UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________.
Commission file number 0-16637
BROAD NATIONAL BANCORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2395057
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
905 Broad Street, Newark, New Jersey 07102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973)624-2300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $1.00 per share
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the 3,341,405 shares of voting
stock of the Registrant held by non-affiliates of the Registrant
on March 2, 1998, computed by reference to the closing sale price
of such stock as reported on NASDAQ, was approximately
$65,993,000. As of March 2, 1998, there were 4,708,476 shares of
the Registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference
into the indicated parts of this report: definitive Proxy
Statement for the 1998 Annual Meeting of Shareholders to be filed
with the Commission pursuant to Regulation 14A - Part III.
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PART I
ITEM 1. BUSINESS.
BUSINESS OF BANCORPORATION
GENERAL
Broad National Bancorporation ("Bancorporation") is a
bank holding company registered under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"). Although Bancorporation
was incorporated under the laws of the State of New Jersey on
April 7, 1981, it did not engage in any business activity until
February 1, 1983. On that date, it acquired all of the issued
and outstanding capital stock of Broad National Bank, a national
banking association (the "Bank") pursuant to a corporate
reorganization involving an exchange of shares. Bancorporation's
activities currently are limited to ownership of the outstanding
common securities of BNB Capital Trust (the "Issuer Trust"), as
well as the outstanding capital stock of the Bank and to
performing certain services for the Bank. Except as otherwise
provided herein, references herein to "Bancorporation" include
Bancorporation and its consolidated subsidiaries.
Bancorporation's principal executive offices are
located at 905 Broad Street, Newark, New Jersey 07102, and its
telephone number is (973) 624-2300.
DESCRIPTION OF BUSINESS
BANCORPORATION
Bancorporation is a bank holding company registered
under the BHC Act. Bancorporation's activities currently are
limited to ownership of the outstanding capital stock of the Bank
and to performing certain services for the Bank.
THE ISSUER TRUST
The Issuer Trust is a statutory business trust formed
under Delaware law pursuant to (i) a trust agreement, as amended
and restated, dated as of June 9, 1997, executed by
Bancorporation, as Depositor, Bankers Trust Company, as Property
Trustee, and Bankers Trust (Delaware), as Delaware Trustee, and
(ii) the filing of a Certificate of Trust with the Delaware
Secretary of State on June 9, 1997. The Issuer Trust is wholly
owned by Bancorporation. Bancorporation, while holder of all of
the beneficial interests represented by common securities of the
Issuer Trust (the "Common Securities"), has selected two
individuals who are employees of Bancorporation to serve as
Administrators. The Issuer Trust's business and affairs are
conducted by its Property Trustee, Delaware Trustee, and the two
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Administrators. The Issuer Trust exists for the exclusive
purposes of (i) issuing and selling the 9.5% Cumulative Trust
Preferred Securities (the "Preferred Securities") and the Common
Securities, (ii) using the proceeds from the sale of the
Preferred Securities and the Common Securities to acquire the
9.5% Junior Subordinated Debentures (the "Junior Subordinated
Debentures") issued by Bancorporation and (iii) engaging in only
those other activities necessary, advisable or incidental thereto
(such as registering the transfer of the Preferred Securities).
Accordingly, the Junior Subordinated Debentures are the sole
asset of the Issuer Trust and payments under the Junior
Subordinated Debentures are the sole revenue of the Issuer Trust.
Bancorporation has entered into several contractual arrangements
for the purpose of fully and unconditionally supporting the
Issuer Trust's payment of distributions on, payments on any
redemption of, and any liquidation distribution with respect to,
the Preferred Securities. These contractual arrangements
constitute a full and unconditional guarantee by Bancorporation
of the Issuer Trust's obligations under the Preferred Securities.
The Issuer Trust has a term of 31 years, but may terminate
earlier as provided in the Trust Agreement. The principal
executive office of the Issuer Trust is 905 Broad Street, Newark,
New Jersey, 07102 and its telephone number is (973)624-2300. See
"Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations, and Item 8. Financial
Statements and Supplementary Data.
THE BANK
The Bank is a national banking association organized in
1925 under the laws of the United States with offices in Newark
(7 offices), East Orange, Millburn, North Arlington, Livingston,
Perth Amboy, Kearny and Elizabeth (2 offices), New Jersey. The
Bank is a full service commercial bank and offers a broad range
of commercial and retail banking services. It offers checking
accounts, savings accounts, money market accounts and individual
retirement accounts (IRAs), as well as various other types of
time deposits which are insured by the Bank Insurance Fund
("BIF") administered by the Federal Deposit Insurance Corporation
("FDIC") to the full extent provided by law. The Bank also
provides typical bank services such as cashiers checks, United
States Savings Bonds and travelers checks. The Bank had total
deposits of $485,073,000 as of December 31, 1996 and of
$518,238,000 as of December 31, 1997. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operation."
The Bank originates and services both secured and
unsecured loans which totaled $278,585,000 as of December 31,
1996 and $315,554,000 as of December 31, 1997, in each case, net
of deferred loan fees and the allowance for possible loan losses.
Commercial lending operations include various types of credit for
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the Bank's commercial and industrial customers. The Bank's
installment loan department makes direct loans to individuals.
The Bank's mortgage loan department makes a variety of
residential, industrial, and commercial loans secured by real
estate. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation."
The Bank also provides agency and custody services for
individuals and institutional accounts. The Bank has trust powers
which permit it to administer trusts and estates, although the
Bank has no trust accounts at this time.
The Bank currently has fourteen branch banking
facilities in addition to its main location. See "Item 2.
Properties."
EMPLOYEES
Bancorporation and the Bank have approximately 205
full-time employees and 35 part-time employees. Neither
Bancorporation nor the Bank is a party to any collective
bargaining agreement and employee relations are deemed to be
satisfactory.
SERVICE AREA AND COMPETITION
The principal market is defined as all of Essex County,
the southern quadrant of Bergen County, the southern quadrant of
Hudson County, the northeast quadrant of Union County and the
northeast quadrant of Middlesex County, New Jersey. This market
area is highly competitive with many banks and financial
institutions vying for the same business. Most of the Bank's
competitors are institutions of far greater size and the Bank's
deposits constitute less than one percent of the commercial bank
deposits in its market area.
The Bank encounters intense competition in local and
national markets from non-banking as well as banking sources in
all of its activities, including many competitors which have
substantially greater resources, name recognition and market
presence than the Bank. As a lender it competes not only with
other banks but also with savings and loan associations, savings
banks, credit unions, finance companies, mortgage companies,
factoring companies, insurance companies, and other financial
institutions, many of which have higher legal lending limits. It
competes for deposits with other banks, savings banks, savings
and loan associations, credit unions, mutual funds, money market
funds, and issuers of commercial paper and other securities.
Such competition is particularly intense from the Bank's Newark,
New Jersey-based competitors. Trends toward the consolidation of
the banking industry may make it more difficult for smaller banks
<PAGE>
and financial institutions, such as the Bank, to compete with
large, national and regional banking institutions.
SUPERVISION AND REGULATION
FEDERAL BANK HOLDING COMPANY ACT
GENERAL. Bancorporation is a registered bank holding
company within the meaning of the BHC Act, subject to the
supervision of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"). Bancorporation is required
to file with the Federal Reserve Board an annual report and such
other additional information as the Federal Reserve Board may
require pursuant to the BHC Act. Also, the Federal Reserve Board
periodically examines Bancorporation. The Federal Reserve Board
has authority to issue cease and desist orders against bank
holding companies if it determines that their actions represent
unsafe and unsound practices or violations of law. In addition,
the Federal Reserve Board is empowered to impose substantial
civil money penalties for violations of banking statutes and
regulations. Regulation by the Federal Reserve Board is intended
to protect depositors of the Bank, not shareholders of
Bancorporation.
SOURCE OF STRENGTH. Federal Reserve Board policy
requires a bank holding company to serve as a source of financial
and managerial strength to its subsidiary banks. Under this
policy, a bank holding company is expected to stand ready to use
its available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity,
and to maintain resources and the capacity to raise capital which
it can commit to its subsidiary banks. It is the Federal Reserve
Board's position that the failure of a bank holding company to
serve as a source of strength to a distressed subsidiary bank is
an unsafe and unsound banking practice. This has become known as
the "source of strength doctrine." It is not clear whether the
source of strength doctrine is legally enforceable by the Federal
Reserve Board.
LIMITATION ON ACQUISITIONS. The BHC Act requires every
bank holding company to obtain the prior approval of the Federal
Reserve Board before (i) taking any action that causes a bank to
become a controlled subsidiary of the bank holding company, (ii)
acquiring direct or indirect ownership or control of voting
shares of any bank or bank holding company, if the acquisition
results in the acquiring bank holding company having control of
more than 5% of the outstanding shares of any class of voting
securities of such bank or holding company and such bank or bank
holding company is not majority-owned by the acquiring bank
holding company prior to the acquisition, (iii) the acquisition
by a bank holding company or any nonbank subsidiary thereof of
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all or substantially all of the assets of a bank, or (iv) a
merger or consolidation with another bank holding company.
In determining whether to approve a proposed
acquisition, merger or consolidation, the Federal Reserve Board
is required to take into account the competitive effects of the
proposed acquisition, the convenience and needs of the community
to be served, and the financial and managerial resources and
future prospects of the bank holding companies and banks
concerned. If a proposed acquisition, merger or consolidation
might have the effect in any section of the United States to
substantially lessen competition or to tend to create a monopoly,
or if such proposed acquisition, merger, or consolidation
otherwise would be in restraint of trade, then the Federal
Reserve Board may not approve it unless it finds that the
anticompetitive effects are clearly outweighed in the public
interest by the probable effect of the proposed transaction in
meeting the convenience and needs of the community to be served.
Bancorporation has no current plans to acquire any interest in
the voting stock or assets of any bank or other financial
institution, although such an acquisition may be considered in
the future.
LIMITATION ON CERTAIN ACTIVITIES. The BHC Act also
prohibits a bank holding company, with certain exceptions, from
engaging in, and from acquiring direct or indirect ownership or
control of the voting shares or assets of any company engaged in
any activity other than banking or managing or controlling banks,
and any activity which the Federal Reserve Board determines to be
so closely related to banking, or managing or controlling banks,
as to be a proper incident thereto. In acting on an application
to engage in such an activity, the Federal Reserve Board is
required to weigh the expected benefits to the public, such as
greater convenience, increased competition or gains in
efficiency, against the risks of possible adverse effects, such
as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
This consideration includes an evaluation of the financial and
managerial resources of the applicant, including its
subsidiaries, and any company to be acquired, and the effect of
the proposed transaction on those resources.
To date, the Federal Reserve Board, by regulation, has
determined that, subject to expressed limitations, certain
activities are permissible for bank holding companies and their
subsidiaries and may be engaged in upon notice to the Federal
Reserve Board without prior approval. These permissible
activities include furnishing or providing services for the
internal operations of the bank holding company and its
subsidiaries, operating a safe deposit business, making and
servicing loans, operating an industrial bank, performing certain
trust company functions, acting as an investment or financial
<PAGE>
advisor in certain capacities, leasing certain real or personal
property, making certain investments to promote community
development, providing certain data processing services,
performing certain insurance agency and underwriting functions,
owning, controlling and operating a savings association,
providing specified courier services, providing management
consulting advice to nonaffiliated banks and nonbank depository
institutions, selling certain money orders, United States savings
bonds and traveler's checks, performing appraisals of real and
personal property, arranging certain commercial real estate
equity financing, providing certain securities brokerage
services, underwriting and dealing in certain government
obligations and money market instruments, providing foreign
exchange advisory and transactional services, acting as a futures
commission merchant, providing investment advice on financial
futures and options on futures, providing consumer financial
counseling, providing tax planning and preparation services,
providing certain check guaranty services, operating a collection
agency and operating a credit bureau.
The Federal Reserve Board has also determined that
certain other activities, including real estate brokerage and
syndication, land development, property management, management
consulting, underwriting of life insurance not sold in connection
with a credit transaction, and insurance premium funding are
improper activities for bank holding companies and their
subsidiaries. In the future the Federal Reserve Board may take
additional actions adding and refusing to add particular
activities to the list of activities that the Federal Reserve
Board deems to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. Certain
bank holding companies and their subsidiaries possess
"grandfather rights" giving them authority to engage in one or
more of the activities which are not generally permissible
because they were engaged in such activities prior to the
adoption of legislation restricting such activities.
Under cross-guaranty provisions of the Federal Deposit
Insurance Act (the "FDIA"), bank subsidiaries of a bank holding
company are liable for any loss incurred (or reasonably
anticipated to be incurred) by the Bank Insurance Fund (the
"BIF"), the federal deposit insurance fund for banks, in
connection with the failure of any other bank subsidiary of the
bank holding company. Liability under such cross-guaranty would
be junior to deposit liabilities and most secured obligations,
but senior to obligations to shareholders and most obligations to
affiliates. The Federal Deposit Insurance Corporation (the
"FDIC") has authority to prospectively waive the cross-guaranty
provision. Currently the Bank is the only bank subsidiary of
Bancorporation.
<PAGE>
A bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in
connection with the extension of credit or the lease or sale of
any property or the furnishing of services. Subsidiary banks of
a bank holding company are also subject to certain restrictions
imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, or
investment in the stock or other securities thereof, and on the
taking of such stocks or securities as collateral for loans.
REGULATORY CAPITAL REQUIREMENTS. The Federal Reserve
Board has promulgated "capital adequacy guidelines" for use in
its examination and supervision of bank holding companies. A
holding company's ability to pay dividends and expand its
business through the acquisition of new banking subsidiaries can
be restricted if its capital falls below levels established by
these guidelines. In addition, holding companies whose capital
falls below specified levels can be required to implement a plan
to increase capital.
The Federal Reserve Board's capital adequacy guidelines
provide for the following types of capital: Tier 1 capital (also
referred to as core capital), Tier 2 capital (also referred to as
supplementary capital), Tier 3 capital (consisting of short-term
subordinated debt that meets certain conditions and used only in
the measure of market risk, as discussed below) and Total
capital. A bank holding company's Tier 1 capital generally
includes the following elements: common shareholders' equity
(excluding unrealized gain (loss) on securities available-for-
sale), qualifying noncumulative perpetual preferred stock and
related surplus, qualifying cumulative perpetual preferred stock
and related surplus (limited to a maximum of 25% of Tier 1
capital elements) and minority interests in the equity accounts
of consolidated subsidiaries. Goodwill is generally excluded
from Tier 1 capital. Most intangible assets also are deducted
from Tier 1 capital. A bank holding company's Tier 2 capital
generally includes allowances for loan and lease losses (limited
to 1.25% of risk-weighted assets), most perpetual preferred stock
and any related surplus (noncumulative and cumulative, without
percentage limits), certain hybrid capital instruments, perpetual
debt and mandatory convertible debt securities, and certain
intermediate-term preferred stock and intermediate-term
subordinated debt instruments (to a maximum of 50% of Tier 1
capital excluding goodwill, but phased-out as the instrument
matures). The maximum amount of supplementary capital that
qualifies as Tier 2 capital is limited to 100% of Tier 1 capital
(net of goodwill). For purposes of calculating the total
risk-based capital ratio, Total capital generally includes Tier 1
capital, plus qualifying Tier 2 capital, minus investments in
unconsolidated subsidiaries, reciprocal holdings of bank holding
company capital securities, certain deferred tax assets and other
deductions as determined by the Federal Reserve Board.
<PAGE>
The Federal Reserve Board issued a regulation that
limits the amount of intangible assets which may be included in
Tier 1 capital. Under the regulation, mortgage servicing rights
("MSRs") and purchased credit card relationships ("PCCRs") would
be included in Tier 1 capital to the extent that, in the
aggregate, they do not exceed 50% of Tier 1 capital and, to the
further extent that PCCRs, individually, do not exceed 25% of
Tier 1 capital. MSRs and PCCRs in excess of these limits, as
well as core deposit intangibles ("CDI") and all other identified
intangible assets, must be deducted in determining Tier 1
capital. As of December 31, 1997, Bancorporation did not have
MSRs, PCCRs, CDIs or other identified intangible assets.
The Federal Reserve Board issued a press release on
October 21, 1996 stating that it would treat trust preferred
securities as part of Tier 1 capital for bank holding companies
subject to the following conditions: (1) the instrument must
provide for a minimum five-year consecutive deferral period on
distributions to preferred shareholders; (2) the underlying
intercompany loan must be subordinated to all other debt and have
the longest feasible maturity; (3) these securities together with
other cumulative preferred stock issued by a bank holding company
can only constitute 25 percent of the holding company's Tier 1
capital; and (4) prior Federal Reserve approval is required
before the preferred security may be redeemed. The $11,500,000
of preferred securities issued by Bancorporation meet these
requirements.
The Federal Reserve Board's capital adequacy guidelines
require a bank holding company to satisfy a Tier 1 Leverage
Ratio, a total risk-based capital ratio and a Tier 1 risk-based
capital ratio. Under the Tier 1 Leverage Ratio capital
guideline, a bank holding company must have and maintain Tier 1
capital in an amount equal to at least 3.0% of its average total
consolidated assets. In general, average total consolidated
assets means the quarterly average total assets (net of the
allowance for loan and lease losses) reported on a bank holding
company's Consolidated Financial Statements (FR Y-9C Report),
minus goodwill and any other intangible assets or investments in
subsidiaries which are deducted from Tier 1 capital. The 3.0%
minimum Tier 1 Leverage Ratio is considered the absolute minimum
amount of Tier 1 capital which the most highly rated bank holding
companies (those rated composite 1 under the BOPEC rating system
for bank holding companies) are required to maintain. All other
bank holding companies must maintain a minimum Tier 1 Leverage
Ratio of 3.0% plus an additional cushion of at least 100 to 200
basis points.
Under the Federal Reserve Board's capital adequacy
guidelines, a bank holding company must have and maintain a ratio
of Total capital to risk-weighted assets of 8.00%, and a ratio of
Tier 1 capital to risk-weighted assets of 4.00%. The amount of a
<PAGE>
bank holding company's risk-weighted assets is determined by
multiplying the balance sheet amount of each of the bank holding
company's consolidated assets by a specified risk-weight factor
of 0%, 20%, 50% or 100%, in accordance with the relative risk
level of the asset. In determining risk-weighted assets, off-
balance sheet items, such as standby letters of credit, are
converted to an on-balance sheet credit equivalent amount by
multiplying the face amount of the off-balance sheet item by a
credit conversion factor of 0%, 20%, 50% or 100%, in accordance
with the probability that the off-balance sheet item will become
a credit extended by the bank holding company. In general,
intangible assets and other assets which are deducted in
determining Tier 1 capital and Total capital must also be
excluded from risk-weighted assets.
The Federal Reserve Board has proposed to permit
portions of claims (including repurchase agreements)
collateralized by cash on deposit with the lending institution or
by securities issued or guaranteed by the U.S. Treasury, U.S.
government agencies, or the central governments in other OECD
countries to be eligible for a zero percent risk weight. The
effect of this proposal is to allow banks and bank holding
companies to hold less capital for these types of collateralized
transactions.
Under the Federal Reserve Board's market risk rules, an
institution with significant trading activities must measure and
hold capital for exposure to general market risk arising from
fluctuations in interest rates, equity prices, foreign exchange
rates and commodity prices and exposure to specific risk
associated with debt and equity positions in the trading
portfolio. This regulation applies to any bank or bank holding
company (i) whose trading activity equals 10% or more of its
total assets or (ii) whose trading activity equals $1 billion or
more. General market risk refers to changes in the market value
of on-balance sheet assets and off-balance sheet items resulting
from broad market movements. Specific risk refers to changes in
the market value of individual positions due to factors other
than broad market movements and includes such risks as the credit
risk of an instrument's issuer. Under the Federal Reserve
Board's rules, an institution must measure its general market
risk using its internal risk measurement model to calculate a
"value-at-risk" based capital charge. An institution must also
measure its specific risk either through a valid internal model
or by a so-called standardized approach. The standardized
approach for the measurement of specific risk uses a risk-
weighing process developed by the Federal Reserve which
categorizes individual instruments and then assesses a fixed
capital charge. Until September, 1997, an institution that used
an internal model to measure specific risk, rather than the
standardized approach, was required to hold capital for specific
risk at least equal to 50 percent of the specific risk charge
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calculated when using the standardized approach (the minimum
specific risk charge). If that portion of an institution's
"value-at-risk" capital charge which was attributable to specific
risk did not equal the minimum specific risk charge, the
institution was subject to additional charges to make up for such
difference. As of September, 1997, the Federal Reserve has
eliminated the use of the minimum specific risk charge and
consequently, the need for a dual calculation if an institution
uses its internal model to measure specific risk. Therefore, an
institution using a valid internal model to measure specific risk
may use the "value-at-risk" measures generated by its model
without being required to compare the model-generated risk charge
to the minimum specific risk charge as calculated under the
standardized approach.
The regulation supplements the existing credit risk-
based capital standards by requiring an affected institution to
adjust its risk-based capital ratio to reflect market risk. In
measuring market risk, institutions may use Tier 3 capital to
meet the market risk capital requirements. Tier 3 capital is
subordinated debt that is unsecured, fully paid up, has an
original maturity of at least two years, is not redeemable before
maturity without the prior approval of the institution's
supervisor, is subject to a lock-in clause that prevents the
issuer from repaying the debt even at maturity if the issuer's
capital ratio is, or with repayment, would become, less than the
minimum 8% risk-based capital ratio, and does not contain and is
not covered by any covenants, terms or restrictions that may be
inconsistent with safe and sound banking practices.
On December 31, 1997, Bancorporation was in compliance
with all of the Federal Reserve Board's capital guidelines. On
such date, Bancorporation had a Tier 1 Leverage Ratio of 8.19%
(compared with a requirement of 4% to 5%), and a ratio of total
capital to risk-weighted assets of 14.41% (compared with a
requirement of 8%) and a ratio of Tier 1 capital to risk-weighted
assets of 13.16% (compared with a requirement of 4%). The
capital ratios include the preferred securities which are 23.10%
of the Tier 1 capital. There can be no assurance, however, that
Bancorporation will remain in compliance with regulatory capital
requirements. For additional information on Bancorporation
capital, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Financial
Condition--Shareholders' Equity."
LIMITATION ON INCURRED DEBT. Bancorporation currently
has no plans to incur any additional indebtedness. If
Bancorporation determines to do so in the future, it will be
subject to the general statutory and regulatory restrictions.
INTERSTATE BANKING AND BRANCHING. Under the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 (the
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"Riegle-Neal Act"), bank holding companies may acquire the stock
or substantially all of the assets of banks located in any state
regardless of whether such transaction is prohibited under the
laws of any state. The Federal Reserve Board, however, may not
approve an interstate acquisition if as a result of the
acquisition the bank holding company would control more than 10%
of the total amount of insured deposits in the United States or
would control more than 30% of the insured deposits in the home
state of the acquired bank. The 30% of insured deposits state
limit does not apply if the acquisition is the initial entry into
a state by a bank holding company or if the home state waives
such limit.
Under the Riegle-Neal Act, individual states may
restrict interstate acquisitions in two ways. First, a state may
prohibit an out-of-state bank holding company from acquiring a
bank located in the state unless the target bank has been in
existence for a specified minimum period of time (not to exceed
five years). Second, a state may establish limits on the total
amount of insured deposits within the state which are controlled
by a single bank holding company (a "deposit cap"), provided that
such deposit limit does not discriminate against out-of-state
bank holding companies.
The Riegle-Neal Act now permits affiliated banks in
different states to act as agents for each other for purposes of
receiving deposits, renewing time deposits, closing loans,
servicing loans and receiving payments on loans and other
obligations. A bank acting as an agent for an affiliated bank is
not considered a branch of the affiliated bank.
Beginning on June 1, 1997, the Riegle-Neal Act
authorized interstate branching by a merger of banks with
different home states which results in a single bank with
branches in both states. The Riegle-Neal Act gave states the
right to "opt out" and prohibit interstate mergers by passing
legislation before June 1, 1997 that expressly prohibits all
merger transactions with out-of-state banks. The Riegle-Neal Act
also gave states the right to "opt in" and authorize early
interstate mergers by passing legislation that expressly permits
interstate merger transactions with all out-of-state banks. The
Riegle-Neal Act authorized banks to establish and operate a de
novo branch in a state (other than the bank's home state) only if
the host state "opts in" to authorize de novo interstate banking
by passing legislation that expressly permits all out-of-state
banks to establish de novo branches in the state. As of June 1,
1997, approximately 44 states acted on the Riegle-Neal Act. Only
two states, Texas and Montana, opted out. The states of New
Jersey, New York, Connecticut, Pennsylvania, Delaware and
Maryland opted into the Riegle-Neal Act, and of those states,
Connecticut, Pennsylvania, and Maryland permit de novo interstate
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branching for banks located in any state which enacts a
reciprocal statute.
Effective October 10, 1997, the Riegle-Neal Act
prohibits any bank from establishing or acquiring a branch or
branches outside its home state primarily for the purpose of
deposit production. An interstate branch must reasonably help
meet the credit needs of the communities served as determined by
a loan-to-deposit ratio screen. The FDIC and other banking
agencies, under the final rule, will determine a bank's total
loan-to-deposit ratio for all branches opened in a particular
state one year or more after the bank has established an
interstate branch. If the ratio is 50 percent of the average
loan-to-deposit ratio for all banks headquartered in that state,
the banking regulators will try to determine whether the branches
are making a "reasonable" effort to meet the needs of the
community served in that state by using six mitigating factors.
The agencies may impose sanctions on institutions found not to
meet the community credit needs. The regulators may require the
bank to close branches in the state where it has a low loan-to
deposit ratio, and may prohibit the bank from opening any new
branches unless the institution assures the agencies that it will
attempt to meet those credit needs.
STATE BRANCHING LIMITATIONS
In general, New Jersey law permits a bank, with prior
regulatory approval, to establish a full branch office, a
mini-branch office or a communications terminal branch office
anywhere in the State. Furthermore, no bank shall establish a
full branch office unless its capital shall equal or exceed the
minimum capital established by the commissioner by regulation.
FEDERAL BANK REGULATION
GENERAL. As a national bank, the Bank is subject to
regulation and examination primarily by the Office of the
Comptroller of the Currency (the "OCC"). The Bank is also
regulated by the Federal Reserve Board and the FDIC. Regulation
by these agencies is designed to protect depositors of the Bank
rather than shareholders of Bancorporation. The OCC has the
authority to issue cease and desist orders if it determines that
activities of the Bank represent unsafe and unsound banking
practices or violations of law. In addition, the OCC is
empowered to impose substantial civil money penalties for
violations of banking statutes and regulations.
REGULATORY CAPITAL REQUIREMENTS. The OCC has adopted
minimum capital requirements applicable to national banks which
are substantially similar to the capital adequacy guidelines
established by the Federal Reserve Board for bank holding
<PAGE>
companies. There are, however, technical differences in the
methodologies used to calculate the capital ratios.
On December 31, 1997, the Bank was in compliance with
all of the OCC's minimum capital requirements. On such date, the
Bank had a Tier 1 Leverage Ratio of 7.33% (compared with a
requirement for the Bank of 4% to 5%), and a ratio of Total
capital to risk-weighted assets of 13.03% (compared with a
requirement of 8%), and a ratio of Tier 1 capital to
risk-weighted assets of 11.77% (compared with a requirement of
4%).
CLASSIFICATION OF BANKS. Federal banking laws classify
financial institutions in one of the following five categories,
depending upon the amount of their capital: well-capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized or critically undercapitalized. Under OCC
regulations, a bank is deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10% or greater, a Tier 1
risk-based capital ratio of 6% or greater and a Tier 1 leverage
ratio of 5% or greater (and is not subject to any order or
written directive specifying any higher capital ratio), (ii)
"adequately capitalized" if it has a total risk-based capital
ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4%
or greater and a Tier 1 leverage ratio of 4% or greater (or a
Tier 1 leverage ratio of 3% or greater, if the bank has a CAMEL
rating of 1), (iii) "undercapitalized" if it has a total
risk-based capital ratio that is less than 8%, a Tier 1
risk-based capital ratio that is less than 4% or a Tier 1
leverage ratio that is less than 4% (or a Tier 1 leverage ratio
that is less than 3%, if the bank has a CAMEL rating of 1), (iv)
"significantly undercapitalized" if it has a total risk-based
capital ratio that is less than 6%, a Tier 1 risk based capital
ratio that is less than 3% or a Tier 1 leverage ratio that is
less than 3%, and (v) "critically undercapitalized" if it has a
Tier 1 leverage ratio that is equal to or less than 2%. Federal
banking laws require the federal regulatory agencies to take
prompt corrective action against undercapitalized financial
institutions. Under OCC regulations, the Bank was a well
capitalized institution as of December 31, 1997.
DEPOSIT INSURANCE AND ASSESSMENTS. The deposits of the
Bank are insured by the BIF administered by the FDIC, in general,
to a maximum of $100,000 per insured depositor. Under FDIA and
FDIC regulations, the Bank is required to pay annual assessments
to the FDIC for deposit insurance. The FDIC has adopted a
risk-based assessment system. Under the risk-based assessment
system, BIF members pay varying assessment rates depending upon
the level of the institution's capital and the degree of
supervisory concern over the institution. The assessment rates
are set by the FDIC semiannually. The FDIC's assessment rates
range from zero (0) cents to 27 cents per $100 of insured
<PAGE>
deposits. Institutions qualifying for the $0 assessment rate are
no longer required to pay the minimum deposit premium payment of
$2,000 annually. As of January 1, 1998, the Bank's assessment
rate was zero cents per $100 of insured deposits. The FDIC has
authority to increase the annual assessment rate if it determines
that a higher assessment rate is necessary to increase BIF's
reserve ratio. There is no cap on the annual assessment rate
which the FDIC may impose.
In addition to any assessments that may be imposed by
the FDIC as described above, the Deposit Insurance Funds Act of
1996 provides for the imposition of annual assessments by the
Financing Corporation on Savings Association Insurance Fund-
assessable deposits and BIF-assessable deposits. These
assessments are scheduled to remain in effect from January 1,
1997 through December 31, 1999. As of January 1, 1998, the
annual assessment rate applicable to the Bank was approximately
1.26 basis points of its assessable deposits.
INTEREST RATES. The rate of interest a bank may charge
on certain classes of loans is limited by state and federal law.
At certain times in the past, these limitations, in conjunction
with national monetary and fiscal policies that affect the
interest rates paid by banks on deposits and borrowings, have
resulted in reductions of net interest margins on certain classes
of loans. Such circumstances may recur in the future, although
the trend of recent federal and state legislation has been to
eliminate restrictions on the rates of interest which may be
charged on some types of loans and to allow maximum rates on
other types of loans to be determined by market factors.
LOANS TO ONE BORROWER. In addition to limiting the
rate of interest chargeable by banks on certain loans, federal
law imposes additional restrictions on a national bank's lending
activities. Under federal law the maximum amount that a national
bank may lend to one borrower (and certain related interests of
such borrower) generally is limited to 15% of the bank's
unimpaired capital and unimpaired surplus, plus an additional 10%
for loans fully secured by readily marketable collateral. There
are certain exceptions to the general rule including loans fully
secured by government securities or deposit accounts in the bank.
As of December 31, 1997, the Bank's lending limit under this
regulation was approximately $7,728,000.
PAYMENT OF DIVIDENDS. The National Bank Act restricts
the payment of dividends by a national bank as follows: (i) no
dividends may be paid if the bank has no undivided profits or
retained earnings then on hand; (ii) until the surplus fund of
the bank is equal to its capital stock, no dividends may be
declared unless there has been carried to the surplus fund not
less than one-tenth of the bank's net profits of the preceding
half-year period in the case of quarterly or semiannual
<PAGE>
dividends, or not less than one-tenth of the net profits of the
preceding two consecutive half-year periods in the case of annual
dividends; and (iii) the approval of the OCC is required if
dividends declared by the bank in any year would exceed the total
of net profits for that year combined with retained net profits
for the preceding two years, less any required transfers to
surplus.
As of December 31, 1997, retained earnings of the Bank
of $9,765,000 were available for payment of dividends to
Bancorporation without regulatory approval. For additional
information on the Bank's capital, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition--Shareholders' Equity."
COMMUNITY REINVESTMENT ACT. On May 4, 1995, the
Federal Reserve Board, the FDIC and the OCC adopted regulations
relating to the Community Reinvestment Act (the "CRA"). The
purpose of the CRA regulations is to establish the framework and
criteria by which the bank regulatory agencies assess an
institution's record of helping to meet the credit needs of its
community, including low- and moderate-income neighborhoods, and
to provide that the agencies' assessment shall be taken into
account in reviewing certain applications. The regulations seek
to emphasize an institution's performance rather than the
process, to promote consistency in evaluation of institutions,
and to eliminate unnecessary reporting burdens. The regulations
replace the previous twelve assessment factors for large banks
with three tests: (i) a lending test, (ii) a service test, and
(iii) an investment test. While documentation requirements have
been substantially reduced, the safe harbors from CRA protest
have also been eliminated.
OTHER REGULATORY LIMITATIONS. Bancorporation and the
Bank are "affiliates" within the meaning of the Federal Reserve
Act. As such, the amount of loans or extensions of credit which
the Bank may make to Bancorporation or to third parties secured
by securities or obligations of Bancorporation are substantially
limited by the Federal Reserve Act and the FDIA. Such acts
further restrict the range of permissible transactions between a
bank and an affiliated company. A bank and its subsidiaries may
engage in certain transactions, including loans and purchases of
assets, with an affiliated company only if the terms and
conditions of the transaction, including credit standards, are
substantially the same as, or at least as favorable to the bank
as, those prevailing at the time for comparable transactions with
non-affiliated companies or, in the absence of comparable
transactions, on terms and conditions that would be offered to
non-affiliated companies.
The Bank is also authorized to invest in a service
corporation that can offer the same services as the banking
<PAGE>
related services that bank holding companies are authorized to
provide. However, prior regulatory approval must generally be
obtained prior to making such an investment or performing such
services.
BANKING ACTIVITIES. The investments and activities of
the Bank are subject to substantial regulation by the OCC and the
FDIC, including without limitation investments in subsidiaries,
investments for their own account (including limitations on
investments in junk bonds and equity securities), investments in
loans, loans to officers, directors and affiliates, security
requirements, truth-in-lending, community reinvestment, the types
of interest bearing deposit accounts which they can offer, trust
department operations, brokered deposits, audit requirements,
issuance of securities, branching and mergers and acquisitions.
MONETARY POLICY AND ECONOMIC CONDITIONS. The principal
sources of funds essential to the business of banks and bank
holding companies are deposits, shareholders' equity, and
borrowed funds. The availability of these various sources of
funds and other potential sources such as preferred stock or
commercial paper and the extent to which they are utilized depend
on many factors, the most important of which are the monetary
policies of the Federal Reserve Board and the relative costs of
different types of funds.
An important function of the Federal Reserve Board is
to regulate the national supply of bank credit in order to combat
recession and curb inflationary pressures. Among the instruments
of monetary policy used by the Federal Reserve Board to implement
these objectives are open market operations in U.S. Government
securities, changes in the discount rate on bank borrowings, and
changes in reserve requirements against bank deposits.
The Bank is subject to regulations issued by the
Federal Reserve Board which require depository institutions to
maintain non-interest-bearing reserves against their transaction
accounts and non-personal time deposits. These regulations
currently require depository institutions to maintain reserves
equal to 3% of transaction accounts up to $47.8 million plus 10%
(subject to adjustment by the Federal Reserve Board between 8%
and 14%) of the total over $47.8 million. In addition, reserves,
subject to adjustment by the Federal Reserve Board between 0% and
9%, must be maintained on non-personal time deposits. This
reserve percentage is currently 0%. Depository institutions may
designate and exempt up to $4.4 million of reservable liabilities
from the above reserve requirements. Because these reserves must
generally be maintained in cash or non-interest-bearing accounts,
the effect of the reserve requirements is to increase the cost of
funds to depository institutions. As of December 31, 1997, the
Bank was required to maintain a reserve balance of $3.4 million.
<PAGE>
Substantially all of the restrictions on the maximum
interest rates banks are permitted to pay on deposits have been
removed, although banks are still prohibited from paying interest
on demand deposits. Consequently, banks and thrift organizations
are substantially free to pay interest at any rate. Deregulation
has increased competition among such institutions for attracting
deposits and has resulted in an overall increase in such
institutions' cost of funds.
The monetary policies of the Federal Reserve Board have
had a significant effect on the operating results of commercial
banks in the past and are expected to continue to do so in the
future. In view of continuing changes in regulations affecting
commercial banks and other actions and proposed actions by the
Federal government and its monetary and fiscal authorities,
including proposed changes in the structure of banking in the
United States and general economic conditions, no prediction can
be made as to future changes in interest rates, credit
availability, deposit levels, loan demand, or the overall
performance of banks generally and of the Bank and Bancorporation
in particular.
The references in the foregoing discussion to various
aspects of statutes and regulations are merely summaries which do
not purport to be complete and which are qualified in their
entirety by reference to the actual statutes and regulations.
Item 2. Properties.
The main offices of both the Bank and Bancorporation
are located at 905 Broad Street, Newark, New Jersey 07102. The
building, which is owned by the Bank, is a two-story structure
constructed in 1960. It has approximately 18,000 square feet of
usable office space, which currently are used for the Bank's
operations. A wholly-owned subsidiary of the Bank owns the
five-story (approximately 45,000 square feet) Western Union
Building at 909 Broad Street in Newark, New Jersey, adjacent to
the Bank's main office. Approximately 81% of this building is
used by the Bank and the remaining 19% of the building is leased
to nonaffiliated companies.
The Bank currently has fourteen branch banking
facilities as described below in addition to its main location:
Approximate Expiration
Location Square Feet Date of Lease
Plaza Banking Center 5,092 December 31,
745 Broad Street 1998 /5/
Newark, New Jersey
<PAGE>
Ironbound Banking Center 4,100 February 28,
7 Wheeler Point Road 1999 /1/
Newark, New Jersey
North Newark Banking Center 3,500 December 31,
466 Bloomfield Avenue 2002 /1/
Newark, New Jersey
Millburn Banking Center 2,600 March 31,
225 Millburn Avenue 2001 /1/
Millburn, New Jersey
Gateway III Banking Center 2,076 September 30,
100 Mulberry Street 1999 /1/
Newark, New Jersey
North Arlington Banking Center 1,700 October 7,
65 River Road 1998 /4/
North Arlington, New Jersey
Jackson Street Banking Center 10,900 Owned
123-133 Jackson Street
Newark, New Jersey
Bayway Banking Center 3,700 April 30,
1000 South Elmora Avenue 2006 /2/
Elizabeth, New Jersey
Livingston Banking Center 3,450 November 30,
30 W. Mt. Pleasant Avenue 2001 /3/
Livingston, New Jersey
Perth Amboy Banking Center 3,400 August 31,
Convery Plaza, Route 35 2002 /5/
Perth Amboy, New Jersey
East Orange Central 6,070 Owned
Banking Center
554 Central Avenue
East Orange, New Jersey
Elizabeth Banking Center 3,190 Owned
826 Elizabeth Avenue
Elizabeth, New Jersey
Kearny Banking Center 700 March 31,
180 Schuyler Ave. 2000 /5/
Kearny, New Jersey
<PAGE>
East Ferry Office 800 November 30,
290 Ferry Street 2000 /2/
Newark, New Jersey
_______________________
/1/ The Bank has the option to extend the term of the lease for
one additional five year period.
/2/ The Bank has the option to extend the term of the lease for
up to four additional five year periods.
/3/ The Bank has the option to extend the term of the lease for
up to one additional five year period and one additional ten
year period.
/4/ The Bank has the option to extend the term of the lease for
two additional one year periods.
/5/ The Bank has the option to extend the term of the lease for
two additional five year periods.
The Bank also owns an 18,000 square foot building
located at 465 Bloomfield Avenue, Bloomfield, New Jersey. Under
a lease agreement dated August 1993 between the Bank and EDS, all
of the space in the Bloomfield Avenue building is being leased to
EDS, which uses the space to provide data processing services,
related professional services, information processing and related
outsourcing services to the Bank and other financial
institutions.
During 1998, the Bank will open a new full-service
banking center in Newark, New Jersey.
Bancorporation neither owns nor leases any property.
ITEM 3. LEGAL PROCEEDINGS.
Neither Bancorporation nor the Bank is involved in any
material pending legal proceedings, other than routine litigation
incidental to their respective businesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of Bancorporation's
shareholders during the fourth quarter of the year ended
December 31, 1997.
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive officers of Bancorporation and of the Bank
are elected annually and serve until their successors are elected
and qualified at the next annual meeting of the directors of the
respective corporations. The following table sets forth
information with respect to the executive officers of
Bancorporation and of the Bank.
Position with
Bancorporation
and Bank and Year Principal
Name Age First Elected Occupation /1/
Donald M. Karp 61 Chairman of Position with
the Board of Bancorporation
Bancorporation (1985) and the Bank/2/
and the Bank (1985);
Chief Executive Officer
of Bancorporation (1991)
and the Bank (1991);
Vice Chairman of the
Board of Bancorporation
(1981-1985) and the
Bank (1978-1985);
Director (1972)
John A. Dorman 59 President of Position with
Bancorporation (1992) Bancorporation
and the Bank (1992); and the Bank
Director (1992)
Fred S. Campo 48 Senior Vice President Position with
of the Bank (1986); Bancorporation
Secretary of and the Bank
Bancorporation (1982)
and the Bank (1991)
Fred Perry, Jr. 68 Senior Vice Position with
President of the Bank
the Bank (1978)
Peter Kenny 52 First Vice Position with
President of the Bank
the Bank (1991);
Senior Vice
President of the
Bank (1992)
<PAGE>
James Boyle 47 Treasurer of Position with
Bancorporation; Bancorporation
Comptroller of the
Bank (1988); Senior
Vice President of the
Bank (1992)
Ellen Rogoff 48 First Vice President Position with
of the Bank (1993); the Bank /3/
Senior Vice President
of the Bank (1994)
Ronald E. Schwarz 43 Senior Vice President Position with
of the Bank (1997) the Bank/4/
___________________
/1/ Unless otherwise indicated, each of the persons listed has
been employed in the indicated principal occupation during
the last five years.
/2/ Mrs. Donald M. Karp is the niece of Stanley J. Lesnik and
the daughter of Harriet M. Alpert, a principal shareholder
of Bancorporation.
/3/ For the three years prior to joining the Bank, Ms. Rogoff
was Manager of Human Resources for Bristol Myers. For at
least two years prior to joining Bristol Myers, Ms. Rogoff
was Manager of Human Resources for Action Tungsram.
/4/ Prior to joining the Bank, from June of 1995 to April of
1997, Mr. Schwarz was Senior Vice President, Regional
President Bergen/Passaic Counties for Hudson United Bank
(successor to Urban National Bank). From 1992 to June of
1995, Mr. Schwarz was Senior Vice President, Director of
Retail Banking for Urban National Bank.
There are no arrangements or understandings between any
of the executive officers or any other persons pursuant to which
any of the executive officers have been selected to their
respective positions.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Shares of the Common Stock of Bancorporation have been
traded under the symbol BNBC on the NASDAQ National Market System
since June 2, 1988, and in the over-the-counter market prior to
this date. The following table sets forth the range of high and
low closing sale price quotations per share for Bancorporation's
Common Stock as reported by NASDAQ, together with cash dividends
per share paid on Bancorporation's Common Stock, during the
periods indicated.
The market price information does not include retail
markups, markdowns or commissions, but is based on actual
transactions.
Bancorporation High* Low* Dividend*
1997 1st Quarter $16 1/4 $10 3/4 $.10
2nd Quarter 17 5/8 14 .10
3rd Quarter 20 1/2 16 3/8 .10
4th Quarter 24 1/2 15 5/8 .11
1996 1st Quarter $10 1/8 $8 $.06
2nd Quarter 10 1/8 9 .06
3rd Quarter 9 1/2 8 5/8 .07
4th Quarter 11 5/8 9 .08
____________
* The market prices and dividends have been restated to give
effect to the 5% stock dividend declared December 18, 1997
and distributed January 6, 1998, and the 10% stock dividend
which was declared September 19, 1996 and distributed
October 4, 1996.
As of January 31, 1998, there were 4,707,321 shares of
Bancorporation's Common Stock outstanding and approximately 900
holders of record of such stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain historical
financial data with respect to Bancorporation on a consolidated
basis. The information contained in this table should be read in
conjunction with Bancorporation's historical Consolidated
Financial Statements and related notes thereto included elsewhere
in this Report.
<PAGE>
December 31,
1997 1996 1995 1994 1993
(Dollars in thousands)
SELECTED CONSOLIDATED
STATEMENTS OF CONDITION
INFORMATION
Total assets $601,669 $533,615 $481,185 $428,630 $438,532
Loans, gross 322,752 287,364 267,419 267,422 265,920
Investment
securities 206,407 159,214 116,212 110,933 102,165
Total deposits 518,238 485,073 429,681 391,466 406,066
Short-term
borrowings 13,000 1,000 782 177 342
Long-term debt 9,000 0 0 0 0
9.5% Cumulative
Trust Preferred
Securities 11,500 0 0 0 0
Shareholders'
equity 39,231 38,358 34,529 30,266 27,421
<PAGE>
December 31,
1997 1996 1995 1994 1993
(Dollars in thousands)
CONSOLIDATED STATEMENTS OF INCOME
INFORMATION
Interest income $ 40,855 $ 35,162 $ 33,398 $ 29,795 $28,313
Interest expense 15,930 11,818 10,082 7,464 8,082
Net interest income 24,925 23,344 23,316 22,331 20,231
Provision for
possible loan
losses 1,800 1,350 720 450 900
Net interest income
after provision
for possible loan
losses 23,125 21,994 22,596 21,881 19,331
Non-interest income 7,117 6,556 4,491 3,649 4,023
Non-interest expense 19,549 19,849 19,536 20,073 19,813
Provision for income
taxes 4,282 3,428 3,131 768 1,491
Net income before
cumulative effect of
a change in
accounting
principle 6,411 5,273 4,420 4,689 2,050
Cumulative effect of
a change in
accounting
principle 0 0 0 0 1,086
Net income $ 6,411 $ 5,273 $ 4,420 $ 4,689 $3,136
Per Share Data
Net income per
common share
Basic
Before cumulative
effect of a change
in accounting
principle $1.34 $1.10 $1.13 $1.23 $0.44
Cumulative effect of
a change in
accounting
principle 0.00 0.00 0.00 0.00 0.33
Basic earnings per
common share $1.34 $1.10 $1.13 $1.23 $0.77
Diluted
Before cumulative
effect of a change
in accounting
principle $1.29 1.06 0.89 0.96 0.43
Cumulative effect
of a change in
accounting
principle 0.00 0.00 0.00 0.00 0.23
Diluted earnings
per common share $1.29 $1.06 $0.89 $0.96 $0.66
Cash dividends per
common share $0.37 $0.27 $0.16 $0.15 $0.00
Book value per
common share 8.33 7.82 7.05 6.81 5.96
Dividend payout ratio 27.16% 24.54% 26.58% 24.05% 20.37%
Weighted average number
of common shares
outstanding
(in thousands):
Basic 4,788 4,789 3,407 3,322 3,276
Diluted 4,957 4,998 4,959 4,896 4,781
FINANCIAL RATIOS
Return on average
assets 1.13% 1.05% 0.97% 1.04% 0.48%
Return on average
shareholders' equity 16.33 14.58 13.52 16.16 7.83
Average equity to
average assets 6.94 7.20 7.14 6.44 6.12
Earnings to fixed
charges /1/ 1.56 1.74 1.71 1.68 1.30
Net interest margin 4.70 5.05 5.59 5.41 5.12
Net interest spread 3.89 4.33 4.88 4.92 4.55
Asset Quality Ratios
Non-performing loans
as a % of gross loans 1.49% 3.39% 3.82% 3.63% 7.72%
Non-performing loans
as a % of total assets 0.80 1.82 2.12 2.26 4.68
Allowance for possible
loan losses as a %
of gross loans 2.16 2.97 2.77 2.84 4.23
Allowance for possible
loan losses as a %
of non-performing
loans 145.00 87.65 72.47 78.32 54.81
Net chargeoffs as a %
of average gross
loans 1.10 0.08 0.35 1.56 0.90
Non-performing assets
as a % of loans and
OREO 2.19 5.03 6.00 5.81 10.03
Capital Ratios
Leverage capital 8.19% 6.92% 7.17% 7.00% 6.23%
Tier 1 capital to total
risk-weighted assets 13.16 11.17 10.58 9.96 9.16
Total capital to total
risk-weighted assets 14.41 12.44 11.85 11.22 10.45
/1/ The ratio of earnings to fixed charges is computed by dividing the sum
of income before taxes, fixed charges and preferred stock dividends by the sum
of fixed charges and preferred stock dividends. Fixed charges represent
interest expense and payment of debt.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
STATEMENTS MADE IN THIS REPORT ON FORM 10-K ARE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
BANCORPORATION'S ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS
COULD DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL
CONDITION OR BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL
CONDITION OR BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
BELOW UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS
OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS," AS WELL AS THOSE
DISCUSSED ELSEWHERE IN BANCORPORATION'S REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
The following discussion and analysis is intended to
provide information about the financial condition and results of
operations of Broad National Bancorporation and its subsidiaries
on a consolidated basis and should be read in conjunction with
the Consolidated Financial Statements and their related notes.
As used in the following discussion, the term "Company" refers to
Broad National Bancorporation and its subsidiaries on a
consolidated basis; the term "Bank" refers to Broad National Bank
and its subsidiaries on a consolidated basis; and the term
"Bancorporation" refers to Broad National Bancorporation on a
parent company only basis. When necessary, reclassifications
have been made to prior years' data throughout the following
discussion and analysis for purposes of comparability with 1997
data.
SUMMARY
The Company recorded net income of $6,411,000 or diluted per
share earnings of $1.29 in 1997, compared to net income of
$5,273,000 or diluted per share earnings of $1.06 in 1996, and
net income of $4,420,000 or diluted per share earnings of $.89 in
1995.
The per-share data for 1996 and 1995 have been restated to
reflect the effects of the 5% stock dividend declared December
18, 1997 and distributed January 6, 1998, as well as all prior
stock dividends.
An improvement in net interest income and non-interest
income as well as a decrease in non-interest expense contributed
to the increase in income for 1997 as compared to 1996.
An improvement in non-interest income, particularly the
increase in service charges on deposit accounts resulting from a
more consistent collection of fee income for services provided,
<PAGE>
is the primary reason for the increase in net income for 1996 as
compared to 1995.
The Company's return on average assets was 1.13% for 1997,
1.05% for 1996 and 0.97% for 1995. The Company's return on
average shareholders' equity was 16.33% for 1997, 14.58% for 1996
and 13.52% for 1995.
The Company's total assets increased $68,054,000 or 12.8% in
1997 following an increase of $52,430,000 or 10.9% in 1996.
Total deposits increased $33,165,000 or 6.8% in 1997 following an
increase of $55,392,000 or 12.9% in 1996. Total loans, net of
the allowance for possible loan losses and unearned income,
increased $36,969,000 or 13.3% in 1997 following growth of
$18,857,000 or 7.3% in 1996.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income, the primary source of earnings for the
Company, is the difference between interest and fees earned on
loans and other earning assets, and interest paid on deposits and
other interest bearing liabilities. Earning assets include
loans, investment securities and federal funds sold. Interest
bearing liabilities include savings, interest bearing demand and
time deposits, short-term borrowings, long-term debt and 9.5%
Cumulative Trust Preferred Securities.
The following table shows the Company's consolidated average
balance of assets, liabilities, and shareholders' equity as well
as the amount of interest income or interest expense and the
average rate for each category of interest-earning assets and
interest-bearing liabilities. Non-accrual loans are included in
average loans and interest on loans includes loan fees.
Nontaxable income from investment securities and loans is
presented on a tax-equivalent basis assuming a 34% tax rate.
<PAGE>
<TABLE>
NET INTEREST INCOME
1997 1996 1995
Average Interest Average Average Interest Average Average Interest Average
Balance and Fees Rate Balance and Fees Rate Balance and Fees Rate
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds
sold $ 51,321 $ 2,813 5.48% $ 48,201 $ 2,567 5.33% $ 38,383 $ 2,253 5.87%
Investment
Securities
Securities
held-to-
maturity /1/ 82,241 5,243 6.38 75,403 4,745 6.29 87,128 5,154 5.92
Securities
available-
for-sale/4/ 93,135 5,894 6.33 61,948 3,689 5.95 27,029 1,682 6.22
Total investment
securities 175,376 11,137 6.35 /2/ 137,351 8,434 6.14 /2/ 114,157 6,836 5.99 /2/
Loans
Mortgage 197,324 17,476 8.86 186,717 16,188 8.67 179,371 16,425 9.16
Installment 23,214 2,088 8.99 15,083 1,460 9.68 11,328 1,125 9.93
Commercial 83,687 7,370 8.81 75,459 6,485 8.59 74,248 6,691 9.01
States and political
subdivisions /1/ 5 1 12.48 756 88 11.64 1,148 146 12.72
Total loans 304,230 26,935 8.85 /2/ 278,015 24,221 8.71 /2/ 266,095 24,387 9.16 /2/
Total interest
earning assets 530,927 $40,885 7.70%/2/ 463,567 $35,222 7.60%/2/ 418,635 $33,476 8.00%/2/
Less-Allowance for
possible
loan losses 8,599 7,869 7,558
All other assets 43,683 46,517 46,749
Total assets $566,011 $ 502,215 $457,826
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing
deposits Savings,
money market and
interest bearing
demand deposits $214,666 $ 4,756 2.22% $222,912 $4,899 2.20% $221,749 $ 4,900 2.21%
Time deposits:
Under $100,000 96,429 4,990 5.17 84,077 4,222 5.02 78,511 3,973 5.06
Over $100,000 93,127 5,182 5.56 52,891 2,639 4.99 20,279 1,040 5.13
Total interest
bearing deposits 404,222 14,928 3.69 359,880 11,760 3.27 320,539 9,913 3.09
Short-term
borrowings 4,885 281 5.75 1,149 58 5.05 2,808 169 6.02
Long-term debt 2,752 175 6.36 0 0 0 0 0 0
9.5% Cumulative Trust
Preferred
Securities 5,750 546 9.50 0 0 0 0 0 0
Total interest
bearing
liabilities 417,609 $15,930 3.81% 361,029 $11,818 3.27% 323,347 $10,082 3.12%
Other liabilities 9,085 7,831 6,516
Demand deposits 100,055 97,197 95,264
Shareholders'
equity 39,262 36,158 32,699
Total liabilities
and shareholders'
equity $566,011 $502,215 $457,826
NET INTEREST INCOME $24,955 $23,404 $23,394
NET INTEREST SPREAD 3.89% 4.33% 4.88%
NET INTEREST MARGIN 4.70%/3/ 5.05%/3/ 5.59%/3/
/1/ Interest income for investments in states and political subdivisions includes tax-equivalent adjustments at a
34% rate.
/2/ Average rates reflect the tax-equivalent adjusted yields on non-taxable investments and loans.
/3/ Represents the difference between interest earned and interest paid, divided by total interest-earning assets.
/4/ Securities available-for-sale are presented at amortized cost.
<TABLE\>
Rate/Volume Analysis Of Net Interest Income
The effect of changes in average balance and rate from the
corresponding prior period on interest income, interest expense
and net interest income for the years ended December 31, 1997 and
1996 is set forth below.
<PAGE>
The effect of a change in average balance has been
determined by applying the average rate for the earlier period to
the change in average balance for the later period, as compared
with the earlier period. The effect of a change in the average
rate has been determined by applying the average balance for the
earlier period to the change in average rate for the later
period, as compared with the earlier period. The variances
attributable to simultaneous balance and rate changes have been
allocated in proportion to the relationship of the dollar amount
of change in each category.
</TABLE>
<TABLE>
1997 Compared with 1996 1996 Compared with 1995
Increase (Decrease) Increase (Decrease)
Due to a Change in Due to a Change in
Average Average Average Average
Balance Rate Total Balance Rate Total
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans $ 2,316 $ 398 $2,714 $1,073 $(1,239) $ (166)
Investment securities 2,415 288 2,703 1,421 177 1,598
Federal funds sold 164 82 246 578 (264) 314
Total interest income 4,895 768 5,663 3,072 (1,326) 1,746
Interest paid on:
Savings, money market and
interest bearing demand
deposits (246) 103 (143) 1 (2) (1)
Time deposits:
Under $100,000 642 126 768 282 (33) 249
Over $100,000 2,242 301 2,543 1,673 (74) 1,599
Short-term borrowings 222 1 223 (87) (24) (111)
Long-term debt 175 0 175 0 0 0
9.5% Cumulative Trust
Preferred Securities 546 0 546 0 0 0
Total interest expense 3,581 531 4,112 1,869 (133) 1,736
Change in net interest income $ 1,314 $ 237 $1,551 $1,203 $(1,193) $ 10
Percent increase in
net interest income over the
prior period 6.63% 0.04%
<TABLE\>
Total tax equivalent interest income of $40,885,000 for 1997
represents an increase of $5,663,000 or 16.1% over total tax
equivalent interest income of $35,222,000 for 1996. This
improvement is primarily due to an increase of $67,360,000 in the
average balance of interest earning assets for 1997 as compared
to 1996. The average balance of total investment securities was
$38,025,000 higher for 1997 than for 1996, while the average
balance of total loans was $26,215,000 higher for 1997 than for
<PAGE>
1996. The increase in the average balance of interest earning
assets contributed an additional $4,895,000 to total tax
equivalent interest income for 1997 as compared to 1996. An
increase in the average rate earned on interest earning assets
contributed an additional $768,000 to total tax equivalent
interest income for 1997 as compared to 1996. The average tax
equivalent yield for total average interest earning assets was
7.70% for 1997 as compared to 7.60% for 1996, an increase of 10
basis points.
Total interest expense of $15,930,000 for 1997 was
$4,112,000 or 34.8% higher than 1996. An increase of $56,580,000
in total interest-bearing liabilities is the primary reason for
this increase, resulting in an additional $3,581,000 of interest
expense for 1997 as compared to 1996. 1997 interest expense
increased an additional $531,000 due to an increase in the cost
of total interest-bearing liabilities. The average cost of
interest-bearing liabilities was 3.81%, an increase of 54 basis
points from 3.27% in 1996. The funding of asset growth through
an increase in relatively higher costing time deposits as well as
the addition of higher costing short-term and long-term
borrowings contributed to the increase in the cost of interest-
bearing liabilities for 1997.
Tax equivalent net interest income for 1997 was $24,955,000,
an increase of $1,551,000 or 6.63% from $23,404,000 for 1996,
primarily due to the average balance of total interest earning
assets increasing more than the average balance of total interest
bearing liabilities. However, the net interest spread on a tax
equivalent basis declined 44 basis points to 3.89% for 1997
compared to 4.33% for 1996, and the net interest margin, which is
tax equivalent net interest income expressed as a percentage of
average interest earning assets, declined 35 basis points to
4.70% for 1997 compared to 5.05% for 1996. This reflects the
fact that the growth of interest earning assets outpaced the
growth in net interest income, resulting from the use of higher
costing time deposits as well as short-term and long-term
borrowings to fund the growth of average interest earning assets.
Total tax equivalent interest income of $35,222,000 for 1996
represents an increase of $1,746,000 or 5.2% over total tax
equivalent interest income of $33,476,000 for 1995. This
improvement is primarily due to an increase of $44,932,000 in the
average balance of interest earning assets for 1996 as compared
to 1995. The largest increase in average balances is reflected
in total investment securities, for which the average balance of
$137,351,000 for 1996 is $23,194,000 higher than 1995. The
average balances of total loans and federal funds sold for 1996
as compared to 1995 increased $11,920,000 and $9,818,000,
respectively. The overall increase in the average balance of
total interest earning assets contributed an additional
$3,072,000 to total tax equivalent interest income for 1996 as
<PAGE>
compared to 1995. However, this increase was partially offset by
a decrease of $1,326,000 in total tax equivalent interest income
for 1996 as compared to 1995, resulting from a decline of 40
basis points in the average rate earned on interest earning
assets. Decreases in the federal funds rate and the prime rate
are the primary reasons for the decline in the average rates
earned on total interest earning assets.
Total interest expense of $11,818,000 for 1996 was
$1,736,000 or 17.2% higher than 1995. The cost of total interest
bearing liabilities increased to 3.27% for 1996 as compared to
3.12% for 1995. An increase of $37,682,000 in total interest
bearing liabilities, and a change in the mix of interest bearing
liabilities contributed to the increase in total interest expense
for 1996 as compared to 1995. Total average time deposits of
$136,968,000 for 1996 were $38,178,000 or 38.7% higher than 1995
total average time deposits. This increase in average time
deposit balances increased 1996 interest expense by $1,955,000 as
compared to 1995 interest expense. The increase in the average
balance of total time deposits also resulted in higher cost time
deposits representing 37.9% of total interest bearing liabilities
for 1996 as compared to 30.6% of total interest bearing
liabilities for 1995. This change in the mix of interest bearing
liabilities contributed to the increase in the cost of interest
bearing liabilities to 3.27% for 1996 as compared to 3.12% for
1995.
Tax equivalent net interest income for 1996 was $10,000 or
.04% higher than 1995 tax equivalent net interest income. The
decline in the average rate on interest earning assets and the
increase in the volume of interest bearing liabilities,
particularly higher cost time deposits, offset the increased
interest income which resulted from the increased volume of
interest earning assets.
PROVISION FOR POSSIBLE LOAN LOSSES
In determining the provision for possible loan losses,
management considers historical loan loss experience, changes in
composition and volume of the portfolio, the level and
composition of non-performing loans, the adequacy of the
allowance for possible loan losses, and prevailing economic
conditions. The provision for possible loan losses was
$1,800,000, $1,350,000 and $720,000 for 1997, 1996 and 1995,
respectively. The increase in the provision for possible loan
losses during 1997 was primarily due to the increase in loans
outstanding, as well as the increase in net loan charge-offs.
The increase in the provision for possible loan losses during
1996 was primarily due to the increase in loans outstanding, as
well as management's efforts to address specific problem loans
and improve the Company's asset quality ratios.
<PAGE>
Actual net loan charge-offs were $3,357,000 or 1.10% of
average total loans, $221,000 or .08% of average total loans and
$920,000 or .35% of average total loans for 1997, 1996 and 1995,
respectively.
NON-INTEREST INCOME AND NON-INTEREST EXPENSES
Total non-interest income of $7,117,000 for 1997 was
$561,000 or 8.6% higher than 1996. Service charges on deposit
accounts increased $575,000 or 10.7% to $5,945,000 for 1997.
This growth occurred during the first six months of 1997 and
represents primarily non-sufficient funds fees from demand
deposit accounts.
Other non-interest income declined $146,000 or 11.9% to
$1,085,000 for 1997. 1996 other non-interest income included a
non-recurring damage award of $285,000. Exclusive of this non-
recurring item for 1996, other non-interest income for 1997 was
$139,000 higher than 1996, primarily due to ATM non-customer
convenience fees.
