarter of 1991 through the
second quarter of 1992, writedowns and disposition expenses associated with
real estate assets held for accelerated disposition were charged to the reserve
for losses on accelerated disposition of real estate assets rather than to the
other real estate expense category. During the first six months of 1992,
writedowns and disposition related losses and expenses of $35.2 million were
charged to the program-related reserves.
Occupancy expense of $28.4 million was down $1.8 million or 6.0% less than
1991 primarily due to a decrease in property rentals, repairs and services.
Furniture and equipment expense of $15.4 million decreased $1.6 million or 9.2%
as a result of the sale of equipment and the transfer of equipment and leases
under an agreement to outsource computer operations to IBM. Advertising and
public relations expenses were $6.1 million, up $207 thousand or 3.5%. Legal
fees of $5.1 million were down $628 thousand or 10.9%. FDIC insurance expense
was $8.8 million, down $267 thousand or 2.9% as a decrease in deposit base was
substantially offset by an increase in the premium. Data processing expense of
$17.7 million was up $297 thousand primarily due to the computer operations
outsourcing arrangement with IBM. Other noninterest
31
<PAGE>
expense totalled $51.9 million, up $3.9 million or 8.0% over 1991 primarily due
to an increase in interest on delayed funds, interest costs of hedges,
consultant fees and nonrecurring losses on disposal of equipment.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------
1993 1992 1992 1991
-------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Restructuring Expense...................... $ 34,554 $ -- $ -- $ --
Other Real Estate Owned Expense, net....... 20,231 16,986 17,981 14,370
Provision for Losses on Accelerated Dispo-
sition of Real Estate Assets.............. -- -- -- 49,800
Salaries and Wages......................... 53,151 55,270 74,145 78,444
Pensions and Other Employee Benefits....... 14,225 11,414 15,141 14,389
Occupancy Expense of Premises, Net......... 19,917 21,623 28,354 30,152
Furniture and Equipment Expense............ 8,687 9,631 15,419 16,972
Other Noninterest Expense:
Advertising and Public Relations......... 4,509 4,640 6,129 5,922
Legal Fees............................... 3,175 3,316 5,121 5,749
FDIC Insurance Expense................... 7,793 6,627 8,789 9,056
Data Processing Services................. 12,546 13,288 17,684 17,387
Other Noninterest Expenses............... 44,867 39,603 51,918 48,060
-------- -------- -------- --------
Total Noninterest Expense.................. $223,655 $182,398 $240,681 $290,301
======== ======== ======== ========
</TABLE>
In addition to charge-offs, writedowns and the nonaccrual of interest income,
the Company is presently incurring significant costs to address its asset
quality problems. Direct costs associated with problem assets include selling
expense accruals, legal fees, real estate taxes, appraisal fees, property
management fees and insurance. These direct costs, combined with the cost of
maintaining staff specifically assigned to the management of problem assets,
were approximately $19.0 million during 1992 and $13.7 million for the first
nine months of 1993.
TOTAL ASSETS
September 30, 1993 vs December 31, 1992
The decrease in total assets of $405 million from December 31, 1992 to
September 30, 1993 is primarily the result of decreases in deposits. The
restructuring of Riggs AP included exiting the deposit-gathering business in
London and internally funding this subsidiary. Domestic deposits have declined
as a result of lower interest rates.
December 31, 1992 vs December 31, 1991
The decrease in total assets of $458 million was due to the Company seeking
to maintain its regulatory capital ratios and improve liquidity by reducing
assets and shifting a greater proportion of its assets from loans into money
market assets. Such assets generally carry a lower risk-weighting for capital
purposes, although they typically generate lower yields than the Company's
lending activities. During 1992, loans decreased $863 million while liquid
assets increased $356 million.
SECURITIES HELD FOR SALE
September 30, 1993 vs September 30, 1992
Securities Held for Sale totalled $754 million at September 30, 1993 compared
to $143 million at September 30, 1992. In the second quarter of 1992, the
Company sold approximately $344 million of mortgage-backed securities, which
were classified as Held for Sale. The Company recognized pretax gains of
32
<PAGE>
$8.5 million on the second quarter sales and the proceeds were invested in U.S.
Treasury securities. In view of management's intention to use securities as
part of its asset/liability strategy and the possibility that securities could
be sold in response to changes in interest rates or for liquidity purposes,
$487 million of securities, including those purchased with the proceeds from
the sale of mortgage-backed securities, were classified as Held for Sale at
June 30, 1992. During the third quarter of 1992, these securities were sold and
pretax gains of $22.1 million were realized. The proceeds of these sales were
invested in money market assets. In the first quarter of 1993, in view of
management's intention to continue to use securities as part of its
asset/liability strategy and the possibility that securities could be sold in
response to changes in interest rates or for liquidity purposes, $983 million
of securities were classified as Held for Sale and $697 million were
subsequently sold in the second quarter of 1993 for a pretax gain of $25.5
million. Proceeds were used to purchase shorter duration and variable rate
securities classified as held for sale and money market assets. There were no
sales of securities in the third quarter of 1993.
December 31, 1992 vs December 31, 1991
As of December 31, 1992, there were $160 million of U.S. Treasury securities
and Other Securities classified as Held for Sale. The weighted average yield to
maturity of these securities was 3.64% at year-end 1992. The average maturity
on these securities was six months. The "Other Securities" category consisted
of $16.0 million of United Kingdom Government Obligations and $366 thousand of
Nigerian Bonds received in exchange for the Company's Nigerian loans. The
market value of Securities Held for Sale at December 31, 1992 was $161 million,
$1.1 million more than the book value at that date. Unrealized gains were $1.1
million. There were no unrealized losses in the portfolio.
During 1992, proceeds from the sale of Securities Held for Sale totalled
$1.10 billion, as compared to 1991 when no Securities Held for Sale were sold.
Gross gains and losses from the sale of Securities Held for Sale were $39.5
million and $4.7 million, respectively, in 1992.
Securities Held for Sale at December 31, 1991 amounted to $101 million, which
consisted entirely of U.S. Treasury securities. During the first quarter of
1992, these securities were sold at a pretax gain of $4.2 million and the
Company reinvested the proceeds in mortgage-backed securities. In the second
quarter of 1992, the Company sold approximately $344 million of mortgage-backed
securities and $126 million of U.S. Treasury securities, all of which were
classified as Held for Sale. The Company recognized pretax gains of $8.5
million on the second quarter sales and the proceeds were invested in U.S.
Treasury securities. At June 30, 1992, $487 million of securities were
classified as Held for Sale. During the third quarter of 1992, these securities
were sold and pretax gross gains of $26.9 million were realized. The proceeds
of these sales were invested in mortgage-backed securities and money market
assets. Also during the third quarter of 1992, an additional $143 million of
U.S. Treasury securities were classified as Held for Sale. During the fourth
quarter of 1992, $16.0 million of United Kingdom Government securities were
classified as Held for Sale.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993 DECEMBER 31, 1992
---------------------------- ----------------------------
GROSS GROSS
BOOK UNREALIZED MARKET BOOK UNREALIZED MARKET
VALUE GAINS VALUE VALUE GAINS VALUE
-------- ---------- -------- -------- ---------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securi-
ties:
Due within 1 year...... $438,801 $ 189 $438,990 $143,263 $ -- $143,263
Due after 1 but within
5 years............... 99,318 1,057 100,375 -- -- --
Other Securities:
Due after 1 but within
5 years............... 32,624 66 32,690 15,963 1,128 17,091
Due after 10 years..... 183,156 252 183,408 366 -- 366
-------- ------ -------- -------- ------ --------
Total Securities Held
for Sale............... $753,899 $1,564 $755,463 $159,592 $1,128 $160,720
======== ====== ======== ======== ====== ========
</TABLE>
33
<PAGE>
INVESTMENT SECURITIES
September 30, 1993 vs September 30, 1992
Investment securities at September 30, 1993 totalled $538 million, down $114
million from September 30, 1992. The market value of investment securities at
September 30, 1993 was $544.9 million, $6.5 million more than the book value at
that date. Investment securities maturing within one year, one to five years
and over five years were $88.2 million, $29.1 million and $421.1 million,
respectively.
U.S. Treasury securities at September 30, 1993 were $94.6 million, down from
$588.9 million on September 30, 1992. Mortgage-backed securities, which are
collateralized by residential mortgage loans and guaranteed by the Federal
National Mortgage Association ("FNMA") or Federal Home Loan Mortgage
Corporation ("FHLMC"), were $406.5 million at September 30, 1993. There were no
mortgage-backed securities at September 30, 1992. Other securities, which
primarily consist of floating rate notes, preference shares of United Kingdom
companies and Federal Reserve stock, were $35.3 million at September 30, 1993,
down $26.7 million from September 30, 1992.
December 31, 1992 vs December 31, 1991
Investment securities at December 31, 1992 totalled $795 million, up $312
million or 64.4% from December 31, 1991. The increase in investment securities
was a result of the reinvestment of a portion of the proceeds from loan
maturities and payments and problem asset sales. The market value of investment
securities at December 31, 1992 was $804 million, $8.9 million more than the
book value at that date, as $13.7 million in unrealized gains more than offset
$4.8 million in unrealized losses.
U.S. Treasury securities at December 31, 1992 were $580 million, up from $357
million on the same date a year earlier. The weighted average yield to maturity
on these securities was 5.93% at year-end 1992. The average maturity on U.S.
Treasury securities was two years and three months on December 31, 1992,
compared to two years and six months on December 31, 1991. Obligations of
states and political subdivisions at year-end 1992 were $2 million, level with
year-end 1991. Mortgage-backed securities were $174 million at December 31,
1992, compared to $51 million at year-end 1991. The weighted average yield to
maturity on these securities was 6.12% at year-end 1992. The average
contractual maturity of these securities was six years, nine months at December
31, 1992, as compared to twenty-one years, eight months at December 31, 1991.
Other securities were $40 million at December 31, 1992, down $34 million from
year-end 1991. The decline was due to the sale of $13 million of preference
shares and floating rate notes by the Company's United Kingdom subsidiary as
well as a transfer of $16 million of United Kingdom Government securities to
the Held for Sale category. The weighted average yield to maturity on these
securities was 5.76% on December 31, 1992, as compared to 7.66% at December 31,
1991.
BOOK VALUE OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- --------------------------
1993 1992 1992 1991 1990
-------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
U.S. Treasury Securities.......... $ 94,556 $588,875 $579,576 $356,706 $653,071
Obligations of States and Politi-
cal Subdivisions................. 1,999 1,999 1,999 1,999 17,798
Mortgage-Backed Securities........ 406,509 -- 173,782 51,015 167,768
Other Securities.................. 35,303 61,984 40,036 73,984 122,250
-------- -------- -------- -------- --------
Total Investment Securities....... $538,367 $652,858 $795,393 $483,704 $960,887
======== ======== ======== ======== ========
</TABLE>
LOANS
September 30, 1993 vs September 30, 1992
As of September 30, 1993, loans, net of discount and unearned fees, were
$2.11 billion, down $249 million or 10.6% since September 30, 1992 due to loan
curtailments, particularly with respect to first mortgage loans,
34
<PAGE>
the transfer of loans to the other real estate owned category and weak loan
demand resulting from economic conditions domestically and in the United
Kingdom.
Domestic commercial and financial loans were $340.5 million, down $127.2
million or 27.2% at September 30, 1993 as compared to $467.7 million at
September 30, 1992, principally due to loan curtailments.
Domestic real estate-commercial/construction loans were $394.3 million, down
$66.4 million or 14.4% as a result of transfers to other real estate owned,
charge-offs and curtailments. Domestic real estate-commercial construction
loans were 18.7% of total loans and 8.4% of total assets at September 30, 1993.
Permanent domestic mortgage loans, which were primarily to finance owner-
occupied commercial buildings, represented one-third of real estate-
commercial/construction loans. The remainder of the domestic real estate-
commercial construction portfolio was for the development of commercial
properties, including office buildings, warehouses, shopping centers and
hotels. Approximately 99.6% of the Company's domestic real estate-
commercial/construction loans were secured by properties located in the
Baltimore-Washington, D.C.-Richmond corridor, with the overwhelming majority
concentrated in the Washington, D.C. metropolitan area.
Residential mortgage loans totaled $747.9 million at September 30, 1993, up
$182.3 million or 32.2% over September 30, 1992. Home equity loans, which are
floating rate loans secured by first or second trusts on single-family
residential properties, decreased $36.9 million or 12.7% to $253.7 million at
September 30, 1993. Consumer loans were $88.4 million, down $30.8 million or
25.8% from September 30, 1992.
The Company has recently purchased, or agreed to purchase, in the open market
approximately $520 million of residential mortgage loans. Substantially all of
these loans were recently originated, have original maturities of 15 or 30
years, bear interest at fixed rates and are secured by properties located in
various regions throughout the United States. See "Recent Developments--
Financial Difficulties and Recent Strategic Initiatives--Further Revenue
Enhancements: Increased Loan to Deposit Ratio."
Foreign loans were $281.8 million, down $175.4 million or 38.4% from the
September 30, 1992. Sterling denominated loans made in the United Kingdom by
the London Operations were $228.3 million or 81.0% of the Company's foreign
loans at September 30, 1993.
December 31, 1992 vs December 31, 1991
Total loans at December 31, 1992 were $2.14 billion, $855 million or 28.6%
below the $2.99 billion of loans reported on the same date in the previous year
as a result of loan payments, limited opportunities for quality loan growth,
and the transfer of loans to other real estate owned.
Commercial and financial loans were down $163 million or 30.6% principally
due to loan curtailments.
Domestic real estate-commercial/construction loans were $500 million, down
$106 million or 17.5% as a result of transfers to other real estate owned,
charge-offs and curtailments. Real estate-commercial/
construction is the only industry concentration in excess of 10% of year-end
loans. Domestic real estate-commercial construction loans were 23.4% of total
loans and 9.8% of total assets at December 31, 1992. As of year-end 1992,
$105.7 million or 21.1% of these loans were classified as nonaccrual. In view
of current market conditions, the Company has significantly curtailed new real
estate-commercial/construction lending during the past three years.
Approximately 21.7% of the Company's domestic real estate-
commercial/construction loan portfolio at December 31, 1992 was for the
development of single-family residential properties. Permanent domestic
mortgage loans represented 21.2% of real estate-commercial/construction loans.
The remainder of the domestic real estate-commercial construction portfolio at
that date was for the development of commercial
35
<PAGE>
properties, including office buildings, warehouses, shopping centers and
hotels. Approximately 95.7% of the Company's domestic real estate-
commercial/construction loans at December 31, 1992 were secured by properties
located in the Baltimore-Washington, D.C.-Richmond corridor, with the
overwhelming majority concentrated in the Washington, D.C. metropolitan area.
Residential mortgage loans totalled $529 million at December 31, 1992, a
decrease of $196 million or 27.0% from December 31, 1991. The decline was due
to a high volume of prepayments which were caused by refinancings due to
declining interest rates. Residential mortgage loans, which represent 24.8% of
the Company's loan portfolio, are recognized as being higher quality than other
categories of loans as they are secured by first trusts on the primary
residence of the borrowers and underwritten based upon both appraised home
values and borrower incomes. The Company generally requires full documentation
and adherence to customary underwriting criteria including a maximum 80% loan
to value ratio. Essentially all of the Company's residential lending activity
is in the Washington, D.C. metropolitan area. The historical charge-off figures
attest to the quality of these loans as total charge-offs during the last five
years totalled only $217,000. At September 30, 1993, approximately 52.3% of the
total residential mortgage loans were adjustable rate instruments. While there
are limitations on the amount that the interest rate can increase or decrease
at each interval and over the life of the loan, the adjustable feature of these
loans provides the Company a degree of protection against the impact of
interest rate fluctuations on funding costs.
Home equity loans, which are floating rate loans secured by first or second
trusts on single-family residential properties, decreased $49 million or 15.4%
to $272 million at December 31, 1992. This decrease was primarily attributable
to prepayments associated with refinancings. Home equity loans are originated
with essentially the same standards employed in the underwriting of the
Company's residential mortgage loans.
Consumer loans were $107 million at December 31, 1992, down $51 million or
32.4% from year end 1991. The Company's consumer credit portfolio consists
principally of installment loans for personal expenditures and student loans.
Foreign loans were $364 million at December 31, 1992, down $297 million or
45.0% from December 31, 1991. Sterling denominated loans made in the United
Kingdom by Riggs AP were $293 million or 80.4% of the Company's foreign loans
at December 31, 1992. Approximately 39% of the decline in the foreign loan
portfolio was due to repayments, 26% was due to exchange rate fluctuation, 24%
related to transfers to other real estate owned and 11% related to charge-offs.
Riggs AP's lending activities have been reduced due to weak economic conditions
in the United Kingdom. Riggs AP's loan portfolio at December 31, 1992 consisted
of $187 million of commercial property loans which are secured by leased
properties and $105 million of corporate loans. At year-end 1992, Riggs AP's
commercial property loans were down $139 million or 42.6% and its corporate
loans were down $122 million or 53.6% from year-end 1991.
Riggs AP's commercial property loans are diversified by project type and
geographic location and have maturities ranging from 3 to 5 years. Vacancy
rates on the properties securing these loans have increased due to weak
economic conditions in the United Kingdom. At June 30, 1992, Riggs AP's $88.9
million of nonperforming assets were transferred to Riggs-Washington and the
Company. These assets were transferred at book value, net of related reserves,
and are serviced by Riggs AP. During the last six months of 1992, the
transferred assets were reduced $45.2 million or 51% as a result of sales,
writedowns and exchange rate fluctuations. As of year-end 1992 an additional
$15.2 million of Riggs AP's loans were placed on nonperforming status including
approximately $4 million or 2.2% of its remaining commercial property loans, as
the borrowers were not able to fully support debt service.
36
<PAGE>
PERIOD-END LOANS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------------- ------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial and Finan-
cial.................. $ 340,477 $ 467,675 $ 369,447 $ 532,068 $ 805,319 $ 962,452 $1,223,419
Real Estate-Commercial/
Construction.......... 394,267 460,639 500,073 606,094 760,974 820,515 835,803
Residential Mortgage... 747,863 565,593 529,163 724,842 840,403 845,412 455,681
Home Equity............ 253,667 290,560 272,225 321,690 341,100 276,220 235,370
Consumer............... 88,428 119,199 107,382 158,872 249,124 278,463 270,557
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Domestic.......... 1,824,702 1,903,666 1,778,290 2,343,566 2,996,920 3,183,062 3,020,830
Foreign:
Governments and
Official Institutions. 26,883 26,083 29,319 27,377 30,477 46,545 53,960
Banks and Other
Financial
Institutions.......... 17,502 30,425 24,734 28,481 65,722 80,438 107,308
Commercial and
Industrial and
Commercial Property... 222,501 385,665 283,775 581,499 689,137 500,265 386,236
Other.................. 14,896 15,051 25,948 23,886 33,228 29,304 21,674
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Foreign........... 281,782 457,224 363,776 661,243 818,564 656,552 569,178
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Loans............. 2,106,484 2,360,890 2,142,066 3,004,809 3,815,484 3,839,614 3,590,008
Less: Unearned Discount
and Net Deferred Fees.. 912 6,281 4,360 12,116 24,228 30,854 27,177
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Loans, Net of Un-
earned Discount and Net
Deferred Fees.......... 2,105,572 2,354,609 2,137,706 2,992,693 3,791,256 3,808,760 3,562,831
Less: Reserve for Loan
Losses................. 80,869 74,520 83,307 103,674 108,887 39,863 49,038
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Loans, Net........ $2,024,703 $2,280,089 $2,054,399 $2,889,019 $3,682,369 $3,768,897 $3,513,793
========== ========== ========== ========== ========== ========== ==========
</TABLE>
NONPERFORMING ASSETS AND PAST DUE LOANS
September 30, 1993 vs September 30, 1992
Nonperforming assets, which include nonaccrual loans, renegotiated loans and
other real estate owned, net, totalled $271.0 million at September 30, 1993, a
decrease of $28.7 million from the $299.7 million reported at September 30,
1992, and a decrease of $34.8 million from the $305.8 million reported at
December 31, 1992.
In light of current economic conditions domestically and in the United
Kingdom and the possibility of further deterioration in commercial real estate
values in the Baltimore-Washington, D.C.-Richmond corridor, nonperforming
assets may continue to rise. The extent to which additional loans will move to
nonperforming status will depend, among other factors, on whether economic
conditions continue to deteriorate domestically and in the United Kingdom. The
level of nonperforming assets also will depend on the extent to which non-
performing assets return to performing status.
At September 30, 1993, nonaccrual loans, including both domestic and foreign
loans, were $148.8 million or 7.1% of outstanding loans compared to $150.7
million or 6.4% of outstanding loans at September 30, 1992 and $162.1 million
or 7.6% of outstanding loans at December 31, 1992. This decrease was primarily
due to a decrease in domestic nonaccrual loans from $113.1 million at September
30, 1992 to $85.3 million at September 30, 1993. Of the $63.6 million of
foreign nonaccrual loans at September 30, 1993, $33.5 million related to
nonaccrual real estate-commercial mortgage loans at the United Kingdom offices.
The decrease of $13.3 million in nonaccrual loans between December 31, 1992
and September 30, 1993 is attributable to sales and repayments of $27.1 million
combined with transfers to other real estate owned of
37
<PAGE>
nonaccrual loans totalling $55.2 million, which more than offset net additions
to nonaccrual loans of $69.0 million during the period. Nonaccrual foreign
loans increased $26.0 million during the nine month period ended September 30,
1993. This increase is attributable to net increases in nonperforming loans and
deteriorating credits in the United Kingdom portfolio, which was adversely
affected by several factors such as: unfavorable reports by court-appointed
receivers on two commercial properties, borrowers experiencing reduced cash
flows from the ongoing soft commercial property market and external and
internal evaluations of United Kingdom assets reflecting more conservative
assumptions due to ongoing concerns about the United Kingdom economy.
Renegotiated loans totalled $9.4 million at September 30, 1993 compared to
$14.5 million at September 30, 1992 and $11.8 million at December 31, 1992. The
domestic renegotiated loans consisted entirely of commercial real estate loans
which were renegotiated to provide a reduction or deferral of interest or
principal as a result of a deterioration in the financial position of the
borrower.
Other real estate owned, net ("OREO"), which is property acquired through
foreclosure, or deemed to have been acquired through foreclosure ("in substance
foreclosure" or "ISF") or by acceptance of a deed in lieu of foreclosure, was
$112.7 million at September 30, 1993, down from $134.5 million at September 30,
1992 and $131.9 million at December 31, 1992.
Past due loans, on which the Company is accruing interest as they are well
secured and in the process of collection, were $4.2 million at September 30,
1993, compared to $1.6 million at September 30, 1992 and $1.4 million at
December 31, 1992. At September 30, 1993, the Company had identified
approximately $18.7 million in potential problem loans currently performing and
therefore not included as nonaccrual or past due. Potential problem loans
represent loans which are currently performing but which management believes
may become nonaccrual or past due in the foreseeable future. These loans
consist of approximately $5.3 million of domestic loans, principally commercial
real estate loans, and approximately $13.4 million of commercial property and
corporate loans in the United Kingdom.
December 31, 1992 vs December 31, 1991
Nonperforming assets, which include nonaccrual loans, renegotiated loans,
other real estate owned (net of reserves) and, for the period from September
30, 1991 through the second quarter of 1992, real estate assets subject to
accelerated disposition (net of reserves), totalled $305.8 million (13.5% of
outstanding loans, real estate assets subject to accelerated disposition and
other real estate owned) at December 31, 1992, a decrease of $25.3 million from
the $331.1 million (10.7% of outstanding loans, other real estate owned (net of
reserves) and real estate assets subject to accelerated disposition (net of
reserves)) reported at December 31, 1991. Excluding the $46.8 million reserve
for losses on accelerated dispositions of real estate assets, nonperforming
assets would have been $377.9 million at December 31, 1991.
At December 31, 1992, nonaccrual loans were $162.1 million or 7.6% of
outstanding loans as compared to $231.8 million or 7.8% of outstanding loans at
December 31, 1991. This decrease is primarily due to the accelerated
disposition of real estate assets as well as a decrease in foreign nonaccrual
loans from $78.9 million to $44.9 million. Of the $44.9 million of foreign
nonaccrual loans at December 31, 1992, $23.5 million relates to nonaccrual real
estate-commercial loans at the Company's London Operations, which are secured
by properties located in the United Kingdom. The decrease in foreign nonaccrual
loans is attributable to the transfer of $29.3 million of nonaccrual loans to
other real estate owned. Included in year-end 1992 foreign nonaccrual loans was
a $15 million loan originated at Riggs-Washington.
At December 31, 1992, the Company had renegotiated loans totalling $11.8
million as compared to no loans classified as renegotiated at December 31,
1991. The renegotiated loans consisted entirely of domestic commercial real
estate loans which were renegotiated to provide a reduction or deferral of
interest or principal as a result of a deterioration in the financial position
of the borrower.
Other real estate owned (net of reserves), was $131.9 million at December 31,
1992, up $106.4 million from $25.5 million at December 31, 1991. At December
31, 1991, the Company had other real estate owned
38
<PAGE>
(net of reserves) of $99.3 million including real estate assets subject to
accelerated disposition (net of reserves) of $73.7 million.
Past due loans, on which the Company is accruing interest as they are well
secured and in the process of collection, were $1.4 million at December 31,
1992 compared to $3.5 million at year-end 1991. At December 31, 1992, the
Company had identified approximately $41.6 million in potential problem loans.
NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming Assets:
Nonaccrual Loans: (1)
Domestic............... $ 85,256 $ 113,068 $ 117,182 $ 137,340 $ 137,544 $ 3,313 $ 19,068
Foreign................ 63,571 37,636 44,892 78,855 21,245 1,191 5,048
Subject to Accelerated
Disposition, Net (3).. -- -- -- 15,641 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Nonaccrual Loans.. 148,827 150,704 162,074 231,836 158,789 4,504 24,116
Renegotiated Loans: (2)
Domestic............... 8,533 14,516 11,806 -- -- -- 834
Foreign................ 914 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Renegotiated
Loans.................. 9,447 14,516 11,806 -- -- -- 834
Other Real Estate Owned,
Net:
Domestic............... 99,870 92,965 97,592 21,316 120,154 37,919 737
Foreign................ 12,862 41,485 34,300 4,211 53 44 50
Subject to Accelerated
Disposition, Net (3).. -- -- -- 73,748 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Other Real Estate
Owned, Net............. 112,732 134,450 131,892 99,275 120,207 37,963 787
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Nonperforming As-
sets, Net.............. $ 271,006 $ 299,670 $ 305,772 $ 331,111 $ 278,996 $ 42,467 $ 25,737
========== ========== ========== ========== ========== ========== ==========
Total Loans, Net of Un-
earned Discount and Net
Deferred Fees.......... $2,105,572 $2,354,609 $2,137,706 $2,992,693 $3,791,256 $3,808,760 $3,562,831
Ratio of Nonaccrual
Loans to Total Loans.. 7.07% 6.40% 7.58% 7.75% 4.19% 0.12% 0.68%
Ratio of Nonperforming
Assets to Total Loans
and Other Real
Estate Owned, Net..... 12.22% 12.04% 13.47% 10.71% 7.13% 1.10% 0.72%
Past Due Loans: (4)
Domestic............... $ 4,214 $ 1,567 $ 1,369 $ 2,743 $ 46,756 $ 12,258 $ 6,458
Foreign................ 31 15 55 790 8,733 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Past Due Loans.... $ 4,245 $ 1,582 $ 1,424 $ 3,533 $ 55,489 $ 12,258 $ 6,458
========== ========== ========== ========== ========== ========== ==========
</TABLE>
- --------
(1) Loans 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 or
deferral of interest or principal as a result of a deterioration in the
financial position of the borrower in accordance with Financial Accounting
Standards Board Statement No. 15. Extensions of loans, at market terms,
are not considered renegotiated for purposes of this Schedule.
(3) Balances are net of reserves of $10,134 and $36,644 related to loans and
other real estate owned, respectively, held for accelerated disposition.
(4) Loans contractually past due 90 days or more in principal or interest
which are well secured and in the process of collection and, accordingly,
are not classified as either nonaccrual or renegotiated.
During the 12 month period ended September 30, 1993, the ratio of
nonperforming assets to total loans and other real estate owned, net,
increased from 12.04% to 12.22%. This increase is principally due to the 10.6%
decline in total loans from $2.35 billion to $2.11 billion over the same
period. As presented in the table above, the dollar level of nonperforming
assets decreased 9.6% over the same 12 month period.
39
<PAGE>
PROVISION AND RESERVE FOR LOAN LOSSES
The Company's banking subsidiaries maintain reserves for loan losses which
are available to absorb potential losses in the current loan portfolio. The
reserve for loan losses is increased by loan loss provisions and recoveries on
charged-off loans, and is reduced by loan charge-offs. The Company determines
its reserve requirements based upon an analysis of risk factors affecting the
entire loan portfolio and specific reviews of individual loans. The Company's
loan loss reserve methodology is a formal process that is primarily dependent
on the risk ratings assigned to each of the Company's loans, including
commercial real estate, corporate, and other large balance, non-homogenous
loans. The Company's loan officers risk rate the loans for which they are
responsible. In addition, the Company's loan review department periodically
independently reviews and risk rates these loans and has authority to downgrade
credits if it concludes that a more severe risk rating is appropriate.
The Company's 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 Company's reserve for loan losses is
determined quarterly by evaluating loans individually and pools of similar type
loans, taking into consideration the primary source of repayment, the liquidity
and financial condition of the borrowers and guarantors, and general economic
conditions and other factors that exist as of the determination date. In
addition, the Company prepares a migration analysis of charge-offs over the
prior three years in order to assist in the process of estimating inherent
losses for different categories of risk rated credits. The Company's actual
charge-off experience is then adjusted for judgmental factors such as trends in
delinquencies, nonaccrual loans and charge-offs, volume, maturity and
composition of the portfolio, effects of changes in lending policies, economic
trends and credit concentration considerations. From these analyses and related
information, the Company determines reserve percentages by risk rating for each
loan portfolio type (including, for example, commercial real estate,
residential construction and corporate loans). These estimated reserve
percentages are applied to the portfolio. The resultant amount is then
subjected to an overall reasonableness test by evaluating such factors as
annual charge-off experience and loan loss reserve coverage.
All significant criticized loans are reviewed by the Loan Loss Reserve
Committee on a quarterly basis to insure their classification is accurate.
General allocations are made for all loans and legal contingencies including
the consideration of specific reserve requirements for individual loans, if
appropriate. The allocations are designed to be sufficient to cover any losses
inherent in the portfolio. Identifiable and quantifiable losses are charged-off
against the reserve for loan losses.
On a quarterly basis, the Loan Loss Reserve Committee also evaluates the
adequacy of the reserve for loan losses. The Audit Committee of each of the
Boards of Directors of the Company's subsidiary banks reviews management's
determination of the adequacy of the reserve for loan losses. The loan
portfolio is continuously monitored by management to identify loans requiring
particular attention.
Nine Months 1993 vs Nine Months 1992
Provisions for loan losses totalled $59.1 million during the first nine
months of 1993 compared with $23.5 million for the first nine months of 1992.
Approximately $29.6 million of the $59.1 million of provisions were taken for
loans originated in the United Kingdom, as severe recessionary conditions there
led to deterioration in the corporate and commercial property loan portfolios.
The remaining provisions related primarily to domestic commercial real estate
loans.
Provisions for loan losses totaled $2.0 million for the third quarter of 1993
compared to $5.5 million for the third quarter of 1992. The 1993 provisions for
loan losses were primarily for domestic commercial real estate loans.
Net charge-offs during the first nine months of 1993 were $61.6 million, up
from $51.1 million of net charge-offs during the first nine months of 1992.
Charge-offs for the first nine months of 1993 primarily related to domestic
commercial real estate loans. The remainder of the charge-offs related to
corporate and
40
<PAGE>
commercial property loans in the United Kingdom. As of June 30, 1993, 100% of
the portions of the loans classified as doubtful for regulatory purposes were
charged off. Previously, it had been the Company's policy to provide reserves
against, rather than to charge-off the doubtful portion of credits.
Net charge-offs during the third quarter of 1993 were $4.2 million compared
to net charge-offs of $9.4 million during the third quarter of 1992. In the
third quarter 1993, the Corporation charged off $4.0 million of an
international loan which is in the process of being restructured. There were no
charge-offs in the Corporation's London operations during the third quarter of
1993.