For 1997, gains from the sale of securities available-for-
sale were $84,000, an improvement of $129,000 over the loss of
$45,000 recorded in 1996.
Total non-interest income of $6,556,000 for 1996 was
$2,065,000 or 46% higher than 1995. The most significant
component of this increase was represented by service charges on
deposit accounts, which were $1,855,000 or 52.8% higher for 1996
as compared to 1995. This improvement was attributable to a more
consistent application and collection of certain deposit fee
income for services provided to the existing base of deposit
accounts.
Other non-interest income increased $344,000 in 1996 as
compared to 1995. The largest component of this increase was a
non-recurring recognition of $285,000 which represented damages
awarded to the bank in settlement of a lawsuit it had filed
against an outside service provider for breach of duty. Non-
interest income for 1996 also included a loss of $45,000 from the
sale of securities available-for-sale, compared to a gain of
$71,000 from the sale of securities available-for-sale in 1995.
Total non-interest expenses of $19,549,000 for 1997 were
$300,000 or 1.5% lower than 1996. Reductions in employee
benefits and other real estate expenses, offset to a certain
extent by an increase in other expenses, were the primary reasons
for the decrease in non-interest expenses.
Salaries increased $104,000 or 1.3% in 1997 to $8,000,000
primarily as the result of incentive salary programs. Employee
benefits expense was $2,094,000 for 1997, a reduction of $392,000
<PAGE>
or 15.8% from 1996. This decrease is the result of a decline in
hospital and medical insurance claims.
The improvement in other real estate expenses is
attributable to gains of $343,000 from the sales in 1997 of
properties classified as other real estate owned.
Other non-interest expenses increased $345,000, or 24.5%, in
1997, reflecting increased costs associated with employee
training programs and temporary help, as well as expenses
associated with the issuance in 1997 of the 9.5% Cumulative Trust
Preferred Securities (see Note 11 of the Notes to Consolidated
Financial Statements).
Total non-interest expense of $19,849,000 for 1996 was
$313,000 or 1.6% higher than 1995.
Salaries expense totaled $7,896,000 for 1996, an increase of
$161,000, or 2.1%, compared to 1995. Merit increases and
increased incentive salary programs were partially offset by
reductions in staff. Employee benefits expense was $231,000 or
10.2% higher for 1996 as compared to 1995. Most of this increase
was attributable to higher costs for hospital and medical
insurance and pension plans.
Furniture and equipment expense of $1,090,000 for 1996 was
$123,000 or 10.1% lower than 1995. This was primarily
attributable to the reduction of equipment rental costs resulting
from the Company's decision to purchase rather than lease its
personal computer equipment.
Legal fees totaled $858,000 for 1996, an increase of
$311,000, or 56.9%, as compared to 1995. Most of this increase
was attributable to increased legal expenses associated with the
Bank's efforts to work out its problem loans.
Professional fees of $1,307,000 for 1996 were $488,000 or
59.6% higher than for 1995. The largest contributing factor to
this increase were fees of approximately $625,000 paid to an
outside consulting firm which assisted management with a
reengineering project for the Bank.
FDIC and OCC assessments totaled $112,000 for 1996, a
decrease of $455,000, or 80.2%, compared to 1995. The FDIC
assessment declined from $461,000 in 1995 to the $2,000 minimum
assessment which the Bank was required to pay in 1996 as a well
capitalized institution as defined in the regulatory prompt
corrective action framework for capital adequacy requirements.
Other real estate expense of $202,000 for 1996 was $103,000
or 104% higher than for 1995. A significant factor contributing
<PAGE>
to this increase was a loss of approximately $95,000 resulting
from the sale of an OREO property during 1996.
Income Taxes
The effective tax rates for 1997, 1996 and 1995 were 40.0%,
39.4% and 41.5%, respectively. The decrease in the effective tax
rate to 39.4% for 1996 was primarily due to the recognition of
tax benefits resulting from the adjustment of the valuation
allowance for deferred tax assets.
There was no change in the total valuation allowance for
1997. The net change in the total valuation allowance for 1996
was a decrease of $160,000, which was primarily the result of the
reduction of the Bank's state tax loss carry forward during 1996.
FINANCIAL CONDITION
Loans
Total loans, net of deferred loan fees, of $322,528,000 at
December 31, 1997 increased $35,412,000 or 12.3% from the
December 31, 1996 balance of $287,116,000. The most significant
growth occurred in the commercial loan and commercial mortgage
categories. Average loans totaled $304,230,000 for 1997, an
increase of $26,215,000 or 9.4% compared to an average of
$278,015,000 for 1996. For 1997, average loans represented 57.3%
of total interest earning assets, compared to 60.0% of total
interest earning assets for 1996.
The following table shows the classification of loans by major
category, at December 31, for each of the past five years.
December 31,
1997 1996 1995 1994 1993
(Dollars in Thousands)
Real estate loans:
Construction $ 10,844 $ 5,990 $ 4,097 $ 3,913 $ 5,209
Mortgage
Residential 78,654 72,791 62,168 63,646 66,409
Commercial 141,464 126,050 122,346 114,901 108,749
Commercial loans 82,524 73,171 68,479 76,465 66,612
Installment loans 8,576 8,341 9,641 7,496 7,339
Other loans 690 1,021 688 1,001 559
Loans held for sale
(market value
$11,153) 0 0 0 0 11,043
Total gross
loans $322,752 $287,364 $267,419 $267,422 $265,920
Real estate loans include construction mortgages,
residential mortgages (including home equity loans), and
commercial mortgages.
<PAGE>
Construction loans are predominately floating rate loans and
the term thereof generally does not exceed one year. The
majority of the Bank's construction loans consist of loans
secured by single family dwellings located in the Bank's primary
market area.
Residential mortgage loans include mortgages for the
purchase or refinancing of residential properties and are secured
by first liens on those properties. This category also includes
home equity loans which are secured by either a first or second
lien on real estate.
Commercial mortgages include mortgages on owner occupied
buildings and investment properties, secured by first mortgages
on these properties. Amortization is generally based on terms of
15 years or less, and most loans have interest rate reset terms
of five years or less.
Commercial loans primarily represent loans to commercial
borrowers for working capital and other short-term needs and term
loans for the acquisition of assets. The terms of such loans
generally range from one to five years.
Installment loans are granted primarily to individuals on an
installment basis, may be secured by liens on personally held
assets or may be unsecured, and include auto loans, home
improvement loans, student loans, revolving credit plans and
personal loans.
The following table summarizes the contractual maturities of
certain loan categories at December 31, 1997.
Within 1-5 Over
One Year Years 5 Years Total
(Dollars in Thousands)
Real estate loans:
Construction $10,036 $ 808 $ 0 $ 10,844
Mortgage 26,414 33,018 160,686 220,118
Commercial
loans 38,786 33,835 9,903 82,524
The table below presents the breakdown of loans with fixed
and variable rates at December 31, 1997 for loans with a term of
greater than one year in the following categories:
Fixed Variable
Interest Rates Interest Rates
(Dollars in Thousands)
Real Estate loans:
Mortgage $ 89,065 $104,639
Commercial loans 19,245 24,493
<PAGE>
The Company's loan portfolio is varied, with no undue
concentration in any single industry, although most of the loans
in the Company's loan portfolio have been made to borrowers in
New Jersey. The Company's home equity loan portfolio (which is
included in real estate mortgages in the table above) and a
substantial portion of its commercial loan portfolio have
interest rates that reprice with changes in the prime rate.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at an
amount considered adequate by management and the Board of
Directors to provide for potential credit losses based upon a
periodic evaluation of the risk characteristics of the loan
portfolio.
Management and the Board of Directors of the Company review
the allowance for possible loan losses on a regular basis.
Management and the Board evaluate a number of factors in
determining the appropriate level of the allowance for possible
loan losses. Weakening credits are evaluated individually and
factors such as the creditworthiness of the borrower, the
adequacy of underlying collateral and the probable impact of
business and economic conditions upon the borrower are examined.
The review process also takes into consideration the possibility
that there may be losses in the loan portfolio which cannot
currently be identified, and the degree of risk inherent in the
composition of the loan portfolio. The volume of non-performing
and other classified loans and their relationship to the loan
portfolio, as well as historical charge-off experience, are also
examined.
The following table summarizes the activity in the allowance for
possible loan losses over each of the past five years. Also
presented are certain key ratios regarding the allowance.
<PAGE>
December 31,
1997 1996 1995 1994 1993
(Dollars in Thousands)
Average loans
outstanding
during the year $304,230 $278,015 $266,095 $262,053 $255,634
Total gross
loans at
period end $322,752 $287,364 $267,419 $267,422 $265,920
Allowance,
beginning of
the year $ 8,531 $ 7,402 $ 7,602 $ 11,252 $ 12,659
Loans charged-off
during the year:
Commercial 2,370 569 1,952 2,184 2,047
Mortgage 1,403 520 80 2,809 379
Installment 185 175 91 148 157
Total loans
charged-off
during the year 3,958 1,264 2,123 5,141 2,583
Recoveries
during the year:
Commercial 369 804 1,005 890 111
Mortgage 132 104 142 10 0
Installment 100 135 56 141 165
Total recoveries
during the year 601 1,043 1,203 1,041 276
Net loans
charged-off
during the year 3,357 221 920 4,100 2,307
Provision charged
to operations 1,800 1,350 720 450 900
Allowance,
end of the year $ 6,974 $ 8,531 $7,402 $ 7,602 $ 11,252
Ratio of net
loans charged-off
to average
loans outstanding
during the year 1.10% 0.08% 0.35% 1.56% 0.90%
Allowance for
possible loan
losses as a
percentage of
total gross loans 2.16% 2.97% 2.77% 2.84% 4.23%
The following table reflects the allowance for possible loan
losses by category as of December 31, for each of the past five
years:
</TABLE>
<TABLE>
December 31,
1997 1996 1995 1994 1993
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
to to to to to
Dollar Total Dollar Total Dollar Total Dollar Total Dollar Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
Construction $ 57 3% $ 30 2% $ 163 2% $ 163 2% $ 817 2%
Mortgage 1,257 68 1,880 69 1,765 68 1,984 66 3,370 65
Commercial
loans 5,340 26 6,303 26 5,052 26 5,147 29 6,664 25
Installment
loans 182 3 171 3 271 4 308 3 401 4
Other 138 * 147 * 151 * 0 * 0 4
Total $6,974 100% $8,531 100% $7,402 100% $ 7,602 100% $11,252 100%
* Less than 1.0%
<TABLE\>
During 1997, total loans charged off increased $2,694,000 or
213% to $3,958,000. Of the total 1997 charge-offs of $3,958,000,
$1,926,000 represented loans that had been classified and
reported as non-accrual loans at or prior to December 31, 1996.
An additional $1,798,000 represented the loan of a single
borrower. This loan had previously been restructured and was
being reported by the Company as a restructured loan and a non-
performing asset. This loan was performing in accordance with
its restructured terms until October of 1997, at which time the
Company noted a significant deterioration in the financial
condition of the borrower sufficient to create doubt as to the
<PAGE>
collectibility of the remaining outstanding loan balance and
resulting in the loan being charged off.
The allowance for possible loan losses includes an
allocation for all loans classified as special mention,
substandard, doubtful or loss (See "Asset Quality" below for
definitions of such classifications). After allocating the
allowance for classified loans, an allocation is made for all
non-classified loans. The allocation for non-classified loans is
made by loan category, based upon the historical loss experience
for each loan category as well as perceived risk of loss for each
loan category. The amount of the allowance applicable to
non-classified loans was $4,770,000 and $5,819,000 at December
31, 1997 and December 31, 1996, respectively. Since these
factors are subject to change, the allocation of the allowance
for possible loan losses should not be interpreted as an
indication that such amounts or proportions will continue or
indicate future trends.
The specific amount of the allowance in any particular
category may prove excessive or inadequate and consequently may
be reallocated in the future to reflect current conditions.
Accordingly, the Company considers the entire reserve to be
available to absorb losses in any category.
Asset Quality
Various degrees of credit risk are associated with
substantially all investing activities. Management believes that
the lending function, however, carries the greatest risk of loss.
The Bank's credit due diligence begins at the time a
borrower and the Bank begin to discuss the origination of a loan.
Documentation including a borrower's credit history, materials
establishing the value and liquidity of potential collateral, the
purpose of the loan, the source and timing of the repayment of
the loan and other factors are analyzed before a loan is
submitted for approval.
The Company attempts to minimize overall credit risk through
loan diversification. The Company's loan portfolio is varied,
with no undue concentration in any single industry, although most
of the loans in the Company's loan portfolio have been made to
borrowers in New Jersey.
Individual loan officers are assigned to monitor
non-installment and non-residential mortgage loans and are
responsible for the periodic updating of their reviews of such
loans. Loan officers are actively encouraged to identify
potential deteriorating loan situations through a self-reporting
system.
<PAGE>
Installment and residential mortgage loans are primarily
monitored through an analysis of their payment status.
Classified loan reports are prepared and reviewed regularly
by the problem loan committee. Classified loans are placed into
one of several categories, depending upon the condition of the
borrower and the strength and amount of collateral.
Classifications consist of "special mention loans," defined
as loans with only modest deficiencies in documentation and with
potentially weakening credit features; "substandard loans,"
defined as loans that have a well-defined credit weakness;
"doubtful loans," defined as loans that have a significantly
higher probability of loss than substandard loans; and "loss"
loans which are charged-off when they are deemed uncollectible.
Non-performing assets consist of (i) non-performing loans,
which include non-accrual loans and loans past due 90 days or
more as to interest or principal payments but not placed on
non-accrual status; (ii) loans that have been restructured due to
a weakening in the financial position of the borrower
(restructured loans) and (iii) other real estate owned ("OREO"),
net of reserves.
The following table reflects the components of non-performing
assets at December 31, for each of the past five years:
<PAGE>
</TABLE>
<TABLE>
December 31,
1997 1996 1995 1994 1993
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Past due, 90 days or more:
Mortgage $ 434 $1,068 $1,938 $1,388 $4,535
Commercial 477 247 1,167 714 1,434
Installment 20 34 18 23 53
Total past due 90 days
or more $ 931 $1,349 $3,123 $2,125 $6,022
Non-accrual loans:
Mortgage $ 652 $2,800 $4,042 $4,357 $9,858
Commercial 3,229 5,584 3,049 3,222 4,641
Installment 10 0 0 2 7
Total non-accrual loans $3,891 $8,384 $7,091 $ 7,581 $14,506
Total non-performing loans $4,822 $9,733 $10,214 $ 9,706 $20,528
Restructured loans
(excluding amounts
classified as
non-performing loans) 1,619 3,934 5,105 5,445 5,721
Other real estate
owned, net 648 841 772 400 461
Total non-performing assets $ 7,089 $14,508 $16,091 $15,551 $26,710
Non-performing loans as a
percent of total gross
loans 1.49% 3.39% 3.82% 3.63% 7.72%
Non-performing loans as a
percent of total assets 0.80% 1.82% 2.12% 2.26% 4.68%
Non-performing assets as a
percent of loans and other
real estate owned 2.19% 5.03% 6.00% 5.81% 10.03%
Allowance for possible
loan losses $6,974 $ 8,531 $ 7,402 $ 7,602 $11,252
Allowance for possible
loan losses as a percent
of non-performing loans 144.63% 87.65% 72.47% 78.32% 54.81%
<TABLE\>
During 1997 non-performing loans decreased $4,911,000 or 50%
to $4,822,000. The major components of this reduction were
chargeoffs of $1,926,000, payments received of $931,000,
transfers to other Real Estate Owned in the amount of $212,000
and loans totaling $1,629,000 returned to accrual status.
The decline of $2,315,000 in restructured loans during 1997
is primarily due to the chargeoff of a single loan in the amount
of $1,798,000, as previously discussed under Allowance for
Possible Loan Losses.
It is the Company's general policy to discontinue the
accrual of interest and reverse previously accrued but unpaid
interest as to a particular loan when interest or principal is
more than 90 days past due on such loan or other circumstances
indicate that full collection is questionable, unless the loan is
adequately secured and in the process of collection. Income on
non-accrual loans is recognized only in the period in which it is
collected.
In addition to the non-performing and restructured loans as
of December 31, 1997 and 1996, the Company had classified an
additional $4,539,000 and $3,088,000, respectively, as
substandard loans. A loan loss reserve has been allocated to
such loans in accordance with the Company's policies.
In the course of resolving non-performing loans, the Bank
may restructure the contractual terms of its loans with its
<PAGE>
borrowers. If, prior to such restructuring, the loan was
classified as non-accrual, it is the Bank's policy to continue to
carry these restructured loans on non-accrual status for a period
of time (typically six months) before management considers their
return to accrual status. At December 31, 1997, one loan in the
amount of $1,619,000 was categorized as restructured. This loan
is currently performing in accordance with its modified terms.
At December 31, 1997 and 1996, the recorded investment in
loans that are considered to be impaired was $7,334,000 and
$10,109,000, respectively. The related allowance for credit
losses was $0 at December 31, 1997, and $500,000 at December 31,
1996. The impaired loan portfolio is primarily collateral
dependent. The change in the allowance for impaired loans
represented a recovery of $500,000 during 1997, as compared to a
recovery of $270,000 during 1996. The average investment in
impaired loans during the years ended December 31, 1997 and 1996
was approximately $9,334,000 and $9,657,000, respectively. For
the years ended December 31, 1997 and 1996, the Company
recognized cash basis interest income on these impaired loans of
$344,000 and $265,500, respectively.
The level of non-performing assets is heavily dependent upon
local economic conditions. The December 31, 1997 total
non-performing assets of $7,089,000 represents a decrease of
$7,419,000 or 51% from December 31, 1996. There can be no
assurance that the level of the Company's non-performing assets
will not increase in the future.
Investment Securities and Federal Funds Sold
The Company invests a portion of its available funds in
short-term and longer-term instruments, including federal funds
sold and investment securities.
Federal funds sold are used primarily for daily cash
management purposes. Average federal funds sold of $51,321,000
for 1997 represented 9.7% of total average interest earning
assets, as compared to 10.4% for 1996.
Investment securities include obligations of the U.S.
Government or its agencies, obligations of states and political
subdivisions, Federal Reserve Bank stock and debt securities.
The Company's investment securities portfolio is utilized to
collateralize certain of the Bank's lines of credit and public
and fiduciary deposits. It also provides liquidity through
proceeds from scheduled maturities. The majority of the
Company's investment securities carry fixed interest rates.
The Company does not have trading securities. It classifies
its securities holdings between held-to-maturity and
available-for-sale. The accounting standard provides a different
<PAGE>
accounting treatment for each category. Management determines
the appropriate classification of securities at the time of
purchase.
If management has the positive intent and the Company has
the ability at the time of purchase to hold securities until
maturity, they are classified as held-to-maturity securities.
Such securities are stated at amortized cost, adjusted for
unamortized purchase premiums and discounts.
Securities in the available-for-sale category are those for
which the Company does not have the positive intent and ability
to hold to maturity. Available-for-sale securities are reported
at fair value. Any unrealized appreciation or depreciation in
the available-for-sale securities, net of tax effects, is
reported as a separate component of equity capital. At December
31, 1997 and 1996, the Company reported net unrealized securities
gains of $244,000 and $146,000, respectively, in the
Shareholders' Equity section of the Consolidated Statement of
Condition.
At December 31, 1997, securities held-to-maturity of
$65,330,000 represented 31.7% of the total investment securities
portfolio, as compared to 56.6% at December 31, 1996. Securities
available-for-sale of $141,077,000 at December 31, 1997
represented 68.3% of the total investment securities portfolio,
as compared to 43.4% at December 31, 1996. This shift in the
composition of the securities portfolio is intended to give
management the ability to actively manage a larger percentage of
the overall portfolio. While proceeds from the maturities of
securities held-to-maturity amounted to $31,211,000 during 1997,
only $6,716,000 was reinvested into the held-to-maturity
portfolio. The remaining proceeds were used to purchase
securities for the available-for-sale portfolio. Total average
investment securities of $175,376,000 for 1997 represented 33.0%
of 1997 total average interest earning assets, up from 29.6% of
total average interest earning assets for 1996.
The table below presents the amortized cost and total
estimated fair values of securities held-to-maturity as of year
end for each of the past five years:
1997 1996 1995 1994 1993
(Dollars in Thousands)
U.S. Treasury
Notes $ 0 $ 0 $ 0 $11,795 $ 8,804
U.S. Government
Agencies 13,149 33,862 11,055 3,080 1,089
Mortgage-backed
securities 47,869 52,946 46,108 73,204 59,670
States and
political
subdivisions 1,683 1,182 1,875 1,336 1,009
Other 2,629 2,180 1,228 374 376
Amortized cost $65,330 $90,170 $60,266 $89,789 $70,948
Estimated fair
value $65,203 $89,482 $59,948 $84,188 $70,759
<PAGE>
Maturities and weighted average yields of securities
held-to-maturity at December 31, 1997 segregated by contractual
maturity, are illustrated below. Expected maturities will differ
from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment
penalties.
</TABLE>
<TABLE>
Maturing
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
Agencies $ -- --% $ 1,999 6.05% $ 7,150 6.85% $ 4,000 7.50% $13,149 6.93%
Mortgage-backed
securities 2,349 4.01 29,429 5.96 12,236 6.61 3,855 6.90 47,869 6.11
States and political
subdivisions /1/ 972 6.27 711 6.71 -- -- -- -- 1,683 6.45
Other -- -- -- -- -- -- 2,629 6.01 2,629 6.01
Total amortized cost $ 3,321 4.68% $32,139 5.99% $19,386 6.70% $10,484 6.91% $65,330 6.29%
/1/ The weighted average yields have been computed based on a tax-equivalent basis, assuming a 34% income tax rate.
<TABLE\>
The table below presents the amortized cost and total
estimated fair values of securities available-for-sale as of year
end for each of the past five years.
December 31,
1997 1996 1995 1994 1993
(Dollars in Thousands)
U.S. Treasury Notes $ 12,499 $12,513 $14,745 $10,932 $14,008
U.S. Government
Agencies 32,967 1,000 1,000 0 0
Mortgage-backed
securities 93,537 55,309 39,774 11,297 17,209
States and
political
subdivisions 325 0 0 0 0
Other 1,377 0 0 0 0
Amortized cost $140,705 $68,822 $55,519 $22,229 $31,217
Estimated fair value $141,077 $69,044 $55,946 $21,144 $31,303
Maturities and weighted average yields of securities
available-for-sale at December 31, 1997, segregated by
contractual maturity, are illustrated below. Expected maturities
will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call
or prepayment penalties.
</TABLE>
<TABLE>
Maturing
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Notes $4,487 5.82% $ 8,012 6.47% $ -- --% $ -- --%$ 12,499 6.24%
U.S. Government
Agencies 1,000 5.76 6,996 6.61 24,971 6.91 -- -- 32,967 6.80
Mortgage-backed
securities -- -- 14,167 6.49 18,359 6.64 61,011 6.82 93,537 6.73
States and political
subdivisions -- -- -- -- 325 6.78 -- -- 325 6.78
Other -- -- -- -- -- -- 1,377 7.45 1,377 7.45
Total amortized
cost $5,487 5.81% $29,175 6.52% $43,655 6.79% $62,388 6.83% $140,705 6.70%
<TABLE\>
<PAGE>
Realized gains (losses) from the sale of securities
available-for-sale were $84,000, ($45,000), and $71,000 for 1997,
1996, and 1995, respectively.
Deposits
The Bank's deposit base is its primary source of funds. The
Bank offers a broad range of deposit products, including
non-interest bearing demand deposits, savings, money market and
interest bearing demand accounts, and certificates of deposit.
The December 31, 1997 total deposit balance of $518,238,000
represents an increase of $33,165,000 or 6.8% from the December
31, 1996 balance of $485,073,000. The most significant component
of this increase was reflected in time deposits, which were
$17,839,000 higher at December 31, 1997 than at December 31,
1996. The majority of this increase was in certificates of
deposits with terms of 9 months and 15 months.
Average total deposits were $504,277,000 for 1997, an
increase of $47,200,000 or 10.3% over average total deposits of
$457,077,000 for 1996.
Average demand deposits were $100,055,000 for 1997, an
increase of $2,858,000 or 2.9% over the prior year. Demand
deposit growth occurred primarily in small business checking
accounts.
Average savings, money market and interest bearing demand
accounts declined $8,246,000 or 3.7% during 1997. This is
attributable in part to the increased demand on the part of
depositors for higher yielding investment alternatives. The
average cost of savings, money market and interest bearing demand
accounts was 2.22% for 1997, as compared to 2.20% for 1996.
Time deposits under $100,000 averaged $96,429,000 for 1997,
an increase of $12,352,000 or 14.7% over 1996. Most of this
growth is reflected in time deposits with maturities of 9 months
and 15 months. The average cost of time deposits under $100,000
was 5.17% for 1997, and increase of 15 basis points from the
average cost of 5.02% for 1996.
The average balance of time deposits of $100,000 or more
increased $40,236,000 or 76.1% to $93,127,000 for 1997. The
majority of these deposits, which usually bear maturities from
thirty to ninety days, were from municipal government units
within markets served by the bank, and served as alternatives to
other sources of borrowed funds. The average cost of time
deposits over $100,000 was 5.56% for 1997, an increase of 57
basis points from the average cost of 4.99% for 1996.
<PAGE>
Time deposits represented 46.9% of average total interest
bearing deposits for 1997 as compared to 38.1% for 1996. This
increase in higher costing deposits was a significant
contributing factor to the overall increase in the cost of funds
for 1997 as compared to 1996.
The following table shows a breakdown of the average
balances and average rates paid on the following deposit
categories for each of the past three years:
</TABLE>
<TABLE>
Year Ended December 31,
1997 1996 1995
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
(Dollars in thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
demand deposits $100,055 - % $ 97,197 - % $ 95,264 -%
Savings, money market
and interest bearing
demand deposits 214,666 2.22 222,912 2.20 221,749 2.21
Time deposits 189,556 5.37 136,968 5.01 98,790 5.07
Total average deposits $504,277 2.96% $457,077 2.57% $415,803 2.38%
<TABLE\>
The following is a breakdown of the maturity of time
certificates of deposit and other time deposits in excess of
$100,000 as of December 31, 1997 and December 31, 1996,
respectively:
1997 1996
(Dollars in Thousands)
Under three months $77,157 $71,160
Three to six months 7,524 5,851
Six to twelve months 5,422 2,993
Over twelve months 597 1,160
Total $90,700 $81,164
Short-Term Borrowings
Short-term borrowings represent Federal Home Loan Bank
(FHLB) advances and securities sold under agreements to
repurchase, which are used to supplement the Bank's deposit base
as a source of funding. The FHLB advances have remaining
maturities of less than one year, while the securities sold under
agreements to repurchase generally have terms ranging from one to
thirty days. These balances increased $12,000,000 during 1997,
primarily due to the Federal Home Loan Bank advances. The
average balance of short-term borrowings increased to $4,885,000
for 1997 and the average cost of <PAGE> short-term borrowings increased
to 5.75%, both increases attributable primarily to the Federal
Home Loan Bank advances.
Short-term borrowings at December 31 consisted of the
following (dollars in thousands):
1997 1996
Securities sold under
agreements to repurchase $ 1,000 $1,000
Federal Home Loan Bank
advances 12,000 0
$13,000 $1,000
Information regarding the levels of short-term borrowings
for each of the past three years is as follows:
December 31,
1997 1996 1995
(Dollars in Thousands)
Balance, end of year $13,000 $ 1,000 $ 782
Maximum outstanding
during the year
at any month end $13,000 $ 1,282 $21,345
Average interest
rate, end of year 5.88% 4.95% 5.69%
Average outstanding
during the year $ 4,885 $ 1,149 $ 2,808
Average interest
rate for the year 5.75% 5.05% 6.02%
The average amounts outstanding were computed from daily averages
and the average interest rates for the period were computed by
dividing the respective interest expense by the average balance
outstanding.
Long Term Debt
Long term debt of $9,000,000 at December 31, 1997 represents
Federal Home Loan Bank advances with remaining maturities of
greater than one year. This debt represents a series of nine
$1,000,000 advances with interest rates ranging from 6.16% to
6.28%, and maturities from January 29, 1999 to September 30,
1999. The advances are secured by residential mortgages and
securities under a blanket collateral agreement.
Company-Obligated Mandatorily Redeemable Cumulative Trust
Preferred Securities of a Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Company (9.5% Cumulative Trust
Preferred Securities).
On June 30, 1997, $11.5 million of 9.5% Cumulative Trust
Preferred Securities were issued by BNB Capital Trust, a Delaware
statutory business trust formed and wholly-owned by
Bancorporation. The net proceeds from this issuance were
invested in Bancorporation in exchange for Bancorporation's
junior subordinated debentures. <PAGE> The sole asset of BNB Capital
Trust, the obligor on the 9.5% Cumulative Trust Preferred
Securities, is $11,855,670 principal amount of 9.5% Junior
Subordinated Debentures of Bancorporation due June 30, 2027.
Bancorporation has entered into several contractual arrangements
for the purpose of fully and unconditionally supporting BNB
Capital Trust's payment of distributions on, payments on any
redemption of, and any liquidation distribution with respect to,
the 9.5% Cumulative Trust Preferred Securities. These
contractual arrangements constitute a full and unconditional
guarantee by Bancorporation of BNB Capital Trust's obligations
under the 9.5% Cumulative Trust Preferred Securities.
The proceeds have been used by Bancorporation to fund stock
repurchases and for general corporate purposes as well as to meet
debt service obligations pursuant to the junior subordinated
debentures. Additionally, some of the proceeds have been
invested in both long-term and short-term securities with yields
substantially less than the cost of the 9.5% Cumulative Trust
Preferred Securities. The cost of the 9.5% Cumulative Trust
Preferred Securities has contributed to the increase in the cost
of funds and a reduction of the net interest margin during 1997.
The $11,500,000 of 9.5% Cumulative Trust Preferred Securities
qualified as regulatory Tier 1 Capital at December 31, 1997.
Liquidity of the Bank
The Bank actively monitors its liquidity position to ensure
that it has sufficient funds to provide for cash outflows without
incurring losses from the premature liquidation of assets or the
unexpected acquisition of costly liabilities. The Bank's cash
outflows encompass interest paid to depositors and other
creditors, deposit withdrawals, and disbursements to acquire
assets and pay general operating costs. The Bank obtains cash
from customers in the form of interest and principal payments on
loans, fees paid for services, and from new deposits. Investment
maturities also provide a source of cash.
Many different measurements of liquidity are used in the
banking industry. The ratios of cash and cash equivalents
(including federal funds sold) and short-term securities to total
assets and net loans to total deposits are among some of the more
commonly used indicators. These measurements are set forth below
as of December 31, 1997 and 1996.
Dec. 31, 1997 Dec. 31, 1996
Cash and cash equivalents
and securities maturing in
one year to total assets 11.3% 14.9%
Net loans to total deposits 60.9% 57.4%
<PAGE>
The Consolidated Statements of Cash Flows present the change
in cash from operating, investing and financing activities.
During 1997, cash and cash equivalents decreased by $17,624,000,
primarily to fund growth in the loan and securities portfolios.
Net cash provided by operating activities was $8,719,000 for
1997, representing primarily the results of operations adjusted
for depreciation, amortization and the provision for possible
loan losses.
Net cash used in investing activities was $86,524,000, which
was used primarily to fund the growth in the loan and the
securities portfolio.
Net cash provided by financing activities was $60,181,000,
reflecting increases in short-term and long-term debt, the
issuance of 9.5% Cumulative Trust Preferred Securities and
increases in deposits, partially offset by the payment of
dividends to shareholders and the purchase of Treasury Stock.
To assist in the management of its liquidity, the Bank had
available $26,318,000 in lines of credit for overnight borrowing
with correspondent banks and the Federal Home Loan Bank, which
lines were not in use at December 31, 1997.
Managing the Bank's liquidity position involves a
significant degree of analytical estimation and other objective
factors. Although customer demand for funds, in the form of
loans or deposit withdrawals, is largely dependent on general
economic factors outside of the Bank's control, management
believes that its present liquidity structure is adequate to meet
such needs.
Liquidity of Bancorporation
Bancorporation's ability to meet its cash requirements,
including dividend payments, is generally dependent upon the
declaration and payment of dividends by the Bank to
Bancorporation.
Under Federal law, the approval of the Comptroller of the
Currency is required for the payment of dividends in any calendar
year by Broad National Bank to Broad National Bancorporation if
the total of all dividends declared in any calendar year exceeds
the net income for that year combined with the retained net
income for the preceding two calendar years. As of December 31,
1997, retained earnings of the Bank of $9,765,000 are available
for payment of dividends to the parent company without regulatory
approval.
Additionally, at December 31, 1997, Bancorporation had
available $5,212,000 of cash and interest bearing balances with
banks for the purpose of paying future dividends, interest and
operating costs. However, a change in circumstances, such as
changes in regulatory requirements or in the Bank's financial
<PAGE>
condition, could result in Bancorporation being required by
regulatory authorities to utilize its funds to increase the
Bank's capital. In such event, Bancorporation may not have
sufficient cash for operations or to make interest or dividend
payments and may be required to seek other sources of capital and
liquidity, if available.
Market Risk
The Company does not have assets held for trading purposes,
and does not currently use derivatives to manage market risk.
Market risk is the risk of loss from changes in market
prices and rates. The Company's market risk arises primarily
from interest rate risk inherent in its lending and deposit
taking activities. Interest rate risk can be defined as the
exposure of the Company's net interest income to adverse
movements in interest rates.
The Company's interest rate risk management is the
responsibility of the Company's Asset/Liability Committee. Tools
used by the Asset/Liability Committee to monitor interest rate
risk include the GAP report and an interest rate shock simulation
report (See "Interest Rate Sensitivity").
The table below represents in tabular form the contractual
balances of the Company's on balance sheet financial instruments,
categorized by expected maturity dates, and the instruments' fair
values at December 31, 1997. Expected maturities are contractual
maturities adjusted for repayments, and, where prepayment
information is available, prepayments of principal.
The Company uses certain assumptions to estimate fair values
and expected maturities.
Expected maturities for loans reflect contractual maturities
adjusted for projected scheduled repayments. Investment
securities reflect contractual maturities adjusted for
prepayments, which prepayments reflect the most recent three
month prepayment speeds. Deposits, other than time deposits,
reflect decay rates based upon industry accepted assumptions.
Time deposits, short term borrowings, long term debt and 9.5%
Cumulative Trust Preferred Securities reflect contractual
maturities.
The fair value of federal funds sold approximates book value
due to the short maturity. The fair value of investment
securities is based on quotations from security dealers. The
fair value of loans are estimated using the discounted value of
future cash flows expected to be received using estimated market
discount rates. The fair value of savings, money market and
interest bearing demand accounts is the amount payable upon
demand. The fair value of time deposits is based upon the
discounted value of contractual cash flows, which is estimated
using current rates offered for deposits <PAGE> of similar remaining
terms. The fair value of short-term borrowings and long-term
debt is estimated by discounting the cash flows through maturity
based upon current rates offered for similar instruments with
similar maturities. The fair value of the 9.5% Cumulative Trust
Preferred Securities is estimated by discounting the cash flows
through maturity based upon current rates for similar Trust
Preferred Securities.
<PAGE>
</TABLE>
<TABLE>
TABLE OF MARKET RISK SENSITIVE INSTRUMENTS
Expected Maturity/Principal Repayments as of December 31, 1997
(Dollars in Thousands)
Fair
1998 1999 2000 2001 2002 Beyond Total Value
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST
SENSITIVE
ASSETS
Federal funds $37,300 $ -- $ -- $ -- $ -- $ -- $37,300 $37,300
Weighted average
interest rate 5.42% -- -- -- -- -- 5.42% 5.42%
Investment
securities 43,075 35,979 34,734 20,934 16,489 54,824 206,035 206,280
Weighted average
interest rate 6.42% 6.58% 6.16% 6.51% 6.59% 6.75% 6.47% 6.48%
Fixed loans 55,534 24,540 11,725 9,973 9,536 39,331 150,639 150,444
Weighted average
interest rate 9.00% 9.04% 9.70% 8.53% 8.60% 8.51% 8.77% 8.54%
Variable loans 38,746 15,359 10,762 11,496 11,648 84,102 172,113 174,582
Weighted average
interest rate 9.69% 9.26% 9.41% 9.28% 9.26% 8.59% 8.95% 8.37%
INTEREST
SENSITIVE
LIABILITIES
Savings, money
market and
interest
bearing
demand
deposits 83,755 36,678 36,678 36,678 36,678 -- 230,467 231,226
Weighted
average
interest rate 2.44% 2.44% 2.44% 2.44% 2.44% -- 2.44% 2.29%
Time deposits 178,217 3,490 1,744 510 276 480 184,717 184,961
Weighted
average
interest rate 5.37% 5.32% 5.78% 5.44% 5.70% 3.24% 5.37% 5.23%
Short-term
borrowings 13,000 -- -- -- -- -- 13,000 13,037
Weighted
average
interest rate 5.87% -- -- -- -- -- 5.87% 5.66%
Long-term debt -- 9,000 -- -- -- -- 9,000 9,065
Weighted
average
interest rate -- 6.22% -- -- -- -- 6.22% 5.72%
9.5% Cumulative
Trust Preferred
Securities -- -- -- -- -- 11,500 11,500 12,269
Weighted
average
interest rate -- -- -- -- -- 9.50% 9.50% 8.28%
<TABLE\>
<PAGE>
Because of assumptions used to estimate fair values and
expected maturities, actual future changes in fair value could
differ from those reflected in the table.
Interest Rate Sensitivity
Management of interest rate sensitivity involves matching
the maturity and repricing dates of interest-earning assets with
those of interest-bearing liabilities in an effort to reduce the
impact of fluctuating net interest rates on net interest margins
and to promote consistent growth of net interest income during
periods of changing interest rates.
The Company's Asset/Liability Committee (the "Committee")
meets regularly to establish, communicate, coordinate and control
asset/liability management procedures. The purpose of the
Committee is to monitor the volume and mix of the Company's
interest sensitive assets and liabilities consistent with the
Company's overall liquidity, capital, growth, risk and
profitability goals.
Interest rate risk arises from mismatches (i.e., the
interest sensitivity gap) between the dollar amount of repricing
or maturing assets and liabilities, and is measured in terms of
the ratio of the interest rate sensitivity gap to total assets.
More assets repricing or maturing than liabilities over a given
time period is considered asset-sensitive and is reflected as a
positive gap, and more liabilities repricing or maturing than
assets over a given time period is considered liability-sensitive
and is reflected as a negative gap. An asset-sensitive position
(i.e., a positive gap) will generally enhance earnings in a
rising interest rate environment and will negatively impact
earnings in a falling interest rate environment, while a
liability-sensitive position (i.e., a negative gap) will
generally enhance earnings in a falling interest rate environment
and negatively impact earnings in a rising interest rate
environment. Fluctuations in interest rates are not predictable
or controllable.
The table below indicates as of December 31, 1997 the time
period in which interest-earning assets and interest-bearing
liabilities are scheduled to mature or reprice in accordance with
their contractual terms.
<PAGE>
</TABLE>
<TABLE>
After After After
Three Six One
Three Through Through Through
Months Six Twelve Five After
Or Less Months Months Years Five Years Total
(Dollars in Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
INTEREST SENSITIVE ASSETS
Investment securities $ 2,231 $ 0 $47,732 $ 93,873 $ 62,571 $206,407
Loans 110,592 11,050 16,429 59,466 125,215 322,752
Federal funds sold 37,300 0 0 0 0 37,300
Total interest sensitive assets $150,123 $11,050 $64,161 $153,339 $187,786 $566,459
INTEREST SENSITIVE LIABILITIES
Savings, money market
and interest
bearing demand
accounts $27,919 $27,918 $27,918 $146,712 $ 0 $230,467
Time deposits 109,929 35,098 33,190 6,020 480 184,717
Short term borrowings 4,000 3,000 6,000 0 0 13,000
Long term debt 0 0 0 9,000 0 9,000
9.5% cumulative trust
preferred securities 0 0 0 0 11,500 11,500
Total interest sensitive liabilities
$141,848 $66,016 $ 67,108 $161,732 $ 11,980 $448,684
Sensitivity gap $ 8,275 $(54,966) $ (2,947) $ (8,393) $175,806 $117,775
Gap as a percentage of
total assets 1.38% -9.14% -0.49% -1.39% 29.22%
Cumulative sensitivity gap $ 8,275 $(46,691) $ (49,638) $(58,031) $117,775
Cumulative gap as a
percentage of total assets 1.38% -7.76% -8.25% -9.65% 19.57%
Cumulative sensitivity ratio 105.83% 77.54% 81.95% 86.71% 126.25%
<TABLE\>
At December 31, 1997, the Company had a one year cumulative
negative gap of 8.3%. This negative one year gap position may,
as noted above, have a negative impact on earnings in a rising
interest rate environment.
This interest sensitivity table is not a complete picture of
the possible effect of interest rate changes on net interest
income for various reasons, among them: the table represents a
one-day position; variations occur daily as the Company adjusts
its interest sensitivity throughout the year; changes in the
general level of interest rates will not affect all categories of
assets and liabilities equally or simultaneously; and the
repricing distribution of interest sensitive assets may not be
indicative of the liquidity of those assets. Additionally, the
calculation of these interest sensitivity gap positions involves
certain assumptions as to the repricing period of interest
earning assets and interest bearing liabilities. These gap
positions are significantly impacted by assumptions made as to
the prepayments of loans and investment securities as well as to
the repricing of deposit accounts. The significant assumptions
used in the above table include: fixed rate loans reflect
contractual maturities adjusted for projected scheduled
repayments; investment securities reflect contractual maturities
adjusted for prepayments on mortgage backed securities, which
prepayments reflect the most recent three month prepayment
speeds; deposits, other than time deposits, reflect decay rates
based upon industry accepted assumptions; and time deposits,
short-term borrowings and long term debt reflect contractual
maturities. The impact of actual repayments, repricings and
changes in interest rates may differ from that indicated in the
<PAGE>
table above. Consequently, these static measurements are best
used as early indicators of potential interest rate exposure.
The Company also uses simulation modeling techniques which
apply alternative interest rate scenarios to forecasts of future
business activity. The results of such simulation modeling
techniques may differ from the implications derived from the
interest sensitivity gap analysis, and the use of such simulation
modeling techniques provides further assistance to management in
its efforts to achieve earnings growth in varying interest rate
environments.
The Company currently does not use derivatives to manage
interest rate risk.
Shareholders' Equity
Shareholders' equity of $39,231,000 at December 31, 1997 was
$873,000 or 2.3% higher as compared to December 31, 1996. The
ratio of average total equity to average total assets was 6.9%
for 1997 compared to 7.2% for 1996. Book value per common share
increased to $8.33 at December 31, 1997 from $7.82 at December
31, 1996.
During 1997, the Company purchased an additional 237,000
shares of treasury stock at a cost of $4,053,000.
The Company and its bank subsidiary are subject to various
regulatory capital requirements. Capital adequacy for the
Company is measured against guidelines established by the Federal
Reserve Board.
The Bank is subject to generally similar capital
requirements adopted by the OCC.
For information on regulatory capital, see Note 15 of the
Notes to the Consolidated Financial Statements.
Recent Accounting Pronouncements and Other Matters
Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128") establishes standards for
computing and presenting earnings per share (EPS) and applies to
entities with publicly held common stock or potential common
stock. SFAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS and requires dual presentation of basic
and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation. SFAS 128 is effective for financial statements
issued for periods ending after December 15, 1997, including
interim periods; earlier application is not permitted and
requires restatement of all prior-period EPS data presented.
<PAGE>
The Company has adopted SFAS 128 and has made the required
disclosures, including restatement of all prior-period EPS data
presented, in the Consolidated Statements of Income and the
accompanying Notes to the Consolidated Financial Statements.
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS 130") establishes standards
for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set
of general - purpose financial statements. SFAS 130 requires
that all items that are required to be recognized under
accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 does not
require a specific format for that financial statement but
requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and
(b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital
in the equity section of a statement of financial position. SFAS
130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS
131 requires public companies to report information about
business segments in their annual financial statements and
selected business segment information in quarterly reports issued
to shareholders. SFAS 131 requires entity-wide disclosures about
the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its
major customers. This statement supersedes SFAS 14, "Financial
Reporting for Segments of a Business Enterprise". SFAS 131 is
effective for fiscal years beginning after December 15, 1997.
Year 2000
In 1997, Broad National Bank conducted a review of its
computer systems to determine the systems that would be affected
by the Year 2000 issue. A steering committee comprised of Senior
Management has been formed to ensure that adequate resources are
allocated to this project and to monitor the progress and testing
of the Year 2000 transition.
The Bank's primary computer applications are handled by an
outside processor. To date, the Bank has received confirmation
that this processor has developed a plan of action for the
testing and implementation of Year 2000 enhancements. The Bank
will use internal resources to identify and test all vendor
applications for Year 2000 compliance. Testing is scheduled to
begin June 1998 and be completed by March 1999. The Bank does
not expect the costs associated with the Year 2000 transition to
be material.
<PAGE>
Except for the historical information contained herein, the
matters discussed in this report are forward looking statements
that involve risks and uncertainties, including risks and
uncertainties associated with quarterly fluctuations in results,
the impact of changes in interest rates on the Bank's net
interest income, the quality of the Bank's loans and other assets
and the credit risk associated with lending activities, the
fluctuations in the general economic and real estate climate in
the Bank's primary market area of New Jersey, the impact of
competition from other banking institutions and financial service
providers and the increasing consolidation of the banking
industry, the enforcement of federal and state bank regulations
and the effect of changes in such regulations, and other risks
and uncertainties detailed from time to time in the Company's SEC
reports. Actual results may vary materially from those expressed
in any forward-looking statements herein.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL
CONDITION OR BUSINESS
In order to take advantage of the safe harbor provisions for
forward-looking statements contained in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, added to those Acts
by the Private Securities Litigation Reform Act of 1995,
Bancorporation is hereby identifying important risks and
uncertainties that could affect Bancorporation's actual results
of operations, financial condition or business and could cause
Bancorporation's actual results of operations, financial
condition or business to differ materially from its historical
results of operations, financial condition or business, or the
results of operations, financial condition or business
contemplated by forward-looking statements made herein or
elsewhere orally or in writing, by, or on behalf of,
Bancorporation. Factors that could cause or contribute to such
differences include, but are not limited to, those factors
described below.
ECONOMIC CONDITIONS IN BANCORPORATION'S PRIMARY MARKET AREA
The profitability of Bancorporation is dependant on the
profitability of its subsidiary, Broad National Bank, which is a
national banking association operating out of New Jersey. The
Bank's financial condition is affected by fluctuations in the
economic conditions prevailing in that portion of New Jersey in
which the Bank's banking operations are located. Accordingly,
the financial conditions of both the Bank and Bancorporation
would be adversely affected by deterioration in the general
economic and real estate climate in the State of New Jersey. The
Bank's business is also subject to fluctuations in interest
rates, national and local economic <PAGE> conditions, monetary and
regulatory policies and consumer and institutional confidence in
the Bank. The fluctuations are neither predictable nor
controllable and may have materially adverse consequences upon
the operations and financial condition of the Bank and
Bancorporation in the future even if other favorable events
occur.
IMPORTANCE OF NET INTEREST INCOME AND SUSCEPTIBILITY TO CHANGES
IN INTEREST RATES
The primary source of earnings for the Bank and
Bancorporation is net interest income, which is the difference
between interest and fees earned on loans and other interest-
earning assets, and the interest paid on deposits and other
interest-bearing liabilities. There may be a difference between
the amount of interest-earning assets scheduled to reprice in any
given period and the amount of interest-bearing liabilities
scheduled to reprice over the same time. Any difference can
create a lag between the time it takes the rate the bank earns
interest to respond to market fluctuations and the time it takes
the rate the bank incurs interest costs to respond to market
fluctuations, and vice-versa. Because of these "interest
sensitivity gaps," the amount of net interest income may be
affected by fluctuations in the interest rate.
ASSET QUALITY AND LENDING RISKS
Success in the banking industry largely depends on the
quality of loans and other assets. The Bank's loan officers are
actively encouraged to identify deteriorating loans. Loans are
also monitored and categorized through an analysis of their
payment status. The Bank's failure to timely and accurately
monitor the quality of its loans and other assets could have a
materially adverse effect on the operations and financial
condition of the Bank and Bancorporation. There is a degree of
credit risk associated with any lending activity. Bancorporation
attempts to minimize its credit risk through loan
diversification. Although Bancorporation's loan portfolio is
varied, with no undue concentration in any one industry,
substantially all of the loans in the portfolio have been made to
borrowers in New Jersey. Therefore, the loan portfolio is
susceptible to factors affecting the New Jersey area and the
level of non-performing assets is heavily dependant upon local
conditions. See "Economic Conditions in Bancorporation's Primary
Market Area." There can be no assurance that the level of
Bancorporation's non-performing assets will not increase above
current levels. High levels of non-performing assets could have
a materially adverse effect on the operations and financial
condition of the Bank and Bancorporation.
<PAGE>
PROVISIONS FOR POSSIBLE LOAN LOSSES
Bancorporation makes a provision for possible loan losses
based upon management's analysis of potential losses in the loan
portfolio and consideration of prevailing economic conditions.
Bancorporation may need to increase the provision for loan losses
through additional provisions in the future if the financial
condition of any of its borrowers deteriorates or if real estate
values decline. See "Asset Quality and Lending Risks."
Furthermore, various regulatory agencies, as an integral part of
their examination process, periodically review Bancorporation's
loan portfolio, provision for loan losses, in-substance
foreclosed loans, and real estate acquired by foreclosure. Such
agencies may require, and in the past have required,
Bancorporation to recognize additions to the provision for loan
losses based on their judgments of information available to them
at the time of the examination. Any additional provisions for
possible loan losses, whether required as a result of regulatory
review or initiated by Bancorporation itself, may materially
alter the financial outlook of the Bank and Bancorporation.
COMPETITION IN BANCORPORATION'S MARKET AREA
Vigorous competition exists in all major areas where
Bancorporation and the Bank presently engage in business. The
Bank faces intense competition in local and national markets from
other major banking institutions. The Bank is in direct
competition with some larger institutions that have substantially
greater resources, better name recognition, stronger market
presence, and the ability to offer a wider range of services.
Competition from larger institutions is especially prevalent due
to the accelerated pace of bank mergers in the New Jersey area.
The long-term impact of such mergers and consolidations on the
New Jersey market area is uncertain. The Bank may face even more
intense competition because of the proliferation of bank mergers.
An increase in the intensity of competition from other banks in
the New Jersey market could have a materially adverse impact on
the operations and financial condition of the Bank and
Bancorporation.
In addition to the competition from rival banking companies,
the Bank faces competition from non-bank institutions including:
finance companies; mortgage lenders; small loan companies; credit
unions; insurance companies; and a variety of other financial
service and advisory companies. The stock market, mutual funds,
and other non-federally insured investments also compete with the
Bank for customer deposits. The Bank may face more intense
competition from these and other non-banking industries and
investments in the future. A failure of the Bank to be
competitive could have a materially adverse effect on the Bank
and Bancorporation.
<PAGE>
REGULATION
Banks and bank holding companies such as Bancorporation are
subject to regulation by both federal and state bank regulatory
agencies. The regulations, which are designed to protect
borrowers and promote certain social policies, include
limitations on the operations of banks and bank holding
companies, such as minimum capital requirements and restrictions
on dividend payments. These regulations are not necessarily
designed to maximize the profitability of banking institutions.
Future changes in the banking laws and regulations could have a
materially adverse effect on the operations and financial
condition of the Bank and Bancorporation.
IMPORTANCE OF EXECUTIVE OFFICERS
The success of the Bank and Bancorporation has been
largely dependant on the efforts of Donald Karp, John Dorman and
the other executive officers. These individuals are expected to
continue to perform their services. However, the loss of the
services of Donald Karp, John Dorman, or any of the other key
executive officers could have a materially adverse effect on the
Bank and Bancorporation.
YEAR 2000 COMPLIANCE
The Company's Year 2000 steering committee has been
designated to monitor the progress and testing of the action plan
for Year 2000 compliance, with the objective of ensuring that all
computerized systems and software programs are capable of
functioning in the next century. The Company anticipates that
the incremental cost of ensuring that its computer systems are
Year 2000 compliant may be significant but is not anticipated to
be material to its business, financial condition or results of
operations. However, if such modifications and conversions are
not made, or are not completed timely, the Year 2000 issue could
have a materially adverse effect on the Bank and the Company.
ADDITIONAL FACTORS
Additional risks and uncertainties that may affect the
future results of operations, financial condition or business of
the Bank and Bancorporation include, but are not limited to: (i)
the ability to keep pace with technological change including
developing and implementing technological advances timely and
cost-effectively in order to provide better service and remain
competitive; (ii) adverse publicity, news coverage by the media,
or negative reports by brokerage firms, industry and financial
analysts regarding the Bank or Bancorporation; and (iii) changes
in accounting policies and practices.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market Risk
The Company does not have assets held for trading purposes,
and does not currently use derivatives to manage market risk.
Market risk is the risk of loss from changes in market
prices and rates. The Company's market risk arises primarily
from interest rate risk inherent in its lending and deposit
taking activities. Interest rate risk can be defined as the
exposure of the Company's net interest income to adverse
movements in interest rates.
The Company's interest rate risk management is the
responsibility of the Company's Asset/Liability Committee. Tools
used by the Asset/Liability Committee to monitor interest rate
risk include the GAP report and an interest rate shock simulation
report (See "Interest Rate Sensitivity").
The table below represents in tabular form the contractual
balances of the Company's on balance sheet financial instruments,
categorized by expected maturity dates, and the instruments' fair
values at December 31, 1997. Expected maturities are contractual
maturities adjusted for repayments, and, where prepayment
information is available, prepayments of principal.
The Company uses certain assumptions to estimate fair values
and expected maturities.
Expected maturities for loans reflect contractual maturities
adjusted for projected scheduled repayments. Investment
securities reflect contractual maturities adjusted for
prepayments, which prepayments reflect the most recent three
month prepayment speeds. Deposits, other than time deposits,
reflect decay rates based upon industry accepted assumptions.
Time deposits, short term borrowings, long term debt and 9.5%
Cumulative Trust Preferred Securities reflect contractual
maturities.
The fair value of federal funds sold approximates book value
due to the short maturity. The fair value of investment
securities is based on quotations from security dealers. The
fair value of loans are estimated using the discounted value of
future cash flows expected to be received using estimated market
discount rates. The fair value of savings, money market and
interest bearing demand accounts is the amount payable upon
demand. The fair value of time deposits is based upon the
<PAGE>
discounted value of contractual cash flows, which is estimated
using current rates offered for deposits of similar remaining
terms. The fair value of short-term borrowings and long-term
debt is estimated by discounting the cash flows through maturity
based upon current rates offered for similar instruments with
similar maturities. The fair value of the 9.5% Cumulative Trust
Preferred Securities is estimated by discounting the cash flows
through maturity based upon current rates for similar Trust
Preferred Securities.
<PAGE>
</TABLE>
<TABLE>
TABLE OF MARKET RISK SENSITIVE INSTRUMENTS
Expected Maturity/Principal Repayments as of December 31, 1997
(Dollars in Thousands)
Fair
1998 1999 2000 2001 2002 Beyond Total Value
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST
SENSITIVE
ASSETS
Federal funds $37,300 $ -- $ -- $ -- $ -- $ -- $37,300 $37,300
Weighted average
interest rate 5.42% -- -- -- -- -- 5.42% 5.42%
Investment
securities 43,075 35,979 34,734 20,934 16,489 54,824 206,035 206,280
Weighted average
interest rate 6.42% 6.58% 6.16% 6.51% 6.59% 6.75% 6.47% 6.48%
Fixed loans 55,534 24,540 11,725 9,973 9,536 39,331 150,639 150,444
Weighted average
interest rate 9.00% 9.04% 9.70% 8.53% 8.60% 8.51% 8.77% 8.54%
Variable loans 38,746 15,359 10,762 11,496 11,648 84,102 172,113 174,582
Weighted average
interest rate 9.69% 9.26% 9.41% 9.28% 9.26% 8.59% 8.95% 8.37%
INTEREST
SENSITIVE
LIABILITIES
Savings, money
market and
interest
bearing
demand
deposits 83,755 36,678 36,678 36,678 36,678 -- 230,467 231,226
Weighted
average
interest rate 2.44% 2.44% 2.44% 2.44% 2.44% -- 2.44% 2.29%
Time deposits 178,217 3,490 1,744 510 276 480 184,717 184,961
Weighted
average
interest rate 5.37% 5.32% 5.78% 5.44% 5.70% 3.24% 5.37% 5.23%
Short-term
borrowings 13,000 -- -- -- -- -- 13,000 13,037
Weighted
average
interest rate 5.87% -- -- -- -- -- 5.87% 5.66%
Long-term debt -- 9,000 -- -- -- -- 9,000 9,065
Weighted
average
interest rate -- 6.22% -- -- -- -- 6.22% 5.72%
9.5% Cumulative
Trust Preferred
Securities -- -- -- -- -- 11,500 11,500 12,269
Weighted
average
interest rate -- -- -- -- -- 9.50% 9.50% 8.28%
<TABLE\>
<PAGE>
Because of assumptions used to estimate fair values and
expected maturities, actual future changes in fair value could
differ from those reflected in the table.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BROAD NATIONAL BANCORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report as of December 31, 1997
and 1996 and for the years ended December 31, 1997,
1996 and 1995 64
Consolidated Statements of Condition as of December 31,
1997 and 1996 65
Consolidated Statements of Income for each of the years
ended December 31, 1997, 1996 and 1995 66
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1997, 1996 and 1995 68
Consolidated Statements of Cash Flows for each of the
years ended December 31, 1997, 1996 and 1995 69
Notes to Consolidated Financial Statements 70
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
financial statements or the notes thereto.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
Broad National Bancorporation:
We have audited the accompanying consolidated statements of
condition of Broad National Bancorporation and subsidiaries as of
December 31, 1997 and 1996 and the related consolidated
statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Broad National Bancorporation and
subsidiaries as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
January 15, 1998
<PAGE>
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CONDITION
December 31, 1997 and 1996
(Dollars in thousands, except share amounts)
1997 1996
ASSETS
CASH AND DUE FROM BANKS (Note 12) $ 21,933 $ 19,782
FEDERAL FUNDS SOLD 37,300 57,075
CASH AND CASH EQUIVALENTS 59,233 76,857
SECURITIES HELD-TO-MATURITY
(aggregate market value $65,203
and $89,482, respectively) (Note 2) 65,330 90,170
SECURITIES AVAILABLE-FOR-SALE (Note 2) 141,077 69,044
LOANS, net of deferred loan fees
(Note 3) 322,528 287,116
LESS - Allowance for possible
loan losses (Note 4) 6,974 8,531
NET LOANS 315,554 278,585
PREMISES AND EQUIPMENT, net (Note 5) 8,991 8,888
ACCRUED INTEREST RECEIVABLE 4,020 3,351
OTHER ASSETS (Note 6) 7,464 6,720
TOTAL ASSETS $601,669 $533,615
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Non-interest bearing demand $103,054 $100,945
Savings, money market and
interest bearing demand 230,467 217,250
Time deposits less than $100,000 94,017 85,714
Time deposits of $100,000 or more 90,700 81,164
Total deposits 518,238 485,073
SHORT-TERM BORROWINGS (Note 9) 13,000 1,000
LONG-TERM DEBT (Note 10) 9,000 0
COMPANY-OBLIGATED MANDATORILY
REDEEMABLE CUMULATIVE TRUST
PREFERRED SECURITIES OF A
SUBSIDIARY TRUST HOLDING
SOLELY JUNIOR SUBORDINATED
DEBENTURES OF BANCORPORATION
(Note 11) 11,500 0
ACCRUED TAXES, INTEREST AND
OTHER LIABILITIES (Note 7) 10,700 9,184
TOTAL LIABILITIES 562,438 495,257
COMMITMENTS AND CONTINGENCIES
(Notes 2, 3 and 12)
SHAREHOLDERS' EQUITY (Notes 13,
14 and 15)
Common stock, $1 par value,
authorized 10,000,000 shares
in 1997 and 5,500,000 shares
in 1996; issued: 1997,
4,948,921 shares; 1996,
4,677,188 shares 4,949 4,677
Capital surplus 30,996 26,589
Retained earnings 7,153 7,004
Common stock in treasury,
at cost: 242,000 shares
in 1997 and 5,000 shares in 1996 (4,111) (58)
Unrealized gain on securities
available-for-sale, net 244 146
TOTAL SHAREHOLDERS' EQUITY 39,231 38,358
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $601,669 $533,615
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
<PAGE>
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1997, 1996 and 1995
(In thousands, except per share amounts)
1997 1996 1995
INTEREST INCOME
Interest and fees on loans
(Note 3) $26,935 $24,190 $24,337
Interest on securities
held-to-maturity
Taxable 5,152 4,667 5,071
Tax exempt 61 49 55
Interest on securities
available-for-sale 5,894 3,689 1,682
Interest on federal funds sold 2,813 2,567 2,253
TOTAL INTEREST INCOME 40,855 35,162 33,398
INTEREST EXPENSE
Interest on savings and
interest bearing
demand deposits 4,756 4,899 4,900
Interest on time certificates of
deposit of $100,000 or more 5,182 2,639 1,040
Interest on other time deposits 4,990 4,222 3,973
Interest on short-term borrowings 281 58 169
Interest on 9.5% Cumulative Trust
Preferred Securities 546 0 0
Interest on long-term debt 175 0 0
TOTAL INTEREST EXPENSE 15,930 11,818 10,082
NET INTEREST INCOME 24,925 23,344 23,316
PROVISION FOR POSSIBLE LOAN LOSSES
(Note 4) 1,800 1,350 720
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 23,125 21,994 22,596
NON-INTEREST INCOME
Service charges on deposit accounts 5,945 5,370 3,515
Other income 1,085 1,231 887
Gain (loss) on sale of securities
available-for-sale (Note 2) 84 (45) 71
Gain on sale of loans 3 0 18
TOTAL NON-INTEREST INCOME 7,117 6,556 4,491
NON-INTEREST EXPENSES
Salaries and wages 8,000 7,896 7,735
Employee benefits (Note 7) 2,094 2,486 2,255
Occupancy expense (Note 12) 2,009 1,923 1,975
Furniture and equipment expense 1,167 1,090 1,213
Advertising 589 406 425
Data processing fees 1,083 1,070 1,086
Legal fees 747 858 547
Professional fees 1,133 1,307 819
Insurance 287 413 415
Postage, delivery and communication 721 675 624
FDIC and OCC assessments 182 112 567
Other real estate (income) expense (219) 202 99
Other expenses 1,756 1,411 1,776
TOTAL NON-INTEREST EXPENSES 19,549 19,849 19,536
<PAGE>
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1997, 1996 and 1995
(In thousands, except per share amounts)
1997 1996 1995
INCOME BEFORE INCOME TAXES $10,693 $8,701 $7,551
PROVISION FOR INCOME TAXES (Note 6) 4,282 3,428 3,131
NET INCOME $ 6,411 $5,273 $4,420
NET INCOME APPLICABLE TO
COMMON STOCK (Note 13) $ 6,411 $5,273 $3,840
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 13)
BASIC 4,788 4,789 3,407
DILUTED 4,957 4,998 4,959
EARNINGS PER COMMON SHARE (Note 13)
BASIC $1.34 $1.10 $1.13
DILUTED $1.29 $1.06 $0.89
The accompanying notes to the consolidated financial statements
are an integral part of these
statements.