The reserve for loan losses was $80.9 million or 3.84% of outstanding loans
at September 30, 1993 compared to a reserve balance of $74.5 million or 3.16%
of outstanding loans at September 30, 1992. The Company's coverage ratio was
49.8% at September 30, 1993 compared to 44.7% at September 30, 1992. The
coverage ratio is calculated by dividing total reserves by nonaccrual,
renegotiated and past due loans. At September 30, 1993, 47.5% of the Company's
loan portfolio consisted of residential mortgage and home equity loans. These
loans require minimal reserves based upon the Company's favorable loss
experience. Further, the Company has no credit card loans in its portfolio.
Credit card loans, which require relatively high levels of reserves based on
loss experience, will inflate an institution's coverage ratio as such loans are
typically charged-off rather than classified as nonaccrual or past due.
Finally, the coverage ratio does not account for the existence of collateral
which limits the risk of principal loss on nonaccrual and past due loans. At
September 30, 1993, 66.2% of the Company's nonaccrual, renegotiated and past
due loans were partially or fully secured by commercial real estate.
In light of current conditions domestically and in the United Kingdom, and
the possibility of further deterioration in commercial real estate values in
the Washington, D.C. area and the United Kingdom and increases in interest
rates in the United Kingdom, significant additional provisions and writedowns
are possible and nonperforming assets (as well as the cost of carrying
nonperforming assets) could increase. However, given the uncertainties created
by current economic conditions both in the United Kingdom and domestically,
additional provisions and writedowns could not be reasonably estimated at
September 30, 1993 and the extent to which they may be required will depend on
future economic conditions and their impact on specific borrowers' operations
and liquidity.
1992 vs 1991
Provisions for loan losses totalled $49.8 million for 1992 as compared to
$43.5 million for 1991. Domestic provisions in 1992 of $22.9 million were taken
primarily in recognition of further deterioration in commercial and residential
property development loans and deterioration in a foreign loan which was
originated by Riggs-Washington. Provisions for loans originated in the United
Kingdom were $26.9 million as weak economic conditions in the United Kingdom
resulted in further deterioration in several unrelated corporate loans,
including loans to financial institutions and loans to finance operating
commercial properties which have experienced a rise in vacancy rates.
Net charge-offs were $67.0 million or 2.64% of average loans during 1992
compared to $35.6 million or 1.05% of average loans during 1991.
The reserve for loan losses was $83.3 million or 3.90% of outstanding loans
at December 31, 1992 as compared with $103.7 million or 3.46% of outstanding
loans at December 31, 1991.
The Company's ratio of reserves to nonperforming, renegotiated and past due
loans was 47.5% at December 31, 1992 compared to 44.05% at December 31, 1991.
41
<PAGE>
RESERVE FOR LOAN LOSSES AND SUMMARY OF CHARGE-OFFS AND RECOVERIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, Beginning of the
Period................... $ 83,307 $ 103,674 $ 103,674 $ 108,887 $ 39,863 $ 49,038 $ 66,415
Additions:
Provision for Loan Loss-
es...................... 59,141 23,462 49,789 43,525 105,508 5,588 1,176
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Additions.......... 59,141 23,462 49,789 43,525 105,508 5,588 1,176
Deductions:
Loans Charged-Off:
Commercial and Financial. 4,579 2,316 3,156 7,457 11,643 4,040 1,672
Real Estate-
Commercial/Construction. 33,161 18,956 30,604 14,281 20,429 3,878 --
Residential Mortgage..... 33 133 190 25 -- -- 2
Home Equity.............. 146 123 350 450 639 320 --
Consumer................. 1,652 2,064 2,745 3,864 2,430 1,759 1,203
Foreign.................. 24,481 29,410 35,233 13,172 3,185 5,294 19,173
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Charge-Offs........ 64,052 53,002 72,278 39,249 38,326 15,291 22,050
Recoveries on Charged-Off
Loans:
Commercial and Financial. 303 468 616 1,033 220 168 500
Real Estate-
Commercial/Construction 230 315 3,172 -- -- -- --
Residential Mortgage..... 124 14 15 14 14 -- --
Home Equity.............. -- -- -- 26 -- -- --
Consumer................. 791 996 1,231 908 547 417 348
Foreign.................. 1,009 147 279 1,678 84 454 2,771
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Recoveries on
Charged-Off Loans....... 2,457 1,940 5,313 3,659 865 1,039 3,619
Net Charge-Offs........... 61,595 51,062 66,965 35,590 37,461 14,252 18,431
Reserve Transferred to
Real Estate Assets Sub-
ject to Accelerated
Disposition.............. -- -- -- 13,165 -- -- --
Foreign Exchange Transla-
tion
Adjustments.............. 16 (1,554) (3,191) 17 977 (511) (122)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, End of the Peri-
od....................... $ 80,869 $ 74,520 $ 83,307 $ 103,674 $ 108,887 $ 39,863 $ 49,038
========== ========== ========== ========== ========== ========== ==========
Average Loans............. $2,112,403 $2,642,263 $2,540,478 $3,392,994 $4,041,756 $3,715,369 $3,349,464
Ratio of Net Charge-Offs
to Average Loans......... 2.92% 1.93% 2.64% 1.05% .93% .38% .55%
Ratio of Reserve for Loan
Losses to Outstanding
Loans.................... 3.84% 3.16% 3.90% 3.46% 2.87% 1.05% 1.38%
</TABLE>
DEPOSITS AND BORROWED FUNDS
September 30, 1993 vs September 30, 1992
Total deposits at September 30, 1993 were $3.93 billion compared to $4.63
billion at September 30, 1992, down $696 million or 15.0% as a result of
reductions in wholesale funding sources and a decline in demand for
certificates of deposits in a lower interest rate environment. Average deposits
during the first nine months of 1993 were $4.3 billion, down $366 million or
7.8% below the $4.7 billion averaged during the first nine months of 1992. The
majority of the decline in average deposits was due to a decrease in time
deposits in foreign offices of $207 million or 27.3%. Deposits in domestic
offices averaged $3.8 billion, a decrease of $158 million or 4.1% from the
first nine months of 1992. Average core deposits (total deposits in domestic
offices, excluding negotiable certificates of deposits) were $3.7 billion, down
$165 million or 4.2% from the first nine months of 1992. Average savings and
NOW accounts were $924 million, up $71 million or 8.4% over the first nine
months of 1992. The increase in savings and NOW accounts was partially offset
by decreases in
42
<PAGE>
demand deposits and investment certificates of deposit. Average demand deposits
were $835 million, down $11 million from the first nine months of 1992. Money
market deposits averaged $1.2 billion, a slight decrease of $22 million or 1.9%
below the first nine months of 1992. Time deposits in domestic offices averaged
$829 million, a decrease of $194 million or 19.0%.
The following table reflects the balances and maturities for the Company's
time deposits in domestic offices of $100 thousand or more.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------
1993 1992 1992 1991
(dollars in thousands) -------- -------- -------- --------
<S> <C> <C> <C> <C>
Certificates of Deposit:
Due within three months.................... $ 97,444 $262,172 $100,483 $228,626
Three to six months........................ 36,907 48,219 44,569 71,835
Six to twelve months....................... 26,349 25,645 22,502 30,858
Over twelve months......................... 12,157 10,477 10,637 10,492
-------- -------- -------- --------
Total..................................... $172,857 $346,513 $178,191 $341,811
======== ======== ======== ========
</TABLE>
Borrowed funds, which includes Federal funds purchased and repurchase
agreements, U.S. Treasury demand notes and other borrowed funds, averaged $244
million during the first nine months of 1993, up $106 million over the $138
million averaged during the first nine months of 1992. Average Federal funds
purchased and repurchase agreements were up $73 million. U.S. Treasury and
other borrowings were up $33 million compared to the previous year.
Long-term debt totalling $213 million was level with September 30, 1992.
December 31, 1992 vs December 31, 1991
Total deposits at December 31, 1992 were $4.44 billion as compared to $4.91
billion at year-end 1991, down $475 million or 9.7%. At December 31, 1992,
foreign time deposits and time deposits in domestic offices were down $311
million and $306 million, respectively, from December 31, 1991.
Average deposits during 1992 were $4.64 billion, down $653 million or 12.3%
below the $5.30 billion averaged during 1991. The majority of the decline in
average deposits was due to a decrease in time deposits in foreign offices of
$433 million or 37.2% as liquid assets were used to reduce wholesale funding
sources. Deposits in domestic offices averaged $3.91 billion, a decrease of
$219 million or 5.3% from 1991. Average core deposits (total deposits in
domestic offices, excluding negotiable certificates of deposits) were $3.89
billion, down $207 million or 5.0% from 1991. Average savings and NOW accounts
were $866 million, up $97 million or 12.6% over 1991 levels. The increase in
savings and NOW accounts was partially offset by decreases in demand deposits,
money market accounts and investment certificates of deposit. Average demand
deposits were $846 million, down $66 million from the 1991 average. Money
market deposits averaged $1.22 billion, a decrease of $57 million or 4.4% below
the 1991 average. Time deposits in domestic offices averaged $991 million, a
decrease of $191 million or 16.2%. Average negotiable certificates of deposit
in domestic offices, which are included in time deposits in domestic offices,
decreased $12 million between 1992 and 1991.
Borrowed funds averaged $128 million during 1992, down $63 million below the
$191 million averaged during 1991. Average Federal funds purchased and
repurchase agreements were down $12 million. U.S. Treasury and other borrowings
were down $51 million compared to last year. These decreases were the result of
the Company's efforts to reduce assets and liabilities as part of its strategy
to improve its leverage capital ratio.
43
<PAGE>
AVERAGE DEPOSITS AND BORROWED FUNDS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------- ----------------------------------------------------
1993 1992 1992 1991 1990
---------------- ---------------- ---------------- ---------------- ----------------
AVERAGE AVERAGES AVERAGE AVERAGES AVERAGE
BALANCES RATES BALANCES RATES BALANCES RATES BALANCES RATES BALANCES RATES
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Deposits in Domestic
Offices:
Noninterest-Bearing
Demand Deposits....... $ 821,416 $ 835,009 $ 834,300 $ 902,513 $ 832,907
Savings and NOW
Accounts.............. 924,139 2.12% 852,698 3.27% 865,608 3.09% 768,866 4.10% 627,860 4.88%
Money Market Deposits.. 1,183,198 2.49% 1,205,564 3.66% 1,220,784 3.45% 1,277,606 5.10% 1,328,464 6.26%
Other Core Deposits.... 805,235 3.41% 1,005,729 4.38% 972,841 4.21% 1,151,432 6.80% 1,168,254 8.15%
---------- ---- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total Average Core
Deposits............... 3,733,988 3,899,000 3,893,533 4,100,417 3,957,485
Negotiable Certificates
of Deposit............. 23,930 5.66% 17,383 11.99% 18,290 9.94% 30,727 6.41% 59,353 7.25%
---------- ---- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total Average Deposits
in Domestic Offices.... $3,757,918 $3,916,383 $3,911,823 $4,131,144 $4,016,838
Deposits in Foreign
Offices:*
Noninterest-Bearing
Demand Deposits....... 13,289 11,107 11,284 8,907 7,579
Interest-Bearing Bank
Deposits.............. 158,800 9.97% 254,198 14.61% 234,490 13.57% 377,240 13.59% 699,074 13.36%
Negotiable Certificates
of Deposit............ 22,972 6.41% 48,748 10.50% 51,640 9.86% 94,208 11.85% 176,393 12.38%
Interest-Bearing Non-
Bank Deposits......... 356,893 3.11% 445,534 5.20% 434,174 4.99% 684,529 7.51% 817,365 9.85%
---------- ---- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total Average Deposits
in Foreign Offices..... 551,954 759,587 731,588 1,164,884 1,700,411
---------- ---------- ---------- ---------- ----------
Total Average Deposits.. $4,309,872 $4,675,970 $4,643,411 $5,296,028 $5,717,249
========== ========== ========== ========== ==========
Borrowed Funds:
Federal Funds Purchased
and Repurchase
Agreements............ $ 169,962 2.69% $ 97,154 2.94% $ 87,339 2.86% $ 99,120 5.10% $ 337,824 7.79%
U.S. Treasury Demand
Notes and Other
Borrowed Funds........ 74,096 2.80% 40,728 3.27% 40,235 3.18% 91,395 5.39% 174,524 7.01%
---------- ---- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total Average Borrowed
Funds.................. $ 244,058 $ 137,882 $ 127,574 $ 190,515 $ 512,348
========== ========== ========== ========== ==========
</TABLE>
- --------
* The majority of interest-bearing deposits in foreign offices are denominated
in amounts of $100 thousand or more.
CAPITAL RESOURCES
Under the Federal Reserve Board's risk-based capital guidelines, bank holding
companies are required to meet a minimum ratio of qualifying total (combined
Tier 1 and Tier 2) capital to risk-weighted assets of 8.00%, at least half of
which must be comprised of core (Tier 1) capital elements. The Company's total
and core capital ratios were 11.01% and 5.78% at September 30, 1993 as compared
to 14.70% and 8.31% at December 31, 1992 and 15.05% and 8.60% at September 30,
1992.
44
<PAGE>
The Federal Reserve Board has established an additional capital adequacy
guideline referred to as the leverage ratio, which measures the ratio of Tier
1 capital to average quarterly assets. The most highly rated bank holding
companies which are not contemplating or experiencing significant growth are
required to maintain a minimum leverage ratio of 3.00%. However, most bank
holding companies, including the Company, 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 company's asset
quality, earnings performance, interest-rate risk and liquidity. The Federal
Reserve Board has not advised the Company of a specific minimum leverage ratio
requirement applicable to the Company.
As a result of the losses incurred in the fourth quarter of 1992 and the
first nine months of 1993, which were attributable to provisions and
writedowns, including those associated with the Company's restructuring plan
announced in the second quarter of 1993, the Company's leverage ratio
decreased from 4.97% at June 30, 1992 to 4.60% at December 31, 1992 and 3.02%
at September 30, 1993. In a capital plan submitted to the Reserve Bank, the
Company indicated that it would seek to achieve a leverage ratio of
approximately 5.0% by December 31, 1993. After giving effect to the October
Equity Sale (see "Recent Developments--October Equity Sale"), the Company's
leverage ratio as of September 30, 1993 on a pro forma basis was 5.73%. The
Memorandum of Understanding does not require the Company's capital plans to be
approved by the Reserve Bank; however, the Company's plans were submitted to
and reviewed without objection by the Reserve Bank.
The Company's policy is to ensure that its bank subsidiaries are capitalized
in accordance with regulatory guidelines. The three national bank subsidiaries
of the Company are subject to minimum capital ratios prescribed by the OCC
which are the same as those of the Federal Reserve Board. Pursuant to the
Written Agreement, Riggs-Washington has committed to the OCC to maintain a
leverage ratio of 5.00%, a Tier 1 to risk-weighted asset ratio of 6.00% and a
total capital to risk-weighted assets ratio of 10.00%. Riggs-Washington's
ratios were 5.69%, 11.04%, and 12.31%, respectively, at September 30, 1993.
The following table reflects the actual and required minimum ratios for the
Company and its national banking subsidiaries based upon fully phased-in
capital requirements.
CAPITAL RATIOS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
REQUIRED SEPTEMBER 30, -------------- --------------
MINIMUM 1993 1993 1992 1992 1991
-------- --------------- ------ ------ ------ ------
AS ADJUSTED
FOR THE OCTOBER
EQUITY SALE(1)
---------------
<S> <C> <C> <C> <C> <C> <C>
LEVERAGE RATIO:(2)
Riggs National Corpo-
ration............... 3.00% 5.73% 3.02% 4.93% 4.60% 3.57%
Riggs-Washington...... 5.00 5.69 5.69 6.32 6.32 5.79
Riggs-Virginia........ 3.00 8.80 8.80 8.30 8.42 7.83
Riggs-Maryland........ 3.00 6.57 6.57 6.44 6.20 6.70
TIER 1:
Riggs National Corpo-
ration............... 4.00 10.85 5.78 8.60 8.31 5.23
Riggs-Washington...... 6.00 11.04 11.04 10.88 11.29 8.36
Riggs-Virginia........ 4.00 16.43 16.43 16.71 16.80 14.32
Riggs-Maryland........ 4.00 11.13 11.13 11.70 11.73 11.23
COMBINED TIER 1 AND TIER
2:
Riggs National Corpo-
ration............... 8.00 16.98 11.01 15.05 14.70 10.46
Riggs-Washington...... 10.00 12.31 12.31 12.15 12.56 9.64
Riggs-Virginia........ 8.00 17.68 17.68 17.97 18.05 16.42
Riggs-Maryland........ 8.00 12.37 12.37 12.96 12.98 12.48
</TABLE>
- --------
(1) Adjusted to give effect to the October Equity Sale and the investment of
the net proceeds thereof (approximately $132 million) in short-term money
market assets, which have been risk-weighted at 20% for purposes of
capital ratio calculations. No effect is given to the sale of any Debt
Securities or the redemption of any outstanding subordinated debt of the
Company.
(2) Most bank holding companies and national banks, including the Company and
the Company's national bank subsidiaries, are expected to maintain an
additional cushion of at least 100 to 200 basis points above the 3.00%
minimum. Under the terms of the Written Agreement, Riggs-Washington has
committed to the OCC to maintain a leverage ratio of 5.00%.
45
<PAGE>
MANAGEMENT
The table below sets forth certain information with respect to the executive
officers of the Company and certain executive officers of Riggs-Washington:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joe L. Allbritton............... 68 Chairman of the Board and Chief Executive
Officer of the Company and Chairman of the
Board of Riggs-Washington
Paul M. Homan................... 53 Vice Chairman of the Board of the Company
and President and Chief Executive Officer
of Riggs-Washington
Timothy C. Coughlin............. 51 President of the Company
John L. Davis................... 52 Chief Financial Officer of the Company and
Senior Vice President and Chief Financial
Officer of Riggs-Washington
David Lesser.................... 38 General Counsel of the Company and
Executive Vice President and General
Counsel of Riggs-Washington
Alexander C. Baker.............. 47 Secretary of the Company and Senior Vice
President, Trust Officer and Secretary of
Riggs-Washington
Randall R. Reeves............... 46 Senior Executive Vice President and Chief
Credit Officer and Head of Special Assets
Group of Riggs-Washington
Joseph W. Barr.................. 44 Executive Vice President of Riggs-
Washington--Head of Retail Banking
Fred L. Bollerer................ 51 Executive Vice President of Riggs-
Washington--Head of General Banking Group
Paul Cushman, III............... 33 Executive Vice President of Riggs-
Washington--Head of International Banking
Group
George W. Grosz................. 55 Executive Vice President of Riggs-
Washington-- Head of Financial Services
Group
Gloria A. Lembo................. 44 Executive Vice President of Riggs-
Washington--Head of Technology Services
Group
S. Dean Lesiak.................. 41 Executive Vice President of Riggs-
Washington--Head of Risk Management
</TABLE>
EXPERIENCE OF MANAGEMENT
JOE L. ALLBRITTON has been Chairman of the Board and Chief Executive Officer
of the Company since 1981. He has served as Chairman of the Board of Riggs-
Washington since 1983 and was the Chief Executive Officer of Riggs-Washington
from 1982 to June 1993. Mr. Allbritton was the beneficial owner of
approximately 33% of the Common Stock of the Company as of September 20, 1993.
He also serves as Chairman of the Board of, and is the owner of, Perpetual
Corporation, Westfield News Advertiser, Inc. and University Bancshares.
PAUL M. HOMAN was appointed President and Chief Executive Officer of Riggs-
Washington and Vice Chairman of the Company in June 1993. See "Recent
Developments--Recent Strategic Initiatives." Mr. Homan served as president and
chief executive officer of First Florida Banks, Inc. of Tampa from August 1991
through December 1992 before returning to serve as principal of Homan &
Associates, a bank consulting firm which he founded in 1987. Mr. Homan served
as senior adviser to the Comptroller of the Currency in 1990 and 1991, as
executive vice president of Continental Bank Corporation from 1985 to 1987 and
as
46
<PAGE>
chairman and chief executive officer of Nevada National Bank from 1983 to 1985.
Mr. Homan also worked at the OCC from 1966 to 1983, rising to the position of
senior deputy controller for bank supervision, the OCC's top career position.
TIMOTHY C. COUGHLIN has served as President of the Company since 1992. He
served as President and Chief Operating Officer of Riggs-Washington from 1983
to 1992. He has been a Director of the Company since 1988 and a Director of
Riggs-Washington since 1983.
JOHN L. DAVIS joined the Company in June 1993 and is Chief Financial Officer
of the Company and Senior Vice President and Chief Financial Officer of Riggs-
Washington. Mr. Davis served as Senior Vice President and Controller of First
Florida Bank, N.A. from 1990 to 1992 and as Senior Vice President and Chief
Financial Officer of First Union National Bank of Georgia from 1987 to 1990.
DAVID LESSER has served as General Counsel of the Company and Executive Vice
President and General Counsel of Riggs-Washington since 1987.
ALEXANDER C. BAKER has served as Secretary of the Company and as Secretary of
Riggs-Washington since 1992 and as Senior Vice President and Trust Officer of
Riggs-Washington since 1987.
RANDALL R. REEVES has served as Senior Executive Vice President and Chief
Credit Officer of Riggs-Washington since 1991. Mr. Reeves was President and
Chief Executive Officer of University Bancshares, Inc. from 1985 to 1992.
JOSEPH W. BARR joined the Company as Executive Vice President in charge of
Retail Banking in June 1993. He served as Executive Vice President in charge of
Retail Banking at First American Metro Corp. from 1992 to June 1993 and as
Executive Vice President in charge of Community Banking at Perpetual Savings
Bank, F.S.B. from 1989 to 1992.
FRED L. BOLLERER joined Riggs-Washington as Executive Vice President in
charge of the General Banking Group in October 1993. During 1988 and 1989, Mr.
Bollerer was the President and Chief Operating Officer of First American, N.A.
of Washington, D.C. From 1989 to 1993, Mr. Bollerer was the Chairman and Chief
Executive Officer of First American Metro Corp.
PAUL CUSHMAN, III has served as Executive Vice President of Riggs-Washington
in charge of the International Banking Group since 1992. He was Senior Vice
President of Riggs-Washington from 1989 to 1992 and Vice President of Riggs-
Washington from 1987 to 1989.
GEORGE W. GROSZ has served as Executive Vice President of Riggs-Washington in
charge of the Financial Services Group, which includes the Trust and Investment
Department and the Private Banking Division, since 1987. He was a Director of
Riggs-Washington from 1989 to 1993.
GLORIA A. LEMBO has served as Executive Vice President in charge of the
Technology Services Group of Riggs-Washington since August 1993. She has been a
Senior Vice President since 1988 with various responsibilities for Deposit
Operations, Corporate Operations, Commercial Real Estate Operations and Loan
Operations.
S. DEAN LESIAK joined the Company in July 1993 as Executive Vice President of
Riggs-Washington in charge of Risk Management. He served as Chief Compliance
Officer of First Florida Banks, Inc. from 1991 to 1993 and also as Senior Vice
President--Senior Credit Policy Officer of First Florida Banks, Inc. from 1988
to 1991. Mr. Lesiak also served as a National Bank Examiner at the OCC for over
ten years.
CONTRACT OF NEW CHIEF EXECUTIVE OFFICER OF RIGGS-WASHINGTON
In June 1993, the Company entered into a three year contract with Paul Homan
to serve as Vice Chairman of the Company and as President and Chief Executive
Officer of Riggs-Washington. Mr. Homan
47
<PAGE>
will receive a base salary of $650,000 per year with an annual performance
bonus of $300,000 payable in 1995 and 1996 if certain performance goals for the
prior year are met and the Company and Riggs-Washington achieve substantial
compliance with their respective regulatory understandings and agreements. Mr.
Homan shall be deemed to have satisfied the performance goal for 1994 if the
Company achieves a return on average assets of 50 basis points for the year
ended December 31, 1994 and for 1995 if the Company achieves a return on
average assets of 75 basis points for the year ended December 31, 1995. Mr.
Homan also received options to purchase 400,000 shares of Common Stock at
$8.125 per share. The options are not exercisable until the earlier of: (1)
June 9, 1998, (2) a "change of control" of the Company as defined in the
Company's 1993 Stock Option Plan and (3) the date on which the reported closing
price of the Common Stock has been at least $12 per share on ninety percent of
the trading days during any rolling six-month period.
PRINCIPAL STOCKHOLDER
At November 15, 1993, there were 30,222,014 shares of Common Stock of the
Company outstanding and eligible to vote. At such date, Mr. Joe L. Allbritton,
Chairman of the Board and Chief Executive Officer of the Company, beneficially
owned 9,970,489 shares of Common Stock representing 33.0% of the outstanding
shares of Common Stock.
Mr. Allbritton has sole voting and investment power with regard to 6,920,489
of these shares. Under federal securities laws, he is deemed to share voting
and investment power with regard to 470,000 shares with Allwin, Inc., which is
wholly owned by Mr. Allbritton. In addition, Mr. Allbritton may be deemed to
share voting and investment power with regard to 1,250,000 shares owned by a
charitable foundation of which Mr. Allbritton, Mrs. Allbritton and their son
are the trustees although the assets of the foundation may not be used for
their benefit and all investment decisions must by law be made with regard to
the charitable interests of the foundation. Mr. Allbritton disclaims beneficial
ownership of 1,732 shares owned by Mrs. Barbara B. Allbritton, a director of
the Company, member of the Executive Committee of the Board of Directors and
wife of Joe L. Allbritton, and 31,110 shares held for the benefit of their son
by a trust of which Riggs-Washington is one of three trustees. As described
below, Mr. Allbritton has shared voting and investment power with regard to the
1,330,000 shares of Common Stock purchased by Mrs. Allbritton in the October
Equity Sale.
The shares of Common Stock owned directly by Mr. Allbritton are pledged to
secure a loan with a commercial bank. Should an event of default set forth in
the related loan agreement (which contains standard default provisions) occur,
the lending bank may be able to sell or transfer the shares depending on the
circumstances. In the absence of such an event of default, Mr. Allbritton
retains the right to receive the dividends and the power to vote the shares.
For a more complete description of the loan, including default provisions, see
the Schedule 13D and amendments thereto filed by Mr. Allbritton with the
Commission.
Mrs. Allbritton purchased 1,330,000 shares of Common Stock in the October
Equity Sale (the "Shares") on the same terms as other investors that purchased
Common Stock in the transaction. Mrs. Allbritton owns an additional 1,732
shares. Mrs. Allbritton has granted to Mr. Allbritton an irrevocable proxy to
vote the Shares and has agreed not to sell the Shares free of the proxy except
in limited market transactions, although she is not restricted from pledging
the Shares. Mrs. Allbritton disclaims beneficial ownership of the 7,390,489
shares beneficially owned by Mr. Allbritton directly or indirectly through
Allwin, Inc. as described above.
As of November 15, 1993, taking into account the October Equity Sale, Mrs.
Allbritton beneficially owned 1,331,732 shares of Common Stock or 4.4% of the
total number of shares of Common Stock outstanding or 8.6% if the 1,250,000
shares owned by the charitable foundation described above, over which she
shares voting and investment power, are included (excluding the 31,110 shares
held in trust for her son as described above). The shares purchased by Mrs.
Allbritton in the October Equity Sale are covered by a shelf registration
statement recently filed by the Company with the Commission and, when such
registration
48
<PAGE>
statement becomes effective, may be freely resold, subject to the agreement
with Mr. Allbritton described above. She has agreed with the Company and the
placement agents from the October Equity Sale, however, not to sell any such
shares prior to April 19, 1994, except to members of her immediate family or to
certain family-affiliated or charitable entities; provided that such agreement
does not prohibit Mrs. Allbritton from pledging such shares as collateral
security for a loan made by a lender in the ordinary course of its business,
nor does it prohibit such lender from foreclosing or otherwise realizing on
such collateral.
The Company knows of no other stockholder who beneficially owns more than
five percent of its common stock.
SUPERVISION AND REGULATION
GENERAL
The Company and certain of its subsidiaries are subject to the supervision of
and regulation by the Federal Reserve Board under the BHCA. The Company's
national banking subsidiaries and their subsidiaries are subject to the
supervision of and regulation by the OCC under the National Bank Act. Other
federal, state, and foreign laws govern many aspects of the businesses of the
Company and its subsidiaries. Generally, bank holding companies and banks are
subject to a comprehensive regulatory structure.
Under the BHCA, bank holding companies may not directly or indirectly acquire
the ownership or control of five percent or more of the voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. The BHCA also restricts the types
of activities in which a bank holding company and its subsidiaries may engage.
Generally, activities are limited to banking and activities found by the
Federal Reserve Board to be so closely related to banking as to be a proper
incident thereto. In addition, the BHCA prohibits the Federal Reserve Board
from approving an application by a bank holding company to acquire shares of a
bank or bank holding company located outside the acquiror's principal state of
operations unless such an acquisition is specifically authorized by statute in
the state in which the bank or bank holding company whose shares are to be
acquired is located. Most states have adopted statutes permitting an out-of-
state bank holding company to acquire in-state banks and bank holding
companies, but in many cases only if the state in which the acquiring company
is located permits reciprocal acquisitions of its banks and bank holding
companies and in some cases subject to geographic restrictions. The District of
Columbia has authorized banks and bank holding companies within a thirteen-
state region in the Southeastern United States to acquire banks within the
District of Columbia subject to certain reciprocity and other requirements.
Banks and bank holding companies outside this region may also acquire banks
within the District of Columbia provided they make substantial financial
commitments to the District of Columbia; it has not been established whether
the District of Columbia statute satisfies the reciprocity requirements of
states outside the thirteen-state region.
The Company and its bank subsidiaries are required to maintain minimum levels
of qualifying capital under the Federal Reserve Board's and the OCC's capital
guidelines. For full discussion of these guidelines, see "Management Discussion
and Analysis of Financial Condition and Results of Operations--Capital
Resources."
REGULATORY DEVELOPMENTS
On May 14, 1993, the Company entered into the Memorandum of Understanding
with the Federal Reserve Bank of Richmond and Riggs-Washington entered into the
Written Agreement with the OCC. The Written Agreement and the Memorandum of
Understanding were the result of regulatory concern over financial and
operational weaknesses and continued losses primarily related to the Company's
domestic and United Kingdom commercial real estate exposure.
Under the terms of the Memorandum of Understanding, the Company will notify
the Reserve Bank in advance of dividend declarations, the issuance and
redemption of long-term debt and use of cash assets in
49
<PAGE>
certain circumstances. Pursuant to the Memorandum of Understanding, the Company
has notified the Reserve Bank of the proposed issuance of Debt Securities and
the use of the net proceeds thereof to redeem outstanding subordinated notes of
the Company. The Reserve Bank has advised the Company that it has no objection
to the proposed issuance of Debt Securities or redemption of such outstanding
subordinated notes. Under the terms of the Memorandum of Understanding, the
Company will also submit plans and reports to the Reserve Bank relating to
capital, asset quality, loan loss reserves and operations, including
contingency measures if projected operational results do not occur. In
addition, the Audit Committee of the Company's Board of Directors will review
and submit a report to the Reserve Bank on the adequacy of data submitted to it
and the Board, and the Company has appointed a compliance committee of
Directors to monitor performance under the Memorandum of Understanding.
In accordance with the terms of the Written Agreement, Riggs-Washington has
appointed a committee of its Board of Directors to monitor and coordinate
compliance with the agreement, implement recommendations previously made by an
independent management consultant, and continue to implement the action plan
and work plan adopted by Riggs-Washington. Riggs-Washington has met a number of
the requirements of the agreement, including filing amended call reports,
adopting policies and procedures relating to the preparation of call reports,
adopting a capital plan which has been approved by the OCC that requires, among
other things, a minimum total risk-based capital ratio of 10.00%, a minimum
Tier 1 risk-based capital ratio of 6.00% and a minimum leverage ratio of 5.00%,
submitting for review by the OCC the results of BankStart '93, and appointing a
president and chief executive officer.
RECENT BANKING LEGISLATION
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), in September 1992, the FDIC issued regulations to implement a risk-
based deposit insurance assessment system under which the assessment rate for
an insured depository institution varies according to the level of risk
incurred in its activities. An institution's risk category is based partly upon
whether the institution is well capitalized, adequately capitalized or less
than adequately capitalized. In addition, each insured institution is assigned
to one of the following "supervisory subgroups": "healthy"; "supervisory
concern"; or "substantial supervisory concern." Based on its capital category
and supervisory subgroup, each insured institution is assigned an annual FDIC
assessment rate, which currently varies between $.23 and $.31 per $100 of
deposits. The new rates were effective for the semi-annual assessment period
beginning January 1, 1993. The Company anticipates that insurance premiums for
its three insured banking subsidiaries will rise by approximately $1.5 million
during 1993 as a result of the new assessment schedule.