<PAGE>
</TABLE>
<TABLE>
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 1997, 1996, and 1995
(In thousands, except per share amounts)
Unrealized
Gain
(Loss) On
Number Securities
Of Common Preferred Preferred Common Capital Retained Treasury Available-
Shares Stock-1985 Stock-1992 Stock Surplus Earnings Stock for-Sale, Net Total
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994 2,883 $171 $653 $2,883 $23,213 $4,062 -- $(716) $30,266
NET INCOME - 1995 -- -- -- -- -- 4,420 -- -- 4,420
CONVERSION OF 1992
PREFERRED STOCK 173 -- (90) 173 (83) -- -- -- --
EXERCISE OF STOCK
OPTIONS 3 -- -- 3 15 -- -- -- 18
CASH DIVIDENDS DECLARED
COMMON STOCK-$0.17 PER
SHARE -- -- -- -- -- (595) -- -- (595)
PREFERRED STOCK - 1992
- $0.85 PER SHARE -- -- -- -- -- (521) -- -- (521)
PREFERRED STOCK - 1985
- $3.42 PER SHARE -- -- -- -- -- (59) -- -- (59)
NET CHANGE IN UNREALIZED
GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE, NET -- -- -- -- -- -- -- 1,000 1,000
BALANCE, DECEMBER 31, 1995 3,059 $171 $563 $3,059 $23,145 7,307 -- $ 284 $34,529
NET INCOME - 1996 -- -- -- -- -- 5,273 -- -- 5,273
REDEMPTION OF 1985
PREFERRED STOCK (2) -- -- (6) -- -- -- (8)
CONVERSION OF 1985
PREFERRED STOCK 110 (169) -- 110 59 -- -- -- --
REDEMPTION OF 1992
PREFERRED STOCK -- -- (4) -- (35) (5) -- -- (44)
CONVERSION OF 1992
PREFERRED STOCK 1,067 -- (559) 1,067 (508) -- -- -- --
EXERCISE OF STOCK OPTION 16 -- -- 16 82 -- -- -- 98
EFFECT OF 10% STOCK
DIVIDEND 425 -- -- 425 3,852 (4,277) -- -- --
CASH DIVIDENDS DECLARED
COMMON STOCK - $0.27
PER SHARE -- -- -- -- -- (1,294) -- -- (1,294)
PURCHASE OF TREASURY STOCK -- -- -- -- -- -- (58) -- (58)
NET CHANGE IN UNREALIZED
GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE, NET -- -- -- -- -- -- -- (138) (138)
BALANCE, DECEMBER 31, 1996 4,677 $ 0 $ 0 $4,677 $26,589 7,004 $ (58) $146 $38,358
NET INCOME - 1997 -- -- -- -- 6,411 -- -- 6,411
EXERCISE OF STOCK OPTIONS 48 -- -- 48 260 -- -- 308
EFFECT OF 5% STOCK DIVIDEND 224 -- -- 224 4,147 (4,371) -- -- --
CASH DIVIDENDS DECLARED
COMMON STOCK - $0.41
PER SHARE -- -- -- -- -- (1,891) -- -- (1,891)
PURCHASE OF TREASURY STOCK -- -- -- -- -- -- (4,053) -- (4,053)
NET CHANGE IN UNREALIZED
GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE, NET -- -- -- -- -- -- -- 98 98
BALANCE, DECEMBER 31, 1997 4,949 $ 0 $ 0 $4,949 $30,996 $7,153 $(4,111) $244 $39,231
The accompanying notes to the consolidated financial statements are an integral part of these statements.
<TABLE\>
FS-4
<PAGE>
Broad National Bancorporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,411 $ 5,273 $ 4,420
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities
Depreciation and amortization 1,329 1,229 1,185
Amortization of securities
premium, net 655 709 440
Amortization of deferred
points and fees and deferral
of loan origination costs (393) (297) (571)
Provision for possible loan
losses 1,800 1,350 720
Deferred tax (benefit)
provision (220) (392) 899
Increase (decrease)in
accrued taxes, interest,
and other liabilities 1,515 (7,009) 9,472
(Gain) loss on sale of
securities available-
for-sale (84) 45 (71)
(Gain) on sale of loans (3) 0 (18)
(Gain) loss on the sale of
other real estate owned (343) 96 23
(Increase) decrease in
accrued interest receivable (669) (532) 41
Other assets, net (1,279) (747) (3,040)
Net cash provided by (used in)
operating activities $ 8,719 ($ 275) $13,500
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of
other real estate owned $ 890 $ 292 $ 308
Net (increase) decrease in
loan balances (38,558) (19,909) 1,144
Proceeds from the sale of
loans 181 0 1,432
Proceeds from the maturities of
securities held-to-maturity 31,211 14,745 8,936
Purchase of securities
held-to-maturity (6,716) (44,986) (17,722)
Proceeds from the maturities
of securities available-
for-sale 15,814 15,795 1,846
Proceeds from the sale of
securities available-
for-sale 25,910 17,103 18,896
Purchase of securities
available-for-sale (113,824) (46,623) (16,093)
Capital expenditures (1,432) (699) (1,077)
Net cash used in investing
activities $ (86,524) $(64,282) $(2,330)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in time deposits $ 17,839 $ 59,462 $32,028
Net increase (decrease) in
demand deposits, savings,
money market and interest
bearing demand deposits 15,328 (4,070) 6,187
Net increase in short term
borrowings 12,000 218 605
Dividends paid (1,741) (1,294) (1,175)
Issuance of 9.5% Cumulative
Trust Preferred Securities 11,500 0 0
Increase in long-term debt 9,000 0 0
Issuance of Common Stock 308 98 0
Redemption of Preferred Stock 0 (52) 0
Purchase of Treasury Stock (4,053) (58) 0
Net cash provided by
financing activities $ 60,181 $ 54,304 $37,645
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (17,624) (10,253) 48,815
CASH AND CASH EQUIVALENTS,
beginning of year 76,857 87,110 38,295
CASH AND CASH EQUIVALENTS,
end of year $ 59,233 $ 76,857 $87,110
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for
Interest $ 15,412 $ 11,939 $ 8,823
Income taxes 5,551 2,847 3,031
NONCASH OPERATING ACTIVITIES
Transfer of loans to other
real estate owned $ 311 $ 458 $ 702
Transfer of securities
held-to-maturity to
securities available-
for-sale $ 0 $ 0 $37,911
The accompanying notes to the consolidated financial statements
are an integral part of these
statements.
FS-5
<PAGE>
Broad National Bancorporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting policies not described
elsewhere in these notes are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of Broad National Bancorporation (the Company), its wholly owned
subsidiaries BNB Capital Trust and Broad National Bank (the Bank)
and the Bank's wholly owned subsidiaries, BNB Investment
Corporation, Broad National Realty Corporation and Bronatoreo.
All intercompany accounts and transactions have been eliminated.
BASIS OF FINANCIAL STATEMENT PRESENTATION
In preparing the consolidated financial statements,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the
date of the statements of condition and results of operations for
the periods indicated. Actual results could differ significantly
from those estimates.
Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination
of the allowance for possible loan losses and the valuation of
other real estate owned. In connection with the determination of
these allowances, management generally obtains independent
appraisals.
While management uses available information to recognize
losses on loans and other real estate owned, future additions may
be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's
allowance for possible losses on loans, and valuation of other
real estate owned. Such agencies may require the Company to
recognize additions to the allowance or changes in valuation
based on their judgments of information available to them at the
time of their examination.
A substantial portion of the Company's loans are secured by
real estate in New Jersey. Accordingly, as with most financial
institutions in this market area, the ultimate collectibility of
a substantial portion of the Company's loan portfolio is
susceptible to changes in New Jersey's market conditions.
<PAGE>
FEDERAL HOME LOAN BANK OF NEW YORK (FHLBNY) STOCK
The Bank, as a member of the FHLBNY, is required to hold
shares of capital stock of FHLBNY, which are carried at cost,
based upon a specified formula.
INVESTMENT SECURITIES
The Company does not have trading securities, but does
differentiate between held-to-maturity securities and
available-for-sale securities. Management determines the
appropriate classification of securities at the time of purchase.
If management has the positive intent and the Company has
the ability at the time of purchase to hold securities until
maturity, they are classified as held-to-maturity securities.
Such securities are stated at amortized cost, adjusted for
unamortized purchase premiums and discounts.
Securities in the available-for-sale category are those for
which the Company does not have the positive intent and ability
to hold to maturity. Available-for-sale securities are reported
at fair value. Any unrealized appreciation or depreciation in
the available-for-sale securities, net of tax effects, is
reported as a separate component of shareholders' equity.
Realized gains or losses on the sale of securities available-
for-sale are recognized using the specific identification method.
LOANS AND LOAN FEES
Loans are stated at their principal amount outstanding, net
of deferred loan fees and costs.
Non-refundable fees and costs associated with originating or
acquiring loans are deferred and amortized over the expected
remaining life of the related loans by use of a method which
approximates the level yield method.
It is the policy of the Bank to discontinue the accrual of
interest and reverse previously accrued but unpaid interest where
interest or principal is more than 90 days past due or when other
circumstances indicate that collection is questionable, unless
the loans are adequately secured and in the process of
collection. Income on these loans is recognized only in the
period in which it is collected. A loan is returned to accrual
status when it is brought current as to principal and interest
and its future collectibility is assured.
<PAGE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a
level considered adequate to provide for potential loan losses.
The allowance is increased by provisions charged to expense and
reduced by net charge-offs. The level of the allowance is based
upon management's evaluation of potential losses in the loan
portfolio, after consideration of prevailing economic conditions.
The Bank has identified the population of loans to be
evaluated for impairment to be non-accrual loans and loans
internally classified as substandard or below and in each
instance above an established dollar threshold. The value of an
impaired loan is measured based upon the present value of
expected future cash flows discounted at the loan's effective
interest rate, or the fair value of the collateral if the loan is
collateral dependent. Smaller balance homogeneous loans that are
collectively evaluated for impairment, such as residential
mortgage loans and installment loans, are specifically excluded
from impaired loans. The impaired loan portfolio is primarily
collateral dependent. Impaired loans are assessed to determine
that each loan's carrying value is not in excess of the fair
value of the related collateral or the present value of expected
future cash flows.
OTHER REAL ESTATE OWNED
Other real estate owned is composed of foreclosed properties
where the Bank has actually received title. Such properties are
carried at the lower of cost or fair value less estimated cost to
sell. The fair value of such assets is determined based upon
independent appraisals and other relevant factors. Operating
expenses, and gains or losses from the sale of other real estate
owned are charged or credited to other real estate expense.
Other real estate owned is included in "Other Assets" in the
Consolidated Statements of Condition.
PREMISES AND EQUIPMENT
These assets are stated at cost less accumulated
depreciation and amortization, which are computed primarily using
the straight-line method over the estimated useful lives of the
assets. Gains or losses on dispositions are reflected in current
operations. Maintenance and repairs are charged to expense as
incurred.
<PAGE>
INCOME TAXES
Bancorporation and the Bank file a consolidated federal
income tax return. State income tax returns are filed on a
separate basis.
The Company accounts for income taxes using the asset and
liability method. Temporary differences between the basis of
assets and liabilities for financial reporting and tax purposes
are measured as of the balance sheet date. Deferred tax
liabilities or recognizable deferred tax assets are calculated on
such differences, using current statutory rates which result in
future taxable or deductible amounts. The effect on deferred
taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
NET INCOME PER SHARE
On March 3, 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). SFAS 128 established new
standards for the computation of earnings per share ("EPS") by
simplifying the standards prescribed in APB Opinion No. 15.
Under the new requirements, the Company is required to present
both basic and diluted EPS on the face of the income statement.
Basic EPS replaced the current EPS terminology and is computed by
dividing income available to common shareholders by the weighted-
average number of common shares outstanding. Diluted EPS
includes any additional common shares as if all potentially
dilutive common shares were issued (e.g. stock options). The
Company was required to adopt SFAS 128 for the period ended
December 31, 1997. All prior-period EPS data is restated as
required.
All share and per share amounts have been restated to
reflect the 5% stock dividend declared in December 1997 and
distributed in January 1998 and the 10% stock dividend
distributed in October 1996.
STOCK COMPENSATION PLANS
Prior to January 1, 1996, the Bank accounted for its stock
option plans in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. As such,
compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Bank adopted Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123), which permits entities to
recognize as expense over the vesting period the fair value of
all stock-based <PAGE> awards on the date of grant. Alternatively, SFAS
123 also allows entities to continue to apply the provisions of
APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method
defined in SFAS 123 had been applied. The Bank has elected to
continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS 123.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, noninterest bearing amounts due
from banks, and federal funds sold.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS 130") establishes standards
for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set
of general - purpose financial statements. SFAS 130 requires
that all items that are required to be recognized under
accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS 130 does not
require a specific format for that financial statement but
requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement.
SFAS 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and
(b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital
in the equity section of a statement of financial position. SFAS
130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required.
In June 1997, the FASB issued SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information". SFAS
131 requires public companies to report information about
business segments in their annual financial statements and
selected business segment information in quarterly reports issued
to shareholders. SFAS 131 requires entity-wide disclosures about
the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its
major customers. This statement supersedes SFAS 14, "Financial
Reporting for Segments of a Business Enterprise". SFAS 131 is
effective for fiscal years beginning after December 15, 1997.
<PAGE>
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements
presented for prior periods have been reclassified to conform
with the 1997 presentation.
NOTE 2: INVESTMENT SECURITIES
The amortized costs, gross unrealized gains and losses and
estimated fair values of securities held-to-maturity are as
follows (in thousands):
</TABLE>
<TABLE>
December 31
1997 1996
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
Agencies $13,149 $ 1 $( 39) $ 13,111 $33,862 $ 42 $ (177) $33,727
Mortgage-Backed
Securities 47,869 131 (233) 47,767 52,946 30 (591) 52,385
States and
Political
Subdivisions 1,683 13 0 1,696 1,182 8 0 1,190
Other Bonds 30 0 0 30 32 0 0 32
Total Debt
Securities $62,731 $ 145 $(272) $62,604 $88,022 $80 $ (768) $87,334
FRB and FHLB
Stock 2,599 0 0 2,599 2,148 0 0 2,148
Total Securities
Held-to-
Maturity $65,330 $ 145 $(272) $65,203 $90,170 $80 $ (768) $89,482
<TABLE\>
The amortized cost and estimated fair value of securities
held-to-maturity at December 31, 1997, by contractual maturity,
are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
Estimated
Amortized Fair
Cost Value
(in Thousands)
Due in one year or less $ 3,321 $ 3,314
Due in one year through five years 32,139 31,958
Due after five years through ten years 19,386 19,427
Due after ten years 7,885 7,905
Total Debt Securities $62,731 $62,604
FRB and FHLB Stock 2,599 2,599
Total Securities Held-To-Maturity $65,330 $65,203
The amortized costs, gross unrealized gains and losses and
estimated fair values of securities available-for-sale are as
follows (in thousands):
<PAGE>
</TABLE>
<TABLE>
December 31
1997 1996
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury
Notes $ 12,499 $120 $ 0 $ 12,619 $12,513 $ 83 $ (1) $12,595
U.S. Government
Agencies 32,967 39 (63) 32,943 1,000 0 (4) 996
Mortgage Backed
Securities 93,537 428 (154) 93,811 55,309 280 (136) 55,453
States and
Political
Subdivisions 325 10 0 335 0 0 0 0
Other 1,377 0 (8) 1,369 0 0 0 0
$140,705 $597 $(225) $141,077 $68,822 $363 $(141) $69,044
<TABLE\>
The amortized cost and estimated fair value of securities
available-for-sale at December 31, 1997, by contractual maturity,
are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
Estimated
Amortized Fair
Cost Value
(in thousands)
Due in one year or less $ 5,487 $ 5,493
Due in one year through five years 29,175 29,371
Due after five years through ten years 43,655 43,681
Due after ten years 62,388 62,532
$140,705 $141,077
Gross realized gains (losses) from the sale of securities
available-for-sale were $149,000 and ($65,000) during 1997,
$52,000 and ($97,000) during 1996 and $71,000 and ($0) during
1995.
At December 31, 1997 and 1996, securities having a book
value of $53,199,000 and $75,559,000 respectively, were pledged
to secure lines of credit, letters of credit, public deposits and
for other purposes as required by law.
NOTE 3: LOANS
Loans are summarized as follows (in thousands):
December 31
<PAGE>
1997 1996
Real Estate loans
Construction $ 10,844 $ 5,990
Secured conventional
Residential 78,654 72,791
Nonresidential 141,464 126,050
Commercial and industrial loans 82,524 73,171
Loans to individuals
Automobile 2,743 2,488
Revolving credit 290 315
Other installment loans 5,543 5,538
All other loans 690 1,021
Total loans 322,752 287,364
Less deferred loan fees (224) (248)
Total loans net of deferred
loan fees $322,528 $287,116
Non-performing loans and non-performing assets include the
following (in thousands):
December 31
1997 1996
Non-accrual loans $ 3,891 $8,384
Accruing loans past due
90 days or more 931 1,349
Total non-performing loans $ 4,822 $9,733
Restructured loans
(excluding amounts
classified as non-
performing loans) 1,619 3,934
Other real estate owned, net 648 841
Total non-performing assets $ 7,089 $14,508
If the non-accrual loans had continued to accrue interest in
accordance with their original contract terms, interest income
would have increased approximately $387,284, $710,500 and
$689,000 in 1997, 1996 and 1995, respectively. No interest
income was collected on these loans subsequent to their
classification as non-accrual in 1997, 1996 and 1995.
At December 31, 1997 and 1996, the recorded investment in
impaired loans was $7,334,000 and $10,109,000, respectively. The
related allowance for credit losses was $0 at December 31, 1997,
and $500,000 at December 31, 1996. The impaired loan portfolio
is primarily collateral dependent. The change in the allowance
for impaired loans represented a recovery of $500,000 during
1997, as compared to a recovery of $270,000 during 1996. The
average recorded investment in impaired loans during the years
ended December 31, 1997 and 1996 was approximately $9,334,000 and
$9,657,000, respectively. For the years ended December 31, 1997,
1996 and 1995 the Company recognized cash basis interest income
on these impaired loans of $344,000, $265,500 and $70,000,
respectively.
All loans to directors, executive officers, significant
shareholders and their related interests are current as to
principal and interest payments at December 31, 1997. The
following summarizes the <PAGE> activity for related party loans for the
year ended December 31, 1997 (in thousands):
Balance, beginning of year $1,758
Additions 252
Payments 147
Balance, end of year $1,863
The Bank is party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financial needs of its customers. These financial
instruments include commercial and standby letters of credit and
unused lines of credit and involve, to varying degrees, elements
of credit risk in excess of the amount recognized in the
statements of condition. The contract or notional amounts of
these instruments express the extent of involvement the Bank has
in each class of financial instruments.
The Bank's exposure to credit loss from non-performance by
the other party to the above mentioned financial instruments is
represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet
instruments.
Unless otherwise noted, the Bank does not require collateral
or other security to support financial instruments with
off-balance-sheet credit risk.
Contract or
Notional Amount
Financial Instruments Whose Contract at December 31,1997
Amounts Represent Credit Risk (in Thousands)
Commercial and standby letters of credit $ 3,904
Outstanding loan commitments-fixed rate $16,259
Outstanding loan commitments-variable rate $53,341
Commercial and standby letters of credit are conditional
commitments issued by the Bank guaranteeing performance by a
customer to a third party. Outstanding loan commitments
represent the unused portion of loan commitments available to
individuals and companies as long as there is no violation of any
condition established in the contract. Outstanding loan
commitments generally have a fixed expiration date of one year or
less, except for home equity lines of credit commitments which
generally have an expiration date of 15 years. The Bank
evaluates each customer's credit worthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based upon management's
credit evaluation of the customer. Various types of collateral
may be held, including property and marketable securities.
<PAGE>
The credit risk involved in these financial instruments is
essentially the same as that involved in extending loan
facilities to customers.
NOTE 4:
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is based upon
estimates, and ultimate losses may vary from the current
estimates. These estimates are reviewed periodically and, as
adjustments become necessary, they are reported in earnings in
the periods in which they become known.
The following summarizes the activity in the allowance for
possible loan losses (in thousands):
Year Ended December 31,
1997 1996 1995
Balance, beginning of year $ 8,531 $ 7,402 $ 7,602
Provisions charged to operations 1,800 1,350 720
Loans charged-off ( 3,958) (1,264) (2,123)
Recoveries of charged-off loans 601 1,043 1,203
Balance, end of year $ 6,974 $ 8,531 $ 7,402
The allowance for loan losses for Federal income tax
purposes was $2,352,000 at December 31, 1997, $3,024,000 at
December 31, 1996 and $3,360,000 at December 31, 1995.
NOTE 5:
PREMISES AND EQUIPMENT
The detail of premises and equipment is as follows (in
thousands):
December 31
1997 1996
Land $ 1,309 $ 1,309
Building 8,653 8,550
Furniture and equipment 8,718 7,609
Leasehold improvements 4,203 4,058
$22,883 $21,526
Less-Accumulated depreciation
and amortization 13,892 12,638
$ 8,991 $ 8,888
NOTE 6:
INCOME TAXES
The provision for income taxes (benefit) comprises the
following components (in thousands):
<PAGE>
Year Ended December 31
1997 1996 1995
Federal
Current tax expense $3,659 $3,124 $2,126
Deferred tax (benefit)
expense (187) (334) 563
State
Current tax expense 843 696 106
Deferred tax (benefit)
expense (33) (58) 336
$4,282 $3,428 $3,131
Deferred tax expense (benefit) of $74,000, ($68,000) and
$143,000 has been provided through shareholders' equity to
reflect unrealized gains (losses) on available-for-sale
securities at December 31, 1997, 1996 and 1995, respectively.
The following is a reconciliation of the Federal income tax
expense as reported with the statutory Federal tax on income
before income taxes (in thousands):
Year Ended December 31
1997 1996 1995
Tax at statutory rate $ 3,636 $2,958 $2,567
Tax exempt interest income (14) (15) (38)
State income taxes, net of
federal tax benefit 535 421 292
Contributions and other 39 31 34
Valuation allowance 0 (160) 0
Other, net 86 193 276
Total $ 4,282 $3,428 $3,131
Effective tax rate 40.0% 39.4% 41.5%
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows (in thousands):
<PAGE>
December 31
1997 1996
Deferred tax assets
Deferred fee income $ 0 $ 93
Allowance for possible loan
losses 1,858 2,228
Nonaccrual loan interest 1,382 1,185
Allowance for losses on OREO 38 38
Pension expense 583 440
Premises and equipment,
principally due to
differences in depreciation 914 789
Other 350 110
Total deferred tax asset 5,125 4,883
Valuation allowance (270) (270)
Total gross deferred tax asset $ 4,855 $4,613
Deferred tax liabilities
Deferred fee income $ 19 $ 0
Investment securities,
principally due to
accretion of discounts 28 25
Unrealized gain-securities
available-for-sale 149 75
Total gross deferred tax liabilities $ 196 $ 100
Net deferred tax asset $ 4,659 $ 4,513
Management has projected that the Company will generate
sufficient future taxable income to utilize the net deferred tax
asset. There can be no assurance, however, that the Company will
generate any earnings or any specific level of continuing
earnings.
The valuation allowance for deferred tax assets as of
December 31, 1997 and 1996 was $270,000. There was no change in
the valuation allowance for 1997.
NOTE 7: BENEFITS PLANS
PENSION PLAN:
The Bank has a noncontributory defined benefit pension plan
which covers substantially all employees. The Company makes
annual contributions to the plan equal to the amount accrued for
pension expense if deductible for tax purposes.
The following table sets forth the plan's funded status and
amounts recognized in the Company's consolidated financial
statements (in thousands):
<PAGE>
December 31
1997 1996
Actuarial present value of benefit obligation
Accumulated benefit obligations,
including vested benefits of $2,773 and
$2,425 in 1997 and 1996, respectively $2,905 $2,554
Plan assets at fair value, primarily
listed stocks, U.S. Bonds, and
commingled funds $4,985 $4,141
Projected benefit obligation for service
rendered to date 5,227 4,874
Plan assets less than projected
benefit obligation (242) (733)
Unrecognized net gain due to past experience
different from assumptions made and effects
of changes in assumptions (952) (218)
Unrecognized prior service cost 190 211
Unrecognized transition asset being amortized
over 15 years (122) (146)
Accrued pension cost included in other liabilities $(1,126) $(886)
Net pension cost for 1997, 1996 and 1995 included the
following components (in thousands):
Year Ended December 31
1997 1996 1995
Service cost-benefits earned
during the year $ 529 $ 543 $ 387
Interest cost on projected
benefit obligation 313 289 250
Actual return
on plan assets (724) (377) (697)
Net deferral and amortization 366 68 448
Net pension cost $484 $ 523 $ 388
In determining the projected benefit obligation, the
weighted average assumed discount rate was 7% for 1997 and 1996
and 8% for 1995, while the rate of increase in future salary
levels was 5% for 1997, 1996 and 1995, respectively. The
expected long term rate of return on assets, used in determining
the net period pension cost was 8% for all years presented.
Effective in 1995, the Bank established a non-qualified
deferred compensation plan for certain officers. All benefits
provided under this plan are unfunded. As of December 31, 1997
and 1996, approximately $246,000 and $138,000, respectively, was
included in accrued expense for this plan. For the years ended
December 31,1997, 1996 and 1995, expenses related to this plan
were $108,000, $51,000 and $87,000, respectively.
<PAGE>
401K PLAN:
The Bank sponsors a 401k Plan which provides several tax
deferred investment opportunities to salaried employees of the
Bank who have satisfied the service requirements of the Plan.
The Plan allows eligible employees to make periodic contributions
of certain percentages of their salary, subject to the Internal
Revenue Code limits on maximum annual contributions. The Bank
matches part of these contributions. The Bank's matching
contribution expense was $114,600, $62,300 and $65,100 for 1997,
1996, and 1995, respectively.
NOTE 8: STOCK COMPENSATION PLANS
At December 31, 1997, the Company had five stock based
compensation plans, which are described below. The Company
applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost is
recognized for its stock option plans. Had compensation cost for
the Company's five stock -based compensation plans been
determined consistent with SFAS NO.123, the Company's net income
and earnings per share would have been reduced to the proforma
amounts indicated below (in thousands, except per share amounts):
1997 1996 1995
Net income As Reported $6,411 $5,273 $4,420
Pro forma $6,150 $5,152 $4,368
Basic earnings As Reported $1.34 $1.10 $1.13
per share Pro forma $1.28 $1.08 $1.11
Diluted
earnings As Reported $1.29 $1.06 $0.89
per share Pro forma $1.24 $1.03 $0.88
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1997,
1996 and 1995, respectively: dividend yield of 1.7 percent, 2.4
percent and 2.3 percent; expected volatility of 45 percent for
all periods; risk-free interest rates of 7.0 percent, 6.7
percent, and 7.0 percent for the 1993 Non-Statutory Plan options,
5.9 percent, 6.3 percent, and 5.7 percent for the 1993 and 1996
Incentive Plan options; and expected lives of 8 years for all
periods for the 1993 and 1996 Non-Statutory Plan options; and 7
years for all periods for the 1993 and 1996 Incentive Plan
options. The effects of applying SFAS 123 on the pro forma net
income may not be representative of the effects on the pro forma
net income for future years.
<PAGE>
STOCK OPTION PLANS:
The Company has five option plans. The 1986 Incentive Stock
Option Plan expired April 16, 1996. No additional options are
available for granting under this plan. The 9,690 options issued
and outstanding prior to April 16,1996 remain available for
exercise until their expiration dates.
Under the 1993 Broad National Incentive Stock Option Plan
(1993 Incentive Plan), the Company may grant options to its
management personnel for up to 242,550 shares of common stock.
Under the 1993 Broad National Directors Non-Statutory Stock
Option Plan (1993 Non-Statutory Plan), the Company may grant
options to its directors for up to 90,956 shares of common stock.
Under the 1996 Broad National Bancorporation Incentive Stock
Option Plan (1996 Incentive Plan), the Company may grant options
to its management personnel for up to 210,000 shares of common
stock.
Under the 1996 Broad National Directors Non-Statutory Stock
Option Plan (1996 Non-Statutory Plan), the Company may grant
options to its directors for up to 78,750 shares of common stock.
Under all plans, the exercise price of each option is no
less than the market price of the Company's stock on the date of
grant, and an option's maximum term is ten years.
Options granted under the 1993 and 1996 Non-Statutory Plans
vest at the expiration of two years from the granting date.
Vesting under the 1993 and the 1996 Incentive Plans is
subject to the authority of the committee which administers these
plans, and all options granted to date under these plans vest 40%
at the end of the second year and 20% each year over the next
three years.
A summary of the status of the Company's stock option plans
as of December 31, 1995, 1996 and 1997, and changes during the
years ended on those dates is presented below:
<PAGE>
Shares Under Weighted-Avg.
Option Exercise Price
Outstanding at December 31, 1994 250,315 $5.90
Exercised in 1995 ( 3,751) 5.00
Granted in 1995 87,202 8.26
Expired unexercised in 1995 ( 2,250) 8.52
Outstanding at December 31, 1995 331,516 6.51
Exercised in 1996 (19,003) 5.17
Granted in 1996 81,007 11.58
Expired unexercised in 1996 ( 7,972) 6.56
Outstanding at December 31, 1996 385,548 7.65
Exercised in 1997 (51,425) 6.43
Granted in 1997 89,350 19.67
Expired unexercised in 1997 ( 7,489) 8.28
Outstanding at December 31, 1997 415,984 10.37
Weighted-average fair value 1997 1996 1995
of options granted during the year $9.22 $5.30 $4.09
The following table summarizes information about stock options
outstanding at December 31, 1997:
Options Outstanding Options Exercisable
Range Number Weighted-Avg. Number
Of Outstanding Remaining Weighted-Avg. Exercisable Weighted-Avg.
Exercise at 12/31/97 Contractual Exercise Price at 12/31/97 Exercise
Prices Life Price
$ 5.57 -
6.71 172,251 5.8 years $ 5.84 132,070 $ 5.80
8.23 -
9.53 82,458 6.9 8.51 27,885 8.38
11.55 -
14.70 89,775 8.3 12.37 0 0.00
20.50 -
22.55 71,500 9.0 20.93 0 0.00
$ 5.57 -
$22.55 415,984 7.1 $10.37 159,955 $ 6.25
NOTE 9: SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1997 and 1996
consisted of the following (in thousands):
1997 1996
Securities sold under agreements
to repurchase $ 1,000 $1,000
Federal Home Loan Bank advances 12,000 0
$13,000 $1,000
Details with respect to short-term borrowings are as follows (in
thousands):
<PAGE>
December 31
1997 1996
Balance, end of year $13,000 $ 1,000
Maximum outstanding during the year
at any month end $13,000 $ 1,282
Average interest rate, end of year 5.88% 4.95%
Average outstanding during the year $ 4,885 $ 1,149
Average interest rate for the year 5.75% 5.05%
The average amounts outstanding were computed primarily from
daily averages and the average interest rate for the year and at
the end of the year were computed by dividing the respective
interest expenses by the average balances outstanding.
The Bank has available $26,318,000 in lines of credit with
correspondent banks. At December 31, 1997, these lines of credit
were not in use.
NOTE 10: LONG-TERM DEBT
Long-term debt of $9,000,000 at December 31, 1997 represents
Federal Home Loan Bank Advances with remaining maturities of
greater than one year. This debt represents a series of nine
$1,000,000 advances with interest rates ranging from 6.16% to
6.28%,and maturities from January 29, 1999 to September 30, 1999.
The advances are secured by residential mortgages and securities
under a blanket collateral agreement.
NOTE 11: COMPANY-OBLIGATED MANDATORILY REDEEMABLE CUMULATIVE
TRUST PREFERRED SECURITIES OF A SUBSIDIARY TRUST HOLDING SOLELY
JUNIOR SUBORDINATED DEBENTURES OF BANCORPORATION (9.5% CUMULATIVE
TRUST PREFERRED SECURITIES).
On June 30, 1997, $11.5 million of 9.5% Cumulative Trust
Preferred Securities were issued by BNB Capital Trust, a Delaware
statutory business trust formed and wholly-owned by
Bancorporation. The net proceeds from this issuance were
invested in Bancorporation in exchange for Bancorporation's
junior subordinated debentures. The sole asset of BNB Capital
Trust, the obligor on the 9.5% Cumulative Trust Preferred
Securities, is $11,855,670 principal amount of 9.5% Junior
Subordinated Debentures of Bancorporation due June 30, 2027.
Bancorporation has entered into several contractual arrangements
for the purpose of fully and unconditionally supporting BNB
Capital Trust's payment of distributions on, payments on any
redemption of, and any liquidation distribution with respect to,
the 9.5% Cumulative Trust Preferred Securities. These
contractual arrangements constitute a full and unconditional
guarantee by Bancorporation of BNB Capital Trust's obligations
under the 9.5% Cumulative Trust Preferred Securities.
<PAGE>
Cash distributions on both the 9.5% Cumulative Trust
Preferred Securities and the 9.5% Junior Subordinated Debentures
are payable quarterly in arrears on the last day of March, June,
September and December of each year.
The 9.5% Cumulative Trust Preferred Securities are subject
to mandatory redemption (i) in whole, but not in part, upon
repayment of the Junior Subordinated Debentures at Stated
Maturity or, at the option of Bancorporation, their earlier
redemption in whole upon the occurrence of certain changes in the
tax treatment or capital treatment of the 9.5% Cumulative Trust
Preferred Securities, or a change in the law so that BNB Capital
Trust would be considered an investment company and (ii) in whole
or in part at any time on or after June 30, 2002
contemporaneously with the optional redemption by Bancorporation
of the Junior Subordinated Debentures in whole or part. The
Junior Subordinated Debentures are redeemable prior to maturity
at the option of the Bancorporation (i) on or after June 30,
2002, in whole at any time or in part from time to time, or (ii)
in whole, but not in part, at any time within 90 days following
the occurrence and continuation of certain changes in the tax
treatment or capital treatment of the 9.5% Cumulative Trust
Preferred Securities, or a change in the law so that BNB Capital
Trust would be considered an investment company. The ability of
the Bancorporation to exercise its rights to redeem the Junior
Subordinated Debentures or to cause the redemption of the
Preferred Securities prior to the Stated Maturity may be subject
to prior regulatory approval by the Board of Governors of the
Federal Reserve System (the "Federal Reserve"), if then required
under applicable Federal Reserve capital guidelines or policies.
NOTE 12: COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company and the Bank
may be a party to outstanding legal proceedings and claims. In
its judgement, management does not believe that the Company's
consolidated financial position or results of operations will be
materially affected by any of these present proceedings.
Cash balances reserved to meet the requirements of the bank
regulatory authorities amounted to $3,395,000 at December 31,
1997.
The Bank has lease commitments on certain of its branches
expiring at various dates through 2007. Rental expense on these
leases charged to operations amounted to $577,000, $544,000 and
$567,000 for the years ended December 31, 1997, 1996, and 1995
respectively. The minimum annual rentals under the terms of the
leases as of December 31, 1997 were as follows:
<PAGE>
1998 $533,000
1999 515,000
2000 408,000
2001 345,000
2002 193,000
Thereafter 485,000
NOTE 13: EARNINGS PER SHARE
The following reconciles the income available to common
shareholders (numerator) and the weighted average common stock
outstanding (denominator) for both basic and diluted earnings per
share for 1997, 1996 and 1995:
1997 1996 1995
Net Income $6,411 $5,273 $4,420
Less: Preferred Stock Dividends -- -- (580)
Income Available to Common
Shareholders Basic and Diluted $6,411 $5,273 $3,840
Weighted Average
common shares outstanding-Basic 4,788 4,789 3,407
Effect of Dilutive Securities
Stock options 169 93 60
Convertible preferred stock -- 116 1,492
Weighted Average
common shares outstanding-Diluted 4,957 4,998 4,959
NOTE 14: SHAREHOLDERS' EQUITY
STOCK DIVIDENDS:
On December 18, 1997, the Board of Directors of the Company
declared a 5% stock dividend which was distributed January 6,
1998.
On September 19, 1996, the Board of Directors of the Company
declared a 10% stock dividend which was distributed October 4,
1996.
All per share data included in the accompanying financial
statements and notes thereto reflect the retroactive effect of
these stock dividends.
PREFERRED STOCK 1992 CLASS:
On April 8, 1996, the Company completed the redemption of
the 1992 Preferred Stock. As a result of the redemption
programs, 3,750 shares of 1992 Preferred Stock were redeemed at
the price of $10.60 per share, for a total redemption price of
$43,750. In lieu of redemption, 558,803 shares of 1992 Preferred
Stock were converted into 1,066,616 shares of common stock. Cash
was paid for fractional shares resulting from conversion.
<PAGE>
PREFERRED STOCK 1985 CLASS:
The redemption of the 1985 Preferred Stock was completed on
January 7, 1996 and 197 shares of the 1985 Preferred Stock were
redeemed at a price of $38 per share, for a total redemption
price of $7,486. In lieu of redemption, 16,927 shares of the
1985 Preferred Stock were converted into 109,916 shares of common
stock. Cash was paid for fractional shares resulting from
conversion.
STOCK BUYBACK PROGRAM:
On November 21, 1996, the Board of Directors of the Company
authorized the repurchase of up to 100,000 of its outstanding
common shares. Additionally, on June 19, 1997 the Board of
Directors of the Company authorized the purchase, through open
market transactions, of up to an additional $4,000,000 market
value of the Company's common stock. These repurchases will be
made from time to time in the open market, subject to prevailing
conditions and in a manner to avoid disrupting the market.
Purchasing activities may be discontinued and resumed at any
time, as market conditions warrant. The repurchased shares will
be held in treasury and may be used by the Company for general
corporate purposes including stock-based employee benefit plans
and stock dividends.
At December 31, 1997, the Company had repurchased 242,000
shares of common stock.
NOTE 15: REGULATORY MATTERS
Capital adequacy for the Company is measured against
regulations established by the Federal Reserve Board (FRB). The
Bank is subject to generally similar capital regulations adopted
by the Office of the Comptroller of the Currency (the OCC).
These regulations require the Company and the Bank to maintain
minimum levels of regulatory capital. Under the regulations in
effect at December 31,1997, the Company and the Bank were
required to maintain (i) a minimum leverage ratio of Tier 1
capital to total adjusted assets of 4.0%, and (ii) minimum ratios
of Tier 1 and total capital to risk-weighted assets of 4.0% and
8.0%, respectively.
Under its prompt corrective action regulations, the FDIC is
required to take certain supervisory actions ( and may take
additional discretionary actions) with respect to an
undercapitalized institution. Such actions could have a direct
material effect on the institution's financial statements. The
regulations establish a framework for the classification of
financial institutions into five categories: well capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, an
institution is considered well capitalized if it has a
leverage(Tier 1) capital ratio of at least 5.0%; a Tier 1 risk-
based capital ratio <PAGE> of at least 6.0%; and a total risk-based
capital ratio of at least 10.0%.
The foregoing capital ratios are based in part on specific
quantitative measures of assets, liabilities and certain off-
balance sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications are also subject
to qualitative judgments by the FRB, the OCC and the FDIC about
capital components, risk weightings and other factors.
Management believes that, as of December 31, 1997, the
Company and the Bank meet all capital adequacy requirements to
which they are subject. Further, the most recent FDIC
notification categorized the Bank as a well-capitalized
institution under the prompt corrective action regulations.
There have been no conditions or events since that notification
that management believes have changed the Bank's capital
classification.
The following is a summary of the Company's and the Bank's
actual capital amounts and ratios as of December 31, 1997 and
1996, compared to the regulatory minimum capital adequacy
requirements and the regulatory requirements for classification
as a well-capitalized institution:
Regulatory Requirements
Minimum Capital For Classification
Company Actual Adequacy as Well Capitalized
Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
December 31, 1997
Leverage (Tier 1)
capital $49,787 8.19% $24,318 4.00% $30,397 5.00%
Risk-based capital
Tier 1 $49,787 13.16% $15,138 4.00% $22,706 6.00%
Total $54,545 14.41% $30,276 8.00% $37,844 10.00%
December 31, 1996
Leverage (Tier 1)
capital $37,512 6.92% $21,676 4.00% $27,095 5.00%
Risk-based capital:
Tier 1 $37,512 11.17% $13,434 4.00% $20,151 6.00%
Total $41,764 12.44% $26,868 8.00% $33,585 10.00%
Regulatory Requirements
Minimum Capital For Classification
Bank Actual Adequacy as Well Capitalized
Amount Ratio Amount Ratio Amount Ratio
(Dollars in Thousands)
December 31, 1997
Leverage (Tier 1)
capital $44,544 7.33% $24,318 4.00% $30,397 5.00%
Risk-based capital
Tier 1 $44,544 11.77% $15,138 4.00% $22,706 6.00%
Total $49,302 13.03% $30,276 8.00% $37,844 10.00%
December 31, 1996
Leverage (Tier 1)
capital $36,939 6.82% $21,676 4.00% $27,095 5.00%
Risk-based capital:
Tier 1 $36,939 11.00% $13,434 4.00% $20,151 6.00%
Total $41,191 12.26% $26,868 8.00% $33,585 10.00%
<PAGE>
NOTE 16: Fair values of financial instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments" ("SFAS
107") requires that the Company disclose estimated fair values
for its financial instruments whether or not recognized in the
Statement of Financial Condition.
Limitations: The fair value estimates made at December 31,
1997 and 1996 were based on pertinent market data and relevant
information on the financial instrument at that time. These
estimates do not reflect any premium or discount that could
result from offering for sale at one time the entire portion of
the financial instruments. Because no market exists for a
portion of the financial instruments, fair value estimates may be
based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
Fair value estimates are based on existing on-and-off
balance sheet financial instruments without attempting to
estimate the value of anticipated future business and the value
of assets and liabilities that are not considered financial
instruments. In addition, the tax implications related to the
realization of the unrealized gains and losses can have a
significant effect on fair value estimates and have not been
considered in many of the estimates.
Fair value estimates, methods and assumptions are set forth
below for the Company's financial instruments (in thousands):
At December 31,
1997 1996
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial Assets
Cash and short-term
investments $ 59,233 $ 59,233 $ 76,857 $ 76,857
Securities held-to-maturity 65,330 65,203 90,170 89,482
Securities available-
for-sale 141,077 141,077 69,044 69,044
Loans, net 315,554 317,828 278,585 281,052
Financial Liabilities
Deposits 518,238 519,241 485,073 485,042
Short term borrowings 13,000 13,037 1,000 1,000
Long term debt 9,000 9,065 0 0
9.5% Cumulative Trust
Preferred Securities 11,500 12,269 0 0
The following methods and assumptions were used to estimate
the fair value of each class of financial instrument:
<PAGE>
Cash and short-term investments
The carrying amount approximates fair value.
Investment Securities
The fair values are based on quoted market prices obtained
from outside sources.
Loans
The fair value of the loan portfolio was estimated using the
discounted value of the future cash flows expected to be received
using a market discount rate. For loans that have short-term
maturities or that reprice to market rates, the carrying value
was used as an estimate of fair value.
Deposit liabilities
The fair value of deposits is equal to the amount payable on
demand at the reporting dates except for the fair value of fixed
maturity certificates of deposit which were estimated by
discounting the value of the future cash flows expected to be
paid on deposits.
Long term debt
The fair value is estimated by discounting the cash flows
through maturity based upon current rates offered by the FHLB for
advances with similar maturities.
9.5% Cumulative Trust Preferred Securities
The fair value is estimated by discounting the cash flows
through maturity based upon current rates for similar Trust
Preferred Securities.
Short term borrowings
The fair value is estimated by discounting the cash flows
through maturity based upon current rates offered for similar
instruments with similar maturities.
Commitments to extend credit and letters of credit
The fair market value of unearned fees associated with
financial instruments with off-balance sheet risk at December 31,
1997 approximates the fees received. Amount is not material.
<PAGE>
NOTE 17: CONDENSED FINANCIAL INFORMATION OF BANCORPORATION
(PARENT COMPANY ONLY)
Condensed Statements of Condition (in thousands):
December 31,
1997 1996
Assets
Cash, principally on deposit with
subsidiary bank $ 5,212 $ 684
Investment in subsidiaries 45,844 37,784
Other assets 637 375
Total Assets $51,693 $38,843
Liabilities and Shareholders' Equity
Subordinated debentures $11,856 $ 0
Other liabilities 606 485
Shareholders' equity 39,231 38,358
Total Liabilities and
Shareholders' Equity $51,693 $38,843
Condensed Statements of Income for the years ended December
31, 1997, 1996 and 1995 (in thousands):
December 31,
1997 1996 1995
Income
Dividends received from banking
subsidiary $1,455 $1,230 $1,818
Interest income from bank/nonbank
subsidiaries 98 0 0
1,553 1,230 1,818
Expenses
Interest on subordinated debentures 563 0 0
Salaries and related benefits 39 39 39
Other 145 78 141
747 117 180
Income before equity in undistributed
income of subsidiaries 806 1,113 1,638
Equity in undistributed income
of subsidiaries 5,605 4,160 2,782
Net income $6,411 $5,273 $4,420
<PAGE>
Condensed Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 (in thousands):
December 31,
1997 1996 1995
Cash flows from operating activities
Net income $ 6,411 $ 5,273 $ 4,420
Less-
Equity in undistributed income
of subsidiary (5,605) (4,160) (2,782)
Increase in other liabilities 122 56 123
Increase in other assets (263) 0 0
Other, net (151) 601 (975)
Net cash provided by operating
activities $ 514 $ 1,770 $ 786
Cash flows from investing activities
Investments in and advances to
subsidiaries $ (356) $ 0 $ 0
Net cash used in investing activities $ (356) $ 0 $ 0
Cash flows from financing activities
Redemption of preferred stock $ 0 $ (52) $ 0
Proceeds from issuance of subordinated
debentures 11,856 0 0
Capital contribution to bank subsidiary (2,000) 0 0
Proceeds from issuance of common stock 308 98 18
Dividends to shareholders (1,741) (1,294) (1,175)
Purchase of treasury stock (4,053) (58) 0
Net cash provided by (used in)
financing activities $ 4,370 $(1,306) $(1,157)
Net increase (decrease) in cash and
cash equivalents 4,528 464 (371)
Cash and cash equivalents-beginning
of year 684 220 591
Cash and cash equivalents-end of year $ 5,212 $ 684 $ 220
NOTE 18: Selected quarterly financial information (unaudited)
The following quarterly financial information for the two
years ended December 31, 1997 and 1996, is unaudited. However,
in the opinion of management all adjustments, which include only
normal recurring adjustments necessary to present fairly the
results of operations for the periods, are reflected. Results of
operations for these three-month periods are not necessarily
indicative of the results for the entire year or any other
interim period (in thousands, except per share amounts):
1997
March June September December
Interest income $ 9,682 $10,013 $10,416 $10,744
Interest expense 3,521 3,790 4,095 4,524
Provision for possible
loan losses 450 450 450 450
Non-interest income 1,893 1,783 1,658 1,783
Non-interest expenses 4,690 5,056 4,826 4,977
Net income 1,661 1,659 1,495 1,596
Net income per common share:
Basic earnings per common
share $ 0.34 $ 0.34 $ 0.32 $ 0.34
Diluted earnings per common
share $ 0.33 $ 0.33 $ 0.30 $ 0.33
<PAGE>
1996
March June September December
Interest income $ 8,104 $8,474 $9,060 $9,524
Interest expense 2,613 2,658 3,118 3,429
Provision for possible loan
losses 225 225 450 450
Non-interest income 1,072 1,306 1,685 2,493
Non-interest expenses 4,700 5,076 5,007 5,066
Net income 1,037 1,127 1,262 1,847
Net income per common share:
Basic earnings per common
share $ 0.23 $ 0.23 $ 0.26 $ 0.38
Diluted earnings per common
share $ 0.21 $ 0.23 $ 0.25 $ 0.37
Item 9. Changes in and Disagreements on Accounting and
Financial Disclosure.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pursuant to General Instruction G(3) to Form 10-K, the
information required by this Item (except for the information set
forth in Item 4A of Part I hereof with respect to the
Registrant's executive officers) is incorporated herein by
reference to (i) the information under the caption "Election of
Directors" (except that the information set forth under the
following subcaptions thereunder is expressly excluded from such
incorporation: "Compensation of Directors" and "Meetings of the
Board and Committees") and (ii) the information under the caption
"Compliance with Section 16(a) of the Securities Exchange Act of
1934," in each case, in the Registrant's definitive Proxy
Statement for its 1998 Annual Meeting of Shareholders to be filed
pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
Pursuant to General Instruction G(3) to Form 10-K, the
information required by this Item is incorporated herein by
reference to the information under the caption "Executive
Compensation and Other Information" (except that the information
set forth under the following subcaptions thereunder is expressly
excluded from such incorporation: "Compensation Committee and
Board of Directors Report on Executive Compensation" and "Company
Performance") in the Registrant's definitive Proxy Statement for
its 1998 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Pursuant to General Instruction G(3) to Form 10-K, the
information required by this Item is incorporated herein by
reference to the information under the caption "Ownership of
Bancorporation Capital Stock" in the Registrant's definitive
Proxy Statement for its 1998 Annual Meeting of Shareholders to be
filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Pursuant to General Instruction G(2) to Form 10-K, the
information required by this Item is incorporated herein by
reference to the information under the caption "Transactions With
Management and Others" in the Registrant's definitive Proxy
Statement for its 1998 Annual Meeting of Shareholders to be filed
pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Exhibits and Financial Statement Schedules:
1. The following consolidated financial statements of the
Registrant and subsidiaries and report of the Registrant's
independent auditors included in Item 8 to this report:
Independent Auditors' Report as of December 31,
1997 and 1996 and for the years ended December 31,
1997, 1996 and 1995.
Consolidated Statements of Condition as of
December 31, 1997 and 1996.
Consolidated Statements of Income for each of the
years ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Changes in
Shareholders' Equity for the years ended December 31,
1997, 1996 and 1995.
Consolidated Statements of Cash Flows for each of
the years ended December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements
2. Financial Statement Schedules: All schedules are
omitted because they are not applicable, or not required, or
<PAGE>
because the required information is included in the financial
statements or the notes thereto.
3. Exhibits:
Number Description
3.1 Restated Certificate of Incorporation of the Registrant
as amended through and including June 29, 1995 (filed
September 18, 1997 as Exhibit 4.2 to the Registrant's
Registration Statement under cover of Form 8-A/A (No.
0-16637) and incorporated herein by reference).
3.1.1 Certificate of Amendment of Certificate of
Incorporation of the Registrant, respecting the
Amendment of ARTICLE THIRD to increase the number of
authorized shares of capital stock (filed September 18,
1997 as Exhibit 4.2.1 to the Registrant's Registration
Statement under cover of Form 8-A/A (No. 0-16637) and
incorporated herein by reference).
3.1.2 Certificate of Amendment of Certificate of
Incorporation of the Registrant, respecting the
Amendment of ARTICLE THIRD to establish certain
limitations with respect to preemptive rights of
shareholders (filed September 18, 1997 as Exhibit 4.2.2
to the Registrant's Registration Statement under cover
of Form 8-A/A (No. 0-16637) and incorporated herein by
reference).
3.2 Bylaws of the Registrant, as amended to date (filed as
Exhibit 3(d) to the Registrant's Form 10-K Report for
the fiscal year ended December 31, 1989 and
incorporated herein by reference).
10.1 Lease between The Prudential Insurance Company of
America and Broad National Bank dated as of December
15, 1988 (filed as Exhibit 3(e) to the Registrant's
Form 10-K Report for the fiscal year ended December 31,
1989 and incorporated herein by reference).
10.1.1 Amendment of Lease between The Prudential Insurance
Company of America and Broad National Bank dated as of
February 7, 1996 (filed as Exhibit 10.1.1 to the
Registrant's Form 10-K Report for the fiscal year ended
December 31, 1995 and incorporated herein by
reference).
10.2 Lease between Third Newark Gateway Urban Renewal
Association and Broad National Bank, dated September 7,
1984 (filed as Exhibit 10(b) to Registration Statement
No. 33-01560 and incorporated herein by reference).
<PAGE>
10.3 Lease between O. Navigador Bar, Inc. and Broad National
Bank (filed as Exhibit 10(c) to Amendment No. 1 to
Registration Statement No. 2-78220 and incorporated
herein by reference).
10.4 Lease between Millburn Common Associates and Broad
National Bank dated June 16, 1976, and Amendment to
such Lease, dated September 10, 1985 (filed as Exhibit
10(d) to Registration Statement No. 33-01560 and
incorporated herein by reference).
10.5 Lease between Cada Holding Corp. and Broad National
Bank dated October 8, 1976 (filed as Exhibit 10(e) to
Amendment No. 1 to Registration Statement No. 2-78220
and incorporated herein by reference).
10.6 Lease between Euro Associates and Broad National Bank
acknowledged by the parties on December 12, 1985 and
December 10, 1985 (filed with Amendment No. 2 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 10.6 and incorporated herein by reference).
10.7 Workletter Agreement between Euro Associates and Broad
National Bank (filed with Amendment No. 2 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 10.7 and incorporated herein by reference).
10.8 Lease between 1000 South Elmora Associates and Broad
National Bank dated May 18, 1986 (filed with Amendment
No. 2 to the Registrant's Registration Statement No.
33-53658 as Exhibit 10.8 and incorporated herein by
reference).
10.9 Lease between Convery Associates and Broad National
Bank dated July 1, 1987, and Rider to Lease Agreement,
dated September 1, 1992 (filed with Amendment No. 2 to
the Registrant's Registration Statement No. 33-53658 as
Exhibit 10.10 and incorporated herein by reference).
10.10 Lease Agreement and Amendment between 466 Bloomfield
Avenue Associates, Inc. and Broad National Bank dated
February 9, 1988 (filed as Exhibit 10(l) to the
Registrant's Form 10-K Report for the fiscal year ended
December 31, 1989 and incorporated herein by
reference).
<PAGE>
10.11 Lease Agreement between George Zeik and Broad National
Bank dated September 1, 1989 (filed as Exhibit 10(m) to
the Registrant's Form 10-K Report for the fiscal year
ended December 31, 1989 and incorporated herein by
reference).
10.12 Lease between Broad National Realty Corporation and
Broad National Bank dated May 1, 1990 (filed as Exhibit
10(n) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1990 and incorporated by reference
herein).
10.12.1 Rider to Lease Agreement between Broad National Realty
and Broad National Bank dated December 21, 1993 (filed
as Exhibit 10.13.1 to the Registrant's Form 10-K for
the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.13 Broad National Bank Employees' Retirement Plan (filed
as Exhibit 10(g) to Registration Statement No. 2-78220
and as Exhibit 10(f) to Amendment No. 1 to Registration
Statement No. 2-78220 and incorporated herein by
reference).*
10.14 Form of Amendment to Sections 2.1 and 3.1(c) of the
Broad National Bank Employees' Retirement Plan (filed
as Exhibit 10(p) to the Registrant's Form 10-K for the
fiscal year ended December 31, 1990 and incorporated by
reference herein).*
10.15 Description of Bonus Plan for Designated Officers and
Employees (appears on page 10 of the Registrant's
definitive proxy statement for its 1991 Annual Meeting
of Shareholders and is incorporated herein by
reference).*
10.16 Incentive Stock Option Plan for certain employees
adopted on March 26, 1987, and amended April 27, 1989
(filed as Exhibit 10.18 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1992 and
incorporated by reference herein).*
10.17 Non-Statutory Stock Option Plan for directors adopted
on March 26, 1987 (filed with Amendment No. 2 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 10.19 and incorporated herein by reference).*
<PAGE>
10.18 Employment Agreement between Donald M. Karp and the
Registrant dated December 31, 1997.*
10.19 Employment Agreement among John A. Dorman, Broad
National Bank and the Registrant, dated December 31,
1997.*
10.19.1 Employment Agreement Amendment among John A. Dorman,
Broad National Bank and the Registrant, dated February
6, 1998.*
10.20 Consultant Agreement between Stanley J. Lesnik and the
Registrant dated January 1, 1998.*
10.21 Lease between Broad National Bank, landlord, and
Newtrend L.P., tenant, dated August 10, 1993 (filed as
Exhibit 10.22 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1993 and incorporated
herein by reference).
10.22 Newtrend Service Bureau Agreement between Newtrend,
Inc. and Broad National Bank dated August 10, 1993
(filed as Exhibit 10.23 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.23 Newtrend Item Processing Addendum between Newtrend,
Inc. and Broad National Bank dated August 10, 1993
(filed as Exhibit 10.24 to the Registrant's Form 10-K
for the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.24 1993 Broad National Incentive Stock Option Plan for
certain employees adopted on September 19, 1994 (filed
as Exhibit 10.24 to the Registrant's Form 10-K Report
for the fiscal year ended December 31, 1994 and
incorporated herein by reference).*
10.25 1993 Broad National Directors Non-Statutory Stock
Option Plan for directors adopted on September 19, 1994
(filed as Exhibit 10.25 to the Registrant's Form 10-K
Report for the fiscal year ended December 31, 1994 and
incorporated herein by reference).*
10.26 Lease between Lucky Realty LLC and Broad National Bank
(filed as Exhibit 10.26 to the Registrant's Form 10-K
Report for the fiscal year ended December 31, 1995 and
incorporated herein by reference).
<PAGE>
10.27 Lease between A.J. Seabra Supermarkets V, Inc. and
Broad National Bank dated as of April 20, 1995 (filed
as Exhibit 10.27 to the Registrant's Form 10-K Report
for the fiscal year ended December 31, 1995 and
incorporated herein by reference).
10.28 1996 Broad National Bancorporation Incentive Stock
Option Plan for certain employees adopted on December
19, 1996 and subsequently amended on January 16, 1997
(filed as Exhibit 10.28 to the Registrant's Form 10-K
Report for the fiscal year ended December 31, 1996 and
incorporated herein by reference).*
10.29 1996 Broad National Bancorporation Directors Non-
Statutory Stock Option Plan for directors adopted on
December 19, 1996 (filed as Exhibit 10.29 to the
Registrant's Form 10-K Report for the fiscal year ended
December 31, 1996 and incorporated herein by
reference).*
10.30 Broad National Bank Long-Term Capital Accumulation Plan
for certain employees adopted on October 19, 1995
(filed as Exhibit 10.30 to the Registrant's Form 10-K
Report for the fiscal year ended December 31, 1996 and
incorporated herein by reference).*
10.31 Broad National Bank Deferred Compensation Plan for
certain employees and directors adopted on October 19,
1995 (filed as Exhibit 10.31 to the Registrant's Form
10-K Report for the fiscal year ended December 31, 1996
and incorporated herein by reference).*
10.32 Broad National Bank Management Incentive Plan for
certain employees adopted on October 19, 1995 (filed as
Exhibit 10.32 to the Registrant's Form 10-K Report for
the fiscal year ended December 31, 1996 and
incorporated herein by reference).*
10.33 Form of Change of Control Agreement and Schedule of
Parties Thereto.*
10.34 Junior Subordinated Indenture, dated as of June 30,
1997, between Broad National Bancorporation and
Bankers Trust Company.
<PAGE>
10.35 9.50% Junior Subordinated Debenture, dated as of
June 30, 1997, made and given by Broad National
Bancorporation to and for the benefit of BNB
Capital Trust.
10.36 Trust Agreement, dated as of June 9, 1997, between
Broad National Bancorporation and Bankers Trust
(Delaware).
10.37 Amended and Restated Trust Agreement, dated as of
June 30, 1997, among Broad National Bancorporation
Bankers Trust Company and Bankers Trust (Delaware).
10.38 Form of Certificate Evidencing Preferred Securities
issued by BNB Capital Trust.
10.39 Guarantee Agreement, dated as of June 30, 1997,
between Broad National Bancorporation, as Guarantor,
and Bankers Trust Company, as Trustee.
11 Statement re Computation of Net Income Per Share.
22 List of Subsidiaries (filed with Amendment No. 3 to the
Registrant's Registration Statement No. 33-53658 as
Exhibit 22 and incorporated herein by reference).
<PAGE>
24 Consent of KPMG Peat Marwick LLP with regard to
Bancorporation's Registration Statement on Form S-8
(Reg. No. 33-28183).
27 Financial Data Schedule.
______________________
* Management contracts or compensatory plans or arrangements
required to be identified by Item 14(a)(3).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last
quarter of 1997.
(c) Exhibits
See Exhibits identified above under Item 14(a)(3).
(d) Financial Statement Schedules
See Item 14(a)(2) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BROAD NATIONAL BANCORPORATION
By /s/ Donald M. Karp
Donald M. Karp
Chairman of the Board and
Chief Executive Officer
Dated: March 19, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:
Signature and Title Date
/s/ Donald M. Karp March 19, 1998
Donald M. Karp, Director, Chairman
of the Board and Chief Executive
Officer (Principal Executive Officer)
/s/ John A. Dorman March 19, 1998
John A. Dorman, Director, President
and Chief Operating Officer
/s/ James Boyle March 19, 1998
James Boyle, Treasurer and Comptroller
(Principal Financial and Accounting
Officer)
/s/ Licinio Cruz March 19, 1998
Licinio Cruz, Director
<PAGE>
/s/ Arthur Fischman March 19, 1998
Arthur Fischman, Director
/s/ John J. Iannuzzi March 19, 1998
John J. Iannuzzi, Director
March ___, 1998
James J. Lazarus, Director
/s/ Edward J. Lenihan March 19, 1998
Edward J. Lenihan, Director
/s/ Stanley J. Lesnik March 19, 1998
Stanley J. Lesnik, Director
/s/ Louis J. Owen March 19, 1998
Louis J. Owen, Director
/s/ Catherine McFarland March 19, 1998
Catherine McFarland, Director
/s/ A. Harold Schwartz March 19, 1998
A. Harold Schwartz, Director
/s/ Hubert Williams March 19, 1998
Hubert Williams, Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
3.1 Restated Certificate of Incorporation of the **
Registrant as amended through and including
June 29, 1995 (filed September 18, 1997 as
Exhibit 4.2 to the Registrant's Registration
Statement under cover of Form 8-A/A (No. 0-16637)
and incorporated herein by reference).
3.1.1 Certificate of Amendment of Certificate of **
Incorporation of the Registrant, respecting
the Amendment of ARTICLE THIRD to increase
the number of authorized shares of capital stock
(filed September 18, 1997 as Exhibit 4.2.1 to
the Registrant's Registration Statement under
cover of Form 8-A/A (No. 0-16637) and
incorporated herein by reference).
3.1.2 Certificate of Amendment of Certificate of **
Incorporation of the Registrant, respecting
the Amendment of ARTICLE THIRD to establish
certain limitations with respect to preemptive
rights of shareholders (filed September 18,
1997 as Exhibit 4.2.2 to the Registrant's
Registration Statement under cover of Form
8-A/A (No. 0-16637) and incorporated herein by
reference).
3.2 Bylaws of the Registrant, as amended to date **
(filed as Exhibit 3(d) to the Registrant's Form
10-K Report for the fiscal year ended December 31,
1989 and incorporated herein by reference).
10.1 Lease between The Prudential Insurance Company **
of America and Broad National Bank dated as of
December 15, 1988 (filed as Exhibit 3(e) to the
Registrant's Form 10-K Report for the fiscal year
ended December 31, 1989 and incorporated herein by
reference).
10.1.1 Amendment of Lease between The Prudential **
Insurance Company of America and Broad National
Bank dated as of February 7, 1996 (filed as
Exhibit 10.1.1 to the Registrant's Form 10-K
Report for the fiscal year ended December 31,
1995 and incorporated herein by reference).
10.2 Lease between Third Newark Gateway Urban **
Renewal Association and Broad National Bank,
dated September 7, 1984 (filed as Exhibit 10(b)
to Registration Statement No. 33-01560 and
incorporated herein by reference).
<PAGE>
10.3 Lease between O. Navigador Bar, Inc. and Broad **
National Bank (filed as Exhibit 10(c) to
Amendment No. 1 to Registration Statement No.
2-78220 and incorporated herein by reference).
10.4 Lease between Millburn Common Associates and **
Broad National Bank dated June 16, 1976, and
Amendment to such Lease, dated September 10,
1985 (filed as Exhibit 10(d) to Registration
Statement No. 33-01560 and incorporated herein
by reference).
10.5 Lease between Cada Holding Corp. and Broad **
National Bank dated October 8, 1976 (filed as
Exhibit 10(e) to Amendment No. 1 to Registration
Statement No. 2-78220 and incorporated herein by
reference).
10.6 Lease between Euro Associates and Broad National **
Bank acknowledged by the parties on December 12,
1985 and December 10, 1985 (filed with Amendment
No. 2 to the Registrant's Registration Statement
No. 33-53658 as Exhibit 10.6 and incorporated
herein by reference).
10.7 Workletter Agreement between Euro Associates and **
Broad National Bank (filed with Amendment No. 2
to the Registrant's Registration Statement No.
33-53658 as Exhibit 10.7 and incorporated herein
by reference).
10.8 Lease between 1000 South Elmora Associates and **
Broad National Bank dated May 18, 1986 (filed with
Amendment No. 2 to the Registrant's Registration
Statement No. 33-53658 as Exhibit 10.8 and
incorporated herein by reference).
10.9 Lease between Convery Associates and Broad **
National Bank dated July 1, 1987, and Rider to
Lease Agreement, dated September 1, 1992 (filed
with Amendment No. 2 to the Registrant's
Registration Statement No. 33-53658 as Exhibit
10.10 and incorporated herein by reference).
10.10 Lease Agreement and Amendment between 466 **
Bloomfield Avenue Associates, Inc. and Broad
National Bank dated February 9, 1988 (filed as
Exhibit 10(1) to the Registrant's Form 10-K
Report for the fiscal year ended December 31,
1989 and incorporated herein by reference).
<PAGE>
10.11 Lease Agreement between George Zeik and Broad **
National Bank dated September 1, 1989 (filed as
Exhibit 10(m) to the Registrant's Form 10-K
Report for the fiscal year ended December 31,
1989 and incorporated herein by reference).
10.12 Lease between Broad National Realty Corporation **
and Broad National Bank dated May 1, 1990 (filed
as Exhibit 10(n) to the Registrant's Form 10-K
for the fiscal year ended December 31, 1990 and
incorporated by reference herein).
10.12.1 Rider to Lease Agreement between Broad National **
Realty and Broad National Bank dated December 21,
1993 (filed as Exhibit 10.13.1 to the Registrant's
Form 10-K for the fiscal year ended December 31,
1993 and incorporated herein by reference).
10.13 Broad National Bank Employees' Retirement Plan **
(filed as Exhibit 10(g) to Registration Statement
No. 2-78220 and as Exhibit 10(f) to Amendment No. 1
to Registration Statement No. 2-78220 and
incorporated herein by reference ).*
10.14 Form of Amendment to Sections 2.1 and 3.1(c) **
of the Broad National Bank Employees' Retirement
Plan (filed as Exhibit 10(p) to the Registrant's
Form 10-K for the fiscal year ended December 31,
1990 and incorporated by reference herein).*
10.15 Description of Bonus Plan for Designated Officers **
and Employees (appears on page 10 of the
Registrant's definitive proxy statement for its
1991 Annual Meeting of Shareholders and is
incorporated herein by reference).*
10.16 Incentive Stock Option Plan for certain employees **
adopted on March 26, 1987, and amended April 27,
1989 (filed as Exhibit 10.18 to the Registrant's
Form 10-K for the fiscal year ended December 31,
1992 and incorporated by reference herein).*
10.17 Non-Statutory Stock Option Plan for directors **
adopted on March 26, 1987 (filed with Amendment
No. 2 to the Registrant's Registration Statement
No. 33-53658 as Exhibit 10.19 and incorporated
herein by reference).*
10.18 Employment Agreement between Donald M. Karp and __
the Registrant dated December 31, 1997.*
<PAGE>
10.19 Employment Agreement among John A. Dorman __
Broad National Bank and the Registrant,
dated December 31, 1997.*
10.19.1 Employment Agreement Amendment among __
John A. Dorman, Broad National Bank
and the Registrant, dated December 31,
1997.*
10.20 Consultant Agreement between Stanley J. Lesnik __
and the Registrant dated January 1, 1998.*
10.21 Lease between Broad National Bank, landlord, **
and Newtrend, L.P., tenant, dated August 10,
1993 (filed as Exhibit 10.22 to the Registrant's
Form 10-K for the fiscal year ended December 31,
1993 and incorporated herein by reference).
10.22 Newtrend Service Bureau Agreement between **
Newtrend, Inc. and Broad National Bank dated
August 10, 1993 (filed as Exhibit 10.23 to the
Registrant's Form 10-K for the fiscal year
ended December 31, 1993 and incorporated herein
by reference).
10.23 Newtrend Item Processing Addendum between **
Newtrend, Inc. and Broad National Bank dated
August 10, 1993 (filed as Exhibit 10.24 to the
Registrant's Form 10-K for the fiscal year ended
December 31, 1993 and incorporated herein by
reference).
10.24 1993 Broad National Incentive Stock Option Plan **
for certain employees adopted on September 19,
1994 (filed as Exhibit 10.24 to the Registrant's
Form 10-K Report for the fiscal year ended
December 31, 1994 and incorporated herein by
reference).*
10.25 1993 Broad National Directors Non-Statutory Stock **
Option Plan for directors adopted on September 19,
1994 (filed as Exhibit 10.25 to the Registrant's
Form 10-K Report for the fiscal year ended
December 31, 1994 and incorporated herein by
reference).*
10.26 Lease between Lucky Realty LLC and Broad National **
Bank (filed as Exhibit 10.26 to the Registrant's
Form 10-K Report for the fiscal year ended
December 31, 1995 and incorporated herein by
reference).
<PAGE>
10.27 Lease between A.J. Seabra Supermarkets V, Inc. **
and Broad National Bank dated as of April 20,
1995 (filed as Exhibit 10.27 to the Registrant's
Form 10-K Report for the fiscal year ended
December 31, 1995 and incorporated herein by
reference).
10.28 1996 Broad National Bancorporation Incentive **
Stock Option Plan for certain employees adopted
on December 19, 1996 and subsequently amended
on January 16, 1997 (filed as Exhibit 10.28 to
the Registrant's Form 10-K Report for the fiscal
year ended December 31, 1996 and incorporated
herein by reference).*
10.29 1996 Broad National Bancorporation Directors **
Non-Statutory Stock Option Plan for directors
adopted on December 19, 1996 (filed as Exhibit
10.29 to the Registrant's Form 10-K Report for
the fiscal year ended December 31, 1996 and
incorporated herein by reference).*
10.30 Broad National Bank Long-Term Capital **
Accumulation Plan for certain employees adopted
on October 19, 1995 (filed as Exhibit 10.30 to
the Registrant's Form 10-K Report for the fiscal
year ended December 31, 1996 and incorporated
herein by reference).*
10.31 Broad National Bank Deferred Compensation Plan **
for certain employees and directors adopted on
October 19, 1995 (filed as Exhibit 10.31 to the
Registrant's Form 10-K Report for the fiscal
year ended December 31, 1996 and incorporated
herein by reference).*
10.32 Broad National Bank Management Incentive Plan **
for certain employees adopted on October 19,
1995 (filed as Exhibit 10.32 to the Registrant's
Form 10-K Report for the fiscal year ended
December 31, 1996 and incorporated herein
by reference).*
10.33 Form of Change of Control Agreement and __
Schedule of Parties Thereto.*
10.34 Junior Subordinated Indenture, dated as of __
June 30, 1997, between Broad National
Bancorporation and Bankers Trust Company.
<PAGE>
10.35 9.50% Junior Subordinated Debenture, dated as of __
June 30, 1997, made and given by Broad National
Bancorporation to and for the benefit of BNB
Capital Trust.
10.36 Trust Agreement, dated as of June 9, 1997, between __
Broad National Bancorporation and Bankers Trust
(Delaware).
10.37 Amended and Restated Trust Agreement, dated as of __
June 30, 1997, among Broad National Bancorporation
Bankers Trust Company and Bankers Trust (Delaware).
10.38 Form of Certificate Evidencing Preferred Securities __
issued by BNB Capital Trust.
10.39 Guarantee Agreement, dated as of June 30, 1997, __
between Broad National Bancorporation, as Guarantor,
and Bankers Trust Company, as Trustee.
11 Statement re Computation of Net Income Per Share. __
22 List of Subsidiaries (filed with Amendment No. 3 **
to the Registrant's Registration Statement No.
33-53658 as Exhibit 22 and incorporated herein
by reference).
<PAGE>
24 Consent of KPMG Peat Marwick LLP with regard to __
Bancorporation's Registration Statement on Form
S-8 (Reg. No. 33-28183).
27 Financial Data Schedule. __
__________________________
* Management contracts or compensatory plans or arrangements
required to be identified by Item 14(a)(3).
** Incorporated by reference from previous filings.
</TABLE>
EMPLOYMENT AGREEMENT
This Agreement is made the 31st day of December, 1997
by and between DONALD M. KARP (hereinafter referred to as "Karp")
and BROAD NATIONAL BANCORPORATION, a corporation organized under
the laws of the State of New Jersey (hereinafter, together with
any successor entity, referred to as the "Corporation").
WITNESSETH:
WHEREAS, Karp has for a number of years been employed
as Chairman and Chief Executive Officer of the Corporation and
its subsidiary, Broad National Bank, a national banking
association (hereinafter, together with any successor entity,
referred to as the "Bank"); and
WHEREAS, the Board of Directors of the Corporation
believes that the continued leadership and productivity of Karp
will be extremely beneficial and will significantly contribute to
the continued growth and financial security of the Corporation
and the Bank; and
WHEREAS, the Corporation wishes to assure itself and
the Bank of the services of Karp as an employee, officer and, if
elected, director of the Corporation and the Bank for the period
provided in this Agreement, and Karp has agreed to serve in the
employ of the Corporation and the Bank in such capacities on the
terms and conditions hereinafter set forth; and
WHEREAS, there is currently in effect an Employment
Agreement, dated December 31, 1996, as amended, by and between
Karp and the Corporation (the "Prior Agreement"); and
WHEREAS, the Board of Directors of the Corporation has
determined that the best interests of the Corporation would be
served by replacing the Prior Agreement with this Agreement as of
the Commencement Date hereinafter set forth;
NOW, THEREFORE, for and in consideration of the
employment of Karp with the Corporation, the compensation to be
paid and the other benefits to be provided to Karp by the
Corporation for his services and the mutual covenants set forth
in this Agreement, the parties hereto hereby agree as follows:
1. EMPLOYMENT
1.1 The Corporation agrees to the continued
employment of Karp, and Karp agrees to continue to be employed by
the Corporation and the Bank for the period stated in Section 2.1
hereof and upon the other terms and conditions herein provided.
<PAGE>
2. TERM, POSITION AND RESPONSIBILITIES
2.1 Term of Employment. The period of Karp's
employment under this Agreement shall commence as of January 1,
1998 (the "Commencement Date") and shall continue for a period of
sixty (60) full calendar months thereafter and any extensions
thereafter, unless this Agreement is earlier terminated in
accordance with the terms hereof (the "Employment Period"). The
Prior Agreement (as defined in the recitals hereto) shall remain
in full force and effect, subject to the terms and conditions
thereof, from the date of this Agreement until the Commencement
Date, whereupon this Agreement shall automatically supersede the
Prior Agreement in its entirety without further action by the
parties hereto. At the expiration of each calendar month hereof,
this Agreement shall be deemed extended for one additional
calendar month, so that at all times this Agreement shall have a
term of sixty (60) months. Notwithstanding the foregoing, such
term shall not be extended past five years following the date on
which the Board of Directors shall give a notice to Karp which
provides that from the date of the notice the term of employment
shall be no more than five (5) years from that date.
2.2 Duties During Employment. During the
Employment Period, Karp shall serve as the Chairman and Chief
Executive Officer of the Corporation and the Bank and shall have
the customary duties and responsibilities of each such office.
In addition, during the Employment Period, if elected, Karp shall
also serve, without any additional compensation or fees, as a
member of the Boards of Directors and as a member of the
Executive Committees of the Corporation and of the Bank.
3. COMPENSATION AND REIMBURSEMENT OF EXPENSES
3.1 Compensation - Base Salary.
A. The compensation specified under this
Agreement shall constitute the salary and benefits paid Karp
for his services as described in Section 2.2 by the
Corporation and the Bank. Effective as of the Commencement
Date, the Corporation shall pay or cause the Bank to pay
Karp as compensation an annual salary ("Base Salary") at the
combined rate of not less than two hundred twenty-seven
thousand five hundred dollars $227,500 per year. During the
period of this Agreement it is understood and agreed that
Karp's Base Salary shall be reviewed by the Board of
Directors of the Corporation or the Bank or a committee or
committees thereof at least annually. The first such review
shall be made no later than December 31, 1998. The Board of
Directors of the Corporation or the Bank or the committee or
committees thereof may, in their sole discretion, increase
the Base Salary to be paid to Karp from time to time, to
reflect Karp's performance and to maintain a compensation
level comparable to that of similarly situated executives in
the financial institutions industry, but the Base Salary may
not be decreased below the Base Salary specified above in
this paragraph A without the written consent of Karp.
Karp's salary shall be payable in accordance with the
customary payroll practices of the Bank and the Corporation,
respectively, but in no event less frequently than monthly.
<PAGE>
B. From time to time, the Boards of Directors of
the Corporation and Bank shall apportion between the Bank
and the Corporation amounts payable hereunder without
affecting Karp's rights hereunder. Such apportionment shall
be made (i) on the basis of the judgment of such Boards of
Directors as to Karp's relative responsibilities and
contributions with respect to the Bank and the Corporation,
and (ii) on the basis of such other factors as such Boards
of Directors may deem appropriate. Any amounts not
allocated to the Bank hereunder shall be allocated to the
Corporation.
3.2 Participation in Bonus Plan. Karp shall be
entitled to participate in such bonus or other incentive
compensation plan(s) as currently is or may hereafter be
established by the Corporation or the Bank for their respective
executive officers during the Employment Period. Any such bonus
shall be payable in the manner specified by the appropriate Board
of Directors, or committee of such Board of Directors, at the
time such bonus is awarded.
3.3 Participation in Benefit Plans. The payments
provided for in Sections 3, 5 and 6 hereof, except where
specifically provided otherwise, are in addition to any other
benefits to which Karp may be, or may become, entitled under any
group hospitalization, health, dental care, or sick-leave plan,
life or other insurance or death benefit plan, travel or accident
insurance, retirement income or pension plan or program of the
Corporation or Bank, or other present or future group employee
benefit plan or program of the Bank or Corporation, for which
their executive officers are or shall become eligible to receive
during the Employment Period, and during any subsequent period
for which Karp shall be entitled to receive payments from the
Corporation under sections 5 and 6 to the extent permissible
under the general terms and provisions of such plans or programs
and in accordance with the provisions thereof. Karp shall
contribute such amounts towards such benefits as are required of
all employees so long as he receives such benefits. Nothing
contained in this Agreement shall prevent the Board of Directors
of the Corporation or the Bank from amending or otherwise
altering any such plan, program or arrangement so long as such
amendment or alteration equitably affects all executive officers
of the Bank or Corporation.
3.4 Additional Benefits. The Corporation
recognizes that it is essential to the performance by Karp of his
duties and responsibilities that the Corporation, at its cost,
provide him with the use of certain facilities and that the
Corporation incur certain expenses during the Employment Period,
as follows:
A. An office commensurate with his position, and
a secretary, as he requires, and the continued nonexclusive
use of the offices and facilities on the second floor of the
Bank's building previously used by Karp.
B. The exclusive use of an automobile comparable
to that now being used by Karp now or previously, which
vehicle shall be no more than two years old at any time
hereunder.
<PAGE>
C. Payment of or reimbursement to Karp, in
accordance with such policies and procedures as the
respective Boards of Directors of the Bank or the
Corporation may establish from time to time, for all
reasonable travel, entertainment, country club dues and
other expenses incurred by Karp in the performance of his
obligations under this Agreement; except that country club
dues shall not be paid for Karp except as specified by the
Board.
D. Karp shall be entitled to four (4) weeks'
paid vacation per calendar year (prorated in any calendar
year or in which Karp is employed hereunder for less than
such entire year).
E. Participation in the Bank's Split Dollar Life
Insurance Plan with coverage of $500,000 per a policy
previously purchased.
4. TERMINATION OF EMPLOYMENT
4.1 Termination of Employment. Karp's employment
under this Agreement may be terminated by the Corporation or Karp
as follows:
A. Disability. If, as a result of Karp's
incapacity due to physical or mental illness or injury, Karp
shall have been absent from his duties with the Corporation
on a full time basis or he is unable to substantially
perform the services required for his employment for a
period of six (6) consecutive months, or shorter periods
aggregating one hundred eighty (180) days within any
consecutive twelve (12) month period, and within thirty (30)
days after written notice of potential termination is given
by either the Bank or the Corporation he shall not have
returned to the full-time performance of his duties within
such notice period, then Karp's employment under this
Agreement will terminate for "Disability".
B. Death. If Karp dies while employed under
this Agreement, his employment with the Corporation under
this Agreement will terminate as of the date of his death
("Date of Death").
C. Termination by Karp. Karp shall be entitled
to terminate his employment with the Corporation (i) if the
Corporation defaults or otherwise commits a breach of a
material term or condition of this Agreement, or (ii) for
"Good Reason" as defined below.
For purposes of this Agreement "Good Reason" shall
mean continuation of any of the following after reasonable
notice by Karp to the Corporation that he believes any such
action has occurred:
1. The assignment to Karp of any duties
inconsistent with, or the reduction of powers or
functions associated with Karp's position, title,
duties, <PAGE> responsibilities and status with the
Corporation as set forth herein, or as later agreed
upon by Karp and the Corporation;
2. Any removal of Karp from, or any failure to
re-elect Karp to, any position(s) or office(s) Karp
held immediately prior to such action;
3. A reduction by the Corporation in Karp's
annual base Compensation;
4. The Corporation's transfer of Karp to another
geographic location from his present office location,
except for required travel on the Corporation's
business to an extent substantially consistent with
Karp's business travel obligations immediately prior to
the date hereof;
5. The failure by the Corporation to continue in
effect any employee benefit plan, program or
arrangement (including, without limitation the
Corporation's retirement plan, benefit equalization
plan, life insurance plan, health and accident plan,
disability plan, deferred compensation plan or long
term stock incentive plan) in which Karp is
participating immediately prior to the date hereof
(except that the Corporation may institute or continue
plans, programs or arrangements providing Karp with
substantially similar benefits); the taking of any
action by the Corporation which would adversely affect
Karp's participation in or materially reduce Karp's
benefits under, any of such plans, programs or
arrangements; or the failure to continue, or the taking
of any action which would deprive Karp, of any material
fringe benefit enjoyed by Karp immediately prior to the
date hereof; or
6. Any purported termination of Karp's
employment by the Corporation during the term of this
Agreement which is not effected pursuant to all of the
requirements of this Agreement; and, for purposes of
this Agreement, no such purported termination shall be
effective.
D. Termination by Corporation. Notwithstanding
any other provisions of this Agreement, the Corporation
shall be entitled to terminate Karp's employment with or
without "cause". For purposes of this Agreement, "cause"
shall mean (i) improper action by Karp which shall result in
his removal from office by direction of a regulatory agency
having jurisdiction over the Corporation or the Bank; (ii)
the finding by any such regulatory agency, following any
supervisory action, that Karp has engaged in willful
misconduct, dishonest acts or violations of law to the
material detriment of the Corporation or Bank; or (iii)
conviction of a crime, other than a traffic violation,
habitual drunkenness, drug abuse, or excessive absenteeism
other than for illness, after a warning (with respect to
drunkenness or absenteeism only) in writing from the Board
of Directors to refrain from such behavior. No act or
failure to act on the part of Karp shall be considered
willful unless done, or omitted to be done, by Karp not in
good faith and <PAGE> without reasonable belief that the action or
omission was in the best interest of the Corporation.
4.2 Notice of Termination. Any purported
termination by the Corporation or by Karp in accordance with
Section 4.1 (excluding Section 4.1B), shall be communicated by
written Notice of Termination to the other party or parties
hereto in accordance with this Section 4.2. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Karp's employment under the provision so
indicated.
4.3 Date of Termination, etc. "Date of
Termination" shall mean (a) if Karp's employment is terminated
for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the
performance of his duties on a full time basis during such 30-day
period), and (b) if his employment is terminated for any other
reason, the date specified in the Notice of Termination;
provided, that if within thirty (30) days after a Notice of
Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
earlier of: (i) the date upon which the dispute is finally
determined by mutual agreement of the parties or by a binding
arbitration award entered in accordance with Section 9 hereof; or
(ii) the expiration of the Employment Period then existing under
this Agreement; provided, further, that the Date of Termination
shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable dispatch and
diligence. Notwithstanding the pendency of any such dispute, the
Corporation will continue to pay Karp his full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue him as
a participant in all compensation, benefit and insurance plans in
which he was participating when the notice giving rise to the
dispute was given as though termination had not occurred, until
the dispute is finally resolved in accordance with this Section
at which time the parties shall adjust for any overpayment or
underpayment made. Amounts paid under this Section are in
addition to other amounts due under this Agreement and unless
specifically provided otherwise shall not be offset against to
reduce any other amounts due under this Agreement.
5. TERMINATION BENEFITS
5.1 Disability Termination Benefits. Upon the
termination of Karp's employment with the Corporation as a result
of "Disability" pursuant to Section 4.1A, the Corporation shall
pay to Karp a monthly disability benefit equal to one hundred
(100%) percent of his Base Salary, at the rate in effect on the
"Date of Termination", for a period of one year from and after
said date; provided, however, that any amounts payable under this
Section 5.1 shall be reduced by any amounts paid to Karp under
any other disability program or policy (other than Social
Security) maintained by the Bank or the Corporation. If the
amount of such disability insurance payments exceeds the amount
otherwise payable under this Section 5.1, Karp may retain the
entire amount of such disability insurance payments inclusive of
the excess, if any. Such <PAGE> payments shall be made by the
Corporation to Karp, or in the event of his subsequent death, to
his beneficiary or beneficiaries, or his estate, as the case may
be, in accordance with the customary payroll practices of the
Corporation.
During the period Karp is entitled to receive
payments from the Corporation under this Section 5.1, the
Corporation shall maintain or cause to be maintained life and
health insurance benefits for Karp at least equivalent to those
he had at the Date of Termination with any amendments and/or
alterations subsequently made equitably to all executive officers
of the Bank and/or the Corporation. During the period Karp is
entitled to receive payment from the Corporation under this
Section 5.1 he shall not be an agent of the Corporation, and
shall not be considered an "employee" of the Corporation except
as respects any requirements specifically imposed by law or as
may otherwise be required to continue any insurance benefits
provided for in this Section 5.1.
5.2 Benefits Payable Upon Death. Within thirty
(30) days after the Date of Death, the Corporation shall pay to
Karp's beneficiary or beneficiaries, or his estate, as the case
may be, a lump sum benefit equal to one full year salary from the
date of death.
5.3 Termination by Karp Pursuant to Section 4.1C.
In the event that Karp terminates his employment with the
Corporation under Section 4.1C of this Agreement, the Corporation
shall pay to Karp within thirty (30) days of such termination as
severance a lump sum equal to the aggregate amount of the future
Base Salary and bonus payments Karp would have received if he
continued in the employ of the Corporation for the remainder of
the then existing Employment Period of this Agreement at the
highest rate of Base Salary and bonus paid to Karp at any time
under this Agreement or within two years prior to the date
hereof. Karp shall not be required to mitigate damages by
seeking other employment and payments required to be made
hereunder shall not be reduced by any other income which Karp may
receive or by any set-offs or claims which may exist against Karp
for any reason whatsoever.
5.4 Termination by the Corporation for Cause. If
Karp's employment under this Agreement is terminated by the
Corporation for "cause" (as defined in Section 4.1D), or if Karp
voluntarily resigns his employment other than pursuant to Section
4.1C, the Corporation shall pay to Karp his Base Salary as then
in effect that has accrued to the Date of Termination. Unless
otherwise determined by the Board of Directors of the
Corporation, Karp shall have no right to receive compensation or
other benefits under this Agreement after such a termination for
"cause" or following a voluntary resignation except as otherwise
provided in this Agreement.
5.5 Termination by the Corporation for Other than
Cause. If during the Employment Period the Bank or the
Corporation or both of them terminate Karp's employment other
than for "cause" (as defined in Section 4.1D) or other than for
the reasons specified in Sections 1.3, 1.4, 1.5 and 1.6 of this
Agreement, then in such event the Corporation shall, within
thirty (30) days following such termination, pay Karp, or in the
event of his subsequent death, his beneficiary or beneficiaries,
or his estate, as the case may be, as severance a lump sum equal
to the <PAGE> aggregate amount of the future Base Salary and bonus
payments Karp would have received if he continued in the employ
of the Corporation for the remainder of the then existing
Employment Period of this Agreement at the highest rate of Base
Salary and bonus paid to Karp at any time under this Agreement or
within two years prior to the date hereof. Karp shall not be
required to mitigate damages by seeking other employment and
payments required to be made hereunder shall not be reduced by
any other income which Karp may receive or by any set-offs or
claims which may exist against Karp for any reason whatsoever.
6. OTHER TERMINATION BENEFITS
6.1 Insurance. If Karp's employment with the
Corporation shall be terminated either by Karp pursuant to the
provisions of Section 4.1C or by the Corporation without "cause",
the Corporation will continue or cause to be continued life and
health insurance coverage substantially identical to the coverage
maintained by the Corporation for Karp prior to his severance.
Karp shall contribute such amounts toward such benefits as are
required of all employees of the Corporation so long as he
receives such benefits.
6.2 Special Retirement Benefits. If Karp's
employment with the Corporation shall be terminated either by
Karp pursuant to the provisions of Section 4.1C or by the
Corporation or either of them without "cause", Karp shall be
entitled to receive "Special Retirement Benefits" from the
Corporation so that the total retirement benefits Karp receives
from the Corporation will approximate the total retirement
benefits Karp would have received under all qualified retirement
plans (which shall not include severance plans) of the
Corporation in which Karp participates were Karp fully vested
under such qualified retirement plans as if Karp had continued in
the employ of the Corporation for the remaining term of this
Agreement or until his retirement. The benefits specified in
this Section 6.2 will include all ancillary benefits, such as
early retirement and survivor rights and benefits available at
retirement. The amount payable to Karp or his beneficiary(s)
under this Section 6.2 shall equal the excess of (1) the benefits
that would be paid to Karp or his beneficiaries, under all
retirement plans of the Corporation in which Karp participates if
Karp were fully vested under such plans over (2) the benefits
that are payable to Karp or his beneficiaries under all
retirement plans of the Corporation in which Karp participates.
These Special Retirement Benefits are provided on an unfunded
basis, are not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code and shall be payable
solely from the general assets of the Corporation. These Special
Retirement Benefits shall be payable at all times and in the
manner provided in the applicable retirement plans to which they
relate.
6.3 Split Dollar Insurance. If Karp's employment
with the Corporation shall be terminated by him pursuant to
Section 4.1C or by the Corporation, or if the Corporation shall
terminate Karp's employment otherwise than for cause, the
Corporation shall continue to pay the premium for and maintain
the Broad National Bank Split Dollar Life Insurance or comparable
plan for and on behalf of Karp with coverage of $500,000 until
such time as said policy is fully paid.
<PAGE>
6.4 Use of Vehicle. If Karp shall terminate his
employment with the Corporation pursuant to Section 4.1C or if
the Corporation shall terminate his employment otherwise than for
cause, the Corporation shall at its option provide Karp with the
use of the late model car specified in Section 3.4B for a period
of twenty-four (24) months following the Date of Termination or
the reasonable value corresponding to such usage; provided,
however, that notwithstanding the foregoing Karp may in lieu
thereof elect to purchase said vehicle at its then present value
by providing the Corporation with written notice of such
election.
6.5 Payments Upon Termination. Termination of
this Agreement on any grounds whatsoever will not affect the
obligations of the parties to make payment of any sums that have
accrued or remain unpaid at the effective date of such
termination.
6.6 Golden Parachute Gross-Up. If Karp receives
any amount of compensation or property under this Agreement or
any other agreement and such amount would, but for the provisions
hereof, be subject to a tax imposed under section 4999 of the
Internal Revenue Code, or any similar section which would impose
a tax in excess of ordinary income rates by reason of such
payment being made in conjunction with a change in control then:
A. If Karp provides written notice to the
Corporation or its successor at its principal office that he
declines to accept such compensation or property to the
extent that receipt thereof by him would be in excess of the
maximum amount which could be paid without causing such tax
to be imposed, then the amount of such compensation or
property paid or delivered to him shall be reduced to such
maximum amount; and
B. If Karp shall not give the notice referred to
in (a) above within 15 days after the amount of such
compensation or property has been determined and reported to
him, then the amount of such compensation shall not be
reduced, but shall be increased by an amount of money
necessary to reimburse Karp (on a tax gross-up basis) the
full amount of such tax, and the Corporation, or its
successor, shall pay or cause to be paid such additional
amount promptly following the payment of the compensation to
which such additional payment relates.
Nothing herein contained shall be construed to require Karp to
waive receipt of any payment or benefit to which he is entitled.
7. FEDERAL INCOME TAX WITHHOLDING
The Corporation may withhold from any benefits
payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental
regulation or ruling.
<PAGE>
8. ARBITRATION
In the event that any claim, controversy, issue or
other dispute arises under this Agreement, the breach thereof,
the termination of Karp's employment by the Corporation under
Section 4 of this Agreement, including any claim based in whole
or in part on federal or state constitutions, statutes or
regulations, local ordinances, the common law or public policy,
including, but not limited to Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, the
Employee Retirement Income Security Act of 1974, Americans with
Disabilities Act, the Worker Adjustment and Retraining
Notification Act, the Employee Polygraph Protection Act of 1988,
the Occupational Safety and Health Act, the Fair Labor Standards
Act, the Civil Rights Act of 1971, the Rehabilitation Act of 1973
and the Vietnam Era Veterans Readjustment Assistance Act of 1974,
or the amount of any payments under Sections 5 or 6, if the
claim, controversy, issue or dispute is not settled by agreement
among the parties, the dispute shall be settled by a panel of
three (3) arbitrators in the State of New Jersey, the arbitrators
to be chosen by The American Arbitration Association, under the
auspices of, and in accordance with the applicable rules of, the
American Arbitration Association then in effect, and the decision
of the three arbitrators shall be final and conclusive on the
parties and judgment upon such decision may be entered in any
court having jurisdiction thereof. The award of the arbitrators
shall be in writing and shall specify the factual and legal basis
for the award. Karp shall be entitled to reimbursement by the
Corporation for all reasonable legal and other professional fees
and expenses incurred by him in such arbitration or in enforcing
the award, including reasonable attorneys' fees. The parties
agree that resolution of any such claim, controversy, issue or
other dispute pursuant to the foregoing arbitration proceeding is
intended to be final and binding on them and any award rendered
by such arbitrator shall constitute a complete, final and binding
adjudication of any and all legal or factual issues pertaining to
or arising out of the matter that gave rise to the controversy or
dispute. The provisions of this Article 8 shall survive the
termination of this Agreement for any reason whatsoever.
9. ENTIRE AGREEMENT
This writing shall constitute the entire Agreement
of the parties as to the employment and compensation of Karp by
the Corporation, and shall supersede any and all prior agreements
and understandings, whether they be oral or in writing; provided
that this Agreement shall not supersede the Prior Agreement until
the Commencement Date hereof.
10. SEVERABILITY
If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not effect any
other provision of this Agreement not held so invalid, and each
such other provision shall to the full extent consistent with law
continue in full force and effect. If any provision of this
Agreement shall be held invalid in part, such invalidity shall in
no way affect the rest of such provision not held so invalid and
the rest of such provision together with all provisions of this
Agreement shall to the full extent consistent with law continue
in full force and effect.
<PAGE>
11. AMENDMENT OF AGREEMENT
This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto.
12. WAIVER
No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement,
except by a written instrument executed by the party charged with
such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each
waiver shall operate as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for
the future nor as to any act other than that specifically waived.
13. HEADINGS
Headings used in this Agreement are for
convenience only and shall not affect the construction of this
Agreement.
14. BINDING EFFECT AND GOVERNING LAW
All of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of, and be
enforceable by and against Karp and his executors, administrators
and heirs and the Corporation and their respective permitted
successors and assigns. This Agreement has been executed and
delivered in the State of New Jersey and its validity,
interpretation, performance and enforcement shall be governed by
the laws of said State.
15. NO ATTACHMENT
Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge,
pledge or hypothecation or to execution, attachment, levy or
similar process or assignment by operation of law, and any
attempt to voluntarily or involuntarily effect any such action
shall be null, void and of no effect.
16. NONASSIGNABILITY
Neither this Agreement nor any right or interest
hereunder shall be assignable by Karp, his beneficiaries or legal
representatives without the Corporation's prior written consent;
provided, however, that nothing in this Section 16 shall preclude
(a) Karp from designating a beneficiary to receive any benefit
payable hereunder upon his death, or (b) the executors,
administrators or other legal representatives of Karp or his
estate from assigning any rights hereunder to the person or
persons entitled thereto.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused
this Agreement to be executed and its seal to be affixed hereunto
by its duly authorized officers, and Karp, has signed this
Agreement, all as of the date first written above.
ATTEST: BROAD NATIONAL BANCORPORATION
/s/ James Boyle By /s/ John A. Dorman
Name: James Boyle Name: John A. Dorman
Title: Secretary Title: President & COO
WITNESS:
/s/ Donald M. Karp
Name: DONALD M. KARP
BROAD NATIONAL BANK, a national banking association
organized under the laws of the United States of America, hereby
acknowledges and agrees to be bound to the extent applicable by
the terms of the Employment Agreement, dated December 31, 1997,
between DONALD M. KARP and BROAD NATIONAL BANCORPORATION and
guarantees payment and performance of the terms of said agreement
to the extent permitted by the laws of New Jersey and the laws of
the United States of America.
ATTEST: BROAD NATIONAL BANK
/s/ James Boyle By /s/ John A. Dorman
Name: James Boyle Name: John A. Dorman
Title: Secretary Title: President and COO
WITNESS:
Dated: December 31, 1997
Name:
EMPLOYMENT AGREEMENT
This Agreement is made the 31st day of December, 1997,
by and among JOHN A. DORMAN, who currently resides at 44
Fairmount Road, Ridgewood, New Jersey 07450 (hereinafter referred
to as "Dorman"), BROAD NATIONAL BANK, a national banking
association organized under Acts of Congress, with its principal
office located at 905 Broad Street in the City of Newark, County
of Essex and State of New Jersey (hereinafter referred to as the
"Bank"), and BROAD NATIONAL BANCORPORATION, the holding company
for the Bank, a corporation organized under the laws of the State
of New Jersey, with its principal office located at 905 Broad
Street in the City of Newark, County of Essex and State of New
Jersey (hereinafter referred to as the "Bancorp"). The Bank and
Bancorp are sometimes referred to herein collectively as the
"Corporation" or the "Corporations". In any instance where
reference is made to both the Bank and Bancorp or to the
Corporation or Corporations, unless the context clearly requires
otherwise, conditions, practices or actions referred to shall be
identical or joint.
W I T N E S S E T H:
WHEREAS, Dorman has since April 9, 1992 been employed
as President and Chief Operating Officer of the Bank and of
Bancorp; and
WHEREAS, the Boards of Directors of the Corporations
believe that the continued leadership and productivity of Dorman
will be extremely beneficial and will significantly contribute to
the growth and financial security of the Corporations; and
WHEREAS, the Corporations wish to assure themselves of
the services of Dorman as a employee, officer and, if elected,
director of the Corporations for the period provided in this
Agreement, and Dorman has agreed to serve in the employ of the
Corporations on a full-time basis in such capacities on the terms
and conditions hereinafter set forth; and
WHEREAS, there is currently in effect an Employment
Agreement, dated December 31, 1996, as amended, by and among
Dorman and the Corporations (the "Prior Agreement"); and
WHEREAS, the Boards of Directors of the Corporations
have determined that the best interests of the Corporations would
be served by replacing the Prior Agreement with this Agreement as
of the Commencement Date hereinafter set forth;
NOW, THEREFORE, for and in consideration of the
employment of Dorman with the Corporations, the compensation to
be paid and the other benefits to be provided to Dorman by the
Corporations for his services and the mutual covenants set forth
in the Agreement, the parties hereto hereby agree as follows:
<PAGE>
1. EMPLOYMENT
1.1 The Corporation agrees to the continued employment
of Dorman, and Dorman agrees to continue to be employed by the
Corporations for the period stated in Section 2.1 hereof and upon
the other terms and conditions herein provided.
1.2 If Dorman is suspended from office and/or
temporarily prohibited from participating in the conduct of the
affairs of the Bank or Bancorp, or both of them, by a notice
served under Section 1818(e)(3) or Section 1818(g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. 1818(e)(3), or
1818(g)(1)), all obligations of the Corporations under this
Agreement shall be suspended as of the date of service of the
notice, unless stayed by appropriate proceedings. If the charges
specified in the notice are dismissed, Dorman shall be reinstated
in his employment with the Corporations and the Corporations may
in their discretion (i) pay Dorman all or part of the
compensation withheld while their obligations under this
Agreement were suspended, and/or (ii) reinstate (in whole or in
part) any of their obligations which were suspended.
1.3 If Dorman is removed and/or permanently prohibited
from participating in the conduct of the affairs of the Bank or
Bancorp, or both of them, by an order issued under
Section 8(e)(4) or Section (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1818(e)(4) or 1818(g)(1)), all
obligations of the Corporations under this Agreement shall
terminate as of the effective date of the order, and Dorman shall
not have the right to receive compensation or any of the other
benefits provided for hereunder, unless and then only to the
extent required by law, for any period after such removal or
prohibition.
1.4 If the Bank is in default (as defined in
Section 1813(x)(1) of the Federal Deposit Insurance Act
(12 U.S.C. 1813(x)(1)), all obligations of the Corporations under
this Agreement shall terminate as of the date of default, but
this section shall not affect any vested rights of the parties.
1.5 All obligations of the Corporation under this
Agreement shall be terminated, except to the extent it is
determined that continuation of this Agreement is necessary for
the continued operation of the Bank, (i) by the Federal Deposit
Insurance Corporation ("FDIC"), at any time the FDIC enters into
an agreement to provide assistance to or on behalf of the Bank
under the authority of Section 1823(c) of the Federal Deposit
Insurance Act (12 U.S.C. 1823(c)), or (ii) by the FDIC at any
time the FDIC approves a supervisory merger to resolve problems
related to the operation of the Bank or when the Bank is
determined by FDIC to be in an unsafe or unsound condition, but,
in any of the above-described events, the vested rights of Dorman
shall not be affected.
1.6 In the event of receipt of any notice or order, a
default, an agreement to provide assistance, or an approval of
the supervisory merger as such are described in Sections 1.2,
1.3, 1.4 or 1.5 hereof, the suspension or termination of the
obligations of the Corporations hereunder shall be automatic and
shall not be conditioned upon any further action by the
Corporations or delivery of notice to Dorman and shall be deemed
a suspension or termination of <PAGE> employment jointly and severally
by the Bank, Bancorp and the regulatory body providing or
delivering such document; provided, however, that such suspension
or termination shall not prejudice Dorman's vested rights under
this Agreement.
2. TERMS, POSITION AND RESPONSIBILITIES
2.1 Term of Employment. The period of Dorman's
employment under this Agreement with the Bank and with Bancorp,
respectively, shall commence as of January 1, 1998 (the
"Commencement Date") and shall continue for a period of twelve
(12) full calendar months thereafter and any extension
thereafter, unless this Agreement is earlier terminated in
accordance with the terms hereof (the "Employment Period"). The
Prior Agreement (as defined in the recitals hereto) shall remain
in full force and effect, subject to the terms and conditions
thereof, from the date of this Agreement until the Commencement
Date, whereupon this Agreement shall automatically supersede the
Prior Agreement in its entirety without further action by the
parties hereto. Notwithstanding the foregoing, if at any time
during the Employment Period the shareholders of Bancorp vote
either (i) to approve an agreement to merge or consolidate
Bancorp or the Bank with or into another corporation or (ii) to
sell or otherwise dispose of all or substantially all of its or
their assets, in either case, in a transaction in which a
majority of the outstanding stock of the surviving or acquiring
corporation following such merger, consolidation or sale of
assets shall not be held by persons who held a majority of the
outstanding shares of Bancorp immediately prior to such
transaction the period of Dorman's employment shall automatically
be extended without further action by the respective parties for
an additional twenty-four (24) calendar months. In such event,
the Employment Period of this Agreement shall for all purposes
hereunder be deemed to include the foregoing twenty-four (24)
calendar month extension.
2.2 Duties During Employment. During the Employment
Period, Dorman shall serve as the President and Chief Operating
Officer of Broad National Bank and of Broad National
Bancorporation, and shall have the customary duties and
responsibilities of each such office. The employment of Dorman
in such foregoing capacities is a material condition of this
Agreement for purposes of Section 4.1C. In addition, during the
Employment Period, if elected, Dorman shall also serve, without
any additional compensation or fees, as a member of the Boards of
Directors and as a member of the Executive Committees of the
Corporations.
3. COMPENSATION AND REIMBURSEMENT OF EXPENSES
3.1 Compensation - Base Salary.
A. The compensation specified under this
Agreement shall constitute the salary and benefits paid Dorman
for his services as described in Section 2.2 by the Bank and
Bancorp. The Corporations shall pay Dorman as compensation an
annual salary ("Base Salary") at the combined rate of One Hundred
Seventy-Six Thousand Five Hundred Dollars ($176,500) for the
calendar year 1998. During the period of this Agreement it is
understood and agreed that Dorman's Base Salary shall be reviewed
by the Board of Directors of the <PAGE> Corporation or the Bank or a
committee or committees thereof at least annually. The Board of
Directors of the Corporation or the Bank or the committee or
committees thereof may, in their sole discretion, increase the
Base Salary to be paid to Dorman from time to time, to reflect
Dorman's performance and to maintain a compensation level
comparable to that of similarly situated executives in the
financial institutions industry, but the Base Salary may not be
decreased below the Base Salary specified above in this paragraph
A without the written consent of Dorman.
B. From time to time, the Boards of Directors of
the Corporations shall apportion between the Bank and Bancorp the
amounts payable hereunder without affecting Dorman's rights
hereunder. Such apportionment shall be made (i) on the basis of
the judgment of such Boards of Directors as to Dorman's relative
responsibilities and contributions with respect to the Bank and
Bancorp, and (ii) on the basis of such other factors as such
Boards of Directors may deem appropriate.
3.2 Participation in Bonus Plan. Dorman shall be
entitled to participate in such bonus or other incentive
compensation plan(s) as currently is or may hereafter be
established by the Corporations for their respective executive
officers during the Employment Period. Any such bonus shall be
payable in the manner specified by the appropriate Board of
Directors, or committee of such Board of Directors, at the time
such bonus is awarded.
3.3 Participation in Benefit Plans. The payments
provided for in Sections 3, 5 and 6 hereof, except where
specifically provided otherwise, are in addition to any other
benefits to which Dorman may be, or may become, entitled under
any group hospitalization, health, dental care, or sick-leave
plan, life or other insurance or death benefit plan, travel or
accident insurance, retirement income or pension plan or program
of the Corporations, or other present or future group employee
benefit plan or program of the Bank or Bancorp, for which their
executive officers are or shall become eligible to receive during
the Employment Period, and during any subsequent period for which
Dorman shall be entitled to receive payments from the
Corporations under sections 5 and 6 to the extent permissible
under the general terms and provisions of such plans or programs
and in accordance with the provisions thereof. Dorman shall
contribute such amounts towards such benefits as are required of
all employees so long as he receives such benefits. Nothing
contained in this Agreement shall prevent the Boards of Directors
of the Corporations from amending or otherwise altering any such
plan, program or arrangement so long as such amendment or
alteration equitably affects all executive officers of the Bank
or Bancorp.
3.4 Additional Benefits. The Corporations recognize
that it is essential to the performance by Dorman of his duties
and responsibilities that the Corporations, at their cost,
provide him with the use of certain facilities and that the
Corporations incur certain expenses during the Employment Period,
as follows:
A. An office commensurate with his position, and
a secretary, as he requires.
B. The nonexclusive use of a late model Buick or
Oldsmobile or comparable car which shall be used by other
personnel of the Corporations when not used by Dorman.
<PAGE>
C. Payment of or reimbursement to Dorman, in
accordance with such policies and procedures as the respective
Boards of Directors of the Bank or the Corporation may establish
from time to time, for all reasonable travel, entertainment,
country club dues and other expenses incurred by Dorman in the
performance of his obligations under this Agreement; except that
country club dues shall not be paid for Dorman unless there is a
Change in Control as defined herein or as otherwise specified by
the Board.
D. Dorman shall be entitled to four (4) weeks
paid vacation per calendar year, or such longer period as the
Corporations may from time to time determine (prorated in any
calendar year in such longer period during which Dorman is
employed hereunder for less than such entire year or longer
period).
E. Participation in the Bank's Split Dollar Life
Insurance Plan with coverage of $500,000.
4. TERMINATION OF EMPLOYMENT
4.1 Termination of employment. Dorman's employment
under this Agreement may be terminated by the Corporation or
Dorman as follows:
A. Disability. If, as a result of Dorman's
incapacity due to physical or mental illness or injury, Dorman
shall have been absent from his duties with the Corporation(s) on
a full time basis or he is unable to substantially perform the
services required for his employment for a period of six (6)
consecutive months, or shorter periods aggregating one hundred
eighty (180) days within any consecutive twelve (12) month
period, and within thirty (30) days after written notice of
potential termination is given by either the Bank or Bancorp he
shall not have returned to the full-time performance of his
duties within such notice period, then Dorman's employment under
this Agreement will terminate for "Disability".
B. Death. If Dorman dies while employed under
this Agreement, his employment with the Corporations under this
Agreement will terminate as of the date of his death ("Date of
Death").
C. Termination By Dorman. Dorman shall be
entitled to terminate his employment with the Corporation (i) if
the Corporation defaults or otherwise commits a breach of a
material term or condition of this Agreement, (ii) for Good
Reason as defined below or (iii) upon the occurrence of a Change
in Control as defined below.
For purposes of this Agreement "Good Reason" shall
mean continuation of any of the following after reasonable notice
by Dorman to the Corporation that he believes any such action has
occurred:
1. The assignment to Dorman of any duties
inconsistent with, or the reduction of powers or
functions associated with Dorman's position, title,
<PAGE>
duties, responsibilities and status with the
Corporation as set forth herein, or as later agreed
upon by Dorman and the Corporation;
2. Any removal of Dorman from, or any
failure to re-elect Dorman to, any position(s) or
office(s) Dorman held immediately prior to such action;
3. A reduction by the Corporation in
Dorman's annual base Compensation;
4. The Corporation's transfer of Dorman to
another geographic location from his present office
location, except for required travel on the
Corporation's business to an extent substantially
consistent with Dorman's business travel obligations
immediately prior to the date hereof;
5. The failure by the Corporation to
continue in effect any employee benefit plan, program
or arrangement (including, without limitation the
Corporation's retirement plan, benefit equalization
plan, life insurance plan, health and accident plan,
disability plan, deferred compensation plan or long
term stock incentive plan) in which Dorman is
participating immediately prior to the date hereof
(except that the Corporation may institute or continue
plans, programs or arrangements providing Dorman with
substantially similar benefits); the taking of any
action by the Corporation which would adversely affect
Dorman's participation in or materially reduce Dorman's
benefits under, any of such plans, programs or
arrangements; or the failure to continue, or the taking
of any action which would deprive Dorman, of any
material fringe benefit enjoyed by Dorman immediately
prior to the date hereof; or
6. Any purported termination of Dorman's
employment by the Corporation during the term of this
Agreement which is not effected pursuant to all of the
requirements of this Agreement; and, for purposes of
this Agreement, no such purported termination shall be
effective.
For purposes of this Agreement, a "Change in
Control" shall mean and shall be deemed to have occurred, if at
any time during the Employment Period, directly or indirectly, in
one or a series of transactions:
1. Any person or group (as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, (15 U.S.C. 78m(d) and 15 U.S.C.
78(d)) or under the rules or regulations of the Federal
Home Loan Bank Board or of the Federal Deposit
Insurance Corporations) as in effect on the date hereof
other than Bancorp or Donald Karp has acquired:
(a) more than twenty (20%) percent
of the outstanding common
stock of the Bank or <PAGE> Bancorp,
or equivalent in voting power
of any class or classes of
outstanding securities of the
Bank or Bancorp ordinarily
entitled to vote in elections
of directors;
(b) irrevocable proxies
representing more than twenty
(20%) percent of any class of
voting stock of the Bank or
Bancorp;
(c) any combination of voting
stock and irrevocable proxies
representing more than twenty
(20%) percent of any class of
voting stock of the Bank or
Bancorp; or
(d) the ability to control in any
manner the election of a
majority of the directors of
the Bank or Bancorp;
2. The Karp/Lesnik family sells or
otherwise disposes of fifty (50%) percent or more of
the voting securities of the Bank or Bancorp owned by
such family as of the date Dorman first became employed
by the Corporations to a nonfamily member or members;
3. Any merger or consolidation of the Bank
or Bancorp into or with another entity has occurred and
the holders of a majority of the voting stock of the
surviving entity shall not have been shareholders of
Bancorp immediately prior to such transaction; or
4. Any transfer or sale of all or
substantially all of the assets of the Bank or Bancorp
has occurred.
D. Termination by Corporations. Notwithstanding
any other provisions of this Agreement, the Corporation shall be
entitled to terminate Dorman's employment with or without
"cause". For purposes of this Agreement, "cause" shall mean
(i) willful and continued failure by Dorman to perform his duties
for the Corporation under this Agreement (as it may be modified
or supplemented in the event of a Change in Control) after at
least one warning in writing from the Corporation's Board of
Directors identifying specifically any such failure; (ii) the
willful engaging by Dorman in misconduct which causes material
injury to the Corporation as specified in a written notice to
Dorman from the Board of Directors; or (iii) conviction of a
crime, other than a traffic violation, habitual drunkenness, drug
abuse, or excessive absenteeism other than for illness, after a
warning (with respect to drunkenness or absenteeism only) in
writing from the Board of Directors to refrain from such
behavior. No act or failure to act on the part of Dorman shall
be considered willful unless done, or omitted to be done, by
Dorman not in good faith and without reasonable belief that the
action or omission was in the best interest of the Corporation.
<PAGE>
4.2 Notice of Termination. Any purported termination
by the Corporations or by Dorman in accordance with Section 4.1,
(excluding Section 4.1B) shall be communicated by written Notice
of Termination to the other party or parties hereto in accordance
with this Section 4.2. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Dorman's employment
under the provision so indicated.
4.3 Date of Termination, etc. "Date of Termination"
shall mean (a) if Dorman's employment is terminated for
Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the
performance of his duties on a full time basis during such 30-day
period), and (b) if his employment is terminated for any other
reason, the date specified in the Notice of Termination; provided
that if within thirty (30) days after a Notice of Termination is
given the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the
Date of Termination shall be the earlier of: (i) the date upon
which the dispute is finally determined by mutual agreement of
the parties or by a binding arbitration award entered in
accordance with Section 9 hereof; or, (ii) the expiration of the
Employment Period then existing under this Agreement; provided,
further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such
dispute with reasonable dispatch and diligence. Notwithstanding
the pendency of such dispute, the Corporations will continue to
pay Dorman his full compensation in effect when the notice giving
rise to dispute was given (including, but not limited to, base
salary) and continue him as a participant in all compensation,
benefit and insurance plans in which he was participating when
the notice giving rise to the dispute was given as though
termination had not occurred, until the dispute is finally
resolved in accordance with this Section at which time the
parties shall adjust for any overpayment or underpayment made.
Amounts paid under this Section are in addition to the other
amounts due under this Agreement and unless specifically provided
otherwise shall not be offset against to reduce any other amounts
due under this Agreement.
5. TERMINATION BENEFITS
5.1 Disability Termination Benefits. Upon the
termination of Dorman's employment with the Corporations as a
result of "Disability" pursuant to Section 4.1A, the Corporations
shall pay to Dorman a monthly disability benefit equal to one
hundred (100%) percent of his Base Salary, at the rate in effect
on the "Date of Termination", for a period of one year from and
after said date; provided, however, that any amounts payable
under this Section 5.1 shall be reduced by any amounts paid to
Dorman under any other disability program or policy (other than
Social Security) maintained by the Bank or Bancorp. If the
amount of such disability insurance payments exceeds the amount
otherwise payable under this Section 5.1, Dorman may retain the
entire amount of such disability insurance payments inclusive of
the excess, if any. Such payments shall be made by the
Corporations to Dorman, or in the event of his subsequent death,
to his beneficiary or beneficiaries, or his estate, as the case
may be, in accordance with the customary payroll practices of the
Corporations.
<PAGE>
During the period Dorman is entitled to receive
payments from the Corporations under this Section 5.1, the
Corporations shall maintain or cause to be maintained life and
health insurance benefits for Dorman at least equivalent to those
he had at the Date of Termination with any amendments and/or
alterations subsequently made equitably to all executive officers
of the Bank and/or Bancorp. During the period Dorman is entitled
to receive payments from the Corporations under this Section 5.1
he shall not be considered an "employee" of the Corporations
except as respects any requirements specifically imposed by law
or as may otherwise be required to continue any insurance
benefits provided for this Section 5.1.
5.2 Benefits Payable Upon Death. Within thirty
(30) days after the Date of Death, the Corporations shall pay to
Dorman's beneficiary or beneficiaries or his estate, as the case
may be, a lump sum benefit equal to three (3) times the monthly
rate of Dorman's Base Salary as in effect on the Date of Death.
5.3 Benefits Payable Upon Termination by Dorman. In
the event that Dorman terminates his employment with the
Corporations under Section 4.1 of this Agreement, the
Corporations shall pay to Dorman within thirty (30) days of such
termination as severance a lump sum equal to the aggregate amount
of the future Base Salary, at the monthly rate then in effect,
Dorman would have received if he continued in the employ of the
Corporations for the remainder of the Employment Period then
existing under this Agreement plus, if the Employment Period
shall not have been already extended pursuant to the terms of
Section 2.1 by reason of a vote of shareholders, an additional
twenty-four (24) months and the incentive bonuses to which he
would have otherwise been entitled during such period of time,
based on the average incentive bonus received by him during the
then two most recent fiscal years of the Corporations.
5.4 Termination by the Corporations for Cause. If
Dorman's employment under this Agreement is terminated by either
the Bank or Bancorp for "cause" (as defined in Section 4.1D), or
if Dorman voluntarily resigns his employment other than pursuant
to Section 4.1C, the Corporations shall pay to Dorman his Base
Salary as then in effect that has accrued to the Date of
Termination. Unless otherwise determined by the Boards of
Directors of the Corporations, Dorman shall have no right to
receive compensation or other benefits under this Agreement after
such a termination for "cause" or following a voluntary
resignation.
5.5 Termination by the Corporations for Other than
Cause. If during the Employment Period the Bank or Bancorp or
both of them terminate Dorman's employment other than for "cause"
(as defined in Section 4.1D) or other than for the reasons
specified in Sections 1.3, 1.4, 1.5 and 1.6 of this Agreement,
then in such event the Corporations shall pay Dorman, or in the
event of his subsequent death, his beneficiary or beneficiaries,
or his estate, as the case may be, as severance a lump sum equal
to the aggregate amount of the future Base Salary payments Dorman
would have received if he continued in the employ of the
Corporations for the remainder of the then existing Employment
Period of this Agreement plus twenty-four (24) months at the
highest rate of Base Salary and bonus paid to Dorman at any time
under this Agreement or within two years prior to the date
hereof. Dorman shall not be required to mitigate damages by
seeking other employment and payments required to be made
hereunder shall not be reduced by any other <PAGE> income which Dorman
may receive or by any setoffs or claims which may exist against
Dorman for any reason whatsoever.
6. OTHER TERMINATION BENEFITS
6.1 Insurance. If Dorman's employment with the
Corporations shall be terminated either by Dorman pursuant to the
provisions of Section 4.1C or by the Corporations or either of
them without "cause", the Corporations will continue or cause to
be continued life and health insurance coverage substantially
identical to the coverage maintained by the Corporations for
Dorman prior to his severance. Dorman shall contribute such
amounts towards such benefits as are required of all employees of
the Corporations so long as he receives such benefits.
6.2 Special Retirement Benefits. If Dorman's
employment with the Corporations shall be terminated either by
Dorman pursuant to the provisions of Section 4.1C or by the
Corporations or either of them without "cause", Dorman shall be
entitled to receive "Special Retirement Benefits" from the
Corporations so that the total retirement benefits Dorman
receives from the Corporations will approximate the total
retirement benefits Dorman would have received under all
qualified retirement plans (which shall not include severance
plans) of the Corporations in which Dorman participates were
Dorman fully vested under such qualified retirement plans as if
Dorman had continued in the employ of the Corporations for at
least sixty (60) consecutive months in the absence of early
termination or until his retirement. The benefits specified in
this Section 6.2 will include all ancillary benefits, such as
early retirement and survivor rights and benefits available at
retirement. The amount payable to Dorman or his beneficiary(s)
under this Section 6.2 shall equal the excess of (1) the benefits
that would be paid to Dorman or his beneficiaries, under all
retirement plans of the Corporations in which Dorman participates
if Dorman were fully vested under such plans or (2) the benefits
that are payable to Dorman or his beneficiaries under all
retirement plans of the Corporations in which Dorman
participates. These Special Retirement Benefits are provided on
an unfunded basis, are not intended to meet the qualification
requirements of Section 401 of the Internal Revenue Code and
shall be payable solely from the general assets of the
Corporations. These Special Retirement Benefits shall be payable
at the times and in the manner provided in the applicable
retirement plans to which they relate.
6.3 Split Dollar Insurance. If pursuant to Section
4.1C Dorman's employment with the Corporations following a Change
in Control shall terminate, the Corporations shall continue to
pay the premium for and maintain the Broad National Bank Split
Dollar Life Insurance for and on behalf of Dorman with coverage
of $500,000 until such time as said policy is fully paid.
6.4 Use of Vehicle. If pursuant to Section 4.1C
Dorman shall terminate his employment with the Corporations
following a Change in Control, the Corporations shall at their
option provide Dorman with the use of the late model car
specified in Section 3.4B for a period of twenty-four (24) months
following the Date of Termination or the reasonable value
corresponding to such usage; provided, however, that
notwithstanding the foregoing Dorman may in lieu thereof <PAGE> elect to
purchase said vehicle at its then present value by providing the
Corporations with written notice of such election.
6.5 Payments Upon Termination. Termination of this
Agreement on any grounds whatsoever will not affect the
obligations of the parties to make payment of any sums that have
accrued but remain unpaid at the effective date of such
termination.
6.6 Golden Parachute Gross-Up. If Dorman receives any
amount of compensation or property under this Agreement or any
other agreement and such amount would, but for the provisions
hereof, be subject to a tax imposed under section 4999 of the
Internal Revenue Code, or any similar section which would impose
a tax in excess of ordinary income rates by reason of such
payment being made in conjunction with a change in control then:
A. If Dorman provides written notice to the
Corporation or its successor at its principal office that he
declines to accept such compensation or property to the extent
that receipt thereof by him would be in excess of the maximum
amount which could be paid without causing such tax to be
imposed, then the amount of such compensation or property paid or
delivered to him shall be reduced to such maximum amount; and
B. If Dorman shall not give the notice referred
to in (a) above within 15 days after the amount of such
compensation or property has been determined and reported to him,
then the amount of such compensation shall not be reduced, but
shall be increased by an amount of money necessary to reimburse
Dorman (on a tax gross-up basis) the full amount of such tax, and
the Corporation, or its successor, shall pay or cause to be paid
such additional amount promptly following the payment of the
compensation to which such additional payment relates.
Nothing herein contained shall be construed to require Dorman to
waive receipt of any payment or benefit to which he is entitled.
7. SOURCE OF FUNDS
Except for those benefits payable directly from the
qualified retirement or pension plan of the Corporations or
either of them, all payments and benefits provided in Sections 3,
5 or 6 shall be paid to Dorman or paid for on behalf of Dorman
from the general funds of the Corporations and no special or
separate funds shall be established and no other segregation of
assets shall be made to assure payment. Dorman shall have no
right, title or interest whatsoever in or to any investments
which the Corporations may make to aid them in meeting their
obligations hereunder.
8. FEDERAL INCOME TAX WITHHOLDING
The Corporations may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation
or ruling.