FDICIA contains numerous other provisions. Among other things, FDICIA
requires the federal banking agencies to take "prompt corrective action" in
respect of depository institutions that do not meet minimum capital
requirements. FDICIA required each Federal banking agency, including the OCC,
to specify within nine months after the date of enactment of the statute, by
regulation, the levels at which an insured institution would be considered
"well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." In October
1992, each of the Federal banking agencies, including the OCC, issued uniform
final regulations defining such capital levels. Under these regulations, a bank
is considered "well capitalized" if it has (i) a total risk-based capital ratio
of 10 percent or greater, (ii) a Tier 1 risk-based capital ratio of 6 percent
or greater, (iii) a leverage ratio of 5 percent or greater and (iv) is not
subject to any order or written directive to meet and maintain a specific
capital level. An "adequately capitalized" bank is defined as one that has (i)
a total risk-based capital ratio of 8 percent or greater, (ii) a Tier 1 risk-
based capital ratio of 4 percent or greater and (iii) a leverage ratio of 4
percent or greater (or 3 percent or greater in the case of a bank with the
highest composite regulatory examination rating). A bank is considered (A)
"undercapitalized" if it has (i) a total risk-based capital ratio of less than
8 percent, (ii) a Tier 1 risk-based capital ratio of less than 4 percent or
(iii) a leverage ratio of less than 4 percent (or 3 percent in the case of a
bank with the highest composite regulatory examination rating); (B)
"significantly undercapitalized" if the bank has (i) a total risk-based capital
ratio of less than 6 percent, (ii) a Tier 1 risk-based capital ratio of less
than 3 percent or (iii) a leverage ratio of less than 3 percent; and
50
<PAGE>
(C) "critically undercapitalized" if the bank has a ratio of tangible equity
to total assets of equal to or less than 2 percent. Under these standards,
Riggs-Washington is deemed to be "adequately capitalized" and each of Riggs-
Maryland and Riggs-Virginia is deemed to be "well-capitalized". The applicable
federal bank regulator for a depository institution may, under certain
circumstances, reclassify a "well capitalized" institution as "adequately
capitalized" or require an "adequately capitalized" or "undercapitalized"
institution to comply with supervisory actions as if it were in the next lower
category. Such a reclassification may be made if the regulatory agency
determines that the institution is in an unsafe or unsound condition (which
could include unsatisfactory examination ratings). A summary of applicable
regulatory capital ratios and the minimums required by the OCC under its
capital guidelines for Riggs-Washington, Riggs-Virginia and Riggs- Maryland on
a historical basis are shown above under "Management's Discussion and Analysis
of Financial Condition and Operating Results--Capital Ratios."
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
increased regulatory monitoring and growth limitations and are required to
submit capital restoration plans. A depository institution's holding company
must guarantee that capital plan in order for it to be accepted by the
regulators, up to an amount equal to the lesser of 5% of the depository
institution's assets at the time it becomes undercapitalized or the amount
needed to comply with the plan. The federal banking agencies may not accept a
capital plan without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly or critically undercapitalized institutions and
undercapitalized institutions that do not submit and comply with capital
restoration plans acceptable to the applicable Federal banking agency will be
subject to one or more of the following sanctions: (i) forced sale of shares
to raise capital or, where grounds exist for the appointment of a receiver or
conservator, a forced merger; (ii) restrictions on transactions with
affiliates; (iii) limitations on interest rates paid on deposits; (iv) further
restrictions on growth or required shrinkage; (v) replacement of directors or
senior executive officers, subject to certain grandfather provisions for those
elected prior to the enactment of FDICIA; (vi) prohibitions on the receipt of
correspondent deposits; (vii) restrictions on capital distributions by the
holding companies of such institutions; (viii) required divestiture of
subsidiaries by the institution; or (ix) other restrictions, as determined by
the regulator. In addition, the compensation of executive officers would be
frozen at the level in effect when the institution failed to meet the capital
standards. A forced sale of shares or merger, restrictions on affiliate
transactions and restrictions on rates paid on deposits would be required to
be imposed by the primary federal regulator unless that regulator determined
that they would not further capital improvement.
FDICIA generally requires the appointment of a conservator or receiver
within 90 days after a depository institution becomes critically
undercapitalized, unless the FDIC and the institution's primary federal
regulator jointly determine that another course of action would better protect
the federal deposit insurance fund. FDICIA also provides that the board of
directors of an insured depository institution will not be liable to the
institution's shareholders or creditors for consenting in good faith to the
appointment of a receiver or conservator for the institution or to an
acquisition or merger of the institution required by the regulators.
Under the FDIC's final regulations governing the receipt of brokered
deposits, a bank cannot accept brokered deposits unless (i) it is "well
capitalized" or (ii) it is "adequately capitalized" and receives a waiver from
the FDIC. In addition, a bank that is not well capitalized may not offer rates
of interest on deposits that are more than 75 basis points above prevailing
rates. Also, "pass through" deposit insurance is not available for deposits of
certain employee benefit plans in banks that do not meet all minimum capital
requirements. As mentioned above, under the current regulations, Riggs-
Washington is "adequately capitalized" and each of Riggs-Maryland and Riggs-
Virginia is "well capitalized." Riggs-Washington does not solicit brokered
deposits and, accordingly, the Company does not believe that the regulations
will have
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an adverse effect on its operations. However, Riggs-Washington has received a
waiver from the FDIC to provide pass-through deposit insurance to employee
benefit plans held in the Trust Department.
Among FDICIA's numerous other provisions are new reporting requirements,
termination of the "too big to fail" doctrine except in special cases,
limitations on the FDIC's ability to pay deposits at foreign branches and
provisions requiring federal banking agencies to promulgate regulations and
specify standards in numerous areas of bank operations, including interest rate
exposure, asset growth, internal controls, credit underwriting, executive
officer and director compensation, real estate construction financing,
additional review of capital standards, interbank liabilities and other
operational and managerial standards as the agencies determine appropriate.
These regulations have increased and may continue to increase the cost of and
the regulatory burden associated with the banking business.
CROSS-GUARANTY LIABILITY
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") provides for "cross-guarantees" by insured depository institutions
that are commonly controlled. Pursuant to these cross-guarantee provisions, an
insured depository institution is required to reimburse the FDIC for any loss
suffered by either the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF") as a result of the default of a commonly controlled
insured depository institution or for any assistance provided to such an
insured depository institution in danger of default. The FDIC may decline to
enforce the cross-guarantee provisions if it determines that a waiver is in the
best interest of the SAIF or the BIF or both. The FDIC's claim for damages is
superior to claims of stockholders of the insured depository institution or its
holding company but is subordinate to claims of depositors, secured creditors
and holders of subordinated debt (other than affiliates) of the commonly
controlled insured depository institution. The Company's bank subsidiaries are
subject to these cross-guarantee provisions. As a result, any loss suffered by
the FDIC in respect of any of the Company's bank subsidiaries would likely
result in assertion of the cross-guarantee provisions, the assessment of such
estimated losses against the Company's other bank subsidiaries and a potential
loss of the Company's investment in such subsidiaries (and ultimately
shareholders' investment in the Company).
RESTRICTIONS ON DIVIDENDS AND TRANSACTIONS WITH BANK SUBSIDIARIES
Under Federal Reserve Board policy, a bank holding company should generally
not pay dividends on its stock that exceed operating earnings. In addition, the
Federal Reserve Board may prohibit payment of a dividend if the Federal Reserve
Board deems such a payment to be an unsafe and unsound banking practice.
As national banks subject to the supervision and examination of the OCC,
Riggs-Washington, Riggs-Virginia and Riggs-Maryland are subject to legal
limitations on the source and amount of dividends they are permitted to pay to
the Company. A national bank may pay dividends only to the extent that retained
net profits (including the portion transferred to surplus) exceed bad debts (as
defined by regulation). Moreover, unless a national bank's surplus fund equals
its common capital, dividends may be paid only after 10 percent of its net
profits (as defined) for the specified preceding period have been transferred
to the bank's surplus fund. In addition, prior approval of the OCC is required
if the total of all dividends declared by a national bank in any calendar year
will exceed the sum of that bank's net profits (as defined) for that year and
its retained net profits for the preceding two calendar years, less any
required transfers to either surplus or any fund for retirement of any
preferred stock. The payments of dividends by the Company's national bank
subsidiaries may also be affected by other factors, such as requirements for
the maintenance of adequate capital. See "Risk Factors and Special
Considerations--Holding Company Liquidity." In addition, the OCC is authorized
to determine under certain circumstances relating to the financial condition of
a national bank whether the payment of dividends would be an unsafe or unsound
practice and to prohibit payment thereof. The Written Agreement requires that
Riggs-Washington notify the OCC before paying any dividends to the Company.
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There are legal restrictions on the extent to which the Company and certain
of its non-bank subsidiaries may borrow or otherwise obtain credit from Riggs-
Washington, Riggs-Virginia and Riggs-Maryland. Subject to certain limited
exceptions, a bank subsidiary may not extend credit to the Company or to any
other affiliate (as defined) in an amount which exceeds 10% of its capital
stock and surplus and may not extend credit in the aggregate to such affiliates
in an amount which exceeds 20% of its capital stock and surplus. Further, there
are legal requirements as to the type, amount and quality of collateral which
must secure such extensions of credit by these banks to the Company or to other
affiliates. Finally, extensions of credit and other transactions between the
bank subsidiary and the Company or other affiliates must be on terms and under
circumstances, including credit standards, that are substantially the same or
at least as favorable to such bank as those prevailing at the time for
comparable transactions with non-affiliated companies.
Under Federal Reserve Board policy, bank holding companies are expected to
act as a source of financial strength to their subsidiary banks and to commit
resources to support such banks in circumstances where a bank holding company
might not do so absent such policy. In addition, any capital loans by a bank
holding company to any of its subsidiary banks are subordinate in right of
payment to deposits and to certain other indebtedness of such subsidiary bank.
In the event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of
a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Because the Company is a holding company, its right to participate in the
assets of any subsidiary upon the latter's liquidation or reorganization will
be subject to the prior claims of the subsidiary's creditors (including
depositors in the case of bank subsidiaries) except to the extent that the
Company may itself be a creditor with recognized claims against the subsidiary.
Omnibus Budget Reconciliation Act of 1993
The recently enacted Omnibus Budget Reconciliation Act of 1993 included a so-
called depositor preference provision. Under the provision, in the event of a
liquidation of an insured bank, claims of depositors and their subrogees,
including the FDIC in respect of the payment of insured deposits, would be
entitled to a preference over all other claimants against the bank, including
senior creditors other than depositors. To date, the Company's bank
subsidiaries have not experienced a negative impact from this provision, but
the Company is unable to predict whether it will have a negative impact in the
future.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (the "Indenture")
between the Company and The Bank of New York, as Trustee (the "Trustee"). A
copy of the form of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. See "Available Information."
Specific terms of Offered Debt Securities sold in each offering will be
described in the Prospectus Supplement relating thereto. The following
summaries of certain provisions of the Indenture and the Debt Securities do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Indenture, including the
definition therein of certain terms, and, in the case of any particular Offered
Debt Securities, the description of the terms thereof in the applicable
Prospectus Supplement. Wherever particular sections or defined terms of the
Indenture are referred to herein or in a Prospectus Supplement, it is intended
that such sections or defined terms shall be incorporated by reference herein
or therein, as the case may be. References in this section entitled
"Description of the Debt Securities" to the "Company" mean only Riggs National
Corporation and not its subsidiaries.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued from time to time in one or more separate series. In addition, Debt
Securities issued at different times in different offerings may constitute part
of a single series.
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Unless otherwise indicated in the relevant Prospectus Supplement, the Debt
Securities will be unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness (as defined below) of the Company and,
in certain circumstances, to all existing and future Other Financial
Obligations (as defined below) of the Company. See "--Subordination." At
September 30, 1993, the Company had no Senior Indebtedness and no Other
Financial Obligations outstanding. The Debt Securities are also effectively
subordinate in right of payment to all existing and future indebtedness of the
Company's subsidiaries. The Indenture does not limit or prohibit the incurrence
of additional indebtedness (including additional Senior Indebtedness or Other
Financial Obligations) by the Company, or the issuance of additional
indebtedness by its subsidiaries, nor does the Indenture contain provisions
which would protect the Holders of, or owners of beneficial interests in, the
Debt Securities against a sudden decline in credit quality resulting from
takeovers, recapitalizations or other similar restructurings.
Unless otherwise indicated in the relevant Prospectus Supplement, payment of
the principal of the Debt Securities may be accelerated only in the case of
certain events involving the bankruptcy, insolvency or reorganization of the
Company. There is no right of acceleration in the case of a default in the
performance of any obligation of the Company under the Indenture or the Debt
Securities, including any obligation to pay principal or interest on the Debt
Securities. See "--Events of Default and Limited Rights of Acceleration."
The Prospectus Supplement will set forth the price or prices at which the
Offered Debt Securities will be issued and will describe the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities; (3)
whether the Offered Debt Securities are convertible into Common Stock, or cash
in lieu thereof, and if so, the terms and conditions upon which such conversion
will be effected, including the initial conversion price or conversion rate and
other conversion provisions; (4) the date or dates on which the Offered Debt
Securities will mature; (5) the rate or rates per annum at which the Offered
Debt Securities will bear interest, if any, or the manner in which such rates
will be determined and the date from which such interest, if any, will accrue;
(6) the Interest Payment Dates on which such interest (if any) on the Offered
Debt Securities will be payable and the Regular Record Dates for such Interest
Payment Dates; (7) the currency or currency unit, if other than United States
dollars, of payment of principal of, and premium and interest, if any, on the
Offered Debt Securities; (8) whether the Offered Securities will be represented
in whole or in part by one or more Global Securities; (9) any mandatory or
optional sinking fund or analogous provisions; (10) any additions to, or
modifications or deletions of, any Events of Default or covenants and the
remedies with respect thereto provided for with respect to the Offered Debt
Securities; (11) any redemption terms; (12) if other than the principal amount
thereof, the portion of the principal amount of the Offered Debt Securities
payable upon acceleration of the maturity thereof; and (13) any other specific
terms of the Offered Debt Securities.
Unless otherwise specified in the Prospectus Supplement, principal of, and
premium and interest, if any, on, the Offered Debt Securities will be payable
at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, the City of New York, and the Offered Debt Securities may
be surrendered for transfer or exchange at said office or agency; provided that
payment of interest, if any, may be made at the option of the Company by check
mailed to the address of the person entitled thereto as it appears in the
register for the Offered Debt Securities on the Regular Record Date for such
interest. (Sections 3.1, 3.7 and 10.2) The office of the Trustee in the Borough
of Manhattan, the City of New York, will initially be designated such office or
agency.
FORM, EXCHANGE & TRANSFER
The Debt Securities will be issued only in fully registered form without
coupons and, unless otherwise indicated in the Prospectus Supplement, if
denominated in United States dollars, will be issued in denominations of $1,000
and any integral multiple thereof. At the option of the Holder, subject to the
terms of the Indenture and the limitations applicable to Global Securities,
Debt Securities of each series will be
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exchangeable for other Debt Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount. (Section 3.5)
Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Debt Securities may be presented for exchange as provided
above or for registration of transfer (duly endorsed or with the form of
transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose. No service charge will be made for any transfer or exchange of
the Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
If Debt Securities of any series are to be redeemed in part, the Company will
not be required (i) to issue, register the transfer of or exchange any Debt
Security of any series during a period beginning at the opening of business 15
days before the date of the mailing of a notice of redemption of any Debt
Securities of that series selected for redemption and ending at the close of
business on the date of such mailing or (ii) to register the transfer of or
exchange any Debt Security so selected for redemption in whole or in part,
except the unredeemed portion of Debt Securities being redeemed in part.
(Sections 3.2 and 3.5) Offered Debt Securities may also be represented by one
or more Global Securities. See "--Global Securities."
All moneys paid by the Company to the Trustee or any Paying Agent for the
payment of principal of or any premium or interest on any Debt Security which
remain unclaimed for two years after such principal, premium or interest shall
have become due and payable may be repaid to the Company and thereafter the
Holder of such Debt Security shall look only to the Company for payment
thereof. (Section 10.3)
If any Offered Debt Securities are payable in a currency or currency unit
other than United States dollars, special federal income tax and other
considerations applicable to such Debt Securities will be described in the
Prospectus Supplement relating thereto.
The Debt Securities may be issued as Original Issue Discount Securities
(bearing no interest or bearing interest at a rate which at the time of issue
is below market rates) to be sold at a substantial discount below their
principal amount. If any Debt Securities are issued as Original Issue Discount
Securities, special federal income tax and other considerations applicable to
such Debt Securities may be described in the Prospectus Supplement relating
thereto.