<PAGE>
9. ARBITRATION
In the event that any claim, controversy, issue or
other dispute arises under this Agreement, the breach thereof,
the termination of Dorman's employment by the Corporations under
Section 4 of this Agreement, including any claim based in whole
or in part on federal or state constitutions, statutes or
regulations, local ordinances, the common law or public policy,
including, but not limited to Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act of 1967, the
Employee Retirement Income Security Act of 1974, Americans with
Disabilities Act, the Worker Adjustment and Retraining
Notification Act, the Employee Polygraph Protection Act of 1988,
the Occupational Safety and Health Act, the Fair Labor Standards
Act, the Civil Rights Act of 1971; the Rehabilitation Act of 1973
and the Vietnam Era Veterans Readjustment Assistance Act of 1974,
or the amount of any payments under Sections 5 or 6, if the
claim, controversy, issue or dispute is not settled by agreement
among the parties, the dispute shall be settled by a single
arbitration conducted by three arbitrators in the State of New
Jersey, under the auspices of, and in accordance with the
applicable rules of, the American Arbitration Association then in
effect. One arbitrator shall be selected by the Corporation, one
arbitrator shall be selected by Dorman and the third arbitrator
shall be selected by the two selected in such manner. The
decision of the arbitrators shall be final and conclusive on the
parties and judgment upon such decision may be entered in any
court having jurisdiction thereof. The award of the arbitrators
shall be in writing and shall specify the factual and legal basis
for the award. Dorman shall be entitled to reimbursement by the
Corporations for all reasonable legal and other professional fees
and expenses incurred by him in such arbitration or in enforcing
the award, including reasonable attorneys' fees. The parties
agree that resolution of any such claim, controversy, issue or
other dispute pursuant to the foregoing arbitration proceeding is
intended to be final and binding on them and any award rendered
by such arbitration shall constitute a complete, final and
binding adjudication of any and all legal or factual issues
pertaining to or arising out of the matter that gave rise to the
controversy or dispute. The provisions of this Article 9 shall
survive the termination of this Agreement for any reason
whatsoever.
10. CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the
Corporations or either of them from consolidating or merging into
or with, or transferring all or substantially all of their assets
to, another corporation which assumes this Agreement and all
obligations and undertakings of the Corporations hereunder.
11. POST-TERMINATION COVENANTS
11.1 Covenant Not to Compete. Dorman covenants and
agrees that, in consideration of the amounts to be paid and
benefits to be provided to Dorman hereunder, for a period of
twelve (12) months following the termination of his employment
with the Corporations pursuant to Sections 4.1A, 4.1C or 4.1D,
Dorman shall not be employed as an executive officer of, shall
not control, manage or otherwise participate in the management
of, any other financial institution having its principal
headquarters and/or executive offices in the County of Essex,
State of New Jersey, or of a company that owns or controls a
majority of the voting securities of any <PAGE> such financial
institution. The term "financial institution" shall mean and
include any bank, savings bank, savings and loan association or
credit union.
11.2 In the event of a Change in Control, either before
or after a Date of Termination, Article 11 shall in its entirety
become legally inoperative and Dorman will no longer be bound by
any of the covenants contained therein.
11.3 Solicitation of Employees. Dorman covenants and
agrees that, in consideration of the amounts to be paid and
benefits to be provided to Dorman hereunder, for a period of
twelve (12) months following the termination of his employment
with the Corporations irrespective of the time, manner or cause
of said termination, Dorman shall not solicit any employee of the
Bank or Bancorp to leave its or their employ or join the
employment of, or employ, or permit any business of which he is
an owner, partner, substantial shareholder or principal executive
to solicit the employment of or employ, any person who is
employed by the Bank or Bancorp or has been employed by the Bank
or Bancorp within two (2) years prior to the time of such
solicitation of employment.
11.4 Covenants to Survive. The parties hereto agree
and acknowledge that except as provided in Section 11.2 above,
the terms of this Article 11 and of Article 20 shall survive the
termination of this Agreement for any reason whatsoever.
12. ENTIRE AGREEMENT
This writing shall constitute the entire Agreement of
the parties as to the employment and compensation of Dorman by
the Corporations, and shall supersede any and all prior
agreements and understandings, whether they be oral or in
writing; provided that this Agreement shall not supersede the
Prior Agreement until the Commencement Date hereof.
13. SEVERABILITY
If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not effect any other
provision of this Agreement not held so invalid, and each such
other provision shall to the full extent consistent with law
continue in full force and effect. If any provision of this
Agreement shall be held invalid in part, such invalidity shall in
no way affect the rest of such provision not held so invalid and
the rest of such provision together with all provisions of this
Agreement shall to the full extent consistent with law continue
in full force and effect.
14. AMENDMENT OF AGREEMENT
This Agreement may not be modified or amended except by
an instrument in writing signed by the parties hereto.
<PAGE>
15. WAIVER
No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by a
written instrument executed by the party charged with such waiver
or estoppel. No such written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each waiver shall
operate as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future nor
as to any act other than that specifically waived.
16. HEADINGS
Headings used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
17. BINDING EFFECT AND GOVERNING LAW
All of the terms and provisions of this Agreement shall
be binding upon, shall inure to the benefit of, and be
enforceable by and against Dorman and his executors,
administrators and heirs and Broad National Bank and Broad
National Bancorporation and their respective permitted successors
and assigns. This Agreement has been executed and delivered in
the State of New Jersey and its validity, interpretation,
performance and enforcement shall be governed by the laws of said
State.
18. NO ATTACHMENT
Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation,
communication, alienation, sale, assignment, encumbrance, charge,
pledge or hypothecation or to execution, attachment, levy or
similar process or assignment by operation of law, and any
attempt to voluntarily or involuntarily effect any such action
shall be null, void and of no effect.
19. NONASSIGNABILITY
Neither this Agreement nor any right or interest
hereunder shall be assignable by Dorman, his beneficiaries or
legal representative without the Corporations' prior written
consent; provided, however, that nothing in this Section 19 shall
preclude (a) Dorman from designating a beneficiary to receive any
benefit payable hereunder upon his death, or (b) the executors,
administrators or other legal representatives of Dorman or his
estate from assigning any rights hereunder to the person or
persons entitled thereto.
20. CONFIDENTIAL INFORMATION
20.1 Dorman shall not, directly or indirectly, during
the term of his employment hereunder and any time after
termination of his employment for any reason, to the detriment of
the Corporations, knowingly divulge, disclose, disseminate,
publish, reveal or otherwise <PAGE> communicate to any unauthorized
person any Confidential Information relating to the Corporations
or to any of the businesses operated by them.
20.2 Dorman confirms that the Confidential Information
constitutes the exclusive property of the Corporations. Upon
termination of his employment hereunder, Dorman will promptly
return to the Corporations all materials (whether prepared by
Dorman or others) containing, constituting, embodying or
illustrating Confidential Information, and all other property of
the Corporations then in his possession or custody.
20.3 As used in this Article 20, the following terms
shall have the following meanings:
A. The term "Confidential Information" means
information disclosed to Dorman or known to Dorman as a
consequence of or through his employment by the Corporations and
not generally known in the banking industry. Such information
includes, but is not limited to, information relating to the
Corporations' products, research, developments, accounting,
finances, marketing, merchandising and selling, and specifically
includes future business plans, client list, applicant list, and
training and operating methods and techniques. The term
"Confidential Information" does not include information which
(i) at the time it was received by Dorman was generally available
to the public; (ii) prior to its use by Dorman, becomes generally
available to the public through no act or failure of Dorman;
(iii) prior to its becoming known to Dorman as a consequence of
or through his employment by the Corporations, was otherwise
known to Dorman; or (iv) is received by Dorman from a person who
is not a party to this Agreement and who was not under an
obligation of confidence with respect to such information.
B. "Materials" includes, but is not limited to,
books, notebooks, documents, records, photographs, films, video
tapes, audio recordings, discs, diskettes, or other electronic or
optical storage media, software and support materials, and
similar or other materials.
20.4 Dorman shall not otherwise knowingly act or
conduct himself (a) to the material detriment of the
Corporations, or (b) in a manner which is inimical or contrary to
the interest thereof.
[The remainder of this page intentionally has been left blank]
<PAGE>
IN WITNESS WHEREOF, the Corporations have caused this
Agreement to be executed and their respective seals to be affixed
hereunto by their duly authorized officers, and Dorman, has
signed this Agreement, all as of the date first written above.
BROAD NATIONAL BANK, a national banking association
organized under the laws of the United States of America, hereby
acknowledges and agrees to be bound to the extent applicable by
the terms of the Employment Agreement dated December 31, 1997
between JOHN A. DORMAN, BROAD NATIONAL BANK and BROAD NATIONAL
BANCORPORATION and guarantees payments and performance of the
terms of said agreement to the extent permitted by the laws of
New Jersey and the laws of the United States of America.
ATTEST: BROAD NATIONAL BANCORPORATION
/s/ Fred S. Campo By: /s/ Donald M. Karp
Name: Fred S. Campo Name: Donald M. Karp
Title: Secretary Title: Chairman & CEO
ATTEST: BROAD NATIONAL BANK
/s/ Fred S. Campo By: /s/ Donald M. Karp
Name: Fred S. Campo Name: Donald M. Karp
Title: Secretary Title: Chairman & CEO
WITNESS:
/s/ John A. Dorman
Name: JOHN A. DORMAN
EMPLOYMENT AGREEMENT AMENDMENT
THIS AMENDMENT is made the 6th day of February, 1998,
by and among JOHN A. DORMAN, (hereinafter referred to as
"Dorman"), BROAD NATIONAL BANK, (hereinafter referred to as the
"Bank"), and BROAD NATIONAL BANCORPORATION, a corporation
organized under the laws of the State of New Jersey (hereinafter
referred to as the "Bancorp"). The Bank and Bancorp are
sometimes referred to herein collectively as the "Corporation" or
the "Corporations". In any instance where reference is made to
both the Bank and Bancorp or to the Corporation or Corporations,
unless the context clearly requires otherwise, conditions,
practices or actions referred to shall be identical or joint.
WITNESSETH:
WHEREAS, the parties hereto previously entered into an
Employment Agreement dated December 31, 1997 (the "Existing
Agreement").
WHEREAS, Corporation and Dorman desire to modify the
Existing Agreement in accordance with the terms of this
Amendment.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein and Dorman's continued employment by
the Bank, the parties hereby agree as follows:
1. Section 2.1 of the Existing Agreement is hereby
amended by deleting the first sentence of said Section in its
entirety and substituting the following new sentence in lieu
thereof:
The period of Dorman's employment under this Agreement
with the Bank and with Bancorp, respectively, shall
commence as of January 1, 1998 (the "Commencement
Date") and shall continue for a period of thirty-six
(36) full calendar months thereafter and any extension
thereafter, unless this Agreement is earlier terminated
in accordance with the terms hereof (the "Employment
Period").
2. Section 5.3 of the Existing Agreement is hereby
amended by deleting said Section in its entirety and substituting
the following new Section in lieu thereof:
5.3 Benefits Payable Upon Termination by Dorman.
In the event that Dorman terminates his employment with
the Corporations under Section 4.1 of this Agreement,
the Corporations shall pay to Dorman within thirty
(30) days of such termination as severance a lump sum
equal to the aggregate amount of (i) the future Base
Salary, at the monthly rate then in effect, Dorman
would have received if he continued in the employ of
the Corporations for the remainder of the <PAGE> Employment
Period then existing under this Agreement plus, if the
Employment Period shall not have been already extended
pursuant to the terms of Section 2.1 by reason of a
vote of shareholders, an additional twenty-four
(24) months and (ii) the incentive bonuses to which he
would have otherwise been entitled during such period
of time, based on the average incentive bonus received
by him during the then two most recent fiscal years of
the Corporations; provided, however, that in no event
shall the aggregate severance payment made pursuant to
this Section exceed an amount equal to the future Base
Salary, at the monthly rate then in effect, that Dorman
would have received if he continued in the employ of
the Corporations for thirty-six (36) months and the
incentive bonuses to which he would have otherwise been
entitled during such period of time.
3. Section 5.5 of the Existing Agreement is hereby
amended by deleting said Section in its entirety and substituting
the following new Section in lieu thereof:
5.5 Termination by the Corporations for Other
than Cause. If during the Employment Period the Bank
or Bancorp or both of them terminate Dorman's
employment other than for "cause" (as defined in
Section 4.1D) or other than for the reasons specified
in Sections 1.3, 1.4, 1.5 and 1.6 of this Agreement,
then in such event the Corporations shall pay Dorman,
or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the
case may be, as severance a lump sum equal to the
aggregate amount of the future Base Salary payments
Dorman would have received if he continued in the
employ of the Corporations for the remainder of the
then existing Employment Period of this Agreement plus
twenty-four (24) months at the highest rate of Base
Salary and bonus paid to Dorman at any time under this
Agreement or within two years prior to the date hereof;
provided, however, that in no event shall the aggregate
severance payment made pursuant to this Section exceed
an amount equal to the future Base Salary, at the
monthly rate then in effect, that Dorman would have
received if he continued in the employ of the
Corporations for thirty-six (36) months and the bonuses
to which he would have otherwise been entitled during
such period of time. Dorman shall not be required to
mitigate damages by seeking other employment and
payments required to be made hereunder shall not be
reduced by any other income which Dorman may receive or
by any setoffs or claims which may exist against Dorman
for any reason whatsoever.
4. Except as expressly amended hereby, all of the
terms, conditions and provisions of the Existing Agreement shall
remain unamended and in full force and effect in accordance with
its terms. The amendments provided herein shall be limited
precisely as drafted and shall not constitute an amendment of any
other term, condition or provision of the Existing Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Amendment as of the date first above written.
ATTEST: BROAD NATIONAL BANCORPORATION
By: /s/ Donald M. Karp
Name: Name: Donald M. Karp
Title: Title: Chairman & CEO
ATTEST: BROAD NATIONAL BANK
By: /s/ Donald M. Karp
Name: Name: Donald M. Karp
Title: Title: Chairman & CEO
By: /s/ John A. Dorman
JOHN A. DORMAN
CONSULTANT AGREEMENT
This Agreement, dated as of the 1st day of January,
1998, by and between STANLEY J. LESNIK, residing at 24 Springhill
Drive, in the Township of West Orange, County of Essex, and State
of New Jersey (herein referred to as "Lesnik") and BROAD NATIONAL
BANCORPORATION, a corporation organized under the laws of New
Jersey (herein referred to as "Bancorporation"), with principal
offices at 905 Broad Street, in the City of Newark, County of
Essex, and State of New Jersey.
WITNESSETH:
WHEREAS, Bancorporation is the owner of all of the
outstanding shares of Broad National Bank, a national banking
association organized under the laws of the United States of
America (the "Employing Subsidiary" or the "Bank"); and
WHEREAS, Lesnik has served as the Chairman of the Board
of Directors and the Chief Executive Officer of the Employing
Subsidiary and of Bancorporation; and
WHEREAS, the leadership and productivity of Lesnik have
significantly contributed to the growth and financial security of
Bancorporation and the Employing Subsidiary; and
WHEREAS, Bancorporation and the Employing Subsidiary
desire that Lesnik continue his activities on behalf of the
Employing Subsidiary as a consultant, officer and, if elected,
director, and Lesnik has agreed to continue to service
Bancorporation and the Employing Subsidiary pursuant to the terms
and conditions of this Employment Agreement.
NOW, THEREFORE, in consideration of mutual covenants
hereinafter set forth, the parties agree as follows:
1. Employment, Term and Compensation. Bancorporation
agrees to employ Lesnik and Lesnik hereby accepts and agrees to
be a consultant for Bancorporation and the Subsidiary for the
term, in the capacities, at the compensation and in accordance
with the terms and conditions of this and the following
paragraphs of this Agreement:
A. The term hereunder shall be a period of
three (3) years commencing January 1, 1998 and ending
December 31, 2000. In the event of a sale of all or
substantially all of the assets of Bancorporation or
the merger or consolidation of Bancorporation with any
other institution during the term of this Agreement,
following which the holders of a majority of the voting
stock in the surviving entity shall be persons other
than those who owned a majority of the voting stock of
Bancorporation immediately prior to such transaction,
then <PAGE> the term of this Agreement shall be extended to a
date ending three (3) years from the effective date of
any such sale or merger. Any such transaction is
referred to herein as a "Control Change".
B. Lesnik shall serve as a Special
Consultant to Bancorporation and the Employing
Subsidiary and shall be reasonably available to
management to provide to their respective officers and
key personnel the benefit of his experience and
judgment and to establish, produce and continue
important customer banking relationships.
C. Bancorporation or the Employing
Subsidiary shall compensate Lesnik for his services as
a Special Consultant to Bancorporation and the
Employing Subsidiary at the rate of One Hundred Ten
Thousand Dollars ($110,000) a year, payable monthly in
arrears during the initial term and any extended term
hereof.
D. Lesnik, if elected, shall serve as a
member of the Board of Directors and of the Executive
Committee of Bancorporation and the Employing
Subsidiary at no additional compensation.
E. In addition to all other compensation
payable to Lesnik during the term of this Agreement,
Bancorporation or the Employing Subsidiary shall pay to
Lesnik, or provide for his benefit such medical and
dental insurance benefits as Bancorporation and the
Employing Subsidiary provide to any other personnel of
Bancorporation or the Subsidiary.
F. The provisions of the Consultant
Agreement between Lesnik and Bancorporation dated as of
November 16, 1995 shall be superseded by this Agreement
as of January 1, 1998.
2. Termination of Employment. This Agreement shall
be terminated prior to the expiration of its term upon the date
of the first to occur of the following events:
A. A determination by Lesnik's physician
and by a physician designated by Bancorporation or the
Subsidiary that Lesnik shall not be able to
substantially perform the services required for his
consultantship as set forth in subparagraph B of
paragraph 1 because of a physical or mental illness or
injury and such disability prevents Lesnik from
substantially performing the services required for his
employment for a period of six consecutive months. If
the two physicians cannot agree, they shall select a
third physician and the determination of the majority
of them shall prevail. If the two physicians shall not
agree on the selection of a third physician within
thirty (30) days of their disagreement, the third
physician shall be such physician as shall be selected
by the Essex <PAGE> County Medical Society or by the Chief of
Medicine of the New Jersey College of Medicine and
Dentistry, in that order.
B. The death of Lesnik.
3. Compensation After Termination of Agreement.
A. If this Agreement shall be terminated
because of Lesnik's disability as determined in
accordance with subparagraph A of paragraph 2, or if
Lesnik shall determine to retire from his position as a
consultant, Bancorporation or the Subsidiary shall pay
to Lesnik, or to his legal representative, fifty
percent (50%) of the compensation as would otherwise be
payable to Lesnik for the remainder of the term of this
Agreement in accordance with subparagraph C of
paragraph 1, provided that the amount of such payment
shall be reduced by an amount equal to any insurance
benefits actually paid under any disability policy
maintained and paid for by Bancorporation or the
Subsidiary and provided, further, that if Lesnik shall
retire or become disabled following a Control Change,
then, in lieu of fifty percent (50%) of the
compensation which would otherwise be payable during
the remainder of the term hereof, he shall be entitled
to eighty-five (85%) of such compensation. If any
disability insurance payments actually made to Lesnik
exceed the amount of compensation provided herein, such
excess may be retained by Lesnik. Any retirement
payments made hereunder shall be paid during the
remainder of the term hereof, or until ninety (90) days
following Lesnik's death, whichever shall first occur.
B. If services of Lesnik shall terminate
prior to the expiration of the term hereof, because of
his death, Bancorporation or the Subsidiary shall pay
to his surviving widow, but if she is not surviving,
then to his legal representative, compensation at the
applicable rate set forth in subparagraph C of
paragraph 1 for a period of ninety (90) days after his
death.
C. So long as Lesnik shall be receiving
payments hereunder, Bancorporation shall continue to
provide medical insurance for Lesnik and his wife at
Bancorporation's cost in such amounts and on such terms
as are provided for other employees. Thereafter, if
under the terms of Bancorporation's or the Bank's
health insurance plan Lesnik and/or his wife are
eligible for inclusion, such insurance shall be made
available to them at their cost.
4. Additional Benefits. Bancorporation and the
Subsidiary recognize that it is essential to the satisfactory
performance by Lesnik of his duties and responsibilities that
Bancorporation and the Subsidiary, at their cost, provide him
with certain facilities and the <PAGE> Subsidiary or Bancorporation
incur certain expenses during the period of his employment as
follows:
A. An office commensurate with his
position, and a secretary, as he may require.
B. Use of a Bank vehicle.
C. Reimbursement for reasonable expenses
incurred by him for business travel and entertainment
any and other expenses relating to Bancorporation's or
the Subsidiary's businesses, as may be incurred by him.
5. Termination of Employment and/or Payments Without
Benefits.
A. In the event that during the term
hereof, Lesnik shall fail on a continuing basis to
perform consulting services hereunder substantially as
such services were performed during the two years prior
to the date hereof, the Board of Directors of
Bancorporation may notify Lesnik of such failure,
stating those areas in which the Board shall have
determined that Lesnik's performance shall have been
deficient. If within 60 days thereafter Lesnik shall
not have corrected the deficiency, the Board may place
Lesnik on retirement and he shall thereafter receive
only the amount provided herein for such retirement.
B. If at any time during the period that
Lesnik shall be receiving payments (including
retirement payments) under this Agreement he shall
engage in competition against the Bank and shall fail
to discontinue such competition within thirty (30) days
after written notice of demand by the Bank to
discontinue such competition, then Bancorporation shall
not be required to make any further payments under this
Agreement.
6. Automatic Extension. This Agreement shall be
extended automatically for one additional year on each December
31 during the term hereof or any extended term unless on or
before December 1 of any year during the term hereof or any
extended term, Bancorporation shall notify Lesnik that it has
elected not to extend such term or Lesnik shall have notify
Bancorporation that he desires that such term not be extended.
7. Entire Agreement. This writing shall constitute
the entire Agreement of the parties as to the employment and
compensation of Lesnik by Bancorporation and the Employing
Subsidiary and shall supersede any and all prior agreements and
understandings, whether they be oral or in writing.
<PAGE>
8. Severability. If any provision hereof shall be
determined by a court of competent jurisdiction to be
unenforceable, such determination shall not affect the validity
or enforceability of the remaining provisions hereof.
9. Governing Law. This Agreement shall be binding
upon the parties hereto, and all persons who succeed to their
rights and obligations such as their successors and permitted
assigns, and it shall be construed in accordance with the laws of
and in the Courts of New Jersey.
IN WITNESS WHEREOF, Bancorporation has caused this
Agreement to be signed and sealed by its duly authorized officers
and Lesnik has signed and sealed this Agreement.
ATTEST: BROAD NATIONAL BANCORPORATION
/s/ Fred S. Campo By: /s/ Donald M. Karp
Fred S. Campo Donald M. Karp, Chairman
Secretary and Chief Executive Officer
WITNESS:
/s/ Stanley J. Lesnik
______________________ Stanley J. Lesnik
CHANGE OF CONTROL AGREEMENT
THIS AGREEMENT dated and entered into effective as of
the ____ day of _______________, 19___, by and between Broad
National Bank, a national banking association (together with any
successor, the "Bank"), Broad National Bancorporation, a New
Jersey corporation (together with any successors, the
"Corporation") and ___________________________, residing at
_____________________, ______________________ (the "Executive").
WITNESSETH:
WHEREAS should the Bank or Corporation receive a
proposal from, or engage in discussions with, a third person,
whether solicited by the Bank or unsolicited, concerning a
possible business combination with or the acquisition of a
substantial portion of voting securities of either party, the
Boards of Directors of the Bank and the Corporation
(collectively, the "Board") have deemed it imperative that it and
the Bank be able to rely on the Executive to continue to serve in
his position, and that the Board and the Bank be able to receive
and rely upon the Executive's advice, if they request it, as to
the best interests of the Bank and its shareholders, without
concern that the Executive might be distracted by the personal
uncertainties and risks that such a proposal or discussions might
otherwise create; and
WHEREAS, the Bank desires to enhance executive morale
and its ability to retain existing management; and
WHEREAS, the Bank desires to reward the Executive for
valuable, dedicated service to the Bank should such service be
terminated under circumstances hereinafter described; and
WHEREAS, the Board therefore considers it in the best
interests of the Bank and its shareholders for the Bank to enter
into Change of Control Agreements, in form similar to this
Agreement, with certain key executive officers of the Bank; and
WHEREAS, the Executive is presently a key executive
with whom the Bank has been authorized by the Board to enter into
this Agreement;
NOW, THEREFORE, to assure the Bank of the Executive's
continued dedication and the availability of the Executive's
advice and counsel in the event of any such proposal, to induce
the Executive to remain in the employ of the Bank, and to reward
the Executive for valuable, dedicated service to the Bank should
such service be terminated under circumstances hereinafter
described, and for other good and valuable consideration, the
receipt and adequacy whereof each party acknowledges, the Bank
and the Executive agree as follows:
<PAGE>
1. OPERATION, EFFECTIVE DATE, AND TERM OF AGREEMENT
(a) This Agreement shall commence on the date hereof
and continue in effect through December 31, 1998: provided,
however, that commencing on January 1, 1998 and each succeeding
January 1 thereafter, the term of this Agreement shall be
extended automatically for one additional year unless not later
than September 30, of the preceding year the Bank shall have
given notice that it does not wish to extend this Agreement.
(b) This Agreement is effective and binding on both
parties as of the date hereof. Notwithstanding its present
effectiveness, the provisions of paragraphs 3 and 4 of this
Agreement shall become operative only when, as and if there has
been a "Change in Control of the Bank." For purposes of this
Agreement, a "Change in Control of the Bank" shall be deemed to
have occurred if (X) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), other than (i) Donald M. Karp
or any spouse, former spouse or lineal descendant of Donald M.
Karp ("Karp Family Member"), (ii) a trustee or other fiduciary
holding securities in trust for a Karp Family Member or under an
employee benefit plan of the Bank or (iii) a person engaging in a
transaction of the type described in clause (Z) of this
subsection but which does not constitute a change in control
under such clause, is or become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank or the Corporation
representing 25% or more of the combined voting power of the
Bank's or Corporation's then outstanding securities; or (Y)
during any period of two consecutive years during the term of
this Agreement, individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the
Bank to effect a transaction described in clauses (X) or (Z) of
this Subsection) whose election by the Board or nomination for
election by the Bank or Corporation shareholders was approved by
a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved ("Continuing Members"), cease for any
reason to constitute a majority thereof; or (Z) the shareholders
of the Bank or Corporation approve or, if no shareholder approval
is required or obtained, the Bank or the Corporation or a
subsidiary of either of them completes a merger, consolidation or
similar transaction of the Bank or Corporation or such a
subsidiary with or into any other corporation, or a binding share
exchange involving the Bank's or Corporation's securities, other
than any such transaction which would result in the voting
securities of the Bank or Corporation outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) at least 66 2/3% of the combined voting power
of the voting securities of the Bank, the Corporation or such
surviving entity outstanding immediately after such transaction,
or the shareholders of the Bank or Corporation approve a plan of
complete liquidation of the Bank or Corporation or an agreement
for the sale or disposition by the Bank or Corporation of all or
substantially all the Bank's or Corporation's assets.
<PAGE>
2. EMPLOYMENT OF EXECUTIVE
Nothing herein shall affect any right which the
Executive or the Bank may otherwise have to terminate the
Executive's employment by the Bank at any time in any lawful
manner, subject always to the Bank's providing to the Executive
the payments and benefits specified in paragraphs 3 and 4 of this
Agreement to the extent hereinbelow provided.
In the event any person commences a tender or exchange
offer, circulates a proxy statement to the Bank's or
Corporation's shareholders or takes other steps designed to
effect a Change in Control of the Bank as defined in paragraph 1
of this Agreement, the Executive agrees that he will not
voluntarily leave the employ of the Bank, and will continue to
perform his regular duties and to render the services specified
in the recitals of this Agreement, until such person has
abandoned or terminated his efforts to effect a Change in Control
of the Bank or until a Change in Control of the Bank has
occurred. Should the Executive voluntarily terminate his
employment before any such effort to effect a Change in Control
of the Bank has commenced, or after any such effort has been
abandoned or terminated without effecting a Change in Control of
the Bank and no such effort is then in process, this Agreement
shall lapse and be of no further force or effect.
3. TERMINATION FOLLOWING CHANGE IN CONTROL
(a) If any of the events described in paragraph 1
hereof constituting a Change in Control of the Bank shall have
occurred, the Executive shall be entitled to the benefits
provided in paragraph 4 hereof upon the subsequent termination of
his employment within the applicable period set forth in
paragraph 4 hereof following such Change in Control of the Bank
unless such termination is (i) due to the Executive's death or
Retirement; or (ii) by the Bank by reason of the Executive's
Disability or for Cause; or (iii) by the Executive other than for
Good Reason.
(b) If following a Change in Control of the Bank, the
Executive's employment is terminated by reason of his death or
Disability, the Executive shall be entitled to death or long-term
disability benefits, as the case may be, from the Bank no less
favorable than those benefits to which he would have been
entitled had the death or termination for Disability occurred
during the six-month period prior to the Change in Control of the
Bank. If prior to any such termination for Disability, the
Executive fails to perform his duties as a result of incapacity
due to physical or mental illness, he shall continue to receive
his Base Salary less any benefits as may be available to him
under the Bank's disability plans until his employment is
terminated for Disability.
(c) If the Executive's employment shall be terminated
by the Bank for Cause or by the Executive other than for Good
Reason, the Bank shall pay to the Executive his full Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, and the Bank shall have no
further obligations to the Executive under this Agreement.
(d) For purposes of this Agreement:
<PAGE>
(i) "Disability" shall mean the Executive's
absence, due to physical or mental illness or injury, from his or
her duties with the Bank on a full time basis or his or her
inability to substantially perform the services required for his
or her employment for a period of six (6) consecutive months, or
shorter periods aggregating one hundred eighty (180) days within
any consecutive twelve (12) month period, and continued inability
to perform or failure to perform duties on a full-time basis
after thirty (30) days written notice of a proposed determination
of disability has been given by the Bank to the Executive.
(ii) "Retirement" shall mean that the Executive
shall have reached age 65 and shall voluntarily retire under the
Bank's retirement plans applicable to such Executive or any
earlier actual voluntary retirement by the Executive from his
employment with the Bank.
(iii) "Cause" shall mean:
(A) the conviction of the Executive of a
felony, or the willful commission by the Executive of a criminal
or other act that the judgment of the Board causes or will
probably cause substantial economic damage to the Bank or
substantial injury to the business reputation of the Bank;
(B) the commission by the Executive of an
act of fraud in the performance of such Executive's duties on
behalf of the Bank;
(C) the continuing willful failure of the
Executive to perform the duties of such Executive to the Bank
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable
detail) and a reasonable opportunity to be heard and cure such
failure are given to the Executive by the compensation committee
of the Board; or
(D) the order of a federal or state bank
regulatory agency or a court of competent jurisdiction requiring
the termination of the Executive's employment.
For purposes of this subparagraph (d)(iii), no act, or
failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission
was in the best interests of the Bank.
(iv) "Good Reason" shall mean:
(A) The assignment by the Bank to the
Executive of duties without the Executive's express written
consent, which (i) are materially different or require travel
significantly more time-consuming or extensive than the
Executive's duties or business travel obligations immediately
prior to the Change in Control of the Bank, or (ii) result, in
either a significant reduction in the Executive's authority and
responsibility as a senior corporate executive <PAGE> of the Bank when
compared to the highest level of authority and responsibility
assigned to the Executive at any time during the six (6) month
period prior to the Change in Control of the Bank, or, (iii)
without the Executive's express written consent, the removal of
the Executive from, or any failure to reappoint or reelect the
Executive to, the highest title held since the date six (6)
months before the Change in Control of the Bank, except in
connection with a termination of the Executive's employment by
the Bank for Cause, or by reason of the Executive's death,
Disability or Retirement;
(B) A reduction by the Bank of the
Executive's Base Salary, or the failure to grant increases in the
Executive's Base Salary on a basis at least substantially
comparable to those granted to other executives of the Bank of
comparable title, salary and performance ratings made in good
faith;
(C) The relocation of the Bank's principal
executive offices to a location outside the State of New Jersey,
or the Bank's requiring the Executive to be based anywhere other
than the Bank's principal executive offices except for required
travel on the Bank's business to an extent substantially
consistent with the Executive's business travel obligations
immediately prior to the Change in Control of the Bank, or in the
event of any relocation of the Executive with the Executive's
express written consent, the failure by the Bank to pay (or
reimburse the Executive for) all reasonable moving expenses by
the Executive relating to a change of principal residence in
connection with such relocation and to indemnify the Executive
against any loss realized in the sale of the Executive's
principal residence in connection with any such change of
residence, all to the effect that the Executive shall incur no
loss upon such sale on an after tax basis;
(D) The failure by the Bank to continue to
provide the Executive with substantially the same welfare
benefits (which for purposes of this Agreement shall mean
benefits under all welfare plans as that term is defined in
Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended), and perquisites, including participation on a
comparable basis in the Bank's retirement plans, stock options
plan and other plans in which executives of the Bank of
comparable title and salary participate and as were provided to
the Executive immediately prior to such Change in Control of the
Bank, or with a package of welfare benefits and perquisites,
that, though one or more of such benefits or perquisites may vary
from those, including participation on a comparable basis in the
Bank's retirement plan and stock option plan is substantially
comparable in all material respects to such welfare benefits and
perquisites, including participation on a comparable basis in the
Bank's retirement plan and stock option plan taken as a whole; or
(E) The failure of the Bank to obtain the
express written assumption of and agreement to perform this
Agreement by any successor as contemplated in subparagraph 5(d)
hereof.
<PAGE>
(v) "Dispute" shall mean (i) in the case of
termination of employment of an Executive with the Bank or a
Subsidiary by the Bank for Disability or Cause, that the
Executive challenges the existence of Disability or Cause and
(ii) in the case of termination of employment of an Executive
with the Bank by the Executive for Good Reason, that the Bank
challenges the existence of Good Reason.
(vi) "Base Salary" shall mean the amount
determined by multiplying the Executive's highest semi-monthly or
other periodic rate of base pay paid to the Executive during the
twelve-month period immediately prior to the giving of the Notice
of Termination by the number of pay periods per year. The
following items are not part of base pay, as used herein:
reimbursed expenses, any amount paid on account of overtime or
holiday work, payment on account of insurance premiums or other
contributions made to other welfare or benefit plans, any year-
end or other bonuses, commissions and gifts.
(vii) "Incentive Compensation" shall mean the
cash equal to the amount of the cash award that would have been
paid to the Executive under cash bonus plans of the Bank for the
year which includes the Date of Termination, such amount to be
determined in good faith by taking into account the amounts paid
to the other executives with comparable titles, salaries and
performance ratings.
(e) Any purported termination of employment by the
Bank by reason of the Executive's Disability or for Cause, or by
the Executive for Good Reason shall be communicated by written
Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice
given by the Executive or the Bank, as the case may be, which
shall indicate the specific basis for termination and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for determination of any payments under this
Agreement. An Executive shall not be entitled to give a Notice
of Termination that the Executive is terminating his employment
with the Bank for Good Reason more than six (6) months following
the occurrence of the event alleged to constitute Good Reason.
(f) For purposes of this Agreement, "Date of
Termination" shall mean the date specified in the Notice of
Termination, which shall not be more than ninety (90) days after
such Notice of Termination is given, as such date may be modified
pursuant to the following two sentences. If within thirty (30)
days after any Notice of Termination is given, the party who
receives such Notice of Termination notifies the other party that
a Dispute (as heretofore defined) exists, the Date of Termination
shall be the date on which the Dispute is finally determined,
either by mutual written agreement of the parties, or by a final
judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal
having been perfected); provided that the Date of Termination
shall be extended by a notice of Dispute only if such notice is
given in good faith and the party giving such notice pursues the
resolution of such Dispute with reasonable diligence and provided
further that pending the resolution of any such Dispute, the Bank
shall continue to pay the Executive the same Base Salary and to
provide the Executive with the same or substantially comparable
welfare benefits and perquisites, including <PAGE> participation in the
Bank's retirement plan, to the extent then so available at the
date of such determination, and stock option plan that the
Executive was paid and provided immediately prior to the Change
in Control of the Bank. Should a Dispute ultimately be
determined in favor of the Bank then all sums paid by the Bank to
the Executive from the date of termination specified in the
Notice of Termination until final resolution of the Dispute
pursuant to this paragraph shall be repaid promptly by the
Executive to the Bank, with interest at 70% of the prime rate
charged from time to time by the Bank, all stock options granted
to the Executive during such period shall be cancelled or
returned to the Bank, and no service as an employee shall be
credited to the Executive for such period for pension purposes.
The Executive shall not be obligated to pay back the welfare
benefits and perquisites for such period unless the final
judgment, order or decree of a court or other body resolving the
Dispute determines that the Executive acted in bad faith in
giving a notice of Dispute. Should a Dispute ultimately be
determined in favor of the Executive, then the Executive shall be
entitled to retain all sums paid to the Executive under this
subparagraph (f) pending resolution of the Dispute and shall be
entitled to receive, in addition, the payments and other benefits
provided for in paragraph 4 hereof to the extent not previously
paid hereunder.
4. PAYMENTS UPON TERMINATION
If within three years after a Change in Control of the
Bank, the Bank shall terminate the Executive's employment other
than by reason of the Executive's death, Disability, Retirement
or for Cause or if the Executive shall terminate his employment
for Good Reason then,
(a) the Bank will pay to the Executive as compensation
for services rendered, (subject to any applicable payroll or
other taxes required to be withheld) commencing on the first day
of the month following the month of termination, one-twelfth
(1/12) of Base Salary of the Executive payable once monthly for a
period of twelve months.
(b) the Executive will be entitled to receive "Special
Retirement Benefits" as provided herein, so that the total
retirement benefits the Executive receives from the Bank will
approximate the total retirement benefits the Executive would
have received under all retirement plans (which shall not include
severance plans) in which the Executive participates were the
Executive fully vested under such retirement plans and had the
Executive continued in the employ of the Bank for twelve months
following the Date of Termination or until his Retirement, if
earlier (provided that such additional period shall be inclusive
of and shall not be in addition to any period of service credited
under any severance plan of the Bank). The benefits specified in
this subparagraph will include all ancillary benefits, such as
early retirement and survivor rights and benefits available at
retirement. The amount payable to the Executive or his
beneficiaries under this subparagraph shall equal the excess of
(1) the benefits that would be paid to the Executive of his
beneficiaries, under all retirement plans of the Bank in which
the Executive participates if (A) the Executive were fully vested
under such plans, (B) the twelve month period (or the period
until his Retirement, if less) following the Date of Termination
were added to his credited service under <PAGE> such plans, (C) such
plans were not amended after the Change in Control of the Bank in
a way that adversely effects the Executive, and (D) the
Executive's highest average annual compensation as defined under
such retirement plans was calculated as if the Executive had been
employed by the Bank for a twelve month period (or the period
until his Retirement, if earlier) following the Date of
Termination and had the Executive's salary and bonuses included
in compensation for purposes of such retirement plans during such
period been equal to the Executive's Base Salary and Incentive
Compensation (if included in the relevant plan formula for
determining benefits); over (2) the benefits that are payable to
the Executive or his beneficiaries under all retirement plans in
which the Executive participates. These Special Retirement
Benefits are provided on an unfunded basis, are not intended to
meet the qualification requirements of Section 401 of the
Internal Revenue Code of 1986, as amended, and shall be payable
solely from the general assets of the Bank. These Special
Retirement Benefits shall be payable to the times and in the
manner provided in the applicable retirement plans.
(c) In the event that any payment or benefit received
or to be received by the Executive in connection with a Change in
Control of the Bank or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Bank, any
person whose actions result in a Change in Control of the Bank or
any person affiliated with the Bank or such person) (collectively
with the payments and benefits hereunder, "Total Payments") would
not be deductible (in whole or part) as a result of section 280G
of the Internal Revenue Code of 1986, as amended and the
regulations thereunder (the "Code") by the Bank, an affiliate or
other person making such payment or providing such benefit, the
payments and benefits hereunder shall be reduced until no portion
of the Total Payments is not deductible, or the payments and
benefits hereunder are reduced to zero. At the Bank's sole
discretion, such reduction may be effected by extending the date
the payment would otherwise be due by not more than one year or
by decreasing the amount of the payment or benefit otherwise due
and payable, provided, however, if such decrease is necessary,
the payment under subsection (a) shall first be decreased, and
thereafter, if necessary, the benefits under subsection (b) shall
be decreased. For purposes of this limitation (i) no portion of
the Total Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing prior to the
date of payment under subsection (a) shall be taken into account,
(ii) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel selected by the Executive
and acceptable to the Bank's independent auditors, is not likely
to constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code, (iii) the payments and benefits hereunder
shall be reduced only to the extent necessary so that, in the
opinion of the tax counsel referred to in clause (ii) (subject to
the reasonable concurrence of the Bank's independent auditors),
the Total Payments (other than those referred to in clauses (i)
or (ii)) in their entirety are likely to constitute reasonable
compensation for services actually rendered within the meaning of
section 270G(b)(4) of the Code or are otherwise not likely to be
subject to disallowance as deductions; and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in
the Total Payments shall be determined by the Bank's independent
auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
<PAGE>
(d) In the event that any payment or benefit received
or to be received by the Executive in connection with a Change in
Control of the Bank or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Bank, any
person whose actions result in a Change in Control of the Bank or
any person affiliated with the Bank or such person) (collectively
with the payments and benefits hereunder, "Total Payments") would
not be deductible (in whole or in part) as a result of Section
162(m) of the Code, or any combination of Section 162(m) and
Section 280G of the Code, by the Bank, an affiliate or other
person making such payment or providing such benefit, the
payments and benefits hereunder shall be reduced until no portion
of the Total Payments is not deductible, or the payments and
benefits hereunder are reduced to zero. At the Bank's sole
discretion, such reduction may be effected by extending the date
the payment would otherwise be due by not more than one year or
by decreasing the amount of the payment or benefit otherwise due
and payable provided, however, if such decrease is necessary, the
payment under subsection (a) shall first be decreased, and
thereafter, if necessary, the benefits under subsection (b) shall
be decreased. For purposes of this limitation (i) no portion of
the Total Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing prior to the
date of payment under subsection (a) shall be taken into account,
and (ii) the payments and benefits hereunder shall be reduced
only to the extent necessary so that, in the opinion of tax
counsel selected by the Executive and acceptable to the Bank's
independent auditors, the Total Payments (other than those
referred to in clause (i)) in their entirety are likely to
constitute performance-based compensation or remuneration payable
on a commission basis within the meaning of Section 162(m)(4) of
the Code, do not exceed the $1,000,000 limitation of Section
162(m)(1) of the Code, or are otherwise not likely to be subject
to disallowance as deductions.
5. GENERAL
(a) The Executive shall retain in confidence any
proprietary or other confidential information known to him
concerning the Bank and its business (including the Bank's
subsidiaries and their businesses) so long as such information is
not publicly disclosed and disclosure is not required by an order
of any governmental body or court.
(b) If litigation or other proceedings shall be
brought to enforce or interpret any provision contained herein or
in connection with any tax audit to the extent attributable to
the application of Section 4999 of the Code to any payment or
benefit provided hereunder, the Bank shall indemnify the
Executive for his reasonable attorney's fees and disbursements
incurred in connection therewith and pay prejudgment interest on
any money judgment obtained by the Executive calculated at the
Bank's prime rate of interest in effect from time to time from
the date that payment should have been made under the Agreement;
provided that if the Executive initiated the proceedings, the
Executive shall not have been found by the court or other fact
finder to have acted in bad faith in initiating such litigation
or other proceeding, which finding must be final without further
rights of appeal.
<PAGE>
(c) The Bank's obligation to pay the Executive the
compensation and to make the arrangements provided herein shall
be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff,
counterclaim, recoupment, defense or other right which the Bank
may have against the Executive or anyone else. All amounts
payable by the Bank hereunder shall be paid without notice or
demand. Except as expressly provided herein, the Bank waives all
rights which it may now have or may hereafter have conferred upon
it, by statute or otherwise, to terminate, cancel or rescind this
Agreement in whole or in part. Except as provided in paragraph
3(f) herein, each and every payment made hereunder by the Bank
shall be final and the Bank will not seek to recover for any
reason all or any part of such payment from the Executive or any
person entitled thereto. The Executive shall not be required to
mitigate the amount of any payment or other benefit provided for
in this Agreement by seeking other employment or otherwise.
(d) The Bank will in good faith attempt to require any
successor (whether direct or indirect, by purchase, merger,
consolidated or otherwise) to all or substantially all of the
business and/or assets of the Bank, by written agreement in form
and substance satisfactory to the Executive, to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Bank would be required to perform it if no
such succession had taken place. If any such successor shall not
so assume the Bank's obligations hereunder, and such successor is
not bound hereby by operation of law, the Bank will continue to
be liable for any payments to which the Executive may be
entitled. If the Bank shall dissolve within three years
following a change in control of the Bank, prior to dissolution
the Bank shall set aside sufficient funds to pay any such
liability or potential liability which was not paid prior to
dissolution.
As used in this Agreement "Bank" shall mean the Bank as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the agreement
provided for in this paragraph 5 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of
law.
(e) This Agreement shall inure to the benefit of, and
be enforceable by, the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die
while any amounts would still be payable to the Executive
hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee or
other designee or, if there be no such designee, to the
Executive's estate. The obligations of the Executive hereunder
shall not be assignable by the Executive.
(f) Nothing in this Agreement shall be deemed to
entitle the Executive to continued employment with the Bank and
the rights of the Bank to terminate the employment of the
Executive shall continue as fully as though this Agreement was
not in effect.
<PAGE>
6. NOTICE
For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
_______________________
_______________________
_______________________
If to the Bank:
Broad National Bank
905 Broad Street
Newark, New Jersey 07102
Attn: Donald M. Karp
Chairman and Chief
Executive Officer
or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
7. MISCELLANEOUS
No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is
agreed to in writing, signed by the Executive and such officer as
may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No assurances or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
However, this Agreement is in addition to, and not in lieu of,
any other plan providing for payments to or benefits for the
Executive or any agreement now existing, or which hereafter may
be entered into, between the Bank and the Executive. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New
Jersey.
8. FINANCING
All amounts due and benefits provided under this
Agreement shall constitute general obligations of the Bank in
accordance with the terms of this Agreement. The Executive <PAGE> shall
have only an unsecured right to payment thereof out of the
general assets of the Bank. Notwithstanding the foregoing, the
Bank may, by agreement with one or more trustees to be selected
by the Bank, create a trust on such terms as the Bank shall
determine to make payments to the Executive in accordance with
the terms of this Agreement.
9. VALIDITY
The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect. Any provision in this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating or affecting
the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10. PROHIBITION OF PAYMENTS BY BANK REGULATORY AUTHORITIES
Notwithstanding the foregoing, the Bank shall not be
obligated to make any payment to the Executive under this
Agreement, if the payment would violate Section 18(k) of the
Federal Deposit Insurance Act or the regulations of the Federal
Deposit Insurance Corporation (the "FDIC") thereunder; provided,
however, that the Bank covenants to the Executive to take all
reasonable steps to obtain the approval of the FDIC and/or other
bank regulatory authorities to make payments to the Executive
hereunder including obtaining the approval of the FDIC and/or
other bank regulatory authorities of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date set forth above.
BROAD NATIONAL BANK EXECUTIVE
BY: __________________________ ____________________________
__________________________
BROAD NATIONAL BANCORPORATION
BY: ______________________________
<PAGE>
Schedule of Executives Covered by the Foregoing Form of Change of
Control Agreement
1. James Boyle
2. Fred S. Campo
3. Peter J. Kenny
4. Fred Perry, Jr.
5. Ellen K. Rogoff
6. Ronald Schwarz
JUNIOR SUBORDINATED INDENTURE
Between
BROAD NATIONAL BANCORPORATION
and
BANKERS TRUST COMPANY
(as Trustee)
dated as of
June 30, 1997
<PAGE>
BNB CAPITAL TRUST
Certain Sections of this Junior Subordinated Indenture relating
to Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Junior Subordinated
Act Section Indenture
Section
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . .6.9
(a)(2) . . . . . . . . . . . . . . . . . . . . .6.9
(a)(3) . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . . . .6.9
(b) . . . . . . . . . . . . . . . . . . . . .6.8, 6.10
Section 311(a) . . . . . . . . . . . . . . . . . . . . 6.13
(b) . . . . . . . . . . . . . . . . . . . . . . . 6.13
(b)(2) . . . . . . . . . . . . . . . . . . . 7.3(a)
Section 312(a) . . . . . . . . . . . . . . . . .7.1, 7.2(a)
(b) . . . . . . . . . . . . . . . . . . . . . . 7.2(b)
(c) . . . . . . . . . . . . . . . . . . . . . . 7.2(c)
Section 313(a) . . . . . . . . . . . . . . . . . . . 7.3(a)
(a)(4) . . . . . . . . . . . . . . . . . . . 7.3(a)
(b) . . . . . . . . . . . . . . . . . . . . . . 7.3(b)
(c) . . . . . . . . . . . . . . . . . . . . . . 7.3(a)
(d) . . . . . . . . . . . . . . . . . . . . . . 7.3(c)
Section 314(a) . . . . . . . . . . . . . . . . . . . . .7.4
(b) . . . . . . . . . . . . . . . . . . . . . . . .7.4
(c)(1) . . . . . . . . . . . . . . . . . . . . .1.2
(c)(2) . . . . . . . . . . . . . . . . . . . . .1.2
(c)(3) . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . .1.2
Section 315(a) . . . . . . . . . . . . . . . . . . . 6.1(a)
(b) . . . . . . . . . . . . . . . . . . . . . 6.2, 7.3
(c) . . . . . . . . . . . . . . . . . . . . . . 6.1(b)
(d) . . . . . . . . . . . . . . . . . . . . . . 6.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . 5.14
Section 316(a) . . . . . . . . . . . . . . . . . . . . 5.12
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . 5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . 5.13
(a)(2) . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . .5.8
(c) . . . . . . . . . . . . . . . . . . . . . . 1.4(f)
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . .5.3
(a)(2) . . . . . . . . . . . . . . . . . . . . .5.4
(b) . . . . . . . . . . . . . . . . . . . . . . . 10.3
Section 318(a) . . . . . . . . . . . . . . . . . . . . .1.7
Note: This reconciliation and tie shall not, for any
purpose, be deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION. . . . .1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . .1
SECTION 1.2. Compliance Certificate and Opinions. . . . .8
SECTION 1.3. Forms of Documents Delivered to Trustee. . .9
SECTION 1.4. Acts of Holders. . . . . . . . . . . . . . .9
SECTION 1.5. Notices, Etc. to Trustee and Company . . . 11
SECTION 1.6. Notice to Holders; Waiver. . . . . . . . . 11
SECTION 1.7. Conflict with Trust Indenture Act. . . . . 11
SECTION 1.8. Effect of Headings and Table of Contents . 11
SECTION 1.9. Successors and Assigns . . . . . . . . . . 11
SECTION 1.10. Separability Clause. . . . . . . . . . . . 12
SECTION 1.11. Benefits of Indenture. . . . . . . . . . . 12
SECTION 1.12. Governing Law. . . . . . . . . . . . . . . 12
SECTION 1.13. Non-Business Days. . . . . . . . . . . . . 12
ARTICLE II
SECURITY FORMS . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1. Forms Generally. . . . . . . . . . . . . . 12
SECTION 2.2. Form of Face of Security . . . . . . . . . 13
SECTION 2.3. Form of Reverse of Security. . . . . . . . 16
SECTION 2.4. Additional Provisions Required in Global
Security . . . . . . . . . . . . . . . . . 18
SECTION 2.5. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . 18
ARTICLE III
THE SECURITIES. . . . . . . . . . . . . . . . . . . 18
SECTION 3.1. Title and Terms. . . . . . . . . . . . . . 18
SECTION 3.2. Denominations. . . . . . . . . . . . . . . 19
SECTION 3.3. Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . . . . 19
SECTION 3.4. Temporary Securities . . . . . . . . . . . 20
SECTION 3.5. Global Securities. . . . . . . . . . . . . 20
SECTION 3.6. Registration, Transfer and Exchange
Generally; Certain Transfers and
Exchanges; Securities Act Legends. . . . . 21
SECTION 3.7. Mutilated, Lost and Stolen Securities. . . 22
SECTION 3.8. Payment of Interest and Additional
Interest; Interest Rights Preserved. . . . 23
SECTION 3.9. Persons Deemed Owners. . . . . . . . . . . 24
SECTION 3.10. Cancellation . . . . . . . . . . . . . . . 24
SECTION 3.11. Computation of Interest. . . . . . . . . . 24
SECTION 3.12. Deferrals of Interest Payment Dates. . . . 24
SECTION 3.13. Right of Set-Off . . . . . . . . . . . . . 25
SECTION 3.14. Agreed Tax Treatment . . . . . . . . . . . 25
SECTION 3.15. CUSIP Numbers. . . . . . . . . . . . . . . 26
ARTICLE IV
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . 26
SECTION 4.1. Satisfaction and Discharge of Indenture. . 26
SECTION 4.2. Application of Trust Money . . . . . . . . 27
ARTICLE V
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.1. Events of Default. . . . . . . . . . . . . 27
SECTION 5.2. Acceleration of Maturity, Rescission and
Annulment. . . . . . . . . . . . . . . . . 27
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . 28
SECTION 5.4. Trustee May File Proofs of Claim . . . . . 29
SECTION 5.5. Trustee May Enforce Claim Without
Possession of Securities . . . . . . . . . 29
SECTION 5.6. Application of Money Collected . . . . . . 30
SECTION 5.7. Limitation on Suits. . . . . . . . . . . . 30
SECTION 5.8. Unconditional Right of Holders to Receive
Principal, Premium and Interest; Direct
Action by Holders of Preferred Securities. 30
SECTION 5.9. Restoration of Rights and Remedies . . . . 31
SECTION 5.10. Rights and Remedies Cumulative . . . . . . 31
SECTION 5.11. Delay or Omission Not Waiver . . . . . . . 31
SECTION 5.12. Control by Holders . . . . . . . . . . . . 31
SECTION 5.13. Waiver of Past Defaults. . . . . . . . . . 32
SECTION 5.14. Undertaking for Costs. . . . . . . . . . . 32
SECTION 5.15. Waiver of Usury, Stay or Extension Laws. . 32
ARTICLE VI
THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.1. Certain Duties and Responsibilities. . . . 33
SECTION 6.2. Notice of Defaults . . . . . . . . . . . . 33
SECTION 6.3. Certain Rights of Trustee. . . . . . . . . 34
SECTION 6.4. Not Responsible for Recitals or Issuance
of Securities. . . . . . . . . . . . . . . 34
SECTION 6.5. May Hold Securities. . . . . . . . . . . . 34
SECTION 6.6. Money Held in Trust. . . . . . . . . . . . 35
SECTION 6.7. Compensation and Reimbursement . . . . . . 35
SECTION 6.8. Disqualification; Conflicting Interests. . 35
SECTION 6.9. Corporate Trustee Required; Eligibility. . 36
SECTION 6.10. Resignation and Removal; Appointment of
Successor. . . . . . . . . . . . . . . . . 36
SECTION 6.11. Acceptance of Appointment by Successor . . 37
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . 37
SECTION 6.13. Preferential Collection of Claims Against
Company. . . . . . . . . . . . . . . . . . 38
SECTION 6.14. Appointment of Authenticating Agent. . . . 38
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT AND COMPANY . . . . . . . . . . . 39
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders . . . . . . . . . . . 39
SECTION 7.2. Preservation of Information, Communications
to Holders . . . . . . . . . . . . . . . . 39
SECTION 7.3. Reports by Trustee and Paying Agent. . . . 40
SECTION 7.4. Reports by Company . . . . . . . . . . . . 40
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . 40
SECTION 8.1. Company May Consolidate, Etc., Only on
Certain Terms. . . . . . . . . . . . . . . 40
SECTION 8.2. Successor Company Substituted. . . . . . . 41
ARTICLE IX
SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . 41
SECTION 9.1. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . . 41
SECTION 9.2. Supplemental Indentures with Consent
of Holders . . . . . . . . . . . . . . . . 42
SECTION 9.3. Execution of Supplemental Indentures . . . 43
SECTION 9.4. Effect of Supplemental Indentures. . . . . 43
SECTION 9.5. Conformity with Trust Indenture Act. . . . 43
SECTION 9.6. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . 43
ARTICLE X
COVENANTS . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 10.1. Payment of Principal, Premium and Interest 43
SECTION 10.2. Maintenance of Office or Agency. . . . . . 43
SECTION 10.3. Money for Security Payments to be Held in
Trust. . . . . . . . . . . . . . . . . . . 44
SECTION 10.4. Statement as to Compliance . . . . . . . . 45
SECTION 10.5. Waiver of Certain Covenants. . . . . . . . 45
SECTION 10.6. Additional Sums. . . . . . . . . . . . . . 45
SECTION 10.7. Additional Covenants . . . . . . . . . . . 46
SECTION 10.8. Original Issue Discount. . . . . . . . . . 46
ARTICLE IX
REDEMPTION OF SECURITIES . . . . . . . . . . . . . . 47
SECTION 11.1. Applicability of This Article. . . . . . . 47
SECTION 11.2. Election to Redeem; Notice to Trustee. . . 47
SECTION 11.3. Selection of Securities to be Redeemed . . 47
SECTION 11.4. Notice of Redemption . . . . . . . . . . . 47
SECTION 11.5. Deposit of Redemption Price. . . . . . . . 48
SECTION 11.6. Payment of Securities Called for Redemption48
SECTION 11.7. Right of Redemption of Securities Initially
Issued to the Issuer Trust . . . . . . . . 48
ARTICLE XII
SINKING FUNDS . . . . . . . . . . . . . . . . . . . 49
ARTICLE XIII
SUBORDINATION OF SECURITIES. . . . . . . . . . . . 49
SECTION 13.1. Securities Subordinate to Senior
Indebtedness . . . . . . . . . . . . . . . 49
SECTION 13.2. No Payment When Senior Indebtedness in
Default, Payment Over of Proceeds Upon
Dissolution, Etc.. . . . . . . . . . . . . 49
SECTION 13.3. Payment Permitted If No Default. . . . . . 50
SECTION 13.4. Subrogation to Rights of Holders of Senior
Indebtedness . . . . . . . . . . . . . . . 50
SECTION 13.5. Provisions Solely to Define Relative
Rights . . . . . . . . . . . . . . . . . . 51
SECTION 13.6. Trustee to Effectuate Subordination. . . . 51
SECTION 13.7. No Waiver of Subordination Provisions. . . 51
SECTION 13.8. Notice to Trustee. . . . . . . . . . . . . 52
SECTION 13.9. Reliance on Judicial Order or Certificate
of Liquidating Agent . . . . . . . . . . . 52
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior
Indebtedness . . . . . . . . . . . . . . . 52
SECTION 13.11. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights . . . . . . . . . . . . . . . . . . 52
SECTION 13.12. Article Applicable to Paying Agents. . . . 53
SECTION 13.13. Certain Conversions or Exchanges Deemed
Payment. . . . . . . . . . . . . . . . . . 53
<PAGE>
JUNIOR SUBORDINATED INDENTURE
THIS JUNIOR SUBORDINATED INDENTURE, dated as of June 30,
1997, between BROAD NATIONAL BANCORPORATION, a New Jersey
corporation (the "Company"), having its principal office at 905
Broad Street, Newark, New Jersey 07102, and BANKERS TRUST
COMPANY, as Trustee, having its principal office at Four Albany
Street, 4th Floor, New York, New York 10006 (the "Trustee ") -
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance of its
unsecured junior subordinated debentures due June 30, 2027
(hereinafter called the "Securities") of substantially the tenor
hereinafter provided, including Securities issued to evidence
loans made to the Company from the proceeds from the issuance
from time to time by BNB Capital Trust, a Delaware business trust
(the "Issuer Trust") of undivided preferred beneficial interests
in the assets of such Issuer Trust (the "Preferred Securities")
and common undivided interests in the assets of such Issuer Trust
(the "Common Securities" and, collectively with the Preferred
Securities, the "Trust Securities"), and to provide the terms and
conditions upon which the Securities are to be authenticated,
issued and delivered; and
WHEREAS, all things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been
done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders (as such term is defined in Section
1.1 hereof) thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the
Securities or of any series thereof, and intending to be legally
bound hereby, 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 that are defined in the
Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(3) The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation";
(4) All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles as in effect at the time of
computation;
(5) Whenever the context may require, any gender shall be
deemed to include the other;
(6) 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
<PAGE>
(7) The words "hereby", "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.
"25% Capital Limitation" means the limitation imposed by the
Federal Reserve that the proceeds of certain qualifying
securities like the Trust Securities will qualify as Tier I
capital of the issuer up to an amount not to exceed 25% of the
Issuer's Tier I capital, or any subsequent limitation adopted by
the Federal Reserve.
"Act" when used with respect to any Holder has the meaning
specified in Section 1.4.
"Additional Interest" means the interest, if any, that shall
accrue on any interest on the Securities of any series the
payment of which has not been made on the applicable Interest
Payment Date and which shall accrue at the rate per annum
specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means any additional taxes, duties and
other governmental charges to which the Issuer Trust has become
subject from time to time as a result of a Tax Event.
"Administrator" means, in respect of the Issuer Trust, each
Person appointed in accordance with the Trust Agreement, solely
in such Person's capacity as Administrator of the Issuer Trust
and not in such Person's individual capacity, or any successor
Administrator appointed as therein provided.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.
For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer
or transaction involving a Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such
Global Security, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 6.14 to act on behalf of the Trustee
to authenticate Securities.
"Board of Directors" means the board of directors of the
Company or the Executive Committee of the board of directors of
the Company (or any other committee of the board of directors of
the Company performing similar functions) or, for purposes of
this Indenture, a committee designated by the board of directors
of the Company (or such committee), comprised of two or more
members of the board of directors of the Company or officers of
the Company, or both.
"Board Resolution" means a copy of a resolution certified by
the Secretary or any Assistant Secretary of the Company to have
been duly adopted by the Board of Directors, or such committee of
the Board of Directors or officers of the Company to which
authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or
Sunday, (ii) a day on which banking institutions in the State of
New Jersey or the City of New York are authorized or required by
law or executive order to remain closed, or (iii) day on which
the Corporate Trust Office of the Trustee, or, with respect to
the Securities initially issued to the <PAGE> Issuer Trust, the
"Corporate Trust Office" (as defined in the Trust Agreement) of
the Property Trustee or the Delaware Trustee under the Trust
Agreement, is closed for business.
"Capital Treatment Event" means, in respect of the Issuer
Trust, the reasonable determination by the Company that, as a
result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any
rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement, action or
decision is announced on or after the date of the issuance of the
Preferred Securities of the Issuer Trust, there is more than an
insubstantial risk that the Company will not be entitled to treat
an amount equal to the Liquidation Amount (as such term is
defined in the Trust Agreement) of such Preferred Securities as
"Tier I Capital" (or the then equivalent thereof), except as
otherwise restricted under the 25% Capital Limitation, for
purposes of the risk-based capital adequacy guidelines of the
Board of Governors of the Federal Reserve System, as then in
effect and applicable to the Company.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this instrument such
Commission is not existing and, performing the duties now
assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"Common Securities" has the meaning specified in the first
recital of this Indenture.
"Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Company" means the Person named as the "Company" in the
first paragraph of this instrument until a successor entity shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Company " shall mean such successor
entity.
"Company Request" and "Company Order" mean, respectively,
the written request or order signed in the name of the Company by
any Chairman of the Board of Directors, any Vice Chairman of the
Board of Directors, its President or a Vice President, and by its
Chief Financial Officer, its Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust
business shall be administered.
"Creditor" has the meaning specified in Section 6.7.
"Defaulted Interest" has the meaning specified in Section
3.8.
"Delaware Trustee" means, with respect to the Issuer Trust,
the Person identified as the "Delaware Trustee" in the Trust
Agreement, solely in its capacity as Delaware Trustee of the
Issuer Trust under the Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any
successor Delaware trustee appointed as therein provided.
"Depositary" means, with respect to the Securities issuable
or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company
pursuant to Section 3.1 (or any successor thereto).
"Discount Security" means any security that provides for an
amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 5.2.
<PAGE>
"Dollar" or "$" means the currency of the United States of
America that, as at the time of payment, is legal tender for the
payment of public and private debts.
The term "entity" includes a bank, corporation, association,
company, limited liability company, joint-stock company or
business trust.
"Event of Default" has the meaning specified in Article V.
"Exchange Act" means the Securities Exchange Act of 1934 and
any statute successor thereto, in each case as amended from time
to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section
3.12.
"Global Security" means a Security in the form prescribed in
Section 2.4 evidencing all or part of the Securities, issued to
the Depositary or its nominee, and registered in the name of such
Depositary or its nominee.
"Guarantee" means, with respect to the Issuer Trust, the
Guarantee Agreement, dated June 30, 1997, executed by the Company
for the benefit of the Holders of the Preferred Securities issued
by the Issuer Trust as modified, amended or supplemented from
time to time.
"Holder" means a Person in whose name a Security is
registered in the Securities 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.
"Institutional Accredited Investor" means an institutional
accredited investor within the meaning of Rule 501(a)(1), (2),
(e) or (7) of Regulation D under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on such Securities.
"Investment Company Act" means the Investment Company Act of
1940 and any statute successor thereto, in each case as amended
from time to time.
"Investment Company Event" means the receipt by the Issuer
Trust of an Opinion of Counsel (as defined in the Trust
Agreement) experienced in such matters to the effect that, as a
result of the occurrence of a change in law or regulation or a
written change (including any announced prospective change) in
interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the
Issuer Trust is or will be considered an "investment company"
that is required to be registered under the investment Company
Act, which change or prospective change becomes effective or
would become effective, as the case may be, on or after the date
of the issuance of the Preferred Securities of the Issuer Trust.
"Issuer Trust" has the meaning specified in the first
recital of this Indenture.
"Maturity" when used with respect to any Security means the
date on which the principal of such Security becomes due and
payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption
or otherwise.
"Notice of Default" means a written notice of the kind
specified in Section 5.1(3).
<PAGE>
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer,
President or a Vice President, and by the Treasurer, an Associate
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of such Person, and delivered to the Trustee. Any
Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Indenture shall
include;
(a) a statement by each officer signing the
Officers' Certificate that such officer has read the covenant or
condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of
the examination or investigation undertaken by such officer in
rendering the Officers' Certificate;
(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion
as to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of
such officer, such condition or covenant has been complied with;
provided, however, that the Officers' Certificate delivered
pursuant to the provisions of Section 10.4 hereof shall comply
with the provisions of Section 314 of the Trust Indenture Act.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for or an employee of the Company or any Affiliate
of the Company.
"Original Issue Date" means the date of issuance specified
as such in each Security.
"Outstanding" means, when used in reference to any
Securities, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(i) Securities theretofore canceled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities for whose payment money in the
necessary amount has been theretofore deposited with the Trustee
or any Paying Agent in trust for the Holders of such Securities;
and
(iii) Securities in substitution for or in lieu of
which other Securities have been authenticated and delivered or
that have been paid pursuant to Section 3.6, unless proof
satisfactory to the Trustee is presented that any such Securities
are held by Holders in whose hands such Securities are valid,
binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the
requisite principal amount of Outstanding Securities have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or
such other obligor (other than, for the avoidance of doubt, the
Issuer Trust to which Securities of the applicable series were
initially issued) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only
Securities that the Trustee knows to be so owned shall be so
disregarded. Securities so owned that have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate
of the Company or such other obligor (other than, for the
avoidance of doubt, the Issuer Trust). Upon the written request
of the Trustee, the Company shall furnish to the Trustee promptly
an Officers' Certificate listing and identifying all Securities,
if any, known by the Company to be owned or held by or for the
account of the Company, or any other obligor on the Securities or
any Affiliate of the Company or such obligor (other than, for the
avoidance of <PAGE> doubt, the Issuer Trust), and, subject to the
provisions of Section 6.1, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Securities not
listed therein are Outstanding for the purpose of any such
determination.
"Paying Agent" means the Trustee or any Person authorized by
the Company to pay the principal of (or premium, if any) or
interest on, or other amounts in respect of any Securities on
behalf of the Company.
"Person" means any individual, corporation, partnership,
joint venture, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Place of Payment" means, with respect to the Securities,
the place or places where the principal of (and premium, if any)
and interest on the Securities are payable pursuant to 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. For the
purposes of this definition, any security authenticated and
delivered under Section 3.7 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.
"Preferred Securities" has the meaning specified in the
first recital of this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, with respect to the Issuer Trust,
the Person identified as the "Property Trustee" in the Trust
Agreement, solely in its capacity as Property Trustee of the
Issuer Trust under the Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as therein provided.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture or the terms of such Security.
"Redemption Price", when used with respect to any Security
to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"Regular Record Date" for the interest payable on any
Interest Payment Date with respect to the Securities means,
unless otherwise provided pursuant to Section 3.1 with respect to
the Securities, the close of business on March 15, June 15,
September, 15 and December 15 next preceding such Interest
Payment Date (whether or not a Business Day).
"Responsible Officer", when used with respect to the
Property Trustee means any officer assigned to the Corporate
Trust Office, including any managing director, vice president,
assistant vice president, assistant treasurer, assistant
secretary or any other officer of the Trustee customarily
performing functions similar to those performed by any of the
above designated officers and having direct responsibility for
the administration of this Indenture, and also, with respect to a
particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity
with the particular subject.
"Restricted Security" means each Security required pursuant
to Section 3.6(b) to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate
substantially in the form set forth in Annex A.
"Restricted Securities Legend" means a legend substantially
in the form of the legend required in the form of Security set
forth in Section 2.2 to be placed upon a Restricted Security.
<PAGE>
"Rights Plan" means any plan of the Company providing for
the issuance by the Company to all holders of its Common Stock,
par value $1.00 per share, of rights entitling the holders
thereof to subscribe for or purchase shares of any class or
series of capital stock of the Company which rights (i) are
deemed to be transferred with such shares of such Common Stock,
(ii) are not exercisable, and (iii) are also issued in respect of
future issuances of such Common Stock, in each case until the
occurrence of a specified event or events.
"Securities" or "Security" means any debt securities or debt
security, as the case may be, authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1933, and any
statute successor thereto, in each case as amended from time to
time.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 3.6.
"Senior Indebtedness" means, whether recourse is to all or a
portion of the assets of the Company and whether or not
contingent, (i) every obligation of the Company for money
borrowed; (ii) every obligation of the Company evidenced by
bonds, debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of
property, assets or businesses; (iii) every reimbursement
obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account
of the Company; (iv) every obligation of the Company issued or
assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business); (v) every capital
lease obligation of the Company; (vi) every obligation of the
Company for claims (as defined in Section 101(4) of the United
States Bankruptcy Code of 1978, as amended) in respect of
derivative products such as interest and foreign exchange rate
contracts, commodity contracts and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i)
through (vi) of another person and all dividends of another
person the payment of which, in either case, the Company has
guaranteed or is responsible or liable, directly or indirectly,
as obligor or otherwise; provided that "Senior Indebtedness"
shall not include (i) any obligations which, by their terms, are
expressly stated to rank pari passu in right of payment with, or
to not be superior in right of payment to, the Junior
Subordinated Debentures, (ii) any Senior Indebtedness of the
Company which when incurred and without respect to any election
under Section III(b) of the United States Bankruptcy Code of
1978, as amended, was without recourse to the Company, (iii) any
Senior Indebtedness of the Company to any of its subsidiaries,
(iv) Senior Indebtedness to any executive officer or director of
the Company, or (v) any indebtedness in respect of debt
securities issued to any trust, or a trustee of such trust,
partnership or other entity affiliated with the Company that is a
financing entity of the Company in connection with the issuance
by such financing entity of securities that are similar to the
Preferred Securities.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
3.8.
"Stated Maturity", when used with respect to any Security or
any installment of principal thereof or interest thereon, means
the date specified pursuant to the terms of such Security as the
fixed date on which the principal of such Security or such
installment of principal or interest is due and payable, as, such
date may, in the case of such principal, be shortened or extended
as provided pursuant to the terms of such Security and this
Indenture.
"Subsidiary" means an entity more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries,
or by the Company and one or more other Subsidiaries. For
purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"Successor Security" of any particular Security means every
Security issued after, and evidencing all or a portion of the
same debt as that evidenced by, such particular Security; and,
for the purposes of this definition, any Security authenticated
and delivered under Section 3.7 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.
<PAGE>
"Tax Event" means the receipt by the Issuer Trust of an
Opinion of Counsel (as defined in the Trust Agreement)
experienced in such matters to the effect that, as a result of
any amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority
thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or
decision is announced on or after the date of issuance of the
Preferred Securities of the Issuer Trust, there is more than an
insubstantial risk that (i) the Issuer Trust is, or will be
within 90 days of the delivery of such Opinion of Counsel,
subject to United States federal income tax with respect to
income received or accrued on the corresponding series of
Securities issued by the Company to the Issuer Trust, (ii)
interest payable by the Company on the Securities is not, or
within 90 days of the delivery of such Opinion of Counsel will
not be, deductible by the Company, in whole or in part, for
United States federal income tax purposes, or (iii) the Issuer
Trust is, or will be within 90 days of the delivery of such
Opinion of Counsel, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
"Trust Agreement" means, the Amended and Restated Trust
Agreement, dated as of June 30, 1997, as amended, modified or
supplemented from time to time, among the trustees of the Issuer
Trust named therein, the Company, as depositor, and the holders
from time to time of undivided beneficial ownership interests in
the assets of the Issuer Trust.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this Indenture, solely in its capacity as such
and not in its individual capacity, 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 shall mean the Trustee with respect to
Securities.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as modified, amended or supplemented from time to time, except as
provided in Section 9.5.
"Trust Securities" has the meaning specified in the first
recital of this Indenture.
"Vice President", when used with respect to the Company,
means any duly appointed vice president, whether or not
designated by a number or a word or words added before or after
the title "vice president."
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent (including covenants
compliance with which constitutes a condition precedent), if any,
provided for in this Indenture relating to the proposed action
have been complied with and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent
(including covenants compliance with which constitutes a
condition precedent), if any, have been complied with, except
that in the case of any such application or request as to which
the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular
application or request, no additional certificate or opinion need
be furnished.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture (other
than the certificates provided pursuant to Section 10.4) shall
include:
(1) a statement by each individual signing such
certificate or opinion that such individual 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 of such individual contained in such
certificate or opinion are based;
<PAGE>
(3) a statement that, in the opinion of such
individual, he or she has made such examination or
investigation as is necessary to enable him or her 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
such individual, such condition or covenant has been
complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one 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 matters upon which his or her certificate or opinion
is based are erroneous. Any such certificate or Opinion of
Counsel may be based, insofar as it relates to factual matters,
upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information
with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions, or other instruments under this Indenture, they may,
but need not, be consolidated and form one instrument.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
given to or taken by Holders may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments is or
are delivered to the Trustee, and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a
witness of such execution or by the certificate of any notary
public or other officer authorized by law to take acknowledgments
of deeds, certifying that the individual signing such instrument
or writing acknowledged to him or her the execution thereof.
Where such execution is by a Person acting in other than his or
her individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his or her authority.
(c) The fact and date of the execution by any Person of any
such instrument or writing, or the authority of the Person
executing the same, may also be provided in any other manner that
the Trustee deems sufficient and in accordance with such
reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the
Securities Register.
<PAGE>
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security
shall bind every future Holder of the same Security and the
Holder of every Security issued upon the transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such
Security.
(f) The Company may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities
entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other action
provided or permitted by this Indenture to be given, made or
taken by Holders of Securities, provided that the Company may not
set a record date for, and the provisions of this paragraph shall
not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next
succeeding paragraph. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record
date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after
such record date, provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration
Date (as defined below) by Holders of the requisite principal
amount of Outstanding Securities on such record date. Nothing in
this paragraph shall be construed to prevent the Company from
setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action
by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at
its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to
be given to the Trustee in writing and to each Holder of
Securities in the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose
of determining the Holders of outstanding Securities entitled to
join in the giving or making of (i) any Notice of Default, (ii)
any declaration of acceleration referred to in Section 5.2, (iii)
any request to institute proceedings referred to in Section
5.7(2), or (iv) any direction referred to in Section 5.12, in
each case with respect to Securities. If any record date is set
pursuant to this paragraph, the Holders of Outstanding Securities
on such record date, and no other Holders, shall be entitled to
join in such notice, declaration, request or direction, whether
or not such Holders remain Holders after such record date,
provided that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of
the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date for any action
for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of
no effect) and nothing in this paragraph shall be construed to
render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Securities on the date such
action is taken. Promptly after any record date is set pursuant
to this paragraph, the Trustee, at the Company's expense, shall
cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Company in
writing and to each Holder of Securities in the manner set forth
in Section 1.6.
With respect to any record date set pursuant to this
Section, the party hereto that sets such record date may
designate any day as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day,
provided that no such change shall be effective unless notice of
the proposed new Expiration Date is given to the other party
hereto in writing, and to each Holder of Securities in the manner
set forth in Section 1.6 on or prior to the existing Expiration
Date. If an Expiration Date is not designated with respect to
any record date set pursuant to this Section, the party hereto
that set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration
Date with respect thereto, subject to its right to change the
Expiration Date as provided in this paragraph. Notwithstanding
the foregoing, no Expiration Date shall be later than the 180th
day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled
hereunder to 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 part of such principal
amount.
<PAGE>
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, any holder of
Preferred Securities or the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust
Office, or
(2) the Company by the Trustee, any Holder or any
holder of Preferred Securities shall be sufficient for every
purpose (except as otherwise provided in Section 5.1)
hereunder if in writing and mailed, first class, postage
prepaid, to the Company addressed to it at the address of
its principal office specified in the first paragraph of
this instrument or at any other address previously furnished
in writing to the Trustee by the Company.
SECTION 1.6. 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 the
address of such Holder as it appears in the Securities Register,
not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. If, by reason of
the suspension of or irregularities in regular mail services or
for any other reason, it shall be impossible or impracticable to
mail notice of any event to Holders when said notice is required
to be given pursuant to any provision of this Indenture or of the
Securities, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient
giving of such notice. 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.
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
thereunder to be a part of and govern this Indenture, the
provision of the Trust Indenture Act shall control. If any
provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as 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.
<PAGE>
SECTION 1.10. Separability Clause.
If any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto
and their successors and assigns, the holders of Senior
Indebtedness, the Holders of the Securities and, to the extent
expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and
9.2, the holders of Preferred Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or the
Securities) payment of interest or principal (and premium, if
any) or other amounts in respect of such Security need not be
made on such date, but may be made on the next succeeding
Business Day (and no interest shall accrue in respect of the
amounts whose payment is so delayed for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, until such next succeeding Business Day)
except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately
preceding Business Day (in each case with the same force and
effect as if made on the Interest Payment Date or Redemption Date
or at the Stated Maturity).
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities and the Trustee's certificate of
authentication shall be in substantially the forms set forth in
this Article, or in such other form or forms as shall be
established by or pursuant to a Board Resolution or in one or
more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may
such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to
comply with applicable tax laws or the rules of any securities
exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their
execution of the Securities. If the form of Securities 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 with respect to the
authentication and delivery of such Securities.
The Trustee's certificates of authentication shall be
substantially in the form set forth in this Article.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods, if
required by any securities exchange on which the Securities may
be listed, on a steel engraved border or steel engraved borders
or may be produced in any other manner permitted by the rules of
any securities exchange on which the Securities may be listed,
all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
<PAGE>
Securities distributed to holders of Global Preferred
Securities (as defined in the Trust Agreement) upon the
dissolution of the Issuer Trust shall be distributed in the form
of one or more Global Securities registered in the name of a
Depositary or its nominee, and deposited with the Securities
Registrar, as custodian for such Depositary, or with such
Depositary, for credit by the Depositary to the respective
accounts of the beneficial owners of the Securities represented
thereby (or such other accounts as they may direct). Securities
distributed to holders of Preferred Securities other than Global
Preferred Securities upon the dissolution of the Issuer Trust
shall not be issued in the form of a Global Security or any other
form intended to facilitate book-entry trading in beneficial
interests in such Securities.
SECTION 2.2. Form of Face of Security.
BROAD NATIONAL BANCORPORATION
__% Junior Subordinated Debentures due ______, 2027
[If the Security is a Restricted Security, insert - THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
BY ANY INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT,
(I) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) IN AN
OFFSHORE TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (III)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (B) BY AN
INITIAL INVESTOR THAT IS A QUALIFIED INSTITUTIONAL BUYER OR BY
ANY SUBSEQUENT INVESTOR, AS SET FORTH IN (A) ABOVE AND, IN
ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, AND, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS
OF THE UNITED STATES. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS. SECURITIES OWNED BY
AN INITIAL INVESTOR THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER
MAY NOT BE HELD IN GLOBAL FORM AND MAY NOT BE TRANSFERRED WITHOUT
CERTIFICATION THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS, AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. NO
REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE
EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE SECURITIES.]
No. _____ $_____
BROAD NATIONAL BANCORPORATION, a New Jersey corporation
(hereinafter 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 a Global Security, then insert, if applicable--,
or such other principal amount represented hereby as may be set
forth in the records of the Securities Registrar hereinafter
referred to in accordance with the Indenture,]. The Company
further promises to pay interest on said principal from
______________, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, quarterly
(subject to deferral as set forth herein) in arrears on the last
day of March, June, September and December of each year,
commencing _______________, 1997 at the rate of ____% per annum,
together with Additional Sums, if any, as provided in Section
10.6 of the Indenture, until the principal hereof is paid or duly
provided for or made available for payment; provided that any
overdue principal, premium or Additional Sums and any overdue
installment of interest shall bear Additional Interest at the
rate of ______% per annum (to the extent that the payment of such
interest shall be legally enforceable), compounded quarterly from
the dates such amounts are due until they are paid or made
available for payment, and such interest shall be payable on
demand. The amount of interest payable for any period less than
a full interest period shall be computed on the basis of a
360-day year of twelve 30-day months and the <PAGE> actual days elapsed
in a partial month in such period. The amount of interest
payable for any full interest period shall be computed by
dividing the applicable rate per annum by four. The interest so
payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment, which
shall be the 15th day of March, June, September and December
(whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and
upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
So long as no Event of Default has occurred and is
continuing, the Company shall have the right, at any time during
the term of this Security, from time to time to defer the payment
of interest on this Security for up to 20 consecutive quarterly
interest payment periods with respect to each deferral period
(each an "Extension Period"), during which Extension Periods the
Company shall have the right to make partial payments of interest
on any Interest Payment Date, and at the end of which the Company
shall pay all interest then accrued and unpaid including
Additional Interest, as provided below; provided, however, that
no Extension Period shall extend beyond the Stated Maturity of
the principal of this Security, as then in effect, and no such
Extension Period may end on a date other than an Interest Payment
Date; and provided, further, however, that during any such
Extension Period, the Company shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of the Company's
capital stock, or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company that rank pari passu in all
respects with or junior in interest to this Security (other than
(a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to
the applicable Extension Period, (b) as a result of an exchange
or conversion of any class or series of the Company's capital
stock (or any capital stock of a Subsidiary of the Company) for
any class or series of the Company's capital stock or of any
class or series of the Company's indebtedness for any class or
series of the Company's capital stock, (c) the purchase of
fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, or
the issuance of rights, stock or other property under any Rights
Plan, or the redemption or repurchase of rights pursuant thereto,
or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock). Prior to the termination of
any such Extension Period, the Company may further defer the
payment of interest, provided that no Extension Period shall
exceed 20 consecutive quarterly interest payment periods, extend
beyond the Stated Maturity of the principal of this Security or
end on a date other than an Interest Payment Date. Upon the
termination of any such Extension Period and upon the payment of
all accrued and unpaid interest and any Additional Interest then
due on any Interest Payment Date, the Company may elect to begin
a new Extension Period, subject to the above conditions. No
interest shall be due and payable during an Extension Period,
except at the end thereof, but each installment of interest that
would otherwise have been due and payable during such Extension
Period shall bear Additional Interest (to the extent that the
payment of such interest shall be legally enforceable) at the
rate of __% per annum, compounded quarterly and calculated as set
forth in the first paragraph of this Security, from the date on
which such amounts would otherwise have been due and payable
until paid or made available for payment. The Company shall give
the Holder of this Security and the Trustee notice of its
election to begin any Extension Period at least one Business Day
prior to the next succeeding Interest Payment Date on which
interest on this Security would be payable but for such deferral
or so long as such securities are held by BNB Capital Trust, at
least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Preferred
Securities of the Issuer Trust would be payable but for such
deferral, and (ii) the date on which the Property <PAGE> Trustee of the
Issuer Trust is required to give notice to holders of such
Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one
Business Day prior to such record date.
Payment of the principal of (and premium, if any) and
interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the United States, in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts; provided, however that at the option of the Company
payment of interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall
appear in the Securities Register, or (ii) if to a Holder of
$1,000,000 or more in aggregate principal amount of this
Security, by wire transfer in immediately available funds upon
written request to the Trustee not later than 15 calendar days
prior to the date on which the interest is payable.
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and subject in
right of payments 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. 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 or her behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided, and (c)
appoints the Trustee his or her attorney-in-fact for any and all
such purposes. Each Holder hereof, by his or her acceptance
hereof, waives all notice of the acceptance of the subordination
provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said
provisions.
Reference is hereby made to the further provisions of this
Security set forth on the reverse of, which further provisions
shall for all purposes have the same effect as if set forth at
this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
BROAD NATIONAL BANCORPORATION
By:
Name:
Title:
Attest:
Secretary or Assistant Secretary
<PAGE>
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 the Junior
Subordinated Indenture, dated as of June 30, 1997 (herein called
the "Indenture"), between the Company and Bankers Trust Company,
as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for
a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness 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 $__________.
All terms used in this Security that are defined in the
Indenture or in the Amended and Restated Trust Agreement dated as
of June 30, 1997 (as modified, amended or supplemented from time
to time the "Trust Agreement"), relating to BNB Capital Trust
(the "Issuer Trust") among the Company, as Depositor, the
Trustees named therein and the Holders from time to time of the
Trust Securities issued pursuant thereto shall have the meanings
assigned to them in the Indenture or the Trust Agreement, as the
case may be.
The Company has the right to redeem this Security (i) on or
after June 30, 2002 in whole at any time or in part from time to
time, or (ii) in whole (but not in part), at any time within 90
days following the occurrence and during the continuation of a
Tax Event, Investment Company Event, or Capital Treatment Event,
in each case at the Redemption Price described below, and subject
to possible regulatory approval. The Redemption Price shall
equal 100% of the principal amount hereof being redeemed,
together with accrued interest to but excluding the date fixed
for redemption.
In the event of redemption of this Security in part only, a
new Security or Securities of this series for the unredeemed
portion hereof will be issued in the name of the Holder hereof
upon the cancellation hereof.
[If applicable, insert--The Indenture contains provisions
for defeasance at any time [of the entire indebtedness of this
Security] [or] [certain restrictive covenants and Events of
Default with respect to this Security] [, in each case] upon
compliance by the Company with certain conditions set forth in
the Indenture.]
The Indenture permits, with certain exceptions as therein
provided, the Company and the Trustee at any time to enter into a
supplemental indenture or indentures for the purpose of modifying
in any manner the rights and obligations of the Company and of
the Holders of the Securities, with the consent of the Holders of
not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting
Holders of specified percentages in principal amount of the
Securities of each series at the time Outstanding, on behalf of
the Holders of all Securities of each series, to waive compliance
by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made
upon this Security.
[If the Security is not a Discount Security, insert--As
provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities of this series at
the time Outstanding occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities of this
series may declare the principal amount of all the Securities of
this series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders),
provided that, if upon an Event of Default, the Trustee or such
Holders fail to declare the principal of all the Outstanding
Securities of this series to be immediately due and payable, the
holders of at least 25% in aggregate Liquidation Amount of the
Preferred Securities then outstanding shall have the right to
make such declaration by a notice in writing to the Company and
the Trustee; and upon any such declaration the principal amount
of and the accrued interest (including any Additional Interest)
on all the Securities shall become immediately due and payable,
provided that the payment of principal and interest (including
any Additional Interest) on such Securities shall remain
subordinated to the extent provided in Article XIII of the
Indenture.]
<PAGE>
[If the Security is a Discount Security, insert-- As
provided in and subject to the provisions of the Indenture, if an
Event of Default with respect to the Securities of this series at
the time Outstanding occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities of this
series may declare an amount of principal of the Securities of
this series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders),
provided that, if upon an Event of Default, the Trustee or such
Holders fail to declare such principal amount of the Outstanding
Securities of this series to be immediately due and payable, the
Holders of at least 25% in aggregate Liquidation Amount of the
Preferred Securities then outstanding shall have the right to
make such declaration by a notice in writing to the Company and
the Trustee. The principal amount payable upon such acceleration
shall be equal to [insert formula for determining the amount].
Upon any such declaration, such amount of the principal of and
the accrued interest (including any Additional Interest) on all
the Securities shall become immediately due and payable, provided
that the payment of such principal and interest (including any
Additional Interest) on all the Securities of this series shall
remain subordinated to the extent provided in Article XIII of the
Indenture. Upon payment (i) of the amount of principal so
declared due and payable and (ii) of interest on any overdue
principal, premium and 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 premium and interest, if any, on this Security
shall terminate.]
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 premium, if any) and interest
(including Additional Interest) on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Securities Register, upon surrender of this
Security for registration of transfer at the office or agency of
the Company maintained under Section 10.2 of the Indenture for
such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Securities Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon
one or more new Securities of this series, 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 $1,000 and
any integral multiple of $1,000 in excess thereof. As provided
in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of 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.
The Company and, by its acceptance of this Security or a
beneficial interest therein, the Holder of, and any Person that
acquires a beneficial interest in, this Security agrees that for
United States federal, state and local tax purposes it is
intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE
COMPANY, DOES NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER INSURER OR
GOVERNMENT AGENCY.
<PAGE>
SECTION 2.4. Additional Provisions Required in Global
Security.
Unless otherwise specified as contemplated by Section 3.1,
any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 2.2 and 2.3, 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 OF A DEPOSITARY. THIS SECURITY IS
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
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: _________________ BANKERS TRUST COMPANY,
as Trustee
By:
Authorized Signatory
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities that may be
authenticated and delivered under this Indenture is $11,855,670.
The Securities' Stated Maturity shall be June 30, 2027.
The Securities, established pursuant to a Board Resolution,
shall bear interest at a per annum rate equal to 9.50% from June
30, 1997 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be,
payable quarterly (subject to deferral as set forth in Section
3.12), in arrears, on the last day of March, June, September and
December of each year, commencing September 30, 1997, until the
principal thereof is paid or made available for payment.
Interest will compound quarterly and will accrue at a per annum
rate equal to 9.50% to the extent permitted by applicable law, on
any interest installment in arrears for more than one quarterly
period or during an extension of an interest payment period as
set forth below in Section 3.12.
The principal of and interest on the Securities shall be
payable at the office or agency of the Paying Agent in the United
States maintained for such purpose and at any other office or
agency maintained by the Company for such purpose in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of
interest may be made (i) by <PAGE> check mailed to the address of the
Person entitled thereto as such address shall appear in the
Security Register or (ii) by wire transfer in immediately
available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the
Security Register.
Securities shall be issuable in whole or in part in the form
of one or more Global Securities and, in such case, the
Depositary for such Global Securities shall be The Depository
Trust Company.
The securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article XIII.
SECTION 3.2. Denominations.
The Securities shall be in registered form without coupons
and shall be issuable in denominations of $10 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 or impressed thereon and attested by its Secretary or
one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time
and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a
Company Order for the 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 have been established by 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,
(1) 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;
(2) if the terms of such Securities have been established
by or pursuant to Board Resolution as permitted by Section
3.1, that such terms have been established in conformity
with the provisions of this Indenture; and
(3) 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 that is
not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and the
preceding paragraph, if all Securities 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
authentication of each Security if such documents are delivered
at or prior to the authentication upon original issuance of the
first Security to be issued.
<PAGE>
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such security
has been duly authenticated and 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 3.10, 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, the
Company may execute, and upon receipt of a Company Order the
Trustee shall authenticate and deliver, temporary Securities that
are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay.
After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at the office or agency of
the Company designated for that purpose without charge to the
Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more
definitive securities, of any authorized denominations having the
same Original Issue Date and Stated Maturity and having the same
terms as such temporary Securities. Until so exchanged, the
temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 3.5. Global Securities.
(a) Each Global Security issued under this Indenture shall
be registered in the name of the Depositary designated by the
Company for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture,
no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person
other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing
that such Depositary is no longer willing or able to properly
discharge its responsibilities as Depositary with respect to such
Global Security, and the Company is unable to locate a qualified
successor, (ii) the Company executes and delivers to the Trustee
a Company Order stating that the Company elects to terminate the
book-entry system through the Depositary, or (iii) there shall
have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on
behalf of the Depositary or its nominee to the Securities
Registrar for exchange or cancellation as provided in this
Article II. If any Global Security is to be exchanged for other
Securities or canceled in part, or if another Security is to be
exchanged in whole or in part for a beneficial interest in any
Global Security, then either (i) such Global Security shall be so
surrendered for exchange or cancellation as provided in this
Article III or (ii) the principal amount thereof shall be
reduced, subject to Section 3.6(b)(v), or increased by an amount
equal to the portion thereof to be so exchanged or canceled, or
equal to the principal amount of such other Security to be so
exchanged for a beneficial interest therein, as the case may be,
by means of an appropriate adjustment made on the records of the
Securities Registrar, whereupon the Trustee, in accordance with
the Applicable Procedures, shall instruct the Depositary or its
authorized representative to make a corresponding adjustment to
its records. Upon any such surrender or <PAGE> adjustment of a Global
Security by the Depositary, accompanied by registration
instructions, the Trustee shall, subject to Section 3.6(b) and as
otherwise provided in this Article III, authenticate and deliver
any Securities issuable in exchange for such Global Security (or
any portion thereof) in accordance with the instructions of the
Depositary. The Trustee shall not be liable for any delay in
delivery of such instructions and may conclusively rely on, and
shall be fully protected in relying on, such instructions.
(d) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a
Global Security or any portion thereof, whether pursuant to this
Article III, Section 9.6 or 11.6 or otherwise, shall be
authenticated and delivered in the form of, and shall be, a
Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or
a nominee thereof.
(e) The Depositary or its nominee, as the registered owner
of a Global Security, shall be the Holder of such Global Security
for all purposes under this Indenture and the Securities, and
owners of beneficial interests in a Global Security shall hold
such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global
Security shall be shown only on, and the transfer of such
interest shall be effected only through, records maintained by
the Depositary or its nominee or agent. Neither the Trustee nor
the Securities Registrar shall have any liability in respect of
any transfers effected by the Depositary.
(f) The rights of owners of beneficial interests in a
Global Security shall be exercised only through the Depositary
and shall be limited to those established by law and agreements
between such owners and the Depositary and/or its Agent Members.
SECTION 3.6. Registration, Transfer and Exchange
Generally; Certain Transfers and Exchanges; Securities Act
Legends.
(a) The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and transfers of
Securities. Such register is herein sometimes referred to as the
"Securities Register. The Trustee is hereby appointed
"Securities Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security
at the offices or agencies of the Company designated for that
purpose, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of any
authorized denominations of like tenor and aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations, of like tenor
and aggregate principal amount upon surrender of the Securities
to be exchanged at such office or agency. Whenever any
securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the
Securities that the Holder making the exchange is entitled to
receive.
All Securities issued upon any transfer or exchange of
Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Securities surrendered upon such transfer
or exchange.
Every Security presented or surrendered for transfer or
exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities
Registrar, duly executed by the Holder thereof or such Holder's
attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer
or exchange of Securities, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any transfer or exchange
of Securities.
<PAGE>
Neither the Company nor the Trustee shall be required,
pursuant to the provisions of this Section, (i) to issue,
register the transfer of or exchange any Security during a period
beginning at the opening of business 15 days before the day of
selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of the
notice of redemption, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in
part, except, in the case of any such Security to be redeemed in
part, any portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Notwithstanding any
other provision of this Indenture, transfers and exchanges of
Securities and beneficial interests in a Global Security shall be
made only in accordance with this Section 3.6(b).
(i) Non-Global Security to Non-Global Security. A Security
that is not a Global Security may be transferred, in whole
or in part, to a Person who takes delivery in the form of
another Security that is not a Global Security as provided
in Section 3.6(a), provided that if the Security to be
transferred in whole or in part is a Restricted Security,
the Securities Registrar shall have received a Restricted
Securities Certificate duly executed by the transferor
Holder or such Holder's attorney duly authorized in writing.
(ii) Exchanges Between Global Security and Non-Global
Security. A beneficial interest in a Global Security may be
exchanged for a Security that is not a Global Security as
provided in Section 3.5.
(iii) Certain Initial Transfers of Non-Global
Securities. In the case of Securities initially issued
other than in global form, an initial transfer or exchange
of such Securities that does not involve any change in
beneficial ownership may be made to an Institutional
Accredited Investor or Investors as if such transfer or
exchange were not an initial transfer or exchange; provided
that written certification shall be provided by the
transferee and transferor of such Securities to the
Securities Registrar that such transfer or exchange does not
involve a change in beneficial ownership.
SECTION 3.7. Mutilated, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee
together with such security or indemnity as may be required by
the Company or the Trustee to save each of them harmless, the
Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security, of like tenor and
aggregate principal amount, bearing the same legends, and bearing
a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the
Trustee (i) evidence to their satisfaction of the destruction,
loss or theft of any Security, and (ii) such security or
indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the
Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security, of like tenor
and aggregate principal amount and bearing the same legends as
such destroyed, lost or stolen Security, and bearing a number not
contemporaneously outstanding.
If 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
3.7, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
<PAGE>
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 3.8. Payment of Interest and Additional Interest;
Interest Rights Preserved.
Interest and Additional Interest on any Security that is
payable, and is punctually paid or duly provided for, on any
Interest Payment Date, shall be paid to the Person in whose name
that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date
for such interest in respect of Securities, except that, unless
otherwise provided in the Securities, interest payable on the
Stated Maturity of the principal of a Security shall be paid to
the Person to whom principal is paid. The initial payment of
interest on any Security that is issued between a Regular Record
Date and the related Interest Payment Date shall be payable as
provided in such Security or in the Board Resolution pursuant to
Section 3.1 with respect to the Securities.
Any interest on any Security that is due and payable, but is
not timely paid or duly provided for, on any Interest Payment
Date for Securities (herein called "Defaulted Interest"), shall
forthwith cease to be payable to the registered Holder on the
relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company,
at its election in each case, as provided in clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities in
respect of which interest is in default (or their respective
Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and which
shall be fixed 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 a Security
at the address of such Holder as it appears in the
Securities Register not less than 10 days prior to such
Special Record Date. The Trustee may, in its discretion, in
the name and at the expense of the Company, cause a similar
notice to be published at least once in a newspaper,
customarily published in the English language on each
Business Day and of general circulation in the Borough of
Manhattan, The City of New York, but such publication shall
not be a condition precedent to the establishment of such
Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest
shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered
on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the
Securities in respect of which interest is in default may be
listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not
listed), if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause 2,
such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon transfer of or
in exchange for or in lieu of any other Security shall carry
the rights to interest accrued and unpaid, and to accrue
interest, that were carried by such other Security.
<PAGE>
If the Company elects to defer interest under Section 3.12,
then this Section shall not apply during any Extension
Period.
SECTION 3.9. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the
Trustee shall treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.8)
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
held on its behalf by a Depositary shall have any rights under
this Indenture with respect to such Global Security, and such
Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the owner of such Global
Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, 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 impair, as between a Depositary and such
holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary
(or its nominee) as Holder of any Security.
SECTION 3.10. Cancellation.
All Securities surrendered for payment, redemption, transfer
or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee, and any such Securities and
Securities surrendered directly to the Trustee for any such
purpose shall be promptly canceled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder that the Company
may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities
shall be destroyed by the Trustee and the Trustee shall deliver
to the Company a certificate of such destruction.
SECTION 3.11. Computation of Interest.
Interest on the Securities for any period shall be computed
on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in any partial month in such
period, and interest on the Securities for a full period shall be
computed by dividing the rate per annum by the number of interest
periods that together constitute a full twelve months.
SECTION 3.12. Deferrals of Interest Payment Dates.
So long as no Event of Default has occurred and is
continuing, the Company shall have the right, at any time during
the term of the Securities, from time to time to defer the
payment of interest on such Securities for such period or periods
(each an "Extension Period") not to exceed the number of
consecutive quarterly periods that equal five years with respect
to each Extension Period, during which Extension Periods the
Company shall have the right to make partial payments of interest
on any Interest Payment Date. No Extension Period shall end on a
date other than an Interest Payment Date. At the end of any such
Extension Period, the Company shall pay all interest then accrued
and unpaid on the Securities (together with Additional Interest
thereon, if any, at the rate specified for the Securities to the
extent permitted by applicable law); provided, however, that no
Extension Period shall extend beyond the Stated Maturity of the
principal of the Securities; and provided further, however, that,
during any such Extension Period, the Company shall not (i)
declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock, or (ii) make any payment of
principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank
pari passu in all respects with or junior in interest to the
Securities (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit <PAGE> of any one or more
employees, officers, directors or consultants, in connection with
a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Company (or
securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered
into prior to the applicable Extension Period, (b) as a result of
an exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a Subsidiary of the
Company) for any class or series of the Company's capital stock
or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase
of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, or
the issuance of rights, stock or other property under any Rights
Plan, or the redemption or repurchase of rights pursuant thereto,
or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock). Prior to the termination of
any such Extension Period, the Company may further defer the
payment of interest, provided that no Event of Default has
occurred and is continuing and provided further, that no
Extension Period shall exceed the period or periods specified in
such Securities, extend beyond the Stated Maturity of the
principal of such Securities or end on a date other than an
Interest Payment Date. Upon the termination of any such
Extension Period and upon the payment of all accrued and unpaid
interest and any Additional Interest then due on any Interest
Payment Date, the Company may elect to begin a new Extension
Period, subject to the above conditions. No interest or
Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of
interest that would otherwise have been due and payable during
such Extension Period shall bear Additional Interest. The
Company shall give the Holders of the Securities and the Trustee
notice of its election to begin any such Extension Period at
least one Business Day prior to the next succeeding Interest
Payment Date on which interest on Securities would be payable but
for such deferral or, with respect to any Securities issued to
the Issuer Trust, so long as any such Securities are held by the
Issuer Trust, at least one Business Day prior to the earlier of
(i) the next succeeding date on which Distributions on the
Preferred Securities of the Issuer Trust would be payable but for
such deferral, and (ii) the date on which the Property Trustee of
the Issuer Trust is required to give notice to holders of such
Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one
Business Day prior to such record date.
The Trustee shall promptly give notice of the Company's
election to begin any such Extension Period to the Holders of the
Outstanding Securities.
SECTION 3.13. Right of Set-Off.
With respect to the Securities initially issued to the
Issuer Trust, notwithstanding anything to the contrary herein,
the Company shall have the right to set off any payment it is
otherwise required to make in respect of any such Security to the
extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee
relating to such Security or to a holder of Preferred Securities
pursuant to an action undertaken under Section 5.8 of this
Indenture.
SECTION 3.14. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the
Company and, by its acceptance of a Security or a beneficial
interest therein, the Holder of, and any Person that acquires a
beneficial interest in, such Security agree that for United
States federal, state and local tax purposes it is intended that
such Security constitutes indebtedness.
SECTION 3.15. 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 notice of redemption and other similar or
related materials as a convenience to Holders; provided that any
such notice or other materials 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 redemption or
other materials 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.
<PAGE>
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 as otherwise provided in this Section 4.1) and the
Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities that have been
destroyed, lost or stolen and that have been replaced or
paid as provided in Section 3.7 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
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year of the date of deposit, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company, and
the Company in the case of subclause (B)(i), (ii) or
(iii) above, has deposited or caused to be deposited
with the Trustee as trust funds in trust for such
purpose an amount in the currency or currencies in
which the Securities are payable sufficient to pay and
discharge the entire indebtedness on such Securities
not theretofore delivered to the Trustee for
cancellation, for the principal (and premium, if any)
and interest (including any Additional Interest) to the
date of such deposit (in the case of Securities that
have become due and payable) or to the Stated Maturity
or 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 of the Company 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.
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 the Trustee, in
accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own <PAGE> Paying Agent) as
the Trustee may determine, to the Persons entitled thereto, of
the principal (and premium, if any) and interest and Additional
Interest for the payment of which such money or obligations have
been deposited with or received by the Trustee.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein with respect to the
Securities, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any interest upon any
Security, including any Additional Interest in respect
thereof, when it becomes due and payable, and continuance of
such default for a period of 30 days (subject to the
deferral of any due date in the case of an Extension
Period); or
(2) default in the payment of the principal of (or
premium, if any, on) any Security at its Stated Maturity; or
(3) failure on the part of the Company duly to observe
or perform any other of the covenants or agreements on the
part of the Company in the Securities or in this Indenture
for a period of 90 days after the date on which written
notice of such failure, requiring the Company to remedy the
same, shall have been given to the Company by the Trustee by
registered or certified mail or to the Company and the
Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities; or
(4) the occurrence of the appointment of a receiver or
other similar official in any liquidation, insolvency or
similar proceeding with respect to the Company or all or
substantially all of its property; or a court or other
governmental agency shall enter a decree or order appointing
a receiver or similar official and such decree or order
shall remain unstayed and undischarged for a period of 60
days; or
(5) any other Event of Default provided with respect
to the Securities.
SECTION 5.2. Acceleration of Maturity, Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 5.1(4)) with respect to Securities at the
time Outstanding occurs and is continuing, then, and in every
such case, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities may
declare the principal amount (or, if the Securities are Discount
Securities, such portion of the principal amount as may be
specified in the terms) of all the Securities to be due and
payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), provided that, if, upon an
Event of Default, the Trustee or the Holders of not less than 25%
in principal amount of the Outstanding Securities fail to declare
the principal of all the Outstanding Securities to be immediately
due and payable, the holders of at least 25% in aggregate
Liquidation Amount (as defined in the Trust Agreement) of the
Preferred Securities issued by the Issuer Trust then outstanding
shall have the right to make such declaration by a notice in
writing to the Company and the Trustee; and upon any such
declaration such principal amount (or specified portion thereof)
of and the accrued interest (including any Additional Interest)
on all the Securities shall become immediately due and payable.
If an Event of Default specified in Section 5.1(4) with respect
to Securities at the time Outstanding occurs, the principal
amount of all the Securities (or, if the Securities are Discount
Securities, such portion of the principal amount of such
Securities as may be specified by the terms) shall automatically,
and without any declaration or other action on the part of the
Trustee or any Holder, become immediately due and payable.
Payment of principal and interest (including any Additional
<PAGE>
Interest) on such Securities shall remain subordinated to the
extent provided in Article XIII notwithstanding that such amount
shall become immediately due and payable as herein provided.
At any time after such a declaration of acceleration with
respect to the Securities 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 aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay:
(A) all overdue installments of interest on all
Securities;
(B) any accrued Additional Interest on all Securities;
(C) the principal of (and premium, if any, on) any
Securities that have become due otherwise than by such
declaration of acceleration and interest and Additional
Interest thereon at the rate borne by the Securities; and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities, other
than the non-payment of the principal of Securities that has
become due solely by such acceleration, have been cured or
waived as provided in Section 5.13.
If the Holders of Securities fail to annul such declaration
and waive such default, the holders of a majority in aggregate
Liquidation Amount (as defined in the Trust Agreement) of
Preferred Securities issued by the Issuer Trust then outstanding
shall also have the right to rescind and annul such declaration
and its consequences by written notice to the Company and the
Trustee, subject to the satisfaction of the conditions set forth
in clauses (1) and (2) above of this section 5.2.
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.
The Company covenants that if.
(1) default is made in the payment of any installment of
interest (including any Additional Interest) on any Security
when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (and
premium, if any, on) any Security at the Stated Maturity
thereof, the Company will, upon demand of the Trustee, pay
to the Trustee, for the benefit of the Holders of the
Securities, the whole amount then due and payable on the
Securities for principal (and premium, if any) and interest
(including any Additional Interest), and, in addition
thereto, all amounts owing the Trustee under Section 6.7.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid, and may prosecute such proceeding to
judgment or final decree, and may enforce the same against the
Company or any other obligor upon such Securities and collect the
monies adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
<PAGE>
If an Event of Default with respect to Securities 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 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 receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial or administrative proceeding relative to the
Company or any other obligor upon the Securities or the property
of the Company or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment
of overdue principal (and premium, if any) or interest (including
any Additional Interest)) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (including any
Additional Interest) owing and unpaid in respect to the
Securities and to file such other papers or documents as may
be necessary or advisable and to take any and all actions as
are authorized under the Trust Indenture Act in order to
have the claims of the Holders and any predecessor to the
Trustee under Section 6.7 allowed in any such judicial or
administrative proceedings; and
(ii) in particular, the Trustee shall be authorized to
collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator, conservator (or other similar official) in any such
judicial or administrative proceeding is hereby authorized by
each Holder to make such payments to the Trustee for distribution
in accordance with Section 5.6, and in the event that the Trustee
shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any
predecessor Trustee under Section 6.7.
Nothing herein contained shall be deemed authorize the
Trustee to authorize or consent to 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,
that the Trustee may, on behalf of the Holders, vote for the
election of a trustee in bankruptcy or similar official and be a
member of a creditors' or other similar committee.
SECTION 5.5. Trustee May Enforce Claim Without Possession
of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without
the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall,
subject to Article XIII and after provision for the payment of
all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, 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.
Any money or property collected or to be applied by the
Trustee with respect to the Securities pursuant to this Article
shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such
money or property on account of principal (or premium, if any) or
interest (including any Additional Interest), upon <PAGE> 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 and
any predecessor Trustee under Section 6.7;
SECOND: Subject to Article XIII, to the payment of the
amounts then due and unpaid upon Securities for principal (and
premium, if any) and interest (including any Additional Interest)
in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities
for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons
entitled thereto.
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Securities shall
have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture or for the appointment
of a receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to
the Securities;
(2) the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities shall have
made written request to the Trustee to institute proceedings
in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to it 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 aggregate principal
amount of the Outstanding Securities; it being understood
and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by
availing itself of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holders
of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all such
Holders.
SECTION 5.8. Unconditional Right of Holders to Receive
Principal, Premium and Interest; Direct
Action by Holders of Preferred Securities.
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
premium, if any) and (subject to Sections 3.8 and 3.12) interest
(including any Additional Interest) on such Security on the
Stated Maturity (or in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent
of such Holder. Any registered holder of the Preferred
Securities issued by the Issuer Trust shall have the right, upon
the occurrence of an Event of Default described in Section 5.1
(1) or 5.1(2), to institute a suit directly against the Company
for enforcement of payment to such holder of principal of
(premium, if any) and (subject to Sections 3.8 and 3.12) interest
(including any Additional Interest) on the Securities having a
principal amount equal to the aggregate Liquidation Amount (as
defined in the Trust Agreement) of such Preferred Securities held
by such holder.
<PAGE>
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred
Securities issued by the Issuer Trust 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, such
Holder or such holder of Preferred Securities, then, and in every
such case, the Company, the Trustee, such Holders and such holder
of Preferred Securities shall, subject to any determination in
such proceeding, be restored severally and respectively to their
former positions hereunder, and thereafter all rights and
remedies of the Trustee, such Holder and such holder of Preferred
Securities shall continue as though no such proceeding had been
instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of
Section 3.7, no right or remedy herein conferred upon or reserved
to the Trustee or 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, any Holder of any
Security with respect to the Securities or any holder of any
Preferred Security to exercise any right or remedy accruing upon
any Event of Default with respect to the Securities 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 and the right and remedy given to
the holders of Preferred Securities by Section 5.8 may be
exercised from time to time, and as often as may be deemed
expedient, by the Trustee, the Holders or the holders of
Preferred Securities, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities shall have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, with respect to the
Securities, provided that:
(1) such direction shall not be in conflict with any
rule of law or with this Indenture,
(2) the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such
direction, and
(3) subject to the provisions of Section 6.1, the
Trustee shall have the right to decline to follow such
direction if a Responsible Officer or Officers of the
Trustee shall, in good faith, determine that the proceeding
so directed would be unjustly prejudicial to the Holders not
joining in any such direction or would involve the Trustee
in personal liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities affected thereby
and, the holders of a majority in aggregate Liquidation Amount
(as defined in the Trust Agreement) of the Preferred Securities
issued by the Issuer Trust may waive any past default hereunder
and its consequences except a default:
<PAGE>
(1) in the payment of the principal of (or premium, if
any) or interest (including any Additional Interest) on any
Security (unless such default has been cured and the Company
has paid to or deposited with the Trustee a sum sufficient
to pay all matured installments of interest (including
Additional Interest) and all principal of (and premium, if
any, on) all Securities due otherwise than by acceleration),
or
(2) in respect of a covenant or provision hereof that
under Article IX cannot be modified or amended without the
consent of each Holder of any Outstanding Security affected.
Any such waiver shall be deemed to be on behalf of the
Holders of all the Securities, or in the case of waiver by
holders of Preferred Securities issued by the Issuer Trust, by
all holders of Preferred Securities issued by the Issuer Trust.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture, but no such
waiver shall extend to any subsequent or other default or impair
any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have
agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action
taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may, in its discretion, assess
reasonable costs, including reasonable attorneys' fees, against
any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party
litigant, but the provisions of this Section shall not apply to
any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than
10% in aggregate principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of
the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security on or after
the Stated Maturity.
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.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture, but in the case of any such certificates or
<PAGE>
opinions that by any provisions hereof are specifically
required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or
her own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct
except that
(1) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of Holders pursuant to
Section 5.12 relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture with respect to the
Securities.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(e) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible
Officer of the Trustee of the occurrence of any default hereunder
with respect to the Securities, the Trustee shall transmit by
mail to all Holders of Securities, as their names and addresses
appear in the Securities Register, notice of such default, unless
such default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the
principal of (or premium, if any) or interest (including any
Additional Interest) on any Security, the Trustee shall be
protected in withholding such notice if and so long as the board
of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the
interests of the Holders of Securities; and provided further,
that, in the case of any default of the character specified in
Section 5.1(3), no such notice to Holders of Securities shall be
given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event
that is, or after notice or lapse of time or both would become,
an Event of Default with respect to the Securities.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
Security or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or
parties;
<PAGE>
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or
Company Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and
the 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 that might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, indenture, Security or
other paper or document, but the Trustee in its discretion may
make such inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by
agent or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
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 neither the Trustee nor any
Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of the
Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Securities Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee
of Securities and, subject to Sections 6.8 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,
Securities 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 with the
Company.
SECTION 6.7. Compensation and Reimbursement.
(a) The Company agrees to pay to the Trustee from time to
time reasonable compensation for all services rendered by it
hereunder in such amounts as the Company and the Trustee shall
agree from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a
trustee of an express trust).
<PAGE>
(b) The Company agrees 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.
(c) Since the Issuer Trust is being formed solely to
facilitate an investment in the Preferred Securities, the
Company, as Holder of the Common Securities, hereby covenants to
pay all debts and obligations (other than with respect to the
Preferred Securities and the Common Securities) and all
reasonable costs and expenses of the Issuer Trust (including
without limitation all costs and expenses relating to the
organization of the Issuer Trust, the fees and expenses of the
trustees and all reasonable costs and expenses relating to the
operation of the Issuer Trust) and to pay any and all taxes,
duties, assessments or governmental charges of whatever nature
(other than withholding taxes) imposed on the Issuer Trust by the
United States, or any taxing authority, so that the net amounts
received and retained by the Issuer Trust and the Property
Trustee after paying such expenses will be equal to the amounts
the Issuer Trust and the Property Trustee would have received had
no such costs or expenses been incurred by or imposed on the
Issuer Trust. The foregoing obligations of the Company are for
the benefit of, and shall be enforceable by, any person to whom
any such debts, obligations, costs, expenses and taxes are owed
(each, a "Creditor") whether or not such Creditor has received
notice thereof. Any such Creditor may enforce such obligations
directly against the Company, and the Company irrevocably waives
any right or remedy to require that any such Creditor take any
action against the Issuer Trust or any other person before
proceeding against the Company. The Company shall execute such
additional agreements as may be necessary or desirable to give
full effect to the foregoing.
(d) The Company shall indemnify the Trustee, its directors,
officers, employees and agents for, and hold them harmless
against, any loss, liability or expense (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel) incurred without negligence or bad faith, arising out of
or in connection with the acceptance or administration of this
trust or the performance of its duties hereunder, including the
reasonable costs and expenses of defending against any claim or
liability in connection with the exercise or performance of any
of its powers or duties hereunder. This indemnification shall
survive the termination of this Indenture or the resignation or
removal of the Trustee.
When the Trustee incurs expenses or renders services after
an Event of Default specified in Section 5.1(4) occurs, the
expenses and the compensation for the services are intended to
constitute expenses of administration under the Bankruptcy Reform
Act of 1978 or any successor statute.
SECTION 6.8. Disqualification; Conflicting Interests.
The Trustee for the Securities issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust
Indenture Act. Nothing herein shall prevent the Trustee from
filing with the Commission the application referred to in the
second to last paragraph of said Section 310(b).
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall
be:
(a) an entity organized and doing business under the laws
of the United States of America or of any state or territory
thereof or of the District of Columbia, authorized under such
laws to exercise corporate trust powers and subject to
supervision or examination by federal, state, territorial or
District of Columbia authority, or
(b) an entity or other Person organized and doing business
under the laws of a foreign government that is permitted to act
as Trustee pursuant to a rule, regulation or order of the
Commission, authorized under such laws to exercise corporate
trust powers, and subject to supervision or examination by
authority of such foreign or a political subdivision thereof
substantially equivalent to supervision or examination applicable
to United States institutional trustees; in either case having a
combined capital and surplus of at least $50,000,000, subject to
supervision or examination by federal or state authority. If
such entity publishes reports of condition at least annually,
pursuant to law <PAGE> or to the requirements of the aforesaid
supervising or examining authority, then, for the purposes of
this Section, the combined capital and surplus of such entity
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. Neither the Company nor any Person directly or
indirectly controlling, controlled by or under common control
with the Company shall serve as Trustee for the Securities issued
hereunder.
SECTION 6.10. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities by giving written notice thereof to the Company. If
an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a
successor Trustee.
(c) The Trustee may be removed at any time with respect to
the Securities by Act of the Holders of a majority in aggregate
principal amount of the Outstanding Securities, 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;
then, in any such case, (i) the Company, acting pursuant to the
authority of a Board Resolution, may remove the Trustee with
respect to the Securities issued hereunder, 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 such Holder
and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with
respect to the Securities issued hereunder and the appointment of
a successor Trustee or Trustees.
(e) if the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause with respect to the Securities, the
Company, by a Board Resolution, shall promptly appoint a
successor Trustee with respect to the Securities. If, within one
year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to
the Securities shall be appointed by Act of the Holders of a
majority in aggregate principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee with
respect to the Securities and supersede the successor Trustee
appointed by the Company. If no successor Trustee with respect
to the Securities shall have been so appointed by the Company or
the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, subject to Section 5.14, on
behalf of such Holder and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities.
(f) The Company shall give notice of each resignation and
each removal of the Trustee with respect to the Securities and
each appointment of a successor Trustee with respect to the
Securities by mailing written notice of such event by first-class
mail, postage prepaid, to the Holders of Securities as their
names and addresses appear in the <PAGE> Securities Register. Each
notice shall include the name of the successor Trustee with
respect to the Securities 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) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all
rights, powers and trusts referred to in paragraph (a) of this
Section.
(c) 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 entity into which the Trustee may be merged or converted
or with which it may be consolidated, or any entity resulting
from any merger, conversion or consolidation to which the Trustee
shall be a party, or any entity succeeding to all or
substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, provided such
entity 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, and in case any Securities shall not have been
authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the
certificate of authentication shall have the full force which it
is provided anywhere in the Securities or in this Indenture that
the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company (or any
such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
with respect to the Securities, which shall be authorized to act
on behalf of the Trustee to authenticate Securities issued upon
original issue and upon exchange, registration of transfer or
partial redemption 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 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. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be an entity
organized and doing business under the laws of the United States
of America, or of any state or territory thereof or of 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
<PAGE>
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 entity into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any entity
resulting from any merger, conversion or consolidation to which
such Authenticating Agent shall be a party, or any entity
succeeding to all or substantially all of the corporate trust
business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such entity 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 give notice of such
appointment in the manner provided in Section 1.6 to all Holders
of Securities. Any successor Authenticating Agent upon
acceptance hereunder shall become vested with all the rights,
powers and duties of its predecessor hereunder, with like effect
as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the
provision of this Section.
The Company 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 payment, subject to the provisions of Section 6.7.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities referred to in the within
mentioned Indenture.
Dated: BANKERS TRUST COMPANY,
as Trustee
By:
As Authenticating Agent
Name:
Title:
By:
As Authenticating Agent
Name:
Title:
<PAGE>
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE,
PAYING AGENT 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) quarterly, not more than 15 days after March 15, June
15, September 15, and December 15 in each year, a list, in such
form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such dates, excluding from any
such list names and addresses received by the Trustee in its
capacity as Securities Registrar, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any
such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by the
Trustee in its capacity as Securities Registrar.
SECTION 7.2. 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 Securities 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 in the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither
the Company nor the Trustee nor any agent of either of them shall
be held accountable by reason of the disclosure of information as
to the names and addresses of the Holders made pursuant to the
Trust Indenture Act.
SECTION 7.3. Reports by Trustee and Paying Agent.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act, at the times
and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated
intervals of not more than 12 months shall be transmitted within
60 days of December 1 in each calendar year, commencing with the
first January 31 after the issuance of Securities under this
Indenture.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each
securities exchange upon which any Securities are listed and also
with the Commission. The Company will notify the Trustee when
any Securities are listed on any securities exchange.
(d) The Paying Agent shall comply with all withholding,
backup withholding, tax and information reporting requirements
under the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations issued thereunder with respect to payments
on, or with respect to, the Securities.
<PAGE>
SECTION 7.4. Reports by Company.
The Company shall file or cause to be filed with the Trustee
and with the Commission, and transmit to Holders, such
information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act
at the times and in the manner provided in the Trust Indenture
Act. In the case of information, documents or reports required
to be filed with the Commission pursuant to Section 13(a) or
Section 15(d) of the Exchange Act, the Company shall file or
cause the filing of such information documents or reports with
the Trustee within 15 days after the same is 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 no Person
shall 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) If 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 entity formed by such consolidation or into
which the Company is merged or the Person that acquires by
conveyance or transfer, or that leases, the properties and
assets of the Company substantially as an entirety shall be
an entity organized and existing under the laws of the
United States of America or 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 premium, if any),
and interest (including any Additional Interest) on all the
Securities of every series and the performance of every
covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such
transaction, no Event of Default, and no event that, after
notice or lapse of time, or both, would constitute an Event
of Default, shall have occurred 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 any such supplemental indenture comply
with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied
with and, in the case of a transaction subject to this
Section 8.1 but not requiring a supplemental indenture under
paragraph (1) of this Section 8.1, an Officer's Certificate
or Opinion of Counsel to the effect that the surviving,
resulting or successor entity is legally bound by the
Indenture and the Securities; and the Trustee, subject to
Section 6.1, may rely upon such Officers' Certificates and
Opinions of Counsel as conclusive evidence that such
transaction complies with this Section 8.1.
SECTION 8.2. Successor Company Substituted.
Upon any consolidation or merger by the Company with or into
any other Person, or any conveyance, transfer or lease by the
Company of its properties and assets substantially as an entirety
to any Person in accordance with Section 8.1, the successor
entity formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the
Company herein; and in the event of any such conveyance, transfer
or lease the Company shall be discharged from all obligations and
covenants under the Indenture and the Securities.
<PAGE>
Such successor Person may cause to be executed, and may
issue either in its own name or in the name of the Company, any
or all of the Securities issuable hereunder that theretofore
shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of
the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities that previously
shall have been signed and delivered by the officers of the
Company to the Trustee for authentication pursuant to such
provisions and any Securities that such successor Person
thereafter shall cause to be executed and delivered to the
Trustee on its behalf for the purpose pursuant to such
provisions. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with
the terms of this Indenture.
In case of any such consolidation, merger, sale, conveyance
or lease, such changes in phraseology and form may be made in the
Securities thereafter to be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. 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 amend or waive any provision of this
Indenture or 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
contained; or
(2) to convey, transfer, assign, mortgage or pledge
any property to or with the Trustee or to surrender any
right or power herein conferred upon the Company; or
(3) to facilitate the issuance of Securities in
certificated or other definitive form; or
(4) to add to the covenants of the Company for the
benefit of the Holders of the Securities or to surrender any
right or power herein conferred upon the Company; or
(5) to add any additional Events of Default for the
benefit of the Holders of the Securities; or
(6) to change or eliminate any of the provisions of
this Indenture, provided that any such change or elimination
shall not apply to any Outstanding Securities; or
(7) to cure any ambiguity, to correct or supplement
any provision herein that 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 (7) shall not adversely affect the interest of
the Holders of Securities in any material respect or, in the
case of the Securities issued to the Issuer Trust and for so
long as any of the Preferred Securities issued by the Issuer
Trust shall remain outstanding, the holders of such
Preferred Securities; or
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities and to add to or change any of the provisions
of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by
more than one Trustee, pursuant to the requirements of
Section 6.11(b); or
(9) to comply with the requirements of the Commission
in order to effect or maintain the qualification of this
Indenture under the Trust Indenture Act.
<PAGE>
SECTION 9.2. Supplemental Indentures with Consent of
Holders.
With the consent of the Holders of not less than a majority
in aggregate principal amount of the Outstanding Securities
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 under this
Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or
any installment of interest (including any Additional
Interest) on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of
principal of a Discount Security that would be due and
payable upon a declaration of acceleration of the Stated
Maturity thereof pursuant to Section 5.2, or change the
place of payment where, or the coin or currency in which,
any Security or interest thereon is payable, or impair the
right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in aggregate principal
amount of the Outstanding Securities, the consent of whose
Holders is required for any such supplemental indenture, or
the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided
for in this Indenture, or
(3) modify any of the provisions of this Section,
Section 5.13 or Section 10.5, except to increase any such
percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the
consent of the Holder of each Security affected thereby;
provided, further, that, in the case of the Securities
issued to the Issuer Trust, so long as any of the Preferred
Securities issued by the Issuer Trust remains outstanding,
(i) no such amendment shall be made that adversely affects
the holders of such Preferred Securities in any material
respect, and no termination of this Indenture shall occur,
and no waiver of any Event of Default or compliance with any
covenant under this Indenture shall be effective, without
the prior consent of the holders of at least a majority of
the aggregate Liquidation Amount (as defined in the Trust
Agreement) of such Preferred Securities then outstanding
unless and until the principal of (and premium, if any, on)
the Securities and all accrued and (subject to Section 3.8)
unpaid interest (including any Additional Interest) thereon
have been paid in full, and (ii) no amendment shall be made
to Section 5.8 of this Indenture that would impair the
rights of the holders of Preferred Securities issued by the
Issuer Trust provided therein without the prior consent of
the holders of each such Preferred Security then outstanding
unless and until the principal of (and premium, if any, on)
the Securities of such series and all accrued and (subject
to Section 3.8) unpaid interest (including any Additional
Interest) thereon have been paid in full.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
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 Officers'
Certificate and an Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this
Indenture, and that all conditions precedent herein provided for
relating to such action have been complied with. The Trustee
may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
<PAGE>
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 as then in effect.
SECTION 9.6. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and
shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new
Securities so modified as to conform, in the opinion of the
Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the
Securities that it will duly and punctually pay the principal of
(and premium, if any) and interest (including any Additional
Interest) on the Securities in accordance with the terms of such
Securities and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment an office
or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be
served. The Company initially appoints the Trustee, acting
through its Corporate Trust Office, as its agent for said
purposes. The Company will give prompt written notice to the
Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain such
office or agency or shall 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 may be presented
or surrendered for any or all of such purposes, and may from time
to time rescind such designations; provided, however, that no
such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each
Place of Payment for Securities for such purposes. The Company
will give prompt written notice to the Trustee of any such
designation and any change in the location of any such office or
agency,
SECTION 10.3. Money for Security Payments to be Held in
Trust.
If the Company shall at any time act as its own Paying Agent
with respect to the Securities, it will, on or before each due
date of the principal of (and premium, if any) or interest
(including Additional Interest) on any of the Securities,
segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and
<PAGE>
premium, if any) or interest (including Additional Interest) so
becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly
notify the Trustee of its failure so to act.
Whenever the Company shall have one or more Paying Agents,
it will, prior to 10:00 a.m., New York City time, on each due
date of the principal of (or premium, if any) or interest,
including Additional Interest on any Securities, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium,
if any) or interest, including Additional Interest so becoming
due, such sum to be held in trust for the benefit of the Persons
entitled to such principal (and premium, if any) or interest,
including Additional Interest, and (unless such Paying Agent is
the Trustee) the Company will promptly notify the Trustee of its
failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and 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:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any, or interest (including
Additional Interest) on the Securities in trust for the
benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon such Securities) in the
making of any payment of principal (and premium, if any) or
interest (or Additional interest) in respect of any
Security;
(3) at any time during the continuance of any default
with respect to the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums so held
in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture
Act applicable to it as a Paying Agent.
The Company may, at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such
Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or
such paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company in trust for the payment of the
principal of (and premium, if any) or interest (including
Additional Interest) on any Security and remaining unclaimed for
two years after such principal (and premium, if any) or interest
(including Additional Interest) has become due and payable shall
(unless otherwise required by mandatory provision of applicable
escheat or abandoned or unclaimed property law) be paid on
Company Request to the Company, or (if then held by the Company)
shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each
Business Day and of general circulation in the Borough of
Manhattan, the City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 10.4. Statement as to Compliance.
The Company shall 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 covering the preceding
calendar year, stating whether or not to the best knowledge of
the signers thereof of the Company is in default in the
performance, observance or fulfillment of or <PAGE> compliance with any
of the terms, provisions, covenants and conditions of this
Indenture, and if the Company shall be in default, specifying all
such defaults and the nature and status thereof of which they may
have knowledge. For the purpose of this Section 10.4, compliance
shall be determined without regard to any grace period or
requirement of notice provided pursuant to the terms of this
Indenture.
SECTION 10.5. Waiver of Certain Covenants.
Subject to the rights of holders of Preferred Securities
specified in Section 9.2, if any, the Company may omit in any
particular instance to comply with any covenant or condition
provided pursuant to Section 3.1, 9.1(3) or 9.1(4) with respect
to the Securities, if before or after the time for such
compliance the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities shall, by Act of
such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but
no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the
Company in respect of any such covenant or condition shall remain
in full force and effect.
SECTION 10.6. Additional Sums.
So long as no Event of Default has occurred and is
continuing and except as otherwise specified as contemplated by
Section 2.1 or Section 3.1, if (i) the Issuer Trust is the Holder
of all of the Outstanding Securities, and (ii) a Tax Event
described in clause (i) or (iii) of the definition of "Tax Event"
in Section 1.1 hereof has occurred and is continuing in respect
of the Issuer Trust, the Company shall pay the Issuer Trust (and
its permitted successors or assigns under the Trust Agreement)
For so long as the Issuer Trust (or its permitted successor or
assignee) is the registered holder of the Outstanding Securities,
such additional sums as may be necessary in order that the amount
of Distributions (including any Additional Amounts (as defined in
the Trust Agreement)) then due and payable by the Issuer Trust on
the Preferred Securities and Common Securities that at any time
remain outstanding in accordance with the terms thereof shall not
be reduced as a result of such Additional Taxes (the "Additional
Sums"). Whenever in this Indenture or the Securities there is a
reference in any context to the payment of principal of or
interest on the Securities, such mention shall be deemed to
include mention of the payments of the Additional Sums provided
for in this paragraph to the extent that, in such context,
Additional Sums are, were or would be payable in respect thereof
pursuant to the provisions of this paragraph and express mention
of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional
Sums in those provisions hereof where such express mention is not
made; provided, however, that the deferral of the payment of
interest pursuant to Section 3.12 or the Securities shall not
defer the payment of any Additional Sums that may be due and
payable.
SECTION 10.7. Additional Covenants.
The Company covenants and agrees with each Holder of
Securities that it shall not (x) declare or pay any dividends or
distributions on, or redeem purchase, acquire or make a
liquidation payment with respect to, any shares of the Company's
capital stock, or (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company that rank pari passu in all
respects with or junior in interest to the Securities (other than
(a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to
the applicable Extension Period or other event referred to below,
(b) as a result of an exchange or conversion of any class or
series of the Company's capital stock (or any capital stock of a
Subsidiary of the Company) for any class or series of the
Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's
capital stock, (c) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in
connection with any Rights Plan, or the issuance of rights, stock
or other property under any Rights Plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such
warrants, options or other rights is the <PAGE> same stock as that on
which the dividend is being paid or ranks pari passu with or
junior to such stock) if at such time (i) there shall have
occurred any event (A) Of which the Company has actual knowledge
that with the giving of notice or the lapse of time, or both,
would constitute an Event of Default with respect to the
Securities, and (B) which the Company shall not have taken
reasonable steps to cure, (ii) if the Securities are held by the
Issuer Trust, the Company shall be in default with respect to its
payment of any obligations under the Guarantee relating to the
Preferred Securities issued by the Issuer Trust, or (iii) the
Company shall have given notice of its election to begin an
Extension Period with respect to the Securities as provided
herein and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities
issued to the Issuer Trust (i) to hold, directly or indirectly,
100% of the Common Securities of the Issuer Trust, provided that
any permitted successor of the Company as provided under Section
8.2 may succeed to the Company's ownership of such Common
Securities, (ii) as holder of such Common Securities, not to
voluntarily terminate, windup or liquidate the Issuer Trust,
other than (a) in connection with a distribution of the
Securities to the holders of the Preferred Securities in
liquidation of the Issuer Trust, or (b) in connection with
certain mergers, consolidations or amalgamations permitted by the
Trust Agreement, and (iii) to use its reasonable efforts,
consistent with the terms and provisions of the Trust Agreement,
to cause the Issuer Trust to continue not to be taxable as a
corporation for United States federal income tax purposes.
SECTION 10.8. Original Issue Discount.
On or before December 15 of each year during which any
Securities are outstanding, the Company shall furnish to each
Paying Agent such information as may be reasonably requested by
each Paying Agent in order that each Paying Agent may prepare the
information which it is required to report for such year on
Internal Revenue Service Forms 1096 and 1099 pursuant to Section
6049 of the Internal Revenue Code of 1986, as amended. Such
information shall include the amount of original issue discount
includible in income for each authorized minimum denomination of
principal amount at Stated Maturity of outstanding Securities
during such year.
ARTICLE IX
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.
Redemption of Securities as permitted or required by any
form of Security issued pursuant to this Indenture shall be made
in accordance with such form of Security and this Article;
provided, however, that, if any provision of any such form of
Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall
be evidenced by or pursuant to a Board Resolution. In case of
any redemption at the election of the Company, the Company shall,
not less than 30 nor more than 60 days prior to the Redemption
Date (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee and, in the case of Securities held
by the Issuer Trust, the Property Trustee under the Trust
Agreement, of such date and of the principal amount of Securities
to be redeemed and provide the additional information required to
be included in the notice or notices contemplated by Section
11.4; provided that, for so long as such Securities are held by
the Issuer Trust, such notice shall be given not less than 45 nor
more than 75 days prior to such Redemption Date (unless a shorter
notice shall be satisfactory to the Property Trustee under the
Trust Agreement). 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, the Company shall
furnish the Trustee with an Officers' Certificate and an Opinion
of Counsel evidencing compliance with such restriction.
<PAGE>
SECTION 11.3. Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed, 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 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 a portion
of the principal amount of any Security, provided that the
unredeemed portion of the principal amount of any Security shall
be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
The Trustee shall promptly notify the Company in writing of
the Securities selected for partial redemption and the principal
amount thereof to be redeemed. For all purposes of this
Indenture, unless the context otherwise requires, all provisions
relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security that has
been or is to be redeemed.
SECTION 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not later than the thirtieth day, and not
earlier than the sixtieth day, prior to the Redemption Date, to
each Holder of Securities to be redeemed, at the address of such
Holder as it appears in the Securities Register.
With respect to Securities to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price or, if the Redemption Price cannot
be calculated prior to the time the notice is required to be
sent, the estimate of the Redemption Price provided pursuant to
the Indenture together with a statement that it is an estimate
and that the actual Redemption Price will be calculated on the
third Business Day prior to the Redemption Date (if such an
estimate of the Redemption Price is given, a subsequent notice
shall be given as set forth above setting forth the Redemption
Price promptly following the calculation thereof);
(c) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of partial
redemption, the respective principal amounts) of the particular
Securities to be redeemed;
(d) that, on the Redemption Date, the Redemption Price will
become due and payable upon each such Security or portion
thereof, and that interest thereon, if any, shall cease to accrue
on and after said date;
(e) the place or places where such Securities are to be
surrendered for payment of the Redemption Price;
(f) such other provisions as may be required in respect of
the terms of the Securities; and
(g) that the redemption is for a sinking fund, if such is
the case.
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. The notice, if mailed
in the manner provided above, shall be conclusively presumed to
have been duly given, whether or not the Holder receives such
notice. In any case, a failure to give such notice by mail or
any defect in the notice to the Holder of any Security designated
for redemption as a whole or in part shall not affect the
validity of the proceedings for the redemption of any other
Security.
SECTION 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m., New York City time, on the Redemption
Date specified in the notice of redemption given as provided in
Section 11.4, the Company will deposit with the Trustee or with
one or more Paying Agents (or if the <PAGE> Company is acting as its own
Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay
the Redemption Price of, and any accrued interest (including
Additional Interest) on, all the Securities (or portions thereof)
that are to be redeemed on that date.
SECTION 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in
Section 11.4, the Securities or portion of Securities with
respect to which such notice has been given shall become due and
payable on the date and at the place or places stated in such
notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption
Date. On presentation and surrender of such Securities at a
Place of Payment in said notice specified, the said Securities or
the specified portions thereof shall be paid and redeemed by the
Company at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption
Date; provided, however, that, installments of interest
(including Additional Interest) whose Stated Maturity is on or
prior to the Redemption Date will 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 3.8.
Upon presentation of any Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a
new Security or Securities, of authorized denominations, in
aggregate principal amount equal to the unredeemed portion of the
Security so presented and having the same Original Issue Date,
Stated Maturity and terms.
If any Security called for redemption shall not be so paid
under surrender thereof for redemption, the principal of and
premium, if any, on such Security shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor
in the Security.
SECTION 11.7. Right of Redemption of Securities Initially
Issued to the Issuer Trust.
The Company, at its option, may redeem such Securities (i)
on or after June 30, 2002, in whole at any time or in part from
time to time, or (ii) upon the occurrence and during the
continuation of a Tax Event, an Investment Company Event or a
Capital Treatment Event, at any time within 90 days following the
occurrence and during the continuation of such Tax Event,
Investment Company Event or Capital Treatment Event, in whole
(but not in part), in each case at a Redemption Price specified
in such Security, together with accrued interest (including
Additional Interest) to the Redemption Date.
If less than all the Securities are to be redeemed, the
aggregate principal amount of such Securities remaining
Outstanding after giving effect to such redemption shall be
sufficient to satisfy any provisions of the Trust Agreement.
ARTICLE XII
SINKING FUNDS
Except as may be provided in any supplemental or amended
indenture, no sinking fund shall be established or maintained for
the retirement of Securities.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior
Indebtedness.
The Company covenants and agrees, and each Holder of a
Security, by its acceptance thereof, likewise covenants and
agrees, that, to the extent and in the manner hereinafter set
forth in this Article, the payment of the <PAGE> principal of (and
premium, if any) and interest (including any Additional interest)
on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
SECTION 13.2. No Payment When Senior Indebtedness in
Default, Payment Over of Proceeds Upon Dissolution, Etc.
If the Company shall default in the payment of any principal
of (or premium, if any) 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, then, upon written notice of such default to the
Company by the holders of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise)
shall be made or agreed to be made on account of the principal of
(or premium, if any) or interest (including Additional Interest)
on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of
the Securities.
In the event of (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment,
composition or other similar proceeding relating to the Company,
its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Company,
voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by the Company for
the benefit of creditors or (iv) any other marshaling of the
assets of the Company (each such event, if any, herein sometimes
referred to as a "Proceeding"), all Senior Indebtedness
(including any interest thereon accruing after the commencement
of any such proceedings) shall first be paid in full before any
payment or distribution, whether in cash, securities or other
property, shall be made to any Holder on account thereof. Any
payment or distribution, whether in cash, securities or other
property (other than securities of the Company or any other
entity provided for by a plan of reorganization or readjustment,
the payment of which is subordinate, at least to the extent
provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all
Senior Indebtedness at the time outstanding and to any securities
issued in respect thereof under any such plan of reorganization
or readjustment), which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of
the Securities shall be paid or delivered directly to the holders
of Senior Indebtedness in accordance with the priorities then
existing among such holders until all Senior Indebtedness
(including any interest thereon accruing after the commencement
of any Proceeding) shall have been paid in full.
In the event of any Proceeding, after payment in full of all
sums owing with respect to Senior Indebtedness, the Holders of
the Securities, together with the holders of any obligations of
the Company ranking on a parity with the Securities, shall be
entitled to be paid from the remaining assets of the Company the
amounts at the time due and owing on account of unpaid principal
of (and premium, if any) and interest on the Securities and such
other obligations before any payment or other distribution,
whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Company ranking
junior to the Securities, and such other obligations. If,
notwithstanding the foregoing, any payment or distribution of any
character or any security, whether in cash, securities or other
property (other than securities of the Company or any other
entity provided for by a plan of reorganization or readjustment
the payment of which is subordinate, at least to the extent
provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all
Senior Indebtedness at the time outstanding and to any securities
issued in respect thereof under any plan of reorganization or
readjustment), shall be received by the Trustee or any Holder in
contravention of any of the terms hereof and before all Senior
Indebtedness shall have been paid in full, such payment or
distribution or security shall be received in trust for the
benefit of, and shall be paid over or delivered and transferred
to, the holders of the Senior Indebtedness at the time
outstanding in accordance with the priorities then existing among
such holders for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full. In the event of the failure of
the Trustee or any Holder to endorse or assign any such payment,
distribution or security, each holder of Senior Indebtedness is
hereby irrevocably authorized to endorse or assign the same.
<PAGE>
The Trustee and the Holders shall take such action
(including, without limitation, the delivery of this Indenture to
an agent for the holders of Senior Indebtedness or consent to the
filing of a financing statement with respect hereto) as may, in
the opinion of counsel designated by the holders of a majority in
principal amount of the Senior Indebtedness at the time
outstanding, be necessary or appropriate to assure the
effectiveness of the subordination effected by these provisions.
The provisions of this Section 13.2 shall not impair any
rights, interests, remedies or powers of any secured creditor of
the Company in respect of any security interest the creation of
which is not prohibited by the provisions of this Indenture.
The securing of any obligations of the Company, otherwise
ranking on a parity with the Securities or ranking junior to the
Securities shall not be deemed to prevent such obligations from
constituting, respectively, obligations ranking on a parity with
the Securities or ranking junior to the Securities.
SECTION 13.3. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent (a) the
Company, at any time, except during the pendency of the
conditions described in the first paragraph of Section 13.2 or of
any Proceeding referred to in Section 13.2, from making payments
at any time of principal of (and premium, if any) or interest
(including Additional Interest) on the Securities, or (b) the
application by the Trustee of any monies deposited with it
hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional
Interest) on the Securities or the retention of such payment by
the Holders, if, at the time of such application by the Trustee,
it did not have knowledge that such payment would have been
prohibited by the provisions of this Article.
SECTION 13.4. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all amounts due or to
become due on all Senior Indebtedness, or the provision for such
payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, the Holders
of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article (equally
and ratably with the holders of all indebtedness of the Company
that by its express terms is subordinated to Senior Indebtedness
of the Company to substantially the same extent as the Securities
are subordinated to the Senior Indebtedness and is entitled to
like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Indebtedness) 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 (including Additional Interest) on
the Securities 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 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 or the Trustee,
shall, as among the Company, its creditors other than holders of
Senior Indebtedness, and the Holders of the Securities, be deemed
to be a payment or distribution by the Company to or on account
of the Senior Indebtedness.
SECTION 13.5. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely
for the purpose of defining the relative rights of the Holders of
the Securities on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as between the Company and the
Holders of the Securities, the obligations of the Company, which
are absolute and unconditional, to pay to the Holders of the
Securities the principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities as and when
the same shall become due and payable in accordance with their
terms; or (b) affect the relative rights against the Company of
the Holders of the Securities and creditors of the Company other
than their rights in relation to the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any
Security (or to the extent <PAGE> expressly provided herein, the holder
of any Preferred Security) from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture,
including filing and voting claims in any Proceeding, subject to
the rights, if any, under this Article of the holders of Senior
Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 13.6. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof
authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or
effectuate the subordination provided in this Article and
appoints the Trustee his or her attorney-in-fact for any and all
such purposes.
SECTION 13.7. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
that any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the
immediately preceding paragraph, the holders of Senior
Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to such Holders of
the Securities and without impairing or releasing the
subordination provided in this Article or the obligations
hereunder of such Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i)
change the manner, place or terms of payment or extent the time
of payment of, or renew or alter, Senior Indebtedness, or
otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person
liable in any manner for the collection of Senior Indebtedness;
and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 13.8. Notice to Trustee.
The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the
Company that would prohibit the making of any payment to or by
the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any
payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof
from the Company or a holder of Senior Indebtedness or from any
trustee, agent or representative therefor; provided, however,
that if the Trustee shall not have received the notice provided
for in this Section at least two Business Days prior to the date
upon which by the term hereof any monies may become payable for
any purpose (including, the payment of the principal of (and
premium, if any, on) or interest (including any Additional
Interest) on any Security), then, anything herein contained to
the contrary notwithstanding, the Trustee shall have full power
and authority to receive such monies and to apply the same to the
purpose for which they were received and shall not be affected by
any notice to the contrary that may be received by it within two
Business Days prior to such date.
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 or herself to be a holder of Senior
Indebtedness (or a trustee or attorney-in-fact therefor) to
establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee or attorney-in-fact 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 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 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 <PAGE> 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 13.9. 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
shall be entitled to rely upon any order or decree entered by any
court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver,
conservator, 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, 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,
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 13.10. Trustee Not Fiduciary for Holders of Senior
Indebtedness.
The Trustee, in its capacity as trustee under this
Indenture, shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any
such holders if it shall in good faith mistakenly pay over or
distribute to Holders of Securities or to the Company or to any
other Person cash, property or securities to which any holders of
Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
SECTION 13.11. Rights of Trustee as Holder of Senior
Indebtedness; 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 that may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
SECTION 13.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting
hereunder, the term "Trustee" as used in this Article shall in
such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the
Trustee.
SECTION 13.13. Certain Conversions or Exchanges Deemed
Payment.
For purposes of this Article only, (a) the issuance and
delivery of junior securities upon conversion or exchange of
Securities shall not be deemed to constitute a payment or
distribution on account of the principal of (or, premium if any,
on) or interest (including any Additional Interest) on such
Securities or on account of the purchase or other acquisition of
such Securities, and (b) the payment, issuance or delivery of
cash, property or securities (other than junior securities) upon
conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such security.
For the purposes of this Section, the term "junior securities"
means (i) shares of any stock of any class of the Company, and
(ii) securities of the Company that are subordinated in right of
payment to all Senior Indebtedness that may be outstanding at the
time of issuance or delivery of such securities to substantially
the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article.
* * * *
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.
<PAGE>
[This page intentionally has been left blank;
signatures appear on following page.]
<PAGE>
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.
Attest: BROAD NATIONAL BANCORPORATION
By:________________________
Name:
Title:
Attest: BANKERS TRUST COMPANY,
as Trustee
By:_________________________
Name:
Title:
BROAD NATIONAL BANCORPORATION
9.50% Junior Subordinated Debentures due June 30, 2027
No. P-I CUSIP 111239 AA 7 $11,855,670.00
BROAD NATIONAL BANCORPORATION, a New Jersey corporation
(hereinafter called the "Company", which term includes any
successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to BNB Capital Trust,
or registered assigns, the principal sum of Eleven Million Eight
Hundred Fifty-Five Thousand Six Hundred Seventy Dollars
($11,855,670) on June 30, 2027, or such other principal amount
represented hereby as may be set forth in the records of the
Securities Registrar hereinafter referred to in accordance with
the Indenture. The Company further promises to pay interest on
said principal from June 30, 1997, or from the most recent
Interest Payment Date to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein)
in arrears on the last day of March, June, September and December
of each year, commencing September 30, 1997 at the rate of 9.50%
per annum, together with Additional Sums, if any, as provided in
Section 10.6 of the Indenture, until the principal hereof is paid
or duly provided for or made available for payment; provided that
any overdue principal, premium or Additional Sums and any overdue
installment of interest shall bear Additional Interest at the
rate of 9.50% per annum (to the extent that the payment of such
interest shall be legally enforceable), compounded quarterly from
the dates such amounts are due until they are paid or made
available for payment, and such interest shall be payable on
demand. The amount of interest payable for any period less than
a full interest period shall be computed on the basis of a
360-day year of twelve 30-day months and the actual days elapsed
in a partial month in such period. The amount of interest
payable for any full interest period shall be computed by
dividing the applicable rate per annum by four. The interest so
payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment, which
shall be the 15th day of March, June, September and December
(whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Trustee, notice whereof shall be given to
Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and
upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
So long as no Event of Default has occurred and is
continuing, the Company shall have the right, at any time during
the term of this Security, from time to time to defer the payment
of interest on this Security for up to 20 consecutive quarterly
interest payment periods with respect to each deferral period
(each an "Extension Period"), during which Extension Periods the
Company shall have the right to make partial payments of interest
on any Interest Payment Date, and at the end of which the Company
shall pay all interest then accrued and unpaid including
Additional Interest, as provided below; provided, however, that
no Extension Period shall extend beyond the Stated Maturity of
the principal of this Security, as then in effect, and no such
Extension Period may end on a date other than an Interest Payment
Date; and provided, further, however, that during any such
Extension Period, the Company shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of the Company's
capital stock, or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the company that rank pari passu in all
respects with or junior in interest to this Security (other than
(a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities
convertible into or exercisable for such capital stock) as
consideration in an acquisition transaction entered into prior to
the applicable Extension Period, (b) as a result of an exchange
or conversion of any class or series of the Company's capital
stock (or any capital stock of a Subsidiary of the Company) for
any class or series of the Company's capital stock or of any
class or series of the Company's indebtedness for any class or
series of the Company's capital stock, (c) the purchase of
fractional <PAGE> interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, or
the issuance of rights, stock or other property under any Rights
plan, or the redemption or repurchase of rights pursuant thereto,
or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari
passu with or junior to such stock). Prior to the termination of
any such Extension Period, the Company may further defer the
payment of interest, provided that no Extension Period shall
exceed 20 consecutive quarterly interest payment periods, extend
beyond the Stated Maturity of the principal of this Security or
end on a date other than an Interest Payment Date. Upon the
termination of any such Extension Period and upon the payment of
all accrued and unpaid interest and any Additional Interest then
due on any Interest Payment Date, the Company may elect to begin
a new Extension Period, subject to the above conditions. No
interest shall be due and payable during an Extension Period,
except at the end thereof, but each installment of interest that
would otherwise have been due and payable during such Extension
Period shall bear Additional Interest (to the extent that the
payment of such interest shall be legally enforceable) at the
rate of 9.50% per annum, compounded quarterly and calculated as
set forth in the first paragraph of this Security, from the date
on which such amounts would otherwise have been due and payable
until paid or made available for payment. The Company shall give
the Holder of this Security and the Trustee notice of its
election to begin any Extension Period at least one Business Day
prior to the next succeeding Interest Payment Date on which
interest on this Security would be payable but for such deferral
or so long as such securities are held by BNB Capital Trust, at
least one Business Day prior to the earlier of (i) the next
succeeding date on which Distributions on the Preferred
Securities of the Issuer Trust would be payable but for such
deferral, and (ii) the date on which the Property Trustee of the
Issuer Trust is required to give notice to holders of such
Preferred Securities of the record date or the date such
Distributions are payable, but in any event not less than one
Business Day prior to such record date.
Payment of the principal of (and premium, if any) and
interest on this Security will be made at the office or agency of
the Company maintained for that purpose in the United States, in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts; provided, however that at the option of the Company
payment of interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall
appear in the Securities Register, or (ii) if to a Holder of
$1,000,000 or more in aggregate principal amount of this
Security, by wire transfer in immediately available funds upon
written request to the Trustee not later than 15 calendar days
prior to the date on which the interest is payable.
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and subject in
right of payments 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. 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 or her behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided, and (c)
appoints the Trustee his or her attorney-in-fact for any and all
such purposes. Each Holder hereof, by his or her acceptance
hereof, waives all notice of the acceptance of the subordination
provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said
provisions.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
BROAD NATIONAL BANCORPORATION
By:________________________
Name:
Title:
Attest:
____________________________
Secretary or Assistant Secretary
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
Dated:____________, 1997 BANKERS TRUST COMPANY,
as Trustee
By:_________________________
Authorized Signatory
<PAGE>
[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 the Junior
Subordinated Indenture, dated as of June30, 1997, (herein called
the "Indenture"), between the Company and Bankers Trust Company,
as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for
a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness 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 $11,855,670.
All terms used in this Security that are defined in the
Indenture or in the Amended and Restated Trust Agreement dated as
of June 30, 1997 (as modified, amended or supplemented from time
to time the "Trust Agreement"), relating to BNB Capital Trust
(the "Issuer Trust") among the Company, as Depositor, the
Trustees named therein and the Holders from time to time of the
Trust Securities issued pursuant thereto shall have the meanings
assigned to them in the Indenture or the Trust Agreement, as the
case may be.
The Company has the right to redeem this Security (i) on or
after June 30, 2002 in whole at any time or in part from time to
time, or (ii) in whole (but not in part), at any time within 90
days following the occurrence and during the continuation of a
Tax Event, Investment Company Event, or Capital Treatment Event,
in each case at the Redemption Price described below, and subject
to possible regulatory approval. The Redemption Price shall
equal 100% of the principal amount hereof being redeemed,
together with accrued interest to but excluding the date fixed
for redemption.
In the event of redemption of this Security in part only, a
new Security or Securities of this series for the unredeemed
portion hereof will be issued in the name of the Holder hereof
upon the cancellation hereof.
The Indenture permits, with certain exceptions as therein
provided, the Company and the Trustee at any time to enter into a
supplemental indenture or indentures for the purpose of modifying
in any manner the rights and obligations of the Company and of
the Holders of the Securities, with the consent of the Holders of
not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting
Holders of specified percentages in principal amount of the
Securities of each series at the time Outstanding, on behalf of
the Holders of all Securities of such series, to waive compliance
by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made
upon this Security.
As provided in and subject to the provisions of the
Indenture, if an Event of Default with respect to the Securities
of this series at the time Outstanding occurs and is continuing,
then and in every such case the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding
Securities of this series may declare the principal amount of all
the Securities of this series to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if
given by Holders), provided that, if upon an Event of Default,
the Trustee or such Holders fail to declare the principal of all
the Outstanding Securities of this series to be immediately due
and payable, the holders of at least 25% in aggregate Liquidation
Amount of the Preferred Securities then outstanding shall have
the right to make such declaration by a notice in writing to the
Company and the Trustee; and upon any such declaration the
principal amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall
become immediately due and payable, provided that the payment of
principal and interest (including any Additional Interest) on
such Securities shall remain subordinated to the extent provided
in Article XIII of the Indenture.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of (and premium, if any) and interest
(including Additional Interest) on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
<PAGE>
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Securities Register, upon surrender of this
Security for registration of transfer at the office or agency of
the Company maintained under Section 10.2 of the Indenture for
such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Securities Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon
one or more new Securities of this series, 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 $1,000 and
any integral multiple of $1,000 in excess thereof. As provided
in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of 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.
The Company and, by its acceptance of this Security or a
beneficial interest therein, the Holder of, and any Person that
acquires a beneficial interest in, this Security agrees that for
United States federal, state and local tax purposes it is
intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THIS SECURITY IS A DIRECT AND UNSECURED OBLIGATION OF THE
COMPANY, DOES NOT EVIDENCE DEPOSITS AND IS NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER INSURER OR
GOVERNMENT AGENCY.
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of June 9, 1997 (this "Trust
Agreement") among (i) BROAD NATIONAL BANCORPORATION, a New Jersey
corporation (the "Depositor"), and (ii) BANKERS TRUST (DELAWARE),
a Delaware banking corporation (the "Trustee"). The Depositor
and the Trustee hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known
as "BNB Capital Trust" in which name the Trustee, or the
Depositor to the extent provided herein, may engage in the
transactions contemplated hereby, make and execute contracts, and
sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and
sets over to the Trustee the sum of $10. The Trustee hereby
acknowledges receipt of such amount in trust from the Depositor,
which amount shall constitute the initial trust estate. The
Trustee hereby declares that it will hold the trust estate in
trust for the Depositor. It is the intention of the parties
hereto that the Trust created hereby constitute a business trust
under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
Section 3801, et seq. (the "Business Trust Act"), and that this
document constitutes the governing instrument of the Trust. The
Trustee is hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in
accordance with the provisions of the Business Trust Act.
3. The Depositor and the Trustee will enter into an
amended and restated Trust Agreement, satisfactory to each such
party and substantially in the form included as an exhibit to the
1933 Act Registration Statement (as defined below), to provide
for the contemplated operation of the Trust created hereby and
the issuance of the Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such
amended and restated Trust Agreement, the Trustee shall not have
any duty or obligation hereunder or with respect to the trust
estate, except as otherwise required by applicable law or as may
be necessary to obtain, prior to such execution and delivery, any
licenses, consents or approvals required by applicable law or
otherwise.
4. The Depositor and the Trustee hereby authorize and
direct the Depositor, as the sponsor of the Trust, (i) to file
with the Securities and Exchange Commission (the "Commission")
and execute, in each case on behalf of the Trust, (a) the
Registration Statement on Form S-2 (the "1933 Act Registration
Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement, relating to
the registration under the Securities Act of 1933, as amended, of
the Preferred Securities of the Trust and possibly certain other
securities and (b) a Registration Statement on Form 8-A (the
"1934 Act Registration Statement") (including all pre-effective
and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under the
Securities Exchange Act of 1934, as amended; (ii) to file with
The Nasdaq Stock Market or any national stock exchange (each, an
"Exchange") and execute on behalf of the Trust one or more
listing applications and all other applications, statements,
certificates, agreements and other instruments as shall be
necessary or desirable to cause the Preferred Securities to be
listed on any of the Exchanges; (iii) to file and execute on
behalf of the trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of
process and other papers and documents as shall be necessary or
desirable to register the Preferred Securities under the
securities or blue sky laws of such jurisdictions as the
Depositor, on behalf of the Trust, may deem necessary or
desirable and (iv) to execute on behalf of the Trust that certain
Underwriting Agreement relating to the Preferred Securities,
among the Trust, the Depositor and the Underwriter named therein,
substantially in the form included as an exhibit to the 1933 Act
Registration Statement. In connection with the filings referred
to above, the Depositor hereby constitutes and appoints Donald M.
Karp and James Boyle, and each of them, as its true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the Depositor or in the Depositor's name,
place and stead, in and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement
and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Commission, the
Exchange and administrators of state securities or blue sky laws,
granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as the Depositor might or could
do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their respective
substitute or substitutes, shall do or cause to be done by virtue
hereof.
5. This Trust Agreement may be executed in one or more
counterparts.
<PAGE>
6. The number of Trustees initially shall be one (1) and
thereafter the number of Trustees shall be such number as shall
be fixed from time to time by a written instrument signed by the
Depositor which may increase or decrease the number of Trustees;
provided, however, that to the extent required by the Business
Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of
Delaware and otherwise meets the requirements of applicable
Delaware law. Subject to the foregoing, the Depositor is
entitled to appoint or remove without cause any Trustee at any
time. The Trustees may resign upon thirty (30) days' prior
notice to the Depositor.
7. This Trust Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware
(without regard to conflict of laws principles.)
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed as of the day and year first
above written.
BROAD NATIONAL BANCORPORATION,
as Depositor
By: /s/ Donald M. Karp
Name: Donald M. Karp
Title: Chairman of the Board and
Chief Executive Officer
BANKERS TRUST (Delaware),
as Trustee
By: /s/ M. Lisa Wilkins
Name: M. Lisa Wilkins
Title: Assistant Secretary
AMENDED AND RESTATED
TRUST AGREEMENT
among
BROAD NATIONAL BANCORPORATION, as Depositor,
BANKERS TRUST COMPANY
as Property Trustee,
and
BANKERS TRUST (DELAWARE),
as Delaware Trustee
Dated as of June 30, 1997
BNB CAPITAL TRUST
<PAGE>
BNB CAPITAL TRUST
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Section Trust Agreement Section
Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . .8.7
(a)(2) . . . . . . . . . . . . . . . . . . . . . . .8.7
(a)(3) . . . . . . . . . . . . . . . . . . . . . . .8.9
(a)(4) . . . . . . . . . . . . . . . . . . . 2.7(a)(ii)
(b). . . . . . . . . . . . . . . . . . . .8.8, 10.10(b)
Section 311(a) . . . . . . . . . . . . . . . . . 8.13, 10.10(b)
(b). . . . . . . . . . . . . . . . . . . 8.13, 10.10(b)
Section 312(a) . . . . . . . . . . . . . . . . . . . . 10.10(b)
(b). . . . . . . . . . . . . . . . . . . .10.10(b), (f)
(c). . . . . . . . . . . . . . . . . . . . . . . . .5.7
Section 313(a) . . . . . . . . . . . . . . . . . . . . .8.15(a)
(a)(4) . . . . . . . . . . . . . . . . . . . . 10.10(c)
(b). . . . . . . . . . . . . . . . . .8.15(c), 10.10(c)
(c). . . . . . . . . . . . . . . . . . . 10.8, 10.10(c)
(d). . . . . . . . . . . . . . . . . . . . . .10.10(c)`
Section 314(a) . . . . . . . . . . . . . . . . . 8.16, 10.10(d)
(b). . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . .8.17, 10.10(d), (e)
(c)(2) . . . . . . . . . . . . . . . . . .10.10(d), (e)
(c)(3) . . . . . . . . . . . . . . .8.17, 10.10(d), (e)
(e). . . . . . . . . . . . . . . . . . . 8.17, 10.10(e)
Section 315(a) . . . . . . . . . . . . . . . . . . . . . 8.1(d)
(b). . . . . . . . . . . . . . . . . . . . . . . . .8.2
(c). . . . . . . . . . . . . . . . . . . . . . . 8.1(c)
(d). . . . . . . . . . . . . . . . . . . . . . . 8.1(d)
(e). . . . . . . . . . . . . . . . . . . Not Applicable
Section 316(a) . . . . . . . . . . . . . . . . . Not Applicable
(a)(1)(A). . . . . . . . . . . . . . . . Not Applicable
(a)(1)(B). . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . Not Applicable
(b). . . . . . . . . . . . . . . . . . . . . . . . 5.13
(c). . . . . . . . . . . . . . . . . . . . . . . . .6.7
Section 317(a)(1). . . . . . . . . . . . . . . . Not Applicable
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 8.14
(b). . . . . . . . . . . . . . . . . . . . . . . . .5.1
Section 318(a) . . . . . . . . . . . . . . . . . . . . 10.10(a)
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINED TERMS. . . . . . . . . . . . . . . . . . . . .1
SECTION 1.1. Definitions. . . . . . . . . . . . . . .1
ARTICLE II CONTINUATION OF THE ISSUER TRUST. . . . . . . 9
SECTION 2.1. Name.. . . . . . . . . . . . . . . . . .9
SECTION 2.2. Office of the Delaware Trustee; Principal
Place of Business.. . . . . .9
SECTION 2.3. Initial Contribution of Trust Property,
Organizational Expenses.. . .9
SECTION 2.4. Issuance of the Preferred Securities.. .9
SECTION 2.5. Issuance of the Common Securities;
Subscription and Purchase of
Junior
Subordinated Debentures.10
SECTION 2.6. Declaration of Trust.. . . . . . . . . 10
SECTION 2.7. Authorization to Enter into Certain
Transactions. . . . . . . . 11
SECTION 2.8. Assets of Trust. . . . . . . . . . . . 13
SECTION 2.9. Title to Trust Property. . . . . . . . 13
ARTICLE III PAYMENT ACCOUNT . . . . . . 13
SECTION 3. 1. Payment Account.. . . . . . . . . . . 13
ARTICLE IV DISTRIBUTIONS; REDEMPTION . 13
SECTION 4.1. Distributions. . . . . . . . . . . . . 13
SECTION 4.2. Redemption.. . . . . . . . . . . . . . 14
SECTION 4.3. Subordination of Common Securities.. . 16
SECTION 4.4. Payment Procedures.. . . . . . . . . . 16
SECTION 4.5. Tax Returns and Reports. . . . . . . . 16
SECTION 4.6. Payment of Taxes; Duties, Etc. of the
Issuer Trust. . . . . . . . 17
SECTION 4.7. Payments under Indenture or Pursuant to
Direct Actions. . . . . . . 17
SECTION 4.8. Liability of the Holder of Common
Securities. . . . . . . . . 17
ARTICLE V TRUST SECURITIES CERTIFICATES. . . . . . . . . . . . 17
SECTION 5.1. Initial Ownership. . . . . . . . . . . 17
SECTION 5.2. The Trust Securities Certificates. . . 17
SECTION 5.3. Execution and Delivery of Trust
Securities Certificates.. . 18
SECTION 5.4. Global Preferred Security. . . . . . . 18
SECTION 5.5. Registration of Transfer and Exchange
Generally; Certain Transfers
and Exchanges;
Preferred Securities
Certificates. . . . . . . . 19
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen
Trust Securities Certificates.20
SECTION 5.7. Persons Deemed Holders.. . . . . . . . 20
SECTION 5.8. Access to List of Holders' Names and
Addresses.. . . . . . . . . 20
SECTION 5.9. Maintenance of Office or Agency. . . . 20
SECTION 5.10. Appointment of Paying Agent.. . . . . 21
SECTION 5.11. Ownership of Common Securities by
Depositor.. . . . . . . . . 21
SECTION 5.12. Notices to Clearing Agency. . . . . . 21
SECTION 5.13. Rights of Holders.. . . . . . . . . . 21
ARTICLE VI ACTS OF HOLDERS; MEETINGS; VOTING . . 23
SECTION 6.1. Limitations on Holder's Voting Rights. 23
SECTION 6.2. Notice of Meetings.. . . . . . . . . . 24
SECTION 6.3. Meetings of Holders. . . . . . . . . . 24
<PAGE>
SECTION 6.4. Voting Rights. . . . . . . . . . . . . 24
SECTION 6.5. Proxies, etc.. . . . . . . . . . . . . 24
SECTION 6.6. Holder Action by Written Consent.. . . 24
SECTION 6.7. Record Date for Voting and Other
Purposes. . . . . . . . . . 24
SECTION 6.8. Acts of Holders. . . . . . . . . . . . 25
SECTION 6.9. Inspection of Records. . . . . . . . . 25
ARTICLE VII REPRESENTATIONS AND WARRANTIES . . 26
SECTION 7.1. Representations and Warranties of the
Property Trustee and the
Delaware Trustee. . . . . . 26
SECTION 7.2. Representations and Warranties of
Depositor.. . . . . . . . . 26
ARTICLE VIII THE ISSUER TRUSTEES; THE ADMINISTRATORS . . . 27
SECTION 8.1. Certain Duties and Responsibilities. . 27
SECTION 8.2. Certain Notices. . . . . . . . . . . . 28
SECTION 8.3. Certain Rights of Property Trustee.. . 29
SECTION 8.4. Not Responsible for Recitals or Issuance
of Securities.. . . . . . . 30
SECTION 8.5. May Hold Securities. . . . . . . . . . 30
SECTION 8.6. Compensation; Indemnity; Fees. . . . . 30
SECTION 8.7. Corporate Property Trustee Required;
Eligibility of Trustees and
Administrators. . . . . . . 31
SECTION 8.8. Conflicting Interests. . . . . . . . . 31
SECTION 8.9. Co-Trustees and Separate Trustee.. . . 31
SECTION 8.10. Resignation and Removal; Appointment of
Successor.. . . . . . . . . 32
SECTION 8.11. Acceptance of Appointment by Successor.33
SECTION 8.12. Merger, Conversion, Consolidation or
Succession to Business. . . 33
SECTION 8.13. Preferential Collection of Claims
Against Depositor or Issuer
Trust.. . . . . . . . . . . 34
SECTION 8.14. Trustee May File Proofs of Claim. . . 34
SECTION 8.15. Reports by Property Trustee.. . . . . 34
SECTION 8.16. Reports to the Property Trustee.. . . 35
SECTION 8.17. Evidence of Compliance with Conditions
Precedent.. . . . . . . . . 35
SECTION 8.18. Number of Issuer Trustees.. . . . . . 35
SECTION 8.19. Delegation of Power.. . . . . . . . . 35
SECTION 8.20. Appointment of Administrators.. . . . 35
ARTICLE IX DISSOLUTION, LIQUIDATION AND MERGER . . . . 36
SECTION 9.1. Dissolution Upon Expiration Date.. . . 36
SECTION 9.2. Early Termination. . . . . . . . . . . 36
SECTION 9.3. Dissolution. . . . . . . . . . . . . . 36
SECTION 9.4. Liquidation. . . . . . . . . . . . . . 37
SECTION 9.5. Mergers, Consolidations, Amalgamations or
Replacements of the Issuer
Trust.. . . . . . . . . . . 38
ARTICLE X MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . 38
SECTION 10.1. Limitation of Rights of Holders.. . . 38
SECTION 10.2. Amendment.. . . . . . . . . . . . . . 39
SECTION 10.3. Separability. . . . . . . . . . . . . 39
SECTION 10.4. Governing Law.. . . . . . . . . . . . 40
SECTION 10.5. Payments Due on Non-Business Day. . . 40
SECTION 10.6. Successors. . . . . . . . . . . . . . 40
SECTION 10.7. Headings. . . . . . . . . . . . . . . 40
SECTION 10.8. Reports, Notices and Demands. . . . . 40
<PAGE>
SECTION 10.9. Agreement Not to Petition.. . . . . . 41
SECTION 10.10. Trust Indenture Act; Conflict with
Trust Indenture Act.. . . . 41
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture.. . 42
Exhibit A Certificate of Trust. . . . . . . . . . . . .
Exhibit B Form of Certificate Depositary Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Preferred Securities Certificate
<PAGE>
AGREEMENT
Amended and Restated Trust Agreement, dated as of June 30,
1997, among (i) Broad National Bancorporation, a New Jersey
corporation (including any successors or assigns, the
"Depositor"), (ii) Bankers Trust Company, a New York banking
corporation, as property trustee, (in such capacity, the
"Property Trustee" and, in its separate corporate capacity and
not in its capacity as Property Trustee, the "Bank"), and (iii)
Bankers Trust (Delaware), a Delaware banking corporation, as
Delaware trustee (the "Delaware Trustee") (the Property Trustee
and the Delaware Trustee are referred to collectively herein as
the "Issuer Trustees") and (iv) the several Holders, as
hereinafter defined.
WITNESSETH
WHEREAS, the Depositor and the Delaware Trustee have
heretofore duly declared and established a business trust
pursuant to the Delaware Business Trust Act by the entering into
a certain Trust Agreement, dated as of June 9, 1997 (the
"Original Trust Agreement"), and by the execution and filing by
the Delaware Trustee with the Secretary of State of the State of
Delaware of the Certificate of Trust, filed on June 9, 1997 (the
"Certificate of Trust"), attached as Exhibit A; and
WHEREAS, the Depositor and the Delaware Trustee desire to
amend and restate the Original Trust Agreement in its entirety as
set forth herein to provide for, among other things, (i) the
issuance of the Common Securities by the Issuer Trust to the
Depositor, (ii) the issuance and sale of the Preferred Securities
by the Issuer Trust pursuant to the Underwriting Agreement, (iii)
the acquisition by the Issuer Trust from the Depositor of all of
the right, title and interest in the Junior Subordinated
Debentures, and (iv) the appointment of the Property Trustee and
the Administrators.
NOW THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each party, for the benefit of the other parties
and for the benefit of the Holders, hereby amends and restates
the Original Trust Agreement in its entirety and agrees,
intending to be legally bound, as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1. Definitions.
For all purposes of this Trust Agreement, except as
otherwise expressly provided or unless the context otherwise
requires:
(a) The terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well
as the singular;
(b) All other terms used herein that are defined in the
Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(c) The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have
the meanings assigned to them in accordance with United States
generally accepted accounting principles as in effect at the time
of computation;
(e) 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 Trust Agreement;
<PAGE>
(f) The words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Trust Agreement as a whole
and not to any particular Article, Section or other subdivision;
and
(g) All references to the date the Preferred Securities
were originally issued shall refer to the date the Preferred
Securities were originally issued.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities
of a given Liquidation Amount and/or a given period, the amount
of Additional Interest (as defined in the Indenture) paid by the
Depositor on a Like Amount of Debentures for such period.
"Additional Sums" has the meaning specified in Section 10.6
of the Indenture.
"Administrators" means each Person appointed in accordance
with Section 8.20 solely in such Person's capacity as
Administrator of the Issuer Trust heretofore formed and continued
hereunder and not in such Person's individual capacity, or any
successor Administrator appointed as herein provided; with the
initial Administrators being Donald M. Karp and James Boyle.
"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.
"Applicable Procedures" means, with respect to any transfer
or transaction involving a Global Preferred Security or
beneficial interest therein, the rules and procedures of the
Depositary for such Preferred Security, in each case to the
extent applicable to such transaction and as in effect from time
to time.
"Bank" has the meaning specified in the preamble to this
Trust Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having
jurisdiction in the premises judging such Person a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjudication or composition of or in
respect of such Person under any applicable federal or State
bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of such Person or of any
substantial part of its property or ordering the winding up or
liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60
consecutive days; or
(b) the institution by such Person of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or State
bankruptcy, insolvency, reorganization or other similar law, or
the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of such Person or of any
substantial part of its property or the making by it of an
assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they
become due and its willingness to be adjudicated a bankrupt, or
the taking of corporate action by such Person in furtherance of
any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.
9.
"Board of Directors" means the board of directors of the
Depositor or the Executive Committee of the board of directors of
the Depositor (or any other committee of the board of directors
of the Depositor performing similar functions) <PAGE> or a committee
designated by the board of directors of the Depositor (or any
such committee), comprised of two or more members of the board of
directors of the Depositor or officers of the Depositor, or both.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Depositor to have
been duly adopted by the Depositor's Board of Directors, or such
committee of the Board of Directors or officers of the Depositor
to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of
such certification, and delivered to the Issuer Trustees.
"Business Day" means a day other than (a) a Saturday or
Sunday, (b) a day on which banking institutions in the City of
New York, New York or in the State of New Jersey are authorized
or required by law or executive order to remain closed or (c) a
day on which the Property Trustee's Corporate Trust Office or the
Delaware Trustee's Corporate Trust Office or the Corporate
Trustee of the Debenture Trustee is closed for business.
"Capital Treatment Event" means, in respect of the Issuer
Trust, the reasonable determination by the Depositor that, as a
result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any
rules or regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement, action or
decision is announced on or after the date of the issuance of the
Preferred Securities of the Issuer Trust, there is more than an
insubstantial risk that the Depositor will not be entitled to
treat an amount equal to the Liquidation Amount of such Preferred
Securities as "Tier I Capital" (or the then equivalent thereof)
for purposes of the risk-based capital adequacy guidelines of the
Board of Governors of the Federal Reserve System, as then in
effect and applicable to the Depositor, provided, however that it
shall not be deemed to be a Capital Treatment Event if the
Depositor is not entitled to treat the aggregate amount of the
Liquidation Amount of such Preferred Securities as "Tier I
Capital" due to the restriction imposed by the Federal Reserve
that no more than 25% of Tier I Capital can consist of perpetual
preferred stock.
"Certificate Depositary Agreement" means the agreement among
the Issuer Trust, the Depositor and the Depository Trust Company
("DTC"), as the initial Clearing Agency, dated as of the Closing
Date, substantially in the form attached as Exhibit B, as the
same may be amended and supplemented from time to time.
"Certificate of Trust" has the meaning specified in the
preamble to this Trust Agreement.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
DTC shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to
time a Clearing Agency effects book-entry transfers and pledges
of securities deposited with the Clearing Agency.
"Closing Date" means the Time of Delivery for the Firm
Securities, which date is also the date of execution and delivery
of this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
or any successor statute, in each case as amended from time to
time.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act
or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing
such duties at such time.
"Common Securities Certificate" means a certificate
evidencing ownership of Common Securities, substantially in the
form attached as Exhibit C.
<PAGE>
"Common Security" means an undivided beneficial interest in
the assets of the Issuer Trust, having a Liquidation Amount of
$10 and having the rights provided therefor in this Trust
Agreement, including the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Corporate Trust Office" means the principal office of the
Property Trustee located in the City of New York, New York, which
at the time of the execution of this Trust Agreement is located
at Four Albany Street, New York, New York 10006; Attention:
Corporate Trust and Agency Group - Corporate Market Services.
"Debenture Event of Default" means an "Event of Default" as
defined in the Indenture.
"Debenture Redemption Date" means, with respect to any
Junior Subordinated Debentures to be redeemed under the
Indenture, the date fixed for redemption of such Junior
Subordinated Debentures under the Indenture.
"Debenture Trustee" means Bankers Trust Company, a New York
banking corporation and any successor.
"Delaware Business Trust Act" means Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. 3801, et seq., as it may be
amended from time to time.
"Delaware Trustee" means the corporation identified as the
"Delaware Trustee" in the preamble to this Trust Agreement solely
in its capacity as Delaware Trustee of the Issuer Trust continued
hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor trustee appointed as
herein provided.
"Depositary" means the Depository Trust Company or any
successor thereto.
"Depositor" has the meaning specified in the preamble to
this Trust Agreement.
"Distribution Date" has the meaning specified in Section 4.
l(a).
"Distributions" means amounts payable in respect of the
Trust Securities as provided in Section 4.1.
"DTC" means the Depository Trust Company.
"Early Termination Event" has the meaning specified in
Section 9.2.
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Issuer Trust in the payment of any
Distribution when it becomes due and payable, and continuation of
such default for a period of 30 days; or
(c) default by the Issuer Trust in the payment of any
Redemption Price of any Trust Security when it becomes due and
payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Issuer Trustees in
this Trust Agreement (other than a covenant or warranty a default
in the performance of which or the breach of which is dealt with
in clause (b) or (c) above) and continuation of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the Issuer Trustees and the
Depositor by the Holders of at least 25% in aggregate Liquidation
Amount of the Outstanding Preferred Securities, a written notice
specifying such default or breach and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder;
or
<PAGE>
(e) the occurrence of any Bankruptcy Event with respect to
the Property Trustee or all or substantially all of its property
if a successor Property Trustee has not been appointed within a
period of 90 days thereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934 or any successor statute thereto, in each case as amended
from time to time.
"Expiration Date" has the meaning specified in Section 9. 1.
"Firm Securities" means an aggregate Liquidation Amount of
$10,000,000 of the Issuer Trust's 9.50% cumulative trust
preferred securities.
"Global Preferred Securities Certificate" means a Preferred
Securities Certificate evidencing ownership of Global Preferred
Securities.
"Global Preferred Security" means a Preferred Security, the
ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 5.4.
"Guarantee Agreement" means the Guarantee Agreement executed
and delivered by the Depositor and Bankers Trust Company, as
trustee, contemporaneously with the execution and delivery of
this Trust Agreement, for the benefit of the holders of the
Preferred Securities, as amended from time to time.
"Holder" means a Person in whose name a Trust Security or
Trust Securities is registered in the Securities Register; any
such Person shall be deemed to be a beneficial owner within the
meaning of the Delaware Business Trust Act.
"Indenture" means the Junior Subordinated Indenture, dated
as of June 30, 1997, between the Depositor and the Debenture
Trustee (as amended or supplemented from time to time) relating
to the issuance of the Junior Subordinated Debentures.
"Investment Company Act" means the Investment Company Act of
1940, or any successor statute, in each case as amended from time
to time.
"Investment Company Event" means the receipt by the Issuer
Trust of an Opinion of Counsel experienced in such matters to the
effect that, as a result of the occurrence of a change in law or
regulation or a written change (including any announced
prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk
that the Issuer Trust is or will be considered an "investment
company" that is required to be registered under the Investment
Company Act, which change or prospective change becomes effective
or would become effective, as the case may be, on or after the
date of the issuance of the Preferred Securities.
"Issuer Trust" means BNB Capital Trust.
"Issuer Trustees" means, collectively, the Property Trustee
and the Delaware Trustee.
"Junior Subordinated Debentures" means the aggregate
principal amount of the Depositor's 9.50% junior subordinated
debentures, due June 30, 2027, issued pursuant to the Indenture.
"Lien" means any lien, pledge, charge, encumbrance,
mortgage, deed of trust, adverse ownership interest,
hypothecation, assignment, security interest or preference,
priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of
Trust Securities, Trust Securities having a Liquidation Amount
equal to that portion of the principal amount of Junior
Subordinated Debentures to be contemporaneously redeemed <PAGE> in
accordance with the Indenture, allocated to the Common Securities
and to the Preferred Securities based upon the relative
Liquidation Amounts of such classes and (b) with respect to a
distribution of Junior Subordinated Debentures to Holders of
Trust Securities in connection with a dissolution or liquidation
of the Issuer Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust
Securities of the Holder to whom such Junior Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $10 per
Trust Security.
"Liquidation Date" means the date on which Junior
Subordinated Debentures are to be distributed to Holders of Trust
Securities in connection with a dissolution and liquidation of
the Issuer Trust pursuant to Section 9.4.
"Liquidation Distribution" has the meaning specified in
Section 9.4(d).
"Majority in Liquidation Amount of the Preferred Securities"
or "Majority in Liquidation Amount of the Common Securities"
means, except as provided by the Trust Indenture Act, Preferred
Securities or Common Securities, as the case may be, representing
more than 50% of the aggregate Liquidation Amount of all then
Outstanding Preferred Securities or Common Securities, as the
case may be.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, Chief Executive Officer, President or a
Vice President, and by the Chief Financial Officer, the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the party provided
herein. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this
Trust Agreement shall include:
(a) a statement by each officer signing the Officers'
Certificate that such officer has read the covenant or condition
and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in
rendering the Officers' Certificate;
(c) a statement that such officer has made such examination
or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for or an employee of the Depositor or any
Affiliate of the Depositor.
"Option Closing Date" shall have the meaning provided in the
Underwriting Agreement.
"Option Securities" means an aggregate Liquidation Amount of
$1,500,000 of the Issuer Trust's 9.50% cumulative trust preferred
securities, issuable to the Underwriters, at its option,
exercisable within 30 days after the date of the Prospectus,
solely to cover over-allotments, if any.
"Original Trust Agreement" has the meaning specified in the
preamble to this Trust Agreement.
"Outstanding," with respect to Trust Securities, means, as
of the date of determination, all Trust Securities theretofore
executed and delivered under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
<PAGE>
(b) Trust Securities for whose payment or redemption money
in the necessary amount has been theretofore deposited with the
Property Trustee or any Paying Agent for the Holders of such
Preferred Securities, provided that if such Trust Securities are
to be redeemed, notice of such redemption has been duly given
pursuant to this Trust Agreement; and
(c) Trust Securities which have been paid or in exchange
for or in lieu of which other Trust Securities have been executed
and delivered pursuant to Sections 5.4, 5.5, 5.6 and 5.13;
provided, however, that in determining whether the Holders of the
requisite Liquidation Amount of the Outstanding Preferred
Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Preferred
Securities owned by the Depositor, any Issuer Trustee, any
Administrator or any Affiliate of the Depositor shall be
disregarded and deemed not to be outstanding, except that (a) in
determining whether any Issuer Trustee shall be protected in
relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Preferred Securities that such
Issuer Trustee or such Administrator, as the case may be, knows
to be so owned shall be so disregarded and (b) the foregoing
shall not apply at any time when all of the outstanding Preferred
Securities are owned by the Depositor, one or more of the Issuer
Trustees, one or more of the Administrators and/or any such
Preferred Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Administrators the Pledgee's right so
to act with respect to such Preferred Securities and that the
pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of
Global Preferred Securities as reflected in the records of the
Clearing Agency or, if a Clearing Agency Participant is not the
Owner, then, as reflected in the records of a Person maintaining
an account with such Clearing Agency, directly or indirectly, in
accordance with the rules of such Clearing Agency.
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 5.10 and shall initially be the
Property Trustee.
"Payment Account" means a segregated non-interest-bearing
corporate trust account maintained by the Property Trustee with
the Property Trustee in its trust department for the benefit of
the Holders in which all amounts paid in respect of the Junior
Subordinated Debentures will be held and from which the Property
Trustee, through the Paying Agent, shall make payments to the
Holders in accordance with Sections 4.1 and 4.2.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association,
joint stock company, company, limited liability company, trust,
unincorporated organization or government or any agency or
political subdivision thereof, or any other entity of whatever
nature.
"Preferred Securities Certificate" means a certificate
evidencing ownership of Preferred Securities, substantially in
the form attached as Exhibit D.
"Preferred Security" means a Firm Security or an Option
Security, each constituting a preferred undivided beneficial
interest in the assets of the Issuer Trust, having a Liquidation
Amount of $10 and having the rights provided therefor in this
Trust Agreement, including the right to receive Distributions and
a Liquidation Distribution as provided herein.
"Property Trustee" means the Person identified as the
"Property Trustee" in the preamble to this Trust Agreement solely
in its capacity as Property Trustee of the Issuer Trust formed
and continued hereunder and not in its individual capacity, or
its successor in interest in such capacity, or any successor
property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security
to be redeemed, the date fixed for such redemption by or pursuant
to this Trust Agreement; provided that each Junior Subordinated
Debenture Redemption Date and the stated maturity of the Junior
Subordinated Debentures shall be a Redemption Date for a Like
Amount of Trust Securities, including but not limited to any date
of redemption pursuant to the occurrence of any Special Event.
<PAGE>
"Redemption Price" means with respect to a redemption of any
Trust Security, the Liquidation Amount of such Trust Security,
together with accumulated but unpaid Distributions to but
excluding the date fixed for redemption, plus the related amount
of the premium, if any, paid by the Depositor upon the concurrent
redemption of a Like Amount of Junior Subordinated Debentures.
"Relevant Trustee" has the meaning specified in Section
8.10.
"Responsible Officer" when used with respect to the Property
Trustee means any officer assigned to the Corporate Trust Office,
including any managing director, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other
officer of the Property Trustee customarily performing functions
similar to those performed by any of the above designated
officers and having direct responsibility for the administration
of the Indenture, and also, with respect to a particular matter,
any officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular
subject.
"Securities Act" means the Securities Act of 1933, or any
successor statute thereto, in each case as amended from time to
time.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 5.5.
"Special Event" means any Tax Event, Capital Treatment Event
or Investment Company Event.
"Successor Preferred Securities" of any particular Preferred
Securities Certificate means every Preferred Securities
Certificate issued after, and evidencing all or a portion of the
same beneficial interest in the Issuer Trust as that evidenced
by, such particular Preferred Securities Certificate; and, for
the purposes of this definition, any Preferred Securities
Certificate executed and delivered under Section 5.6 in exchange
for or in lieu of a mutilated, destroyed, lost or stolen
Preferred Securities Certificate shall be deemed to evidence the
same beneficial interest in the Issuer Trust as the mutilated,
destroyed, lost or stolen Preferred Securities Certificate.
"Tax Event" means the receipt by the Issuer Trust of an
Opinion of Counsel experienced in such matters to the effect
that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any
official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement, action
or decision is announced on or after the date of issuance of the
Preferred Securities, there is more than an insubstantial risk
that (i) the Issuer Trust is, or will be within 90 days of the
delivery of such Opinion of Counsel, subject to United States
federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (ii) interest payable by the
Depositor on the Junior Subordinated Debentures is not, or within
90 days of the delivery of such Opinion of Counsel will not be,
deductible by the Depositor, in whole or in part, for United
States federal income tax purposes, or (iii) the Issuer Trust is,
or will be within 90 days of the delivery of such Opinion of
Counsel, subject to more than a de minimis amount of other taxes,
duties or other governmental changes.