GLOBAL SECURITIES
If indicated in the applicable Prospectus Supplement, any Offered Debt
Securities may be issued in the form of one or more Global Securities
registered in the name of the Depository or a nominee thereof. Except as
described herein or in the applicable Prospectus Supplement, Offered Debt
Securities in definitive form will not be issued in exchange for any Global
Security. A Global Security may not be transferred by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository or by the Depository or any nominee to a
successor of the Depository or a nominee of such successor unless (i) the
Depository has notified the Company that it is unwilling or unable to continue
as Depository for such Global Security or has ceased to be qualified to act as
such as required by the Indenture and a successor is not appointed by the
Company within 90 days, (ii) there shall have occurred and be continuing an
Event of Default with respect to the Debt Securities represented by such Global
Security or (iii) there shall exist such circumstances, if any, in addition to
or in lieu of those described above as may be described in the applicable
Prospectus Supplement. (Sections 2.4 and 3.5). Upon the occurrence of any of
the foregoing events, the Company will issue Debt Securities in definitive form
upon registration of transfer of,
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or in exchange for, such Global Security. In addition, the Company may at any
time and in its sole discretion determine that any Debt Securities represented
by a Global Security shall no longer be represented by a Global Security and,
in such event, will issue Debt Securities in definitive form in exchange for
the entire principal amount of such Global Security. (Section 3.5) All
securities issued in exchange for a Global Security or any portion thereof will
be registered in such names as the Depository may direct.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depository or its nominee ("Participants")
or persons that may hold interests through Participants. The Company expects
that upon the issuance of a Global Security, the Depository will credit, on its
book-entry registration and transfer system, the Participants' accounts with
the respective principal amounts of the Offered Debt Securities represented by
such Global Security. The accounts to be credited will be designated by the
underwriters or agents engaging in the distribution of the Offered Debt
Securities. Ownership of beneficial interests in each Global Security will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the Depository or its nominee (with respect to
interests of Participants) and on the records of Participants (with respect to
interests of persons held through Participants). The laws of some states may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to own, transfer or pledge beneficial interests in a Global Security.
So long as the Depository or its nominee is the registered owner of a Global
Security, the Depository or its nominee, as the case may be, will be considered
the sole owner or Holder of the Offered Debt Securities represented by such
Global Security for all purposes under the Indenture. (Section 3.8)
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of the Depository and, if such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture, and
these procedures may change from time to time. The Company understands that
under existing industry practices, in the event the Company requests any action
of Holders or an owner of a beneficial interest in a Global Security desires to
take any action which a Holder is entitled to take under the Indenture, the
Depository would authorize the Participants holding the relevant beneficial
interests to take such action, and such Participants would authorize beneficial
owners owning through such Participants to take such action or would otherwise
act upon the instructions of beneficial owners owning through them.
Payment of principal of, and any premium or interest on, any Debt Securities
represented by a Global Security will be made to the Depository or its nominee,
as the registered owner of such Global Security. The Company expects that upon
receipt of any payment of principal of, or interest on, a Global Security, the
Depository will immediately credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depository.
Payments by Participants to owners of beneficial interests in such Global
Security held through such Participants will be the responsibility of such
Participants, as is now the case with securities held for the accounts of
customers registered in "street name." None of the Company, the Trustee, any
Paying Agent or any other agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in any such Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Depository has advised the Company as follows: it is a limited-purpose
trust company organized under the laws of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. The Depository was created
to hold securities for Participants and to facilitate the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of Participants. Participants
include securities brokers and dealers, banks and trust companies, clearing
corporations and certain other organizations. Access to the Depository's system
is also available to others such as banks, brokers, dealers
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and trust companies that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly ("Indirect Participants").
Persons who are not Participants may beneficially own securities held by the
Depository only through Participants or Indirect Participants.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearing-house or next-day funds. In contrast, beneficial interests
in a Global Security, in some cases, may trade in the Depository's same-day
funds settlement system, in which secondary market trading activity in those
beneficial interests would be required by the Depository to settle in
immediately available funds. There is no assurance as to the effect, if any,
that settlement in immediately available funds would have on trading activity
in such beneficial interests. Also, settlement for purchases of beneficial
interests in a Global Security upon the original issuance thereof may be
required to be made in immediately available funds.
SUBORDINATION
The Debt Securities will be expressly subordinated in right of payment, to
the extent set forth in the Indenture, to all Senior Indebtedness. (Section
13.1) In certain events of insolvency, the Debt Securities will, to the extent
set forth in the Indenture, also be effectively subordinated in right of
payment to the prior payment of all Other Financial Obligations. (Section
13.15)
If the Company shall default (and during the continuation of any such default
beyond any applicable grace period) in the payment of any principal of, or
premium or interest on, any Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, or if any event of default with
respect to Senior Indebtedness shall have occurred and be continuing permitting
the holders thereof (or a trustee on behalf of such holders) to accelerate the
maturity thereof, or any judicial proceeding shall be pending with respect to
any such default in payment or event of default then, unless and until such
default or 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 such judicial proceeding shall be no longer pending, no payment
shall be made by the Company on account of principal of or premium or interest
on the Debt Securities, or on account of the purchase or other acquisition of
any of the Debt Securities other than payment made in Common Stock (or cash in
lieu of fractional shares thereof) upon conversion pursuant to the Indenture.
In the event that any Debt Securities are declared due and payable before their
Stated Maturity, holders of Senior Indebtedness will be entitled to be paid in
full (or provision shall be made for such payment in cash) before any payment
may be made on account or in respect of the Debt Securities other than payment
made in Common Stock (or cash in lieu of fractional shares thereof) upon
conversion pursuant to the Indenture. If the Company makes any payment to the
Trustee or to or on behalf of any Holder of Debt Securities prohibited by the
provisions described above, such payment must be paid over to the Company.
(Sections 13.3 and 13.4) "Senior Indebtedness" of the Company means the
principal of, premium, if any, and interest on all indebtedness for money
borrowed or purchased by the Company, or borrowed or purchased by another and
guaranteed by the Company (including any deferred obligation for the payment of
the purchase price of property or assets evidenced by a note or similar
agreement and any obligation to pay rent or other amounts under a capitalized
lease obligation), whether outstanding on the date of execution of the
Indenture or subsequently created, assumed or incurred, and any amendments,
renewals, extensions, modifications and refundings of any such Senior
Indebtedness, other than (i) the Floating Rate Subordinated Notes, the
Subordinated Capital Notes and the Company's 9.65% Subordinated Debentures due
2009, (ii) such other indebtedness as by its terms is expressly stated not to
be superior in right of payment or to rank pari passu in right of payment to
the Debt Securities and (iii) the Debt Securities. (Section 1.1)
In the event of any insolvency, bankruptcy, receivership, reorganization,
assignment for the benefit of creditors, marshalling of assets and liabilities
or similar proceedings relating to, or any liquidation, dissolution or winding-
up of, the Company, whether voluntary or involuntary, all obligations of the
Company to holders of Senior Indebtedness shall be entitled to be paid in full
(or provision shall be made for such payment in
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money or money's worth) before any payment shall be made on account of the
principal of or premium or interest on the Debt Securities. In the event of any
such proceeding, if any payment by or distribution of assets of the Company of
any kind or character, whether in cash, property or securities (other than
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, the payment of which is subordinate, at least to
the extent provided in the subordination provisions with respect to the Debt
Securities, to the payment of all Senior Indebtedness at the time outstanding),
shall be received by the Trustee or by or on behalf of the Holders of the Debt
Securities before all Senior Indebtedness is paid in full or payment therefor
is provided for, such payment or distribution shall be held (in trust if
received by the Holders of the Debt Securities) for the benefit of the holders
of such Senior Indebtedness and shall be paid over to the trustee in bankruptcy
or other Person making payment or distribution of the assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid until
all such Senior Indebtedness shall have been paid in full, after giving effect
to any concurrent payment or distribution to the holders of such Senior
Indebtedness. (Section 13.2) If, upon any such payment or distribution of
assets to creditors, there remain, after giving effect to such subordination
provisions in favor of the holders of Senior Indebtedness, any amounts of cash,
property or securities available for payment or distribution in respect of the
Debt Securities (as defined in the Indenture, "Excess Proceeds") and if, at
such time, any person entitled to payment pursuant to the terms of Other
Financial Obligations has not received payment in full of all amounts due or to
become due on or in respect of such Other Financial Obligations, 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 the Debt Securities. (Section 13.15) Payments or
distributions received by the Trustee or by or on behalf of any Holder in
contravention of the provisions described above must be paid over to the
trustee in bankruptcy or other Person making payment or distribution of the
assets of the Company. The term "Other Financial Obligations," as defined in
the Indenture, includes all obligations of the Company (including guarantees of
obligations of others), whether outstanding on the date of execution of
the Indenture or subsequently created, assumed or incurred, 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 futures 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 ranks
pari passu with or subordinate to the Debt Securities. (Section 1.1)
By reason of such subordination, in the event of the bankruptcy or insolvency
of the Company or similar event, whether before or after maturity of the Debt
Securities, holders of Senior Indebtedness or of Other Financial Obligations
may receive more, ratably, and Holders of the Debt Securities having a claim
pursuant to the Debt Securities may receive less, ratably, than creditors of
the Company who do not hold Senior Indebtedness, Other Financial Obligations or
Debt Securities.
In addition, in the event of the insolvency, bankruptcy, receivership,
conservatorship or reorganization of the Company, the claims of the Holders of
the Debt Securities would be subject as to enforcement to the broad equity
power of a Federal bankruptcy court, and to the determination by that court of
the nature of the rights of the Holders.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Company may not consolidate with or merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, any person (a
"successor person"), and may not permit any person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to,
the Company, unless (i) the successor person (if any) is a corporation,
partnership, trust or other entity organized and validly existing under the
laws of any domestic jurisdiction and expressly assumes the Company's
obligations on the
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Debt Securities and under the Indenture, (ii) immediately after giving effect
to the 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 (iii) certain other conditions are met. Notwithstanding
the foregoing, the Company may, without the consent of any Holder of the Debt
Securities of any series, convey or transfer its assets substantially as an
entirety to any person in connection with a transfer that is assisted 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 8.1)
EVENTS OF DEFAULT AND LIMITED RIGHTS OF ACCELERATION
Unless otherwise provided in the applicable Prospectus Supplement, pursuant
to the Indenture, an Event of Default with respect to the Debt Securities of
any series is defined as any one of the following events: (a) default for 30
days in the payment of any interest upon any Debt Security of such series when
it becomes due and payable; (b) default in the payment of the principal of any
Debt Security of such series at its maturity; (c) default in the deposit of any
sinking fund payment, when and as due by the terms of the Debt Securities of
such series; (d) default in the performance, or breach, of any covenant or
warranty of the Company in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of Debt Securities of another
series) which continues for 60 days after the Holders of at least 25% in
principal amount of Outstanding Debt Securities of such series have given
written notice as provided in the Indenture; and (e) certain events of
bankruptcy, insolvency or reorganization of the Company. (Section 5.1)
If an Event of Default of a type set forth in clause (e) above with respect
to the Debt Securities of any series at the time Outstanding occurs and is
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of that principal amount as may be specified
in the terms of that series) of all the Debt Securities of such series to be
due and payable immediately. At any time after a declaration of acceleration
with respect to the Debt Securities of any series has been made, but before a
judgment or decree for payment of the money due based on such acceleration has
been obtained, the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of such series may, under certain circumstances,
rescind and annul such acceleration. (Section 5.2)
The Indenture does not provide for any right of acceleration of the payment
of the principal of the Debt Securities of any series upon a default in the
payment of principal, premium or interest or a default in the performance of
any covenant or agreement in the Debt Securities of such or any other series or
in the Indenture. Accordingly, the Trustee and the Holders of Debt Securities
of any series will not be entitled to accelerate the maturity of such Debt
Securities upon the occurrence of any of the Events of Default with respect
thereto described above, except for those described in clause (e) above. If a
default in the payment of principal, premium or interest or in the performance
of any covenant or agreement in the Debt Securities of any series or in the
Indenture occurs, the Trustee may, subject to certain limitations and
conditions, seek to enforce payment of such principal, premium or interest on
such Debt Securities, or the performance of such covenant or agreement.
(Section 5.3)
The Indenture provides that, subject to the duty of the Trustee during the
continuance of an Event of Default with respect to the Debt Securities of any
series to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders of such Debt Securities, unless such
Holders shall have offered to the Trustee reasonable indemnity. (Section 6.3)
Subject to certain limitations, the Holders of a majority in principal amount
of the Outstanding Debt Securities of any series will 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 Debt Securities of such series. (Section 5.12) The
right of a Holder of any Debt Security to institute a proceeding with respect
to the Indenture is subject to certain conditions precedent, but each Holder
has an absolute and unconditional right to receive payment of principal
59
<PAGE>
of and any premium and any interest when due and to institute suit for the
enforcement of any such payment. (Sections 5.7 and 5.8)
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Sections 1.2 and 10.4)
The Trustee may withhold notice to Holders of Debt Securities of any series of
any default (except in payment of principal, premium or interest on such Debt
Securities) if it in good faith determines that it is in the interests of such
Holders to do so.
DEFEASANCE AND COVENANT DEFEASANCE
Defeasance and Discharge. Unless otherwise provided in the applicable
Prospectus Supplement, the Company may, at its option and at any time, be
discharged from all its obligations, and the provisions of Article Thirteen
relating to subordination will cease to be effective, with respect to any
Offered Debt Securities (except for certain obligations to exchange or register
the transfer of Debt Securities, to replace stolen, lost or mutilated Debt
Securities, to maintain paying agencies, to hold moneys for payment in trust
and to effect conversion of Convertible Debt Securities (as defined below))
upon the deposit in trust for the benefit of the Holders of such Offered Debt
Securities of (a) money or (b) certain U.S. Government Obligations which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on such Offered Debt Securities on
their stated maturity in accordance with the terms of the Indenture and such
Offered Debt Securities or (c) a combination thereof subject to certain
requirements. Such defeasance or discharge may occur only if, among other
things, the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Company has received from, or there has been published by, the
United States Internal Revenue Service a ruling, or there has been a change in
tax law, in either case to the effect that Holders of such Offered Debt
Securities will not recognize 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
amount, in the same manner and at the same times as would have been the case if
such defeasance was not to occur. (Sections 14.2 and 14.4)
Defeasance of Certain Covenants. Unless otherwise provided in the applicable
Prospectus Supplement, the Company may, at its option and at any time, omit to
comply with certain restrictive covenants in the Indenture relating to the
maintenance of properties and the payment of taxes (as well as any other
restrictive covenants in the Indenture that may be described in the applicable
Prospectus Supplement), whereafter the occurrence of certain Events of Default,
which are described above in clause (d) (with respect to any such restrictive
covenants) and clause (e) under "Events of Default" (as well as any other
Events of Default that may be described in the applicable Prospectus
Supplement) will be deemed not to be or result in an Event of Default and the
provisions of Article Thirteen relating to subordination will cease to be
effective, in each case with respect to any Offered Debt Securities. The
Company, in order to exercise such option with respect to any Offered Debt
Securities, will be required to deposit in trust for the benefit of the Holders
of such Offered Debt Securities of (a) money or (b) certain U.S. Government
Obligations which, through the payment of principal and interest in respect
thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on such Offered
Debt Securities on their stated maturity accordance with the terms of the
Indenture and such Offered Debt Securities or (c) a combination thereof subject
to certain requirements. The Company will also be required, among other things,
to deliver to the Trustee an Opinion of Counsel to the effect that Holders of
such Offered Debt Securities will not recognize 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 amount, in the same manner and at the same times as
would have been the case if such defeasance was not to occur. In the event the
Company exercises this option with respect to any Offered Debt Securities and
such Offered Debt Securities were declared due and payable because of the
occurrence of any Event of Default described in clause (e) under "Events of
Default" the amount of money and U.S. Government Obligations so deposited in
trust would be sufficient to pay amounts due on such Offered Debt Securities at
the time of their stated maturity but may not be sufficient to pay amounts due
on such Offered
60
<PAGE>
Debt Securities upon any acceleration resulting from such Event of Default. In
such case, the Company would remain liable for such payments. (Sections 14.3
and 14.4)
MODIFICATION AND WAIVER
The Indenture provides that the Company and the Trustee may enter into a
supplemental indenture to amend the Indenture or any Debt Securities without
the consent of any Holder of any Debt Security: (1) to evidence the succession
of another Person to the Company and the assumption by such successor of the
Company's covenants in the Indenture and any Debt Securities; (2) to add to the
covenants of the Company further covenants, restrictions or conditions for the
benefit of the Holders of any Debt Securities; (3) to add to, change or
eliminate any of the provisions of the Indenture, provided, however, that any
such addition, change or elimination (i) does not apply to any Debt Security
created prior to the execution of such supplemental indenture and entitled to
the benefit of such provision nor modify the rights of the Holder of any such
Debt Security with respect to such provision or (ii) becomes effective only
when there is no such Debt Security Outstanding; (4) to add to, change or
eliminate any of the provisions relating to subordination of the Debt
Securities, provided that any such addition, change or elimination does not
adversely effect the rights of any Holder of Debt Securities in any material
respect; (5) to add to or change any of the provisions of the Indenture
necessary to permit or facilitate the issuance of Debt Securities in bearer or
uncertificated form; (6) to provide for the terms and conditions of conversion
into securities or other property of any Debt Securities that are so
convertible to the extent such terms and conditions differ from those in the
Indenture; (7) to establish the form or terms of Debt Securities of any series
in certain circumstances; (8) to secure any Debt Securities; (9) to evidence
and provide for the acceptance of appointment by a successor trustee or to add
to or change any of the provisions of the Indenture necessary to provide for or
facilitate the administration of the trust by more than one Trustee; (10) to
cure any ambiguity, defect or inconsistency or to make such other provision in
regard to matters or questions arising under the Indenture which do not
adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect; or (11) to add any additional Events of Default
for the benefit of the Holders of any Debt Securities. (Section 9.1)
In addition to the foregoing, modifications and amendments of the Indenture
with respect to Debt Securities of any series may be made by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of Outstanding Debt Securities of such series, provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the stated maturity date
of the principal of, or any installment of interest on, any Debt Security, (b)
reduce the principal amount of, or any premium or interest on, any Debt
Security, (c) reduce the amount of principal of any Debt Securities payable
upon the acceleration of the Maturity thereof, (d) change the place or currency
of payment of principal of, or premium or interest on, any Debt Security, (e)
impair the right to institute suit for the enforcement of any such payment on
or with respect to any Debt Security when due, (f) modify the provisions of the
Indenture with respect to the subordination of Debt Securities in a manner
adverse to the Holders or (g) reduce the percentage of the principal amount of
Outstanding Debt Securities of any series the consent of whose Holders is
required for modification or amendment of the Indenture or for any waiver.
(Section 9.2)
The Holders of a majority in principal amount of Outstanding Debt Securities
may, on behalf of all Holders of Debt Securities of such series, waive, insofar
as the Debt Securities of such series are concerned, compliance by the Company
with certain restrictive provisions of the Indenture. (Section 10.8) The
Holders of a majority in principal amount of the Outstanding Debt Securities of
any series may, on behalf of all Holders of Debt Securities of such series,
waive any past default under the Indenture with respect to the Debt Securities
of such series except a default in the payment of principal of, or any premium
or interest, or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby. (Section 5.13)
61
<PAGE>
The Company may, in the circumstances permitted by the Trust Indenture Act of
1939, fix any day as the record date for the purpose of determining the Holders
of Debt 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 Debt
Securities of such series. (Section 1.4)
CONVERSION
If any of the Offered Debt Securities are convertible into shares of Common
Stock ("Convertible Debt Securities"), specific terms with respect to such
Convertible Debt Securities, including the conversion price, will be set forth
in the Prospectus Supplement relating thereto. Convertible Debt Securities may
be presented for conversion to the conversion agent identified in the
Prospectus Supplement. Unless otherwise indicated in the applicable Prospectus
Supplement, the following provisions will generally apply to such Convertible
Debt Securities.
The Convertible Debt Securities shall be convertible into the number of
shares of Common Stock obtained by dividing the principal amount so to be
converted by the conversion price. The right to convert a Convertible Debt
Security, or portion thereof, shall begin on the date of issuance of such
Convertibled Debt Security and shall terminate on the maturity of such
Convertible Debt Security. The right to convert a Convertible Debt Security, or
portion thereof, called for redemption or delivered for repurchase shall
terminate on the redemption date or repurchase date. (Section 15.2)
Convertible Debt Securities surrendered for conversion during the period from
any record date for such Convertible Debt Securities to the related interest
payment date (except Convertible Debt Securities called for redemption within
such period) shall be accompanied by payment of an amount equal to the interest
payable on the principal amount of the Convertible Debt Security being
surrendered for conversion. No other payment or adjustment shall be made for
interest or dividends upon conversion. (Section 15.3) Cash will be paid in lieu
of the issuance of fractional shares of Common Stock upon conversion based on
the market price (determined in accordance with the Indenture) of the Common
Stock. (Section 15.4)
The conversion price shall be adjusted, with certain exceptions, in the event
of (a) dividends (and other distributions) on the Common Stock payable in
shares of Common Stock, (b) the issuance to all holders of Common Stock of
rights, options or warrants entitling them to subscribe for or purchase Common
Stock at less than the current market price of the Common Stock, (c)
distribution to all holders of the Common Stock of evidences of indebtedness,
equity securities other than Common Stock or assets (other than cash paid from
retained earnings of the Company), and (d) distribution to all holders of
Common Stock of rights, options or warrants to subscribe for or purchase for
securities (other than those referred to in subsection (b) above). In addition
to the foregoing adjustments, the Company will be permitted to make such
reductions in conversion price as it considers to be advisable in order that
any stock dividend, subdivision of shares, distribution rights or warrants to
purchase stock or securities, or distribution of other assets (other than cash
dividends made by the Company) will not be taxable. (Section 15.5)
No adjustments in the conversion price shall be required unless such an
adjustment would require an increase or decrease of at least 1% of the
conversion price; provided that any adjustment that would otherwise be required
to be made shall be carried forward and taken into account in any subsequent
adjustment.
In the case of any consolidation or merger of the Company with or into any
other Person (with certain exceptions) or any sale or transfer of all or
substantially all the assets of the Company, the holder of Convertible Debt
Securities, after the consolidation, merger, sale or transfer, will have the
right to convert such Convertible Debt Securities only into the kind and amount
of securities, cash or other property which the holder would have been entitled
to receive upon such consolidation, merger, sale or transfer, if the holder had
held such Common Stock issuable upon conversion of such Convertible Debt
Securities immediately prior to such consolidation, merger, sale or transfer.
(Section 15.5)
62
<PAGE>
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain deposit accounts and conduct other
banking transactions with the Trustee in the ordinary course of business.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to one or more underwriters (which may
include Dillon, Read & Co. Inc. and Friedman, Billings, Ramsey & Co., Inc.) for
public offering and sale by them or may sell Debt Securities to investors
either directly or through agents. Any such underwriter or agent involved in
the offer and sale of the Offered Debt Securities will be named in the
applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Debt Securities at a fixed price
or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. In connection with the sale of the Offered Debt
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of the Offered Debt Securities for whom
they may act as agent. Underwriters may sell the Offered Debt Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Offered Debt Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Offered Debt Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Debt Securities may be deemed to be underwriting discounts and
commissions under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements entered into with the Company, to indemnification
against and contribution toward certain civil liabilities, including
liabilities under the Securities Act.
Unless otherwise specified in the applicable Prospectus Supplement, each
offering of Offered Debt Securities will be a new issue of securities with no
established trading market. Any underwriters to whom Offered Debt Securities
are sold by the Company for public offering and sale may make a market in such
Offered Debt Securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for any Offered Debt
Securities.
Certain of the underwriters and their associates may be customers of, engage
in transactions with and perform services for the Company or its subsidiaries
in the ordinary course of business.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the Company by
David Lesser, General Counsel of the Company, and by Sullivan & Cromwell, New
York, New York, and unless otherwise indicated in the applicable Prospectus
Supplement, for any underwriters or agents by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
Sullivan & Cromwell and Simpson Thacher & Bartlett will rely as to the due
incorporation of the Company upon the opinion of Mr. Lesser. As of the date of
this Prospectus, Mr. Lesser owned or held options to purchase 21,000 shares of
Common Stock, and he held an additional 1,000 shares of Common Stock as
custodian for his minor son.
63
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of December 31, 1992
and 1991 and for the years ended December 31, 1992, 1991 and 1990, incorporated
by reference in this Prospectus, have been audited by Arthur Andersen & Co.,
independent public accountants, as stated in their report with respect thereto,
which is incorporated by reference herein upon the authority of said firm as
experts in giving said reports. With respect to the financial statements of
Riggs AP, an indirect, wholly owned subsidiary of the Company, as of December
31, 1992 and 1991 and for the years ended December 31, 1992, 1991 and 1990,
Arthur Andersen & Co. has based its report referred to above, as stated in such
report, solely on the report of Ernst & Young Chartered Accountants,
independent auditors, with respect to such financial statements of Riggs AP
given upon the authority of such firm as experts in accounting and auditing.
The report of Ernst & Young Chartered Accountants with respect to such
financial statements is incorporated herein by reference.
64
<PAGE>
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- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY ANY SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by
Reference................................................................ 2
Prospectus Summary........................................................ 3
Risk Factors and Special Considerations................................... 7
The Company............................................................... 12
Recent Developments....................................................... 13
Use of Proceeds........................................................... 19
Capitalization............................................................ 20
Selected Consolidated Financial
Information.............................................................. 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Management................................................................ 46
Principal Stockholder..................................................... 48
Supervision and Regulation................................................ 49
Description of the Debt Securities........................................ 53
Plan of Distribution...................................................... 63
Validity of the Debt Securities........................................... 63
Experts................................................................... 64
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$125,000,000
RIGGS NATIONAL CORPORATION
SUBORDINATED
DEBT SECURITIES
[LOGO OF RIGGS APPEARS HERE]
-----------------
PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.......... $43,103.75
Printing and engraving expenses.............................. 70,000*
Legal fees and expenses...................................... 125,000*
Accounting fees and expenses................................. 150,000*
Blue Sky fees and expenses................................... 15,000*
Miscellaneous expenses....................................... 96,896.25*
----------
Total...................................................... $ 500,000*
==========
</TABLE>
- --------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware, Article
Eleventh of the Company's Certificate of Incorporation and Section 14.1 of the
Company's Bylaws provide for indemnification of the Company's directors and
officers in a variety of circumstances which may include liabilities under the
Securities Act of 1933.
The general effect of the provisions in the Company's Certificate of
Incorporation and Delaware General Corporation Law is to provide that the
Company shall indemnify its directors and officers against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with the defense or settlement of any
judicial or administrative proceedings in which they become involved by reason
of their status as directors or officers of the Company, if they acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. With
respect to legal proceedings by or in the right of the Company in which a
director or officer is adjudged liable for improper performance of his duty to
the Company or another enterprise which he served in a similar capacity at the
request of the Company, indemnification is limited by such provisions to that
amount which is permitted by the court. In addition, the Company has purchased
insurance as permitted by Delaware law on behalf of directors, officers,
employees or agents, which may cover liabilities under the Securities Act of
1933.
In addition, Article Eleventh of the Company's Certificate of Incorporation
provides that no director of the Company will be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director. This provision does not eliminate or limit the liability of a
director for; (i) breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) willful or
negligent conduct in paying illegal dividends or improperly purchasing or
redeeming the Company's own stock; or (iv) any transaction in which the
director obtains an improper personal benefit.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1 Form of Underwriting Agreement will be filed as an exhibit to a Current Report on Form
8-K and incorporated herein by reference
4 Indenture to be dated as of January 1, 1994 between Riggs National
Corporation and The Bank of New York as Trustee
5* Opinion of David Lesser, General Counsel of Riggs National Corporation,
as to the validity of the Debt Securities
12* Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Ernst & Young
24* Power of Attorney
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939
of The Bank of New York
</TABLE>
- --------
* Previously filed
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated
by reference in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
WASHINGTON, D.C., ON THE 13TH DAY OF JANUARY, 1994.
Riggs National Corporation
* Joe L. Allbritton
_____________________________________
Name: JOE L. ALLBRITTON
Title: CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
TITLE DATE
<S> <C> <C>
* Joe L. Allbritton Chairman of the Board and
- ------------------------------------- Chief Executive Officer January 13, 1994
(JOE L. ALLBRITTON)
* Paul M. Homan
- ------------------------------------- Vice Chairman of the Board January 13, 1994
(PAUL M. HOMAN)
* Timothy C. Coughlin
- ------------------------------------- President January 13, 1994
(TIMOTHY C. COUGHLIN)
* John L. Davis Chief Financial Officer
- ------------------------------------- (Principal Financial and January 13, 1994
(JOHN L. DAVIS) Accounting Officer)
* Barbara B. Allbritton
- ------------------------------------- Director January 13, 1994
(BARBARA B. ALLBRITTON)
- ------------------------------------- Director
(NORMAN R. AUGUSTINE)
* Calvin Cafritz
- ------------------------------------- Director January 13, 1994
(CALVIN CAFRITZ)
* Charles A. Camalier, III
- ------------------------------------- Director January 13, 1994
(CHARLES A. CAMALIER, III)
* Floyd E. Davis, III
- ------------------------------------- Director January 13, 1994
(FLOYD E. DAVIS, III)
* Jacqueline C. Duchange
- ------------------------------------- Director January 13, 1994
(JACQUELINE C. DUCHANGE)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
* Michela A. English
- ------------------------------------- Director January 13, 1994
(MICHELA A. ENGLISH)
* James E. Fitzgerald
- ------------------------------------- Director January 13, 1994
(JAMES E. FITZGERALD)
- ------------------------------------- Director
(DAVID J. GLADSTONE)
* Lawrence I. Hebert
- ------------------------------------- Director January 13, 1994
(LAWRENCE I. HEBERT)
- ------------------------------------- Director
(MICHAEL J. JACKSON)
* Leo J. O'Donovan, S.J.
- ------------------------------------- Director January 13, 1994
(LEO J. O'DONOVAN, S.J.)
* Steven B. Pfeiffer
- ------------------------------------- Director January 13, 1994
(STEVEN B. PFEIFFER)
* John A. Sargent
- ------------------------------------- Director January 13, 1994
(JOHN A. SARGENT)
* James R. Schlesinger
- ------------------------------------- Director January 13, 1994
(JAMES R. SCHLESINGER)
* Robert L. Sloan
- ------------------------------------- Director January 13, 1994
(ROBERT L. SLOAN)
* James W. Symington
- ------------------------------------- Director January 13, 1994
(JAMES W. SYMINGTON)
* Jack Valenti
- ------------------------------------- Director January 13, 1994
(JACK VALENTI)
* Eddie N. Williams
- ------------------------------------- Director January 13, 1994
(EDDIE N. WILLIAMS)
</TABLE>
* David Lesser, by signing his name hereto, signs this document on behalf of
each of the persons indicated by an asterisk above pursuant to powers of
attorney duly executed by such persons and filed herewith with the Securities
and Exchange Commission.
/s/ David Lesser
By: _________________________________
David Lesser, Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
------- ----------- ----------
<C> <S> <C>
1 Form of Underwriting Agreement will be filed as an
exhibit to a Current Report on Form 8-K and
incorporated herein by reference
4 Indenture to be dated as of January 1, 1994 between
Riggs National Corporation and The Bank of New York
as Trustee
5* Opinion of David Lesser, General Counsel of Riggs
National Corporation, as to the validity of the Debt
Securities
12* Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Ernst & Young
24* Power of Attorney
25 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939
of The Bank of New York
</TABLE>
--------
* Previously filed.
<PAGE>
- --------------------------------------------------------------------------------
RIGGS NATIONAL CORPORATION
TO
THE BANK OF NEW YORK,
Trustee
_______________
SUBORDINATED DEBT SECURITIES
_______________
INDENTURE
Dated as of ______________, 1994
______________
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
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Riggs National Corporation
Certain Sections of this Indenture relating to
Sections 310 through 318, inclusive, of the
Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
<S> <C> <C> <C> <C> <C> <C>
(S) 310 (a) (1) .................................. 6.9
(a) (2) .................................. 6.9
(a) (3) .................................. Not Applicable
(a) (4) .................................. Not Applicable
(b) .................................. 6.8
6.10
6.13
(S) 311 (a) .................................. 6.13
(b) .................................. 6.13
(S) 312 (a) .................................. 7.1
(b) .................................. 7.2 (a)
(c) .................................. 7.2 (b)
(S) 313 (a) .................................. 7.3 (a)
(b) .................................. 7.3 (a)
(c) .................................. 7.3 (a)
(d) .................................. 7.3 (b)
(S) 314 (a) .................................. 7.4
(a) (4) .................................. 1.2
10.4
(b) .................................. Not Applicable
(c) (1) .................................. 1.2
(c) (2) .................................. 1.2
(c) (3) .................................. Not Applicable
(d) .................................. Not Applicable
(e) .................................. 1.2
(S) 315 (a) .................................. 6.1
(b) .................................. 6.2
(c) .................................. 6.1
(d) .................................. 6.1
(d) (1) .................................. 6.1
(d) (2) .................................. 6.1
(d) (3) .................................. 6.1
(e) .................................. 5.14
(S) 316 (a) (1) (A) .................................. 5.2
5.12
(a) (1) (B) .................................. 5.13
(a) (2) .................................. Not Applicable
(b) .................................. 5.8
(c) .................................. 1.4 (c)
(S) 317 (a) (1) .................................. 5.3
(a) (2) .................................. 5.4
(b) .................................. 10.3
(S) 318 (a) .................................. 1.7
</TABLE>
<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>
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NOTE: This table of contents shall not, for any purpose, be deamed to be part
of the Indenture.