"Time of Delivery" means 9:00 a.m. Eastern Standard Time,
either (i) with respect to the Firm Securities or Common
Securities, on the third Business Day (unless postponed in
accordance with the provisions of Section 2(b) of the
Underwriting Agreement) following the date of execution of the
Underwriting Agreement, or such other time not later than ten
Business Days after such date as shall be agreed upon by the
Underwriters, the Issuer Trust and the Company, or (ii) with
respect to the Option Securities, the Option Closing Date.
"Trust Agreement" means this Amended and Restated Trust
Agreement, as the same may be modified, amended or supplemented
in accordance with the applicable provisions hereof, including
(i) all Exhibits hereto, and (ii) for all purposes of this
Amended and Restated Trust Agreement any such modification,
amendment or supplement, the provisions of the Trust Indenture
Act that are deemed to be a part of and govern this Amended and
Restated Trust Agreement and any modification, amendment or
supplement, respectively.
<PAGE>
"Trust Indenture Act" means the Trust Indenture Act of 1939
or any successor statute, in each case as amended from time to
time.
"Trust Property" means (a) the Junior Subordinated
Debentures, (b) any cash on deposit in, or owing to, the Payment
Account, and (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being
held or deemed to be held by the Property Trustee pursuant to the
trusts of this Trust Agreement.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Preferred Securities Certificates.
"Trust Security" means any one of the Common Securities or
the Preferred Securities.
"Underwriter" has the meaning specified in the Underwriting
Agreement.
"Underwriting Agreement" means the Underwriting Agreement,
dated as of June 25, 1997, among the Issuer Trust, the Depositor
and the Underwriter, as the same may be amended from time to
time.
ARTICLE II
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name.
The Issuer Trust continued hereby shall be known as "BNB
Capital Trust", as such name may be modified from time to time by
the Administrators following written notice to the Holders of
Trust Securities and the other Issuer Trustees, in which name the
Administrators and the Issuer Trustees may engage in the
transactions contemplated hereby, make and execute contracts and
other instruments on behalf of the Issuer Trust and sue and be
sued.
SECTION 2.2. Office of the Delaware Trustee; Principal
Place of Business.
The address of the Delaware Trustee in the State of Delaware
is Bankers Trust (Delaware), 1001 Jefferson Street, Suite 550,
Wilmington, DE 19801, Attention: Lisa Wilkins, or such other
address in the State of Delaware as the Delaware Trustee may
designate by written notice to the Holders and the Depositor.
The principal executive office of the Issuer Trust is in care of
Broad National Bancorporation, 905 Broad Street, Newark, New
Jersey 07102, Attention: Office of the Secretary.
SECTION 2.3. Initial Contribution of Trust Property,
Organizational Expenses.
The Property Trustee acknowledges receipt in trust from the
Depositor in connection with this Trust Agreement of the sum of
$10, which constitutes the initial Trust Property. The Depositor
shall pay all organizational expenses of the Issuer Trust as they
arise or shall, upon request of any Issuer Trustee, promptly
reimburse such Issuer Trustee for any such reasonable expenses
paid by such Issuer Trustee. The Depositor shall make no claim
upon the Trust Property for the payment of such expenses.
SECTION 2.4. Issuance of the Preferred Securities.
On June 25, 1997, the Depositor, both on its own behalf and
on behalf of the Issuer Trust pursuant to the Original Trust
Agreement, executed and delivered the Underwriting Agreement.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrator, on behalf of the Issuer Trust, shall
manually execute in accordance with Section 5.3 and the Property
Trustee shall authenticate in accordance with Section 5.3 and
deliver to the Underwriters, Firm Securities Certificates,
registered in the names requested by the Underwriter, in an
aggregate amount of 1,000,000 Firm <PAGE> Securities having an aggregate
Liquidation Amount of $10,000,000, against receipt of the
aggregate purchase price of such Preferred Securities of
$10,000,000, by the Property Trustee. At the option of the
Underwriters, within 30 days of the date of the Prospectus, and
solely for the purpose of covering an over-allotment, if any, an
Administrator, on behalf of the Issuer Trust, shall manually
execute in accordance with Section 5.3 and the Property Trustee
shall authenticate in accordance with Section 5.4 and deliver to
the Underwriter, Option Securities Certificates, registered in
the names requested by the Underwriter, up to 150,000 Option
Securities having an aggregate Liquidation Amount of $1,500,000,
against receipt of the aggregate purchase price of such Option
Securities of $1,500,000, by the Property Trustee.
SECTION 2.5. Issuance of the Common Securities;
Subscription and Purchase of Junior Subordinated Debentures.
Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrator, on behalf of the Issuer Trust,
shall manually execute in accordance with Section 5.2 and deliver
to the Depositor Common Securities Certificates, registered in
the name of the Depositor, in an aggregate amount of 30,928
Common Securities having an aggregate Liquidation Amount of
$309,278 against receipt by the Property Trustee of the aggregate
purchase price of such Common Securities of $309,278 by the
Property Trustee. In the event of any exercise of an
over-allotment option requiring issuance of additional Preferred
Securities Certificates, as described in Section 2.4 above, a
proportionate number of additional Common Securities
Certificates, with corresponding aggregate Liquidation Amount,
shall be delivered to the Depositor. Contemporaneously with the
executions, and deliveries of Common Securities Certificates and
any Preferred Securities Certificates, an Administrator, on
behalf of the Issuer Trust, shall subscribe for and purchase from
the Depositor corresponding amounts of Junior Subordinate
Debentures, registered in the name of the Property Trustee and
having an aggregate principal amount equal to $10,309,278, plus,
in the event of any exercise of the over-allotment option (i) a
corresponding additional number of Junior Subordinated Debentures
not exceeding an aggregate principal amount of $1,500,000 and
(ii) a corresponding number of Junior Subordinated Debentures not
exceeding an aggregate principal amount equal to the aggregate
Liquidation Amount of Common Securities issued pursuant to such
exercise of an over-allotment option; and, in satisfaction of the
purchase price for such Junior Subordinated Debentures, the
Property Trustee, on behalf of the Issuer Trust, shall deliver to
the Depositor the sum of $10,309,278, plus any corresponding
over-allotment option amount (being the sum of the amounts
delivered to the Property Trustee pursuant to (i) the second
sentence of Section 2.4, and (ii) the first and second sentences
of this Section 2.5) and receive on behalf of the Issuer Trust
the Junior Subordinated Debentures.
SECTION 2.6. Declaration of Trust.
The exclusive purposes and functions of the Issuer Trust are
to (a) issue and sell Trust Securities and use the proceeds from
such sale to acquire the Junior Subordinated Debentures, and (b)
engage in only those other activities necessary or incidental
thereto. The Depositor hereby appoints the Issuer Trustees as
trustees of the Issuer Trust, to have all the rights, powers and
duties to the extent set forth herein, and the Issuer Trustees
hereby accept such appointment. The Property Trustee hereby
declares that it will hold the Trust Property in trust upon and
subject to the conditions set forth herein for the benefit of the
Issuer Trust and the Holders. The Depositor hereby appoints the
Administrators (as agents of the Issuer Trust), with such
Administrators having all rights, powers and duties set forth
herein with respect to accomplishing the purposes of the Issuer
Trust, and the Administrators hereby accept such appointment,
provided, however, that it is the intent of the parties hereto
that such Administrators shall not be trustees or fiduciaries
with respect to the Issuer Trust and this Agreement shall be
construed in a manner consistent with such intent. The Property
Trustee shall have the right and power to perform those duties
assigned to the Administrators. The Delaware Trustee shall not
be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities, of the
Property Trustee or the Administrators set forth herein. The
Delaware Trustee shall be one of the trustees of the Issuer Trust
for the sole and limited purpose of fulfilling the requirements
of Section 3807 of the Delaware Business Trust Act and for taking
such actions as are required to be taken by a Delaware Trustee
under the Delaware Business Trust Act.
<PAGE>
SECTION 2.7. Authorization to Enter into Certain
Transactions.
(a) The Issuer Trustees and the Administrators shall
conduct the affairs of the Issuer Trust in accordance with the
terms of this Trust Agreement. Subject to the limitations set
forth in paragraph (b) of this Section and in accordance with the
following provisions (i), (ii) and (iii), the Issuer Trustees and
the Administrators shall act as follows:
(i) Each Administrator shall have the power and
authority to act on behalf of the Issuer Trust with respect to
the following:
(A) the compliance with the Underwriting
Agreement regarding the issuance and sale of the Trust
Securities;
(B) the compliance with the Securities Act,
applicable state securities or blue sky laws, and the
Trust Indenture Act;
(C) the listing of the Preferred Securities
upon such securities exchange or exchanges or upon the
Nasdaq National Market as shall be determined by the
Depositor, with the registration of the Preferred
Securities under the Exchange Act, if required, and the
preparation and filing of all periodic and other
reports and other documents pursuant to the foregoing;
(D) the application for a taxpayer
identification number for the Issuer Trust; and
(E) the preparation of a registration
statement and a prospectus in relation to the Preferred
Securities, including any amendments thereto and the
taking of any action necessary or desirable to sell the
Preferred Securities in a transaction or series of
transactions subject to the registration requirements
of the Securities Act.
(F) any action incidental to the foregoing
as necessary or advisable to give effect to the terms
of this Trust Agreement.
(ii) The Property Trustee shall have the power and
authority to act on behalf of the Issuer Trust with respect to
the following matters:
(A) the establishment of the Payment
Account;
(B) the receipt of the Junior Subordinated
Debentures;
(C) the receipt and collection of interest,
principal and any other payments made in respect of the
Junior Subordinated Debentures in the Payment Account;
(D) the distribution of amounts owed to the
Holders in respect of the Trust Securities;
(E) the exercise of all of the rights,
powers and privileges of a holder of the Junior
Subordinated Debentures;
(F) the sending of notices of default and
other information regarding the Trust Securities and
the Junior Subordinated Debentures to the Holders in
accordance with this Trust Agreement;
(G) the distribution of the Trust Property
in accordance with the terms of this Trust Agreement;
<PAGE>
(H) to the extent provided in this Trust
Agreement, the winding up of the affairs of and
liquidation of the Issuer Trust and the preparation,
execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
and
(I) after an Event of Default (other than
under paragraph (b), (c), (d), or (f) of the definition
of such term if such Event of Default is by or with
respect to the Property Trustee), comply with the
provisions of this Trust Agreement and take any action
to give effect to the terms of this Trust Agreement and
protect and conserve the Trust Property for the benefit
of the Holders (without consideration of the effect of
any such action on any particular Holder); provided,
however, that nothing in this Section 2.7(a)(ii) shall
require the Property Trustee to take any action that is
not otherwise required in this Trust Agreement.
(b) So long as this Trust Agreement remains in effect, the
Issuer Trust (or the Issuer Trustees or Administrators acting on
behalf of the Issuer Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Issuer Trustees
nor the Administrators shall (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement,
(ii) sell, assign, transfer, exchange, mortgage, pledge, set-off
or otherwise dispose of any of the Trust Property or interests
therein, including to Holders, except as expressly provided
herein, (iii) take any action that would reasonably be expected
to cause the Issuer Trust to become taxable as a corporation for
United States federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt, or (v)
take or consent to any action that would result in the placement
of a Lien on any of the Trust Property. The Property Trustee
shall defend all claims and demands of all Persons at any time
claiming any Lien on any of the Trust Property adverse to the
interest of the Issuer Trust or the Holders in their capacity as
Holders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the power and authority to
assist the Issuer Trust with respect to, or effect on behalf of
the Issuer Trust, the following (and any actions taken by the
Depositor in furtherance of the following prior to the date of
this Trust Agreement are hereby ratified and confirmed in all
respects):
(i) the preparation by the Issuer Trust of, and the
execution and delivery of, a registration statement, and a
prospectus in relation to the Preferred Securities, including any
amendments thereto and the taking of any action necessary or
desirable to sell the Preferred Securities in a transaction or a
series of transactions subject to the registration requirements
of the Securities Act;
(ii) the determination of the States in which to take
appropriate action to qualify or register for sale all or part of
the Preferred Securities and the determination of any and all
such acts, other than actions that must be taken by or on behalf
of the Issuer Trust, and the advice to the Issuer Trustees of
actions they must take on behalf of the Issuer Trust, and the
preparation for execution and filing of any documents to be
executed and filed by the Issuer Trust or on behalf of the Issuer
Trust, as the Depositor deems necessary or advisable in order to
comply with the applicable laws of any such States in connection
with the sale of the Preferred Securities;
(iii) the negotiation of the terms of, and the
execution and delivery of, the Underwriting Agreement providing
for the sale of the Preferred Securities;
(iv) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities; and
(v) compliance with the listing requirements of the
Preferred Securities upon such securities exchange or exchanges,
or upon the Nasdaq National Market, as shall be determined by the
Depositor, the registration of the Preferred Securities under the
Exchange Act, if required, and the preparation and filing of all
periodic and other reports and other documents pursuant to the
foregoing.
(d) Notwithstanding anything herein to the contrary, the
Administrators and the Property Trustee are authorized and
directed to conduct the affairs of the Issuer Trust and to
operate the Issuer Trust so that the Issuer Trust will <PAGE> not be
deemed to be an "investment company" required to be registered
under the Investment Company Act, and will not be taxable as a
corporation for the United States federal income tax purposes and
so that the Junior Subordinated Debentures will be treated as
indebtedness of the Depositor for United States income tax
purposes. In this connection, the Property Trustee, the
Administrators and the Holders of Common Securities are
authorized to take any action, not inconsistent with applicable
law, the Certificate of Trust or this Trust Agreement, that the
Property Trustee, the Administrators and Holders of Common
Securities determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the
holders of the Outstanding Preferred Securities. In no event
shall the Administrators or the Issuer Trustees be liable to the
Issuer Trust or the Holders for any failure to comply with this
section that results from a change in law or regulations or in
the interpretation thereof.
SECTION 2.8. Assets of Trust.
The assets of the Issuer Trust shall consist solely of the
Trust Property.
SECTION 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all
times in the Property Trustee (in its capacity as such) and shall
be held and administered by the Property Trustee for the benefit
of the Issuer Trust and the Holders in accordance with this Trust
Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3. 1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee
shall establish the Payment Account. The Property Trustee and
its agents shall have exclusive control and sole right of
withdrawal with respect to the Payment Account for the purpose of
making deposits in and withdrawals from the Payment Account in
accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment
Account for the exclusive benefit of the Holders and for
distribution as herein provided, including (and subject to) any
priority of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment
Account, promptly upon receipt, all payments of principal of or
interest on, and any other payments or proceeds with respect to,
the Junior Subordinated Debentures. Amounts held in the Payment
Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.
(a) The Trust Securities represent undivided beneficial
interests in the Trust Property, and Distributions (including
Distributions of Additional Amounts) will be made on the Trust
Securities at the rate and on the dates that payments of interest
(including payments of Additional Interest, as defined in the
Indenture) are made on the Junior Subordinated Debentures.
Accordingly:
(i) Distributions on the Trust Securities shall be
cumulative and will accumulate whether or not there are funds of
the Issuer Trust available for the payment of Distributions.
Distributions shall accumulate from June 30, 1997, and, except in
the event (and to the extent) that the Depositor exercises its
right to defer the payment of interest on <PAGE> the Junior Subordinated
Debentures pursuant to the Indenture, shall be payable quarterly
in arrears on the last day of March, June, September and December
of each year, commencing on September 30, 1997. If any date on
which a Distribution is otherwise payable on the Trust Securities
is not a Business Day, then the payment of such Distribution
shall be made on the next succeeding day that is a Business Day
(without any interest or other payment in respect of any such
delay), with the same force and effect as if made on the date on
which such payment was originally payable (each date on which
distributions are payable in accordance with this Section 4.1(a),
a "Distribution Date").
(ii) The Trust Securities shall be entitled to
Distributions payable at a rate of 9.50% per annum of the
Liquidation Amount of the Trust Securities. The amount of
Distributions payable for any period less than a full
Distribution period shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days
elapsed in a partial month in a period. Distributions payable
for each full Distribution period will be computed by dividing
the rate per annum by four. The amount of Distributions payable
for any period shall include any Additional Amounts in respect of
such period.
(iii) So long as no Debenture Event of Default has
occurred and is continuing, the Depositor has the right under the
Indenture to defer the payment of interest on the Junior
Subordinated Debentures at any time and from time to time for a
period not exceeding 20 consecutive quarterly periods (an
"Extension Period"), provided that no Extension Period may extend
beyond June 30, 2027. As a consequence of any such deferral,
quarterly Distributions on the Trust Securities by the Trust will
also be deferred (and the amount of Distributions to which
Holders of the Trust Securities are entitled will accumulate
additional Distributions thereon at the rate per annum of 9.50%
per annum, compounded quarterly) from the relevant payment date
for such Distributions, computed on the basis of a 360-day year
of twelve 30-day months and the actual days elapsed in a partial
month in such period. Additional Distributions payable for each
full Distribution period will be computed by dividing the rate
per annum by four (4). The term "Distributions" as used in
Section 4.1 shall include any such additional Distributions
provided pursuant to this Section 4.1 (a)(iii).
(iv) Distributions on the Trust Securities shall be
made by the Property Trustee from the Payment Account and shall
be payable on each Distribution Date only to the extent that the
Issuer Trust has funds then on hand and available in the Payment
Account for the payment of such Distributions.
(b) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they
appear on the Securities Register for the Trust Securities at the
close of business on the relevant record date, which shall be at
the close of business on the 15th day of March, June, September
or December (whether or not a Business Day).
SECTION 4.2. Redemption.
(a) On each Junior Subordinated Debenture Redemption Date
and on the stated maturity of the Junior Subordinated Debentures,
the Issuer Trust will be required to redeem a Like Amount of
Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not less
than 30 nor more than 60 days prior to the Redemption Date to
each Holder of Trust Securities to be redeemed, at such Holder's
address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price, or if the Redemption Price
cannot be calculated prior to the time the notice is required to
be sent, the estimate of the Redemption Price provided pursuant
to the Indenture together with a statement that it is an estimate
and that the actual Redemption Price will be calculated on the
third Business Day prior to the Redemption Date (and if an
estimate is provided, a further notice shall be sent of the
actual Redemption Price on the date, or as soon as practicable
thereafter, that notice of such actual Redemption Price is
received pursuant to the Indenture);
(iii) the CUSIP number or CUSIP numbers of the
Preferred Securities affected;
<PAGE>
(iv) if less than all the Outstanding Trust Securities
are to be redeemed, the identification and the total Liquidation
Amount of the particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price
will become due and payable upon each such Trust Security to be
redeemed and that Distributions thereon will cease to accumulate
on and after said date, except as provided in Section 4.2(d)
below; and
(vi) the place or places where Trust Securities are to
be surrendered for the payment of the Redemption Price.
The Issuer Trust in issuing the Trust Securities shall use
"CUSIP" numbers, and the Property Trustee shall indicate the
"CUSIP" numbers of the Trust Securities in notices of redemption
and related materials 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 Trust
Securities or as contained in any notice of redemption and
related material.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the applicable
proceeds from the contemporaneous redemption of Junior
Subordinated Debentures. Redemptions of the Trust Securities
shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Issuer Trust has
funds then on hand and available in the Payment Account for the
payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New
York City time, on the Redemption Date, subject to Section
4.2(c), the Property Trustee will, with respect to Preferred
Securities held in global form, irrevocably deposit with the
Clearing Agency for such Preferred Securities, to the extent
available therefor, funds sufficient to pay the applicable
Redemption Price and will give such Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the
Holders of the Preferred Securities. With respect to Preferred
Securities that are not held in global form, the Property
Trustee, subject to Section 4.2(c), will irrevocably deposit with
the Paying Agent, to the extent available therefor, funds
sufficient to pay the applicable Redemption Price and will give
the Paying Agent irrevocable instructions and authority to pay
the Redemption Price to the Holder of the Preferred Securities
upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior
to the Redemption Date for any Trust Securities called for
redemption shall be payable to the Holders of such Trust
Securities as they appear on the Register for the Trust
Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then, upon the date of
such deposit, all rights of Holders holding Trust Securities so
called for redemption will cease, except the right of such
Holders to receive the Redemption Price and any Distribution
payable in respect of the Trust Securities on or prior to the
Redemption Date, but without interest, and such Securities will
cease to be Outstanding. In the event that any date on which any
applicable Redemption Price is payable is not a Business Day,
then payment of the applicable Redemption Price payable on such
date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and
effect as if made on such date. In the event that payment of the
Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either
by the Issuer Trust or by the Depositor pursuant to the Guarantee
Agreement, Distributions on such Trust Securities will continue
to accumulate, as set forth in Section 4.1, from the Redemption
Date originally established by the Issuer Trust for such Trust
Securities to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the
date fixed for redemption for purposes of calculating the
applicable Redemption Price.
(e) Subject to Section 4.3(a), if less than all the
Outstanding Trust Securities are to be redeemed on a Redemption
Date, then the particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption
Date by the Property Trustee from the Outstanding Preferred
Securities not previously called for redemption in such a manner
as the Property Trustee shall deem fair and appropriate.
<PAGE>
SECTION 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts,
if applicable) on, the Redemption Price of, and the Liquidation
Distribution in respect of, the Trust Securities, as applicable,
shall be made, subject to Section 4.2(e), pro rata among the
Common Securities and the Preferred Securities based on the
Liquidation Amount of such Trust Securities; provided, however,
that if on any Distribution Date or Redemption Date any Event of
Default resulting from a Debenture Event of Default in Section
5.1(1) or 5.1(2) of the Indenture shall have occurred and be
continuing, no payment of any Distribution (including any
Additional Amounts) on, Redemption Price of, or Liquidation
Distribution in respect of, any Common Security, and no other
payment on account of the redemption, liquidation or other
acquisition of Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions
(including any Additional Amounts) on all Outstanding Preferred
Securities for all Distribution periods terminating on or prior
thereto, or, in the case of payment of the Redemption price, the
full amount of such Redemption Price on all Outstanding Preferred
Securities then called for redemption, or in the case of payment
of the Liquidation Distribution the full amount of such
Liquidation Distribution on all Outstanding Preferred Securities,
shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including any
Additional Amounts) on, or the Redemption Price of, Preferred
Securities then due and payable. The existence of an Event of
Default does not entitle the Holders of Preferred Securities to
accelerate the maturity thereof.
(b) In the case of the occurrence of any Event of Default
resulting from any Debenture Event of Default, the Holder of the
Common Securities shall have no right to act with respect to any
such Event of Default under this Trust Agreement until the
effects of all such Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise
eliminated. Until all such Events of Default under this Trust
Agreement with respect to the Preferred Securities have been so
cured, waived or otherwise eliminated, the Property Trustee shall
act solely on behalf of the Holders of the Preferred Securities
and not on behalf of the Holder of the Common Securities, and
only the Holders of the Preferred Securities will have the right
to direct the Property Trustee to act on their behalf.
SECTION 4.4. Payment Procedures.
Payments of Distributions (including any Additional Amounts)
in respect of the Preferred Securities shall be made by check
mailed to the address of the Person entitled thereto as such
address shall appear on the Securities Register or, if the
Preferred Securities are held by a Clearing Agency, such
Distributions shall be made to the Clearing Agency in immediately
available funds, which will credit the relevant accounts on the
applicable Distribution Dates. Payments of Distributions to
Holders of $1,000,000 or more in aggregate Liquidation Amount of
Preferred Securities may be made by wire transfer of immediately
available funds upon written request of such Holder of Preferred
Securities to the Securities Registrar not later than 15 calendar
days prior to the date on which the Distribution is payable.
Payments in respect of the Common Securities shall be made in
such manner as shall be mutually agreed between the Property
Trustee and the Holder of the Common Securities.
SECTION 4.5. Tax Returns and Reports.
The Administrators shall prepare (or cause to be prepared),
at the Depositor's expense, and file all United States federal,
state and local tax and information returns and reports required
to be filed by or in respect of the Issuer Trust. In this
regard, the Administrators shall (a) prepare and file (or cause
to be prepared and filed) all Internal Revenue Service forms
required to be filed in respect of the Issuer Trust in each
taxable year of the Issuer Trust and (b) prepare and furnish (or
cause to be prepared and furnished) to each Holder all Internal
Revenue Service forms required to be provided by the Issuer
Trust. The Administrators shall provide the Depositor and the
Property Trustee with a copy of all such returns and reports
promptly after such filing or furnishing. The Issuer Trustees
and the Administrators shall comply with United States federal
withholding and backup withholding tax laws and information
reporting requirements with respect to any payments to Holders
under the Trust Securities.
On or before December 15 of each year during which any
Preferred Securities are outstanding, the Administrators shall
furnish to the Paying Agent such information as may be reasonably
requested by the Property Trustee in order that the <PAGE> Property
Trustee may prepare the information which it is required to
report for such year on Internal Revenue Service Forms 1096 and
1099 pursuant to Section 6049 of the Internal Revenue Code of
1986, as amended. Such information shall include the amount of
original issue discount includible in income for each outstanding
Preferred Security during such year.
SECTION 4.6. Payment of Taxes; Duties, Etc. of the Issuer
Trust.
Upon receipt under the Junior Subordinated Debentures of
Additional Sums, the Property Trustee shall promptly pay any
taxes, duties or governmental charges of whatsoever nature (other
than withholding taxes) imposed on the Issuer Trust by the United
States or any other taxing authority.
SECTION 4.7. Payments under Indenture or Pursuant to Direct
Actions.
Any amount payable hereunder to any Holder of Preferred
Securities shall be reduced by the amount of any corresponding
payment such Holder has directly received pursuant to Section 5.8
of the Indenture or Section 5.13 of this Trust Agreement.
SECTION 4.8. Liability of the Holder of Common Securities.
The Holder of Common Securities shall be liable for the
debts and obligations of the Issuer Trust as set forth in Section
6.7 of the Indenture regarding allocation of expenses.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
Upon the formation of the Issuer Trust and the contribution
by the Depositor pursuant to Section 2.3 and until issuance of
the Trust Securities, and at any time during which no Trust
Securities are outstanding, the Depositor shall be the sole
beneficial owner of the Issuer Trust.
SECTION 5.2. The Trust Securities Certificates.
(a) The Trust Securities Certificates shall be executed on
behalf of the Issuer Trust by manual or facsimile signature of at
least one Administrator except as provided in Section 5.3. Trust
Securities Certificates bearing the signatures of individuals who
were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Issuer Trust, shall be
validly issued and entitled to the benefits of this Trust
Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the delivery of
such Trust Securities Certificates or did not hold such offices
at the date of delivery of such Trust Securities Certificates. A
transferee of a Trust Securities Certificate shall become a
Holder, and shall be entitled to the rights and subject to the
obligations of a Holder hereunder, upon due registration of such
Trust Securities Certificate in such transferee's name pursuant
to Section 5.5.
(b) Upon their original issuance, Preferred Securities
Certificates shall be issued in the form of one or more fully
registered Global Preferred Securities Certificates which will be
deposited with or on behalf of the Depositary and registered in
the name of the Depositary's nominee. Unless and until it is
exchangeable in whole or in part for the Preferred Securities in
definitive form, a global security may not be transferred except
as a whole by the Depositary to a nominee of the Depositary or by
a nominee of the Depositary to the Depositary or another nominee
of the Depositary or by the Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
(c) A single Common Securities Certificate representing the
Common Securities shall be issued to the Depositor in the form of
a definitive Common Securities Certificate.
<PAGE>
SECTION 5.3. Execution and Delivery of Trust Securities
Certificates.
At the Time of Delivery, the Administrators shall cause
Trust Securities Certificates, in an aggregate Liquidation Amount
as provided in Sections 2.4 and 2.5, to be executed on behalf of
the Issuer Trust and delivered to the Property Trustee and upon
such delivery the Property Trustee shall countersign and register
such Trust Securities Certificates and deliver such Trust
Securities Certificates upon the written order of the Depositor,
executed by two authorized officers thereof, without further
corporate action by the Depositor, in authorized denominations.
SECTION 5.4. Global Preferred Security.
(a) Any Global Preferred Security issued under this Trust
Agreement shall be registered in the name of the nominee of the
Clearing Agency and delivered to such custodian therefor, and
such Global Preferred Security shall constitute a single
Preferred Security for all purposes of this Trust Agreement.
(b) Notwithstanding any other provision in this Trust
Agreement, a Global Preferred Security may not be exchanged in
whole or in part for Preferred Securities registered, and no
transfer of the Global Preferred Security in whole or in part may
be registered, in the name of any Person other than the Clearing
Agency for such Global Preferred Security, or its nominee thereof
unless (i) such Clearing Agency advises the Property Trustee in
writing that such Clearing Agency is no longer willing or able to
properly discharge its responsibilities as Clearing Agency with
respect to such Global Preferred Security, and the Depositor is
unable to locate a qualified successor, (ii) the Issuer Trust at
its option advises the Depositary in writing that it elects to
terminate the book-entry system through the Clearing Agency, or
(iii) there shall have occurred and be continuing an Event of
Default.
(c) If a Preferred Security is to be exchanged in whole or
in part for a beneficial interest in a Global Preferred Security,
then either (i) such Global Preferred Security shall be so
surrendered for exchange or cancellation as provided in this
Article V or (ii) the Liquidation Amount thereof shall be reduced
or increased by an amount equal to the portion thereof to be so
exchanged or canceled, or equal to the Liquidation Amount of such
other Preferred Security to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate
adjustment made on the records of the Security Registrar,
whereupon the Property Trustee, in accordance with the Applicable
Procedures, shall instruct the Clearing Agency or its authorized
representative to make a corresponding adjustment to its records.
Upon any such surrender or adjustment of a Global Preferred
Security by the Clearing Agency, accompanied by registration
instructions, the Administrators shall execute and the Property
Trustee shall, subject to Section 5.4(b) and as otherwise
provided in this Article V, countersign, register and deliver any
Preferred Securities issuable in exchange for such Global
Preferred Security (or any portion thereof) in accordance with
the instructions of the Clearing Agency. The Property Trustee
shall not be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.
(d) Every Preferred Security countersigned, registered and
delivered upon registration of transfer of, or in exchange for or
in lieu of, a Global Preferred Security or any portion thereof,
whether pursuant to this Article V or Article IV or otherwise,
shall be authenticated and delivered in the form of, and shall
be, a Global Preferred Security, unless such Global Preferred
Security is registered in the name of a Person other than the
Clearing Agency for such Global Preferred Security or a nominee
thereof.
(e) The Clearing Agency or its nominee, as the registered
owner of a Global Preferred Security, shall be considered the
Holder of the Preferred Securities represented by such Global
Preferred Security for all purposes under this Trust Agreement
and the Preferred Securities, and owners of beneficial interests
in such Global Preferred Security shall hold such interests
pursuant to the Applicable Procedures and, except as otherwise
provided herein, shall not be entitled to receive physical
delivery of any such Preferred Securities in definitive form and
shall not be considered the Holders thereof under this Trust
Agreement. Accordingly, any such owner's beneficial interest in
the Global Preferred Security shall be shown only on, and the
transfer of such interest shall be effected only through, records
maintained by the Clearing Agency or its nominee. Neither the
Property Trustee, the Securities Registrar nor the Depositor
shall have any liability in respect of any transfers effected by
the Clearing Agency.
<PAGE>
(f) The rights of owners of beneficial interests in a
Global Preferred Security shall be exercised only through the
Clearing Agency and shall be limited to those established by law
and agreements between such owners and the Clearing Agency.
SECTION 5.5. Registration of Transfer and Exchange
Generally; Certain Transfers and Exchanges; Preferred Securities
Certificates.
(a) The Property Trustee shall keep or cause to be kept at
its Corporate Trust Office a register or registers for the
purpose of registering Preferred Securities Certificates and
transfers and exchanges of Preferred Securities Certificates in
which the registrar and transfer agent with respect to the
Preferred Securities (the "Securities Registrar"), subject to
such reasonable regulations as it may prescribe, shall provide
for the registration of Preferred Securities Certificates and
Common Securities Certificates (subject to Section 5.11 in the
case of Common Securities Certificates) and registration of
transfers and exchanges of Preferred Securities Certificates as
herein provided. Such register is herein sometimes referred to
as the "Securities Register." The Property Trustee is hereby
appointed "Securities Registrar" for the purpose of registering
Preferred Securities and transfers of Preferred Securities as
herein provided.
Upon surrender for registration of transfer of any Preferred
Security at the offices or agencies of the Property Trustee
designated for that purpose, the Administrators and the Property
Trustee shall execute, countersign, register and deliver, in the
name of the designated transferee or transferees, one or more new
Preferred Securities of the same series of any authorized
denominations of like tenor and aggregate principal amount and
bearing such legends as may be required by this Trust Agreement.
At the option of the Holder, Preferred Securities may be
exchanged for other Preferred Securities of any authorized
denominations, of like tenor and aggregate Liquidation Amount and
bearing such legends as may be required by this Trust Agreement,
upon surrender of the Preferred Securities to be exchanged at
such office or agency. Whenever any securities are so
surrendered for exchange, the Administrators shall execute and
the Property Trustee shall countersign, register and deliver the
Preferred Securities that the Holder making the exchange is
entitled to receive.
All Preferred Securities issued upon any transfer or
exchange of Preferred Securities shall be the valid obligations
of the Issuer Trust, evidencing the same debt, and entitled to
the same benefits under this Trust Agreement, as the Preferred
Securities surrendered upon such transfer or exchange.
Every Preferred Security presented or surrendered for
transfer or exchange shall (if so required by the Property
Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Property
Trustee and the Securities Registrar, duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer
or exchange of Preferred Securities, but the Property Trustee may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
transfer or exchange of Preferred Securities.
Neither the Issuer Trust nor the Property Trustee shall be
required, pursuant to the provisions of this Section, (i) to
issue, register the transfer of or exchange any Preferred
Security during a period beginning at the opening of business 15
days before the day of selection for redemption of Preferred
Securities pursuant to Article IV and ending at the close of
business on the day of mailing of the notice or (ii) to register
the transfer of or exchange any Preferred Security so selected
for of redemption, redemption in whole or in part, except, in the
case of any such Preferred Security to be redeemed in part, any
portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Trust Securities may
only be transferred, in whole or part, in accordance with the
terms and conditions set forth in this Trust Agreement. Any
transfer or purported transfer of any Trust Security not made in
accordance with this Trust Agreement shall be null and void.
<PAGE>
(i) Non Global Security to Non Global Security. A
Trust Security that is not a Global Preferred Security may be
transferred, in whole or in part, to a Person who takes delivery
in the form of another Trust Security that is not a Global
Security as provided in Section 5.5(a).
(ii) Free Transferability. Subject to this Section
5.5, Preferred Securities shall be freely transferable.
(iii) Exchanges Between Global Preferred Security
and Non-Global Preferred Security. A beneficial interest in a
Global Preferred Security may be exchanged for a Preferred
Security that is not a Global Preferred Security as provided in
Section 5.4.
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates.
If (a) any mutilated Trust Securities Certificate shall be
surrendered to the Securities Registrar, or if the Securities
Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Trust Securities Certificate
and (b) there shall be delivered to the Securities Registrar and
the Administrators such security or indemnity as may be required
by them to save each of them harmless, then in the absence of
notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrators, or any one
of them, on behalf of the Issuer Trust shall execute and make
available for delivery, and the Property Trustee shall
countersign and register, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities
Certificate, a new Trust Securities Certificate of like class,
tenor and denomination. In connection with the issuance of any
new Trust Securities Certificate under this Section, the
Administrators or the Securities Registrar may require the
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
Any duplicate Trust Securities Certificate issued pursuant to
this Section shall constitute conclusive evidence of an undivided
beneficial interest in the assets of the Issuer Trust
corresponding to that evidenced by the lost, stolen or destroyed
Trust Certificate, as if originally issued, whether or not the
lost, stolen or destroyed Trust Securities Certificate shall be
found at any time.
SECTION 5.7. Persons Deemed Holders.
The Issuer Trustees, the Securities Registrar or the
Depositor shall treat the Person in whose name any Trust
Securities are issued as the owner of such Trust Securities for
the purpose of receiving Distributions and for all other purposes
whatsoever, and none of the Issuer Trustees, the Administrators,
the Securities Registrar nor the Depositor shall be bound by any
notice to the contrary.
SECTION 5.8. Access to List of Holders' Names and
Addresses.
Each Holder and each Owner shall be deemed to have agreed
not to hold the Depositor, the Property Trustee, or the
Administrators accountable by reason of the disclosure of its
name and address, regardless of the source from which such
information was derived.
SECTION 5.9. Maintenance of Office or Agency.
The Property Trustee shall designate, with the consent of
the Administrators, which consent shall not be unreasonably
withheld, an office or offices or agency or agencies where
Preferred Securities certificates may be surrendered for
registration of transfer or exchange and where notices and
demands to or upon the Issuer Trustees in respect of the Trust
Securities Certificates may be served. The Property Trustee
initially designates its Corporate Trust Office at 123 Washington
Street, New York, NY 10006, Attention: Corporate Trust and Agency
Group - Corporate Market Services, as its corporate trust office
for such purposes. The Property Trustee shall give prompt
written notice to the Depositor, the Administrators and to the
Holders of any change in the location of the Securities Register
or any such office or agency.
<PAGE>
SECTION 5.10. Appointment of Paying Agent.
The Paying Agent shall make Distributions to Holders from
the Payment Account and shall report the amounts of such
Distributions to the Property Trustee and the Administrators.
Any Paying Agent shall have the revocable power to withdraw funds
from the Payment Account solely for the purpose of making the
Distributions referred to above. The Property Trustee may revoke
such power and remove any Paying Agent in its sole discretion.
The Paying Agent shall initially be the Property Trustee. Any
Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrators
and the Property Trustee. In the event that the Property Trustee
shall no longer be the Paying Agent or a successor Paying Agent
shall resign or its authority to act be revoked, the Property
Trustee shall appoint a successor (which shall be a bank or trust
company) that is reasonably acceptable to the Administrators to
act as Paying Agent. Such successor Paying Agent or any
additional Paying Agent appointed by the Administrators shall
execute and deliver to the Issuer Trustees an instrument in which
such successor Paying Agent or additional Paying Agent shall
agree with the Issuer Trustees that as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Holders in trust for
the benefit of the Holders entitled thereto until such sums shall
be paid to such Holders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and upon removal of a
Paying Agent such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of Sections
8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role
as Paying Agent, for so long as the Bank shall act as Paying
Agent and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Trust Agreement to
the Paying Agent shall include any co-paying agent chosen by the
Property Trustee unless the context requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor.
At each Time of Delivery, the Depositor shall acquire and
retain beneficial and record ownership of the Common Securities
except (i) in connection with a consolidation or merger of the
Depositor into another corporation or any conveyance, transfer or
lease by the Depositor of its properties and assets substantially
as an entirety to any Person, pursuant to Section 8.1 of the
Indenture, or (ii) a transfer to an Affiliate of the Depositor in
compliance with applicable law (including the Securities Act and
applicable state securities and blue sky laws). Except as
provided for, any attempted transfer of the Common Securities
shall be void. The Administrators shall cause each Common
Securities Certificate issued to the Depositor to contain a
legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO A
SUCCESSOR IN INTEREST TO THE DEPOSITOR OR AN AFFILIATE OF THE
DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF
THE TRUST AGREEMENT."
SECTION 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the
Holders is required under this Trust Agreement, for so long as
Preferred Securities are represented by a Global Preferred
Securities Certificate, the Administrators and the Issuer
Trustees shall give all such notices and communications specified
herein to be given to the Clearing Agency, and shall have no
obligations to the Owners.
SECTION 5.13. Rights of Holders.
(a) The legal title to the Trust Property is vested
exclusively in the Property Trustee (in its capacity as such) in
accordance with Section 2.9, and the Holders shall not have any
right or title therein other than the undivided beneficial
interest in the assets of the Issuer Trust conferred by their
Trust Securities and they shall have no right to call for any
partition or division of property, profits or rights of the
Issuer Trust except as described below. The Trust Securities
shall be personal property giving only the rights specifically
set forth therein and in this Trust Agreement. The Trust
Securities shall have no preemptive or similar rights and when
issued and delivered to Holders against payment of the purchase
price therefor will be fully paid and nonassessable by the Issuer
Trust. Subject to Section 4.8 hereof the Holders of the Trust
Securities, in their capacities as such, shall be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General
Corporation Law of the State of Delaware.
<PAGE>
(b) For so long as any Preferred Securities remain
Outstanding, if, upon a Debenture Event of Default, the Debenture
Trustee fails or the holders of not less than 25% in principal
amount of the outstanding Junior Subordinated Debentures fail to
declare the principal of all of the Junior Subordinated
Debentures to be immediately due and payable, the Holders of at
least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have such right to make such declaration by a
notice in writing to the Property Trustee, the Depositor and the
Debenture Trustee.
At any time after such a declaration of acceleration with
respect to the Junior Subordinated Debentures has been made and
before a judgment or decree for payment of the money due has been
obtained by the Debenture Trustee as provided in the Indenture,
the Holders of a majority in Liquidation Amount of the Preferred
Securities, by written notice to the Property Trustee, the
Depositor and the Debenture Trustee, may rescind and annul such
declaration and its consequences if:
(i) the Depositor has paid or deposited with the
Debenture Trustee a sum sufficient to pay
(A) all overdue installments of interest on all
of the Junior Subordinated Debentures,
(B) any accrued Additional Interest on all of the
Junior Subordinated Debentures,
(C) the principal of (and premium, if any,
on) any Junior Subordinated Debentures which have
become due otherwise than by such declaration of
acceleration and interest and Additional Interest
thereon at the rate borne by the Junior Subordinated
Debentures, and
(D) all sums paid or advanced by the
Debenture Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Property
Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Junior
Subordinated Debentures, other than the non-payment of the
principal of the Junior Subordinated Debentures which has become
due solely by such acceleration, have been cured or waived as
provided in Section 5.13 of the Indenture.
If the Property Trustee fails to annul any such declaration
and waive such default, the Holders of at least a Majority in
Liquidation Amount of the Preferred Securities shall also have
the right to rescind and annul such declaration and its
consequences by written notice to the Depositor, the Property
Trustee and the Debenture Trustee, subject to the satisfaction of
the conditions set forth in Clause (i) and (ii) of this Section
5.13.
The Holders of at least a Majority in Liquidation Amount of
the Preferred Securities may, on behalf of the Holders of all the
Preferred Securities, waive any past default under the Indenture,
except a default in the payment of principal or interest (unless
such default has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than
by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of
the holder of each outstanding Junior Subordinated Debentures.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
Upon receipt by the Property Trustee of written notice
declaring such an acceleration, or rescission and annulment
thereof, by Holders of the Preferred Securities all or part of
which is represented by Global Preferred Securities, a record
date shall be established for determining Holders of Outstanding
Preferred Securities entitled to join in such notice, which
record date shall be at the close of business on the day the
Property Trustee receives such notice. The Holders on such
record date, or their duly designated proxies, and only such
Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided,
that, unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice
prior to the day which is 90 days after such record date, such
notice of declaration of acceleration, or rescission and
annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further
effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving, after expiration of such 90-day
period, a new written notice of declaration of acceleration, or
rescission and annulment thereof, as the case may be, that is
<PAGE>
identical to a written notice which has been canceled pursuant to
the proviso to the preceding sentence, in which event a new
record date shall be established pursuant to the provisions of
this Section 5.13(b).
(c) For so long as any Preferred Securities remain
Outstanding, to the fullest extent permitted by law and subject
to the terms of this Trust Agreement and the Indenture, upon a
Debenture Event of Default specified in Section 5.1(1) or 5.1(2)
of the Indenture, any Holder of Preferred Securities shall have
the right to institute a proceeding directly against the
Depositor, pursuant to Section 5.9 of the Indenture, for
enforcement of payment to such Holder of the principal amount of
or interest on Junior Subordinated Debentures having an aggregate
principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such Holder (a "Direct Action"). Except
as set forth in Sections 5.13(b) and 5.13(c), the Holders of
Preferred Securities shall have no right to exercise directly any
right or remedy available to the holders of, or in respect of,
the Junior Subordinated Debentures.
ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Holder's Voting Rights.
(a) Except as provided in this Trust Agreement and in the
Indenture and as otherwise required by law, no Holder of
Preferred Securities shall have any right to vote or in any
manner otherwise control the administration, operation and
management of the Issuer Trust or the obligations of the parties
hereto, nor shall anything herein set forth or contained in the
terms of the Trust Securities certificates be construed so as to
constitute the Holders from time to time as members of an
association.
(b) So long as any Junior Subordinated Debentures are held
by the Property Trustee on behalf of the Issuer Trust, the
Property Trustee shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on
the Property Trustee with respect to such Junior Subordinated
Debentures, (ii) waive any past default that may be waived under
Section 5.13 of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the
Junior Subordinated Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such
consent shall be required, without, in each case, obtaining the
prior approval of the Holders of at least a Majority in
Liquidation Amount of the Preferred Securities, provided,
however, that where a consent under the Indenture would require
the consent of each Holder of Junior Subordinated Debentures
affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of
Preferred Securities. The Property Trustee shall not revoke any
action previously authorized or approved by a vote of the Holders
of Preferred Securities, except by a subsequent vote of the
Holders of Preferred Securities. The Property Trustee shall
notify all Holders of the Preferred Securities of any notice of
default received with respect to the Junior Subordinated
Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of
the foregoing actions, the Issuer Trustees shall, at the expense
of the Depositor, obtain an Opinion of Counsel experienced in
such matters to the effect that such action will not cause the
Issuer Trust to be taxable as a corporation for United States
federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement
provides for, or the Issuer Trust otherwise proposes to effect,
(i) any action that would adversely affect in any material
respect the interests, powers, preferences or special rights of
the Preferred Securities, whether by way of amendment to the
Trust Agreement or otherwise, or (ii) the dissolution of the
Issuer Trust, other than pursuant to the terms of this Trust
Agreement, then the Holders of Outstanding Trust Securities as a
class will be entitled to vote on such amendment or proposal and
such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in Liquidation
Amount of the Preferred Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust
Agreement may be made if, as a result of such amendment, it would
cause the Issuer Trust to be taxable as a corporation for United
States federal income tax purposes.
<PAGE>
SECTION 6.2. Notice of Meetings.
Notice of all meetings of the Holders, stating the time,
place and purpose of the meeting, shall be given by the Property
Trustee pursuant to Section 10.8 to each Holder of record, at his
registered address, at least 15 days and not more than 90 days
before the meeting. At any such meeting, any business properly
before the meeting may be so considered whether or not stated in
the notice of the meeting. Any adjourned meeting may be held as
adjourned without further notice.
SECTION 6.3. Meetings of Holders.
No annual meeting of Holders is required to be held. The
Property Trustee, however, shall call a meeting of Holders to
vote on any matter upon the written request of the Holders of
record of 25% of the aggregate Liquidation Amount of the
Preferred Securities and the Administrators or the Property
Trustee may, at any time in their discretion, call a meeting of
Holders of Preferred Securities to vote on any matters as to
which Holders are entitled to vote.
Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, present in person or represented by proxy,
shall constitute a quorum at any meeting of Holders of the
Preferred Securities.
If a quorum is present at a meeting, an affirmative vote by
the Holders of record present, in person or by proxy, holding
Preferred Securities representing at least a Majority in
Liquidation Amount of the Preferred Securities held by the
Holders present, either in person or by proxy, at such meeting
shall constitute the action of the Holders of Preferred
Securities, unless this Trust Agreement requires a greater number
of affirmative votes.
SECTION 6.4. Voting Rights.
Holders shall be entitled to one vote for each $10 of
Liquidation Amount represented by their outstanding Trust
Securities in respect of any matter as to which such Holders are
entitled to vote.
SECTION 6.5. Proxies, etc.
At any meeting of Holders, any Holder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted
at any meeting unless it shall have been placed on file with the
Property Trustee, or with such other officer or agent of the
Issuer Trust as the Property Trustee may direct, for verification
prior to the time at which such vote shall be taken. Pursuant to
a resolution of the Property Trustee, proxies may be solicited in
the name of the Property Trustee or one or more officers of the
Property Trustee. Only Holders of record shall be entitled to
vote. When Trust Securities are held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in
respect of such Trust Securities, but if more than one of them
shall be present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such
Trust Securities. A proxy purporting to be executed by or on
behalf of a Holder shall be deemed valid unless challenged at or
prior to its exercise, and the burden of proving invalidity shall
rest on the challenger. No proxy shall be valid more than three
years after its date of execution.
SECTION 6.6. Holder Action by Written Consent.
Any action which may be taken by Holders at a meeting may be
taken without a meeting if Holders holding at least a Majority in
Liquidation Amount of all Trust Securities entitled to vote in
respect of such action (or such larger proportion thereof as
shall be required by any other provision of this Trust Agreement)
shall consent to the action in writing.
SECTION 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Holders who are entitled
to notice of and to vote at any meeting or by written consent, or
to participate in any distribution on the Trust Securities in
respect of which a record date is not otherwise provided for in
this Trust Agreement, or for the purpose of any other action, the
Administrators or Property Trustee may from <PAGE> time to time fix a
date, not more than 90 days prior to the date of any meeting of
Holders or the payment of a distribution or other action, as the
case may be, as a record date for the determination of the
identity of the Holders of record for such purposes.
SECTION 6.8. Acts of Holders.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this
Trust Agreement to be given, made or taken by Holders may be
embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as otherwise
expressly provided herein, such action shall become effective
when such instrument or instruments are delivered to the Property
Trustee. 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 Trust Agreement and (subject to Section 8.1)
conclusive in favor of the Issuer Trustees, if made in the manner
provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be 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 any Issuer Trustee or Administrator receiving the
same deems sufficient.
The ownership of Trust Securities shall be proved by the
Securities Register.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Trust Security
shall bind every future Holder of the same Trust Security and the
Holder of every Trust Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the
Issuer Trustees, the Administrators or the Issuer Trust in
reliance thereon, whether or not notation of such action is made
upon such Trust Security.
Without limiting the foregoing, a Holder entitled hereunder
to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the
Liquidation Amount of such Trust Security or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation
Amount.
If any dispute shall arise among the Holders, the
Administrators or the Issuer Trustees with respect to the
authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such
Holder or Issuer Trustee under this Article VI, then the
determination of such matter by the Property Trustee shall be
conclusive with respect to such matter.
A Holder may institute a legal proceeding directly against
the Depositor under the Guarantee Agreement to enforce its rights
under the Guarantee Agreement without first instituting a legal
proceeding against the Guarantee Trustee (as defined in the
Guarantee Agreement), the Issuer Trust, any Issuer Trustee, any
Administrator or any person or entity.
SECTION 6.9. Inspection of Records.
Upon reasonable notice to the Administrators and the
Property Trustee, the records of the issuer Trust shall be open
to inspection by Holders during normal business hours for any
purpose reasonably related to such Holder's interest as a Holder.
<PAGE>
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property
Trustee and the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each
severally on behalf of and as to itself, hereby represents and
warrants for the benefit of the Depositor and the Holders that:
(a) The Property Trustee is a banking corporation with
trust powers, duly organized, validly existing and in good
standing under the laws of New York, with trust power and
authority to execute and deliver, and to carry out and perform
its obligations under the terms of this Trust Agreement.
(b) The execution, delivery and performance by the Property
Trustee of this Trust Agreement has been duly authorized by all
necessary corporate action on the part of the Property Trustee;
and this Trust Agreement has been duly executed and delivered by
the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles
of equity and the discretion of the court (regardless of whether
the enforcement of such remedies is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance of this Trust
Agreement by the Property Trustee does not conflict with or
constitute a breach of the certificate of incorporation or
by-laws of the Property Trustee.
(d) At the Time of Delivery, the Property Trustee has not
knowingly created any liens or encumbrances on the Trust
Securities.
(e) No consent, approval or authorization of, or
registration with or notice to, any New York State or federal
banking authority is required for the execution, delivery or
performance by the Property Trustee, of this Trust Agreement.
(f) The Delaware Trustee is duly organized, validly
existing and in good standing under the laws of the State of
Delaware, with trust power and authority to execute and deliver,
and to carry out and perform its obligations under the terms of,
the Trust Agreement.
(g) The execution, delivery and performance by the Delaware
Trustee of this Trust Agreement has been duly authorized by all
necessary corporate action on the part of the Delaware Trustee;
and this Trust Agreement has been duly executed and delivered by
the Delaware Trustee, and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles
of equity and the discretion of the court (regardless of whether
the enforcement of such remedies is considered in a proceeding in
equity or at law).
(h) The execution, delivery and performance of this Trust
Agreement by the Delaware Trustee does not conflict with or
constitute a breach of the certificate of incorporation or
by-laws of the Delaware Trustee.
(i) No consent, approval or authorization of, or
registration with or notice to any state or Federal banking
authority is required for the execution, delivery or performance
by the Delaware Trustee, of this Trust Agreement.
(j) The Delaware Trustee is an entity which has its
principal place of business in the State of Delaware.
SECTION 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit
of the Holders that:
<PAGE>
(a) the Trust Securities Certificates issued at the Time of
Delivery on behalf of the Issuer Trust have been duly authorized
and will have been duly and validly executed, and, subject to
payment therefor, issued and delivered by the Issuer Trustees
pursuant to the terms and provisions of, and in accordance with
the requirements of, this Trust Agreement, and the Holders will
be, as of each such date, entitled to the benefits of this Trust
Agreement; and
(b) there are no taxes, fees or other governmental charges
payable by the Issuer Trust (or the Issuer Trustees on behalf of
the Issuer Trust) under the laws of the State of Delaware or any
political subdivision thereof in connection with the execution,
delivery and performance by either the Property Trustee or the
Delaware Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII
THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Issuer Trustees
and the Administrators shall be as provided by this Trust
Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of
this Trust Agreement shall require the Issuer Trustees or the
Administrators to expend or risk their own funds or otherwise
incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or
powers, if they shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it or them. Whether or
not therein expressly so provided, every provision of this Trust
Agreement relating to the conduct or affecting the liability of
or affording protection to the Issuer Trustees or the
Administrators shall be subject to the provisions of this
Section. Nothing in this Trust Agreement shall be construed to
release an Administrator or the Issuer Trustees from liability
for his or its own negligent action, his or its own negligent
failure to act, or his or its own willful misconduct. To the
extent that, at law or in equity, an Issuer Trustee or
Administrator has duties and liabilities relating to the Issuer
Trust or to the Holders, such Issuer Trustee or Administrator
shall not be liable to the Issuer Trust or to any Holder for such
Issuer Trustee's or Administrator's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust
Agreement, to the extent that they restrict the duties and
liabilities of the Issuer Trustees and Administrators otherwise
existing at law or in equity, are agreed by the Depositor and the
Holders to replace his or such other duties and liabilities of
the Issuer Trustees and Administrators.
(b) All payments made by the Property Trustee or a Paying
Agent in respect of the Trust Securities shall be made only from
the revenue and proceeds from the Trust Property and only to the
extent that there shall be sufficient revenue or proceeds from
the Trust Property to enable the Property Trustee or a Paying
Agent to make payments in accordance with the terms hereof. Each
Holder, by his or its acceptance of a Trust Security, agrees that
he or it will look solely to the revenue and proceeds from the
Trust Property to the extent legally available for distribution
to it or him as herein provided and that neither the Issuer
Trustees nor the Administrators are personally liable to it or
him for any amount distributable in respect of any Trust Security
or for any other liability in respect of any Trust Security.
This Section 8.l(b) does not limit the liability of the Issuer
Trustees expressly set forth elsewhere in this Trust Agreement
or, in the case of the Property Trustee, in the Trust Indenture
Act.
(c) The Property Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default
that may have occurred, shall undertake to perform only such
duties as are specifically set forth in this Trust Agreement
(including pursuant to Section 10.10), and no implied covenants
shall be read into this Trust Agreement against the Property
Trustee. If an Event of Default has occurred (that has not been
cured or waived pursuant to Section 5.13 of the Indenture), the
Property Trustee shall enforce this Trust Agreement for the
benefit of the Holders and shall exercise such of the rights and
powers vested in it by this Trust Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(d) No provision of this Trust Agreement shall be construed
to relieve the Property Trustee from liability for its own
negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
<PAGE>
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default
that may have occurred:
(A) the duties and obligations of the
Property Trustee shall be determined solely by the
express provisions of this Trust Agreement (including
pursuant to Section 10.10), and the Property Trustee
shall not be liable except for the performance of such
duties and obligations as are specifically set forth in
this Trust Agreement (including pursuant to Section
10.10); and
(B) in the absence of bad faith on the part
of the Property Trustee, the Property Trustee may
conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the
Property Trustee and conforming to the requirements of
this Trust Agreement; but in the case of any such
certificates or opinions that by any provision hereof
or of the Trust Indenture Act are specifically required
to be furnished to the Property Trustee, the Property
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Trust Agreement;
(ii) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of
the Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of at least
a Majority in Liquidation Amount of the Preferred Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee
under this Trust Agreement;
(iv) the Property Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the Junior
Subordinated Debentures and the Payment Account shall be to deal
with such Property in a similar manner as the Property Trustee
deals with similar property for its own account, subject to the
protections and limitations on liability afforded to the Property
Trustee under this Trust Agreement and the Trust Indenture Act;
(v) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise
agree with the Depositor; and money held by the Property Trustee
need not be segregated from other funds held by it except in
relation to the Payment Account maintained by the Property
Trustee pursuant to Section 3.1 and except to the extent
otherwise required by law;
(vi) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Depositor
with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the default or
misconduct of any other Issuer Trustee, the Administrators or the
Depositor; and
(vii) no provision of this Trust Agreement shall
require the Property Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance
of any of its duties or in the exercise of any of its rights or
powers, if the Property Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Trust Agreement
or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) The Administrators shall not be responsible for
monitoring the compliance by the Issuer Trustees or the Depositor
with their respective duties under this Trust Agreement, nor
shall either Administrator be liable for the default or
misconduct of any other Administrator, the Issuer Trustees or the
Depositor.
SECTION 8.2. Certain Notices.
Within five Business Days after the occurrence of any Event
of Default actually known to a Responsible Officer of the
Property Trustee, the Property Trustee shall transmit, in the
manner and to the extent provided in Section 10.8, notice <PAGE> of such
Event of Default to the Holders and the Administrators, unless
such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of
interest on the Junior Subordinated Debentures pursuant to the
Indenture, the Property Trustee shall transmit, in the manner and
to the extent provided in Section 10.8, notice of such exercise
to the Holders and the Administrators, unless such exercise shall
have been revoked.
SECTION 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be fully
protected in acting or refraining from acting in good faith upon
any resolution, Opinion of Counsel, certificate, written
representation of a Holder or transferee, certificate of auditors
or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any direction or act of the Depositor contemplated by
this Trust Agreement shall be sufficiently evidenced by an
Officers' Certificate;
(c) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax
or securities laws) or any re-recording, refiling or registration
thereof;
(d) the Property Trustee may consult with counsel of its
own choosing (which counsel may be counsel to the Depositor or
any of its Affiliates, and may include any of its employees) and
the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice; the Property Trustee
shall have the right at any time to seek instructions concerning
the administration of this Trust Agreement from any court of
competent jurisdiction;
(e) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust
Agreement at the request or direction of any of the Holders
pursuant to this Trust Agreement, unless such Holders shall have
offered to the Property Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction; provided that, nothing contained in this Section
8.3(e) shall be taken to relieve the Property Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Trust Agreement;
(f) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, debenture, note or other
evidence of indebtedness or other paper or document, unless
requested in writing to do so by one or more Holders, but the
Property Trustee may make such further inquiry or investigation
into such facts or matters as it may see fit;
(g) the Property Trustee may execute any of the trusts or
powers hereunder or perform any of its duties hereunder either
directly or by or through its agents or attorneys, provided that
the Property Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with
due care by it hereunder;
(h) whenever in the administration of this Trust Agreement
the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Property Trustee (i) may
request instructions from the Holders (which instructions may
only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled
to direct the Property Trustee under the terms of the Trust
Securities in respect of such remedy, right or action), (ii) may
refrain from enforcing such remedy or right or taking such <PAGE> other
action until such instructions are received, and (iii) shall be
fully protected in acting in accordance with such instructions;
and
(i) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation
to take any action that is discretionary under the provisions of
this Trust Agreement.
No provision of this Trust Agreement shall be deemed to
impose any duty or obligation on any Issuer Trustee or
Administrator to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the
Property Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts,
or to exercise any such right, power, duty or obligation. No
permissive power or authority available to any Issuer Trustee or
Administrator shall be construed to be a duty.
SECTION 8.4. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Trust Securities
Certificates shall be taken as the statements of the Issuer
Trust, and the Issuer Trustees and the Administrators do not
assume any responsibility for their correctness. The Issuer
Trustees and the Administrators shall not be accountable for the
use or application by the Depositor of the proceeds of the Junior
Subordinated Debentures.
SECTION 8.5. May Hold Securities.
Except as provided in the definition of the term
"Outstanding" in Article 1, the Administrators, any Issuer
Trustee or any other agent of any Issuer Trustee or the Issuer
Trust, in its individual or any other capacity, may become the
owner or pledgee of Trust Securities and, subject to Sections 8.8
and 8.13, may otherwise deal with the Issuer Trust with the same
rights it would have if it were not an Administrator, Issuer
Trustee or such other agent.
SECTION 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to the Issuer Trustees from time to time
reasonable compensation for all services rendered by them
hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(b) to reimburse the Issuer Trustees and the Administrators
upon request for all reasonable expenses, disbursements and
advances incurred or made by the Issuer Trustees in accordance
with any provision of this Trust Agreement (including the
reasonable compensation, expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as
may be attributable to their negligence or willful misconduct;
and
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Issuer Trustee, (ii) each
Administrator, (iii) any Affiliate of any Issuer Trustee, (iv)
any officer, director, shareholder, employee, representative or
agent of any Issuer Trustee, and (v) any employee or agent of the
Issuer Trust, (referred to herein as an "Indemnified Person")
from and against any loss, damage, liability, tax, penalty,
expense or claim of any kind or nature whatsoever incurred by
such Indemnified Person arising out of or in connection with the
creation, operation or dissolution of the Issuer Trust or any act
or omission performed or omitted by such Indemnified Person in
good faith on behalf of the Issuer Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this Trust
Agreement, except that no Indemnified Person shall be entitled to
be indemnified in respect of any loss, damage or claim incurred
by such Indemnified Person by reason of negligence or willful
misconduct with respect to such acts or omissions.
The provisions of this Section 8.6 shall survive the
termination of this Trust Agreement.
<PAGE>
No Issuer Trustee may claim any lien or charge on any Trust
Property as a result of any amount due pursuant to this Section
8.6.
The Depositor, any Administrator and any Issuer Trustee may
engage in or possess an interest in other business ventures of
any nature