-i-
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<S> <C> <C>
Section 3.8 Persons Deemed Owners......................... 33
Section 3.9 Cancellation.................................. 33
Section 3.10 Computation of Interest....................... 34
Section 3.11 CUSIP Numbers................................. 34
ARTICLE IV
Satisfaction and Discharge.................. 34
Section 4.1 Satisfaction and Discharge of Indenture....... 34
Section 4.2 Application of Trust Money.................... 35
ARTICLE V
Remedies...................... 36
Section 5.1 Events of Default............................. 36
Section 5.2 Acceleration of Maturity;
Rescission and Annulment................. 37
Section 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee............... 38
Section 5.4 Trustee May File Proofs of Claim.............. 39
Section 5.5 Trustee May Enforce Claims Without
Possession of Securities................. 40
Section 5.6 Application of Money Collected................ 40
Section 5.7 Limitation on Suits........................... 40
Section 5.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest
and to Enforce Conversion Rights......... 41
Section 5.9 Restoration of Rights and Remedies............ 42
Section 5.10 Rights and Remedies Cumulative................ 42
Section 5.11 Delay or Omission Not Waiver.................. 42
Section 5.12 Control by Holders............................ 42
Section 5.13 Waiver of Past Defaults....................... 43
Section 5.14 Undertaking for Costs......................... 43
Section 5.15 Waiver of Usury, Stay or Extension Laws....... 44
ARTICLE VI
The Trustee..................... 44
Section 6.1 Certain Duties and Responsibilities........... 44
Section 6.2 Notice of Defaults............................ 44
Section 6.3 Certain Rights of Trustee..................... 44
Section 6.4 Not Responsible for Recitals
or Issuance of Securities................ 46
Section 6.5 May Hold Securities........................... 46
Section 6.6 Money Held in Trust........................... 46
Section 6.7 Compensation and Reimbursement................ 46
Section 6.8 Disqualification; Conflicting Interests....... 47
Section 6.9 Corporate Trustee Required;
</TABLE>
- -------------------
NOTE: This table of contents shall not, for any purpose, be deamed to be part
of the Indenture.
-ii-
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
Eligibility............................... 48
Section 6.10 Resignation and Removal;
Appointment of Successor................. 48
Section 6.11 Acceptance of Appointment by Successor........ 50
Section 6.12 Merger, Conversion, Consolidation
or Succession to Business................ 51
Section 6.13 Preferential Collection of Claims
Against Company.......................... 51
Section 6.14 Appointment of Authenticating Agent........... 51
ARTICLE VII
Holders' Lists and Reports by Trustee and Company........ 53
Section 7.1 Company to Furnish Trustee Names
and Addresses of Holders.................. 53
Section 7.2 Preservation of Information;
Communications to Holders................. 54
Section 7.3 Reports by Trustee............................. 54
Section 7.4 Reports by Company............................. 54
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease...... 55
Section 8.1 Company May Consolidate, Etc.,
Only on Certain Terms..................... 55
Section 8.2 Successor Substituted.......................... 56
ARTICLE IX
Supplemental Indentures..................... 56
Section 9.1 Supplemental Indentures Without
Consent of Holders........................ 56
Section 9.2 Supplemental Indentures with
Consent of Holders........................ 58
Section 9.3 Execution of Supplemental Indentures........... 59
Section 9.4 Effect of Supplemental Indentures.............. 60
Section 9.5 Conformity with Trust Indenture Act............ 60
Section 9.6 Reference in Securities to
Supplemental Indentures................... 60
ARTICLE X
Covenants..................... 60
Section 10.1 Payment of Principal, Premium
and Interest............................. 60
Section 10.2 Maintenance of Office or Agency............... 60
Section 10.3 Money for Securities Payments
to Be Held in Trust...................... 61
</TABLE>
- -------------------
NOTE: This table of contents shall not, for any purpose, be deamed to be part
of the Indenture.
-iii-
<PAGE>
<TABLE>
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<S> <C> <C>
Section 10.4 Statement by Officers as to Default.......... 62
Section 10.5 Existence.................................... 63
Section 10.6 Maintenance of Properties.................... 63
Section 10.7 Payment of Taxes and Other Claims............ 63
Section 10.8 Waiver of Certain Covenants.................. 63
Section 10.9 Calculation of Original Issue Discount....... 64
ARTICLE XI
Redemption of Securities.................. 64
Section 11.1 Applicability of Article..................... 64
Section 11.2 Election to Redeem; Notice to Trustee........ 64
Section 11.3 Selection by Trustee of Securities
to Be Redeemed.......................... 65
Section 11.4 Notice of Redemption......................... 66
Section 11.5 Deposit of Redemption Price.................. 66
Section 11.6 Securities Payable on Redemption Date........ 67
Section 11.7 Securities Redeemed in Part.................. 67
ARTICLE XII
Sinking Funds......................... 68
Section 12.1 Applicability of Article..................... 68
Section 12.2 Satisfaction of Sinking Fund
Payments with Securities................ 68
Section 12.3 Redemption of Securities for
Sinking Fund............................ 69
ARTICLE XIII
Subordination of Securities.................. 69
Section 13.1 Securities Subordinate to
Senior Indebtedness..................... 69
Section 13.2 Payment Over of Proceeds Upon
Dissolution, Etc........................ 70
Section 13.3 Prior Payment to Senior Indebtedness
Upon Acceleration of Securities......... 71
Section 13.4 No Payment When Senior Indebtedness
Default................................. 71
Section 13.5 Payment Permitted If No Default.............. 72
Section 13.6 Subrogation to Rights of Holders
of Senior Indebtedness.................. 72
Section 13.7 Provisions Solely to Define
Relative Rights......................... 73
Section 13.8 Trustee to Effectuate Subordination.......... 74
Section 13.9 No Waiver of Subordination Provisions........ 74
Section 13.10 Notice to Trustee........................... 74
Section 13.11 Reliance on Judicial Order or
</TABLE>
- -------------------
NOTE: This table of contents shall not, for any purpose, be deamed to be part
of the Indenture.
-iv-
<PAGE>
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<CAPTION>
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<S> <C> <C>
Certificate of Liquidating Agent........ 75
Section 13.12 Trustee Not Fiduciary for Holders
of Senior Indebtedness or
Entitled Persons........................ 76
Section 13.13 Rights of Trustee as Holder of
Senior Indebtedness or Entitled Person;
Preservation of Trustee's Rights......... 76
Section 13.14 Article Applicable to
Paying Agents............................ 76
Section 13.15 Payment of Proceeds in Certain Cases......... 77
ARTICLE XIV
Defeasance and Covenant Defeasance................ 78
Section 14.1 Applicability of Article;
Company's Option to Effect
Defeasance or Covenant Defeasance........ 78
Section 14.2 Defeasance and Discharge...................... 79
Section 14.3 Covenant Defeasance........................... 79
Section 14.4 Conditions to Defeasance or
Covenant Defeasance...................... 80
Section 14.5 Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions........... 83
Section 14.6 Reinstatement................................. 84
ARTICLE XV
Conversion of Securities..................... 84
Section 15.1 General....................................... 84
Section 15.2 Right to Convert.............................. 84
Section 15.3 Manner of Exercise of Conversion
Privilege; Delivery of Common Stock; No
Adjustment for Interest or Dividends..... 85
Section 15.4 Cash Payments in Lieu of
Fractional Shares........................ 86
Section 15.5 Conversion Price Adjustments; Effect of
Reclassifications, Mergers,
Consolidations and Sales of Assets....... 87
Section 15.6 Taxes on Shares Issued........................ 91
Section 15.7 Shares to be Fully Paid; Compliance
with Governmental Requirements........... 92
Section 15.8 Responsibility of Trustee..................... 92
Section 15.9 Covenant to Reserve Shares.................... 92
Section 15.10 Other Conversions............................ 92
</TABLE>
- -------------------
NOTE: This table of contents shall not, for any purpose, be deamed to be part
of the Indenture.
-v-
<PAGE>
INDENTURE, dated as of ______________, 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 certification, 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 31W, 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 Securities 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, the U.S. dollar equivalent on the date of original
issuance of such 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 actually knows to be so owned shall be so
disregarded. Securities so owned which have
<PAGE>
7
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any Affiliate of the Company or
of such other obligor.
"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
<PAGE>
8
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"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 purchased (including indebtedness of others for money
borrowed or purchased 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 ___________________________, 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: ____________________________,
As Trustee
By...........................
Authorized Signatory
ARTICLE III
The Securities
Section 3.1 Amount Unlimited; Issuable in Series.
------------------------------------
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
<PAGE>
23
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;
<PAGE>
24
(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 principal 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;
<PAGE>
25
(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
<PAGE>
26
(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.
-------------
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.
-----------------------------------
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
<PAGE>
27
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.
<PAGE>
28
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.
--------------------
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.
---------------------------------------------------
<PAGE>
29
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
<PAGE>
30
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, 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 of transfer of, a Global Security pursuant to the preceding
sentence.
<PAGE>
31
Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of 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.
----------------------------------------------
Except as otherwise provided as contemplated by Section 3.1 with respect
to any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
<PAGE>
32
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).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful
<PAGE>
33
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.
---------------------
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.
------------
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
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as
<PAGE>
34
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.
-----------------------
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.
-------------
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.
---------------------------------------
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
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
<PAGE>
35
(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.
--------------------------
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
<PAGE>
36
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 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
<PAGE>
37
(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 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
<PAGE>
38
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.
Section 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
-------------------------------------------------------
<PAGE>
39
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 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
<PAGE>
40
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.
Section 5.7 Limitation on Suits.
-------------------
<PAGE>
41
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 such rights shall not be impaired without the consent of
such Holder.
<PAGE>
42
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,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
<PAGE>
43
(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 expressed in such Securities (or, in the case of
redemption, on or after the Redemption Date).
<PAGE>
44
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.
-------------------------
Subject to the provisions of Section 6.1:
<PAGE>
45
(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;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either
<PAGE>
46
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);
<PAGE>
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 cotrustees 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
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.
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>
63
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>
64
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>
65
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>
66
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>
67
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>
68
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>
69
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>
70
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>
71
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>
72
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>
73
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>
74
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>
75
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>
76
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>
77
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>
78
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 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 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 Section applicable to such
Securities that are specified pursuant to Section 3.1 as being subject to this
provision), Section 5.1(5) or (6) or determined pursuant to Section 3.1 to be
subject
<PAGE>
79
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 securities that are (x) direct obligations of
the
<PAGE>
80
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>
81
(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>
82
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>
83
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>
84
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,
--------
<PAGE>
85
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 same
fraction of the closing price (determined in the manner provided in Section
15.5(a)(v)) of the Common Stock on the Trading Date next preceding the date of
conversion.
<PAGE>
86
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>
87
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 average of the daily closing prices of the Common
Stock for the shorter of (i) 30 consecutive Trading Days ending on the last
full Trading Day on the exchange or market specified in the second
following sentence prior to the Time of Determination or (ii) the period
commencing on the date next succeeding the first public announcement of the
issuance of such rights or warrants or such distribution through such last
full Trading Day 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
<PAGE>
88
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 each day shall be the reported
last sales price, regular way, or, in case no sale takes place on such day,
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 each 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
<PAGE>
89
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.
(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
<PAGE>
90
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
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.
<PAGE>
91
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
<PAGE>
92
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>
93
______________
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_____________________________
Title:
Attest:
By______________________
Title:
_______________________________,
As Trustee
By_____________________________
Attest: Title:
By______________________
Title:
<PAGE>
94
STATE OF )
) ss.:
COUNTY OF )
On the day of , before me personally came
, to me known, who, being by me duly sworn, did depose and say that
he is 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.
________________________________
<PAGE>
95
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the _____ day of _________________, before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is __________________ 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.
________________________________
<PAGE>
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 19,
1993 (except with respect to the matters discussed in Note 24 to the Financial
Statements as to which the date is October 25, 1993) in Riggs National
Corporation's Form 10-K for the year ended December 31, 1992, as filed in
Amendment No. 4 on Form 10-KA dated October 26, 1993, and to all references to
our Firm included in this registration statement.
/s/ Arthur Andersen & Co.
Washington, D.C.
January 12, 1994
<PAGE>
(LOGO OF ERNST & YOUNG APPEARS HERE)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the Caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Riggs National
Corporation for the registration of its Subordinated Debt Securities, and to the
incorporation by reference therein of our report with respect to the financial
statements of Riggs AP Bank Limited (not separately included herein) dated
March 2, 1993 except for Note 19 - Subsequent Events; Regulatory and Other
Developments Relating to Riggs National Corporation as to which the date is
October 25, 1993, included in Amendment No. 4 to the Annual Report (Form 10-K)
of Riggs National Corporation for the year ended December 31, 1992, filed with
the Securities and Exchange Commission.
ERNST & YOUNG
Chartered Accountants
London, England
January 12, 1994 /s/ERNST & YOUNG
<PAGE>
CONFORMED COPY
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
RIGGS NATIONAL CORPORATION
(Exact name of obligor 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)
______________________
Debt Securities
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20549
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such affilia-
tion.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 7th day of January, 1994.
THE BANK OF NEW YORK
By: LLOYD A. MCKENZIE
-------------------------------
Name: Lloyd A. McKenzie
Title: Assistant Vice President
-4-
<PAGE>
------------------------------------------------------------------
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business
September 30, 1993, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of
the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,112,299
interest-bearing balances .......... 607,187
Securities ........................... 3,712,310
Federal funds sold in domestic offices
of the bank ........................ 613,944
Loans and lease financing receivables:
Loans and leases, net of unearned
income .................23,923,315
Less Allowance for loan and lease
losses ....................800,277
Less allocated transfer risk
reserve ....................35,768
Loans and leases, net of unearned
income, allowance and reserve .... 23,087,270
Assets held in trading accounts ...... 959,333
Premises and fixed assets (including
capitalized leases) ................ 664,500
Other real estate owned .............. 102,235
Investments in unconsolidated subsi-
diaries and associated companies ... 170,664
Customers liability to this bank on
acceptances outstanding ............ 909,084
Intangible assets .................... 45,858
Other assets 1,562,551
-----------
Total assets $36,547,235
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices ................ $19,443,240
Noninterest-bearing .......7,387,665
Interest-bearing .........12,055,575
In foreign offices, Edge and Agree-
ment Subsidiaries, and IBFs ........ 8,104,447
Noninterest-bearing ..........80,823
Interest-bearing ..........8,023,624
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the bank and
of its Edge and Agreement subsi-
diaries, and in IBFs:
Federal funds purchased ............ 1,505,573
Securities sold under agreements to
repurchase ....................... 48,225
Demand notes issued to the U.S.
Treasury ........................... 300,000
Other borrowed money ................. 1,082,537
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,970
Subordinated notes and debentures .... 1,070,780
Other liabilities .................... 1,305,376
-----------
Total liabilities .................... 33,770,148
===========
EQUITY CAPITAL
Perpetual preferred stock and related
surplus ............................ 75,000
Common stock ......................... 942,284
Surplus .............................. 474,677
Undivided profits and capital
reserves ........................... 1,291,716
Cumulative foreign Currency transla-
tion adjustments ................... ( 6,590)
-----------
Total equity capital ................. 2,777,087
-----------
Total liabilities, limited-life pre-
ferred stock, and equity capital ... $36,547,235
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of
the above-named bank do hereby declare that this Report of Condition
has been prepared in conformance with the instructions issued by the
Board of Governors of the Federal Reserve System and is true to the
best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and
to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true and correct.
J. Carter Bacot )
Alan R. Griffith )- Directors
Thomas A. Renyi )
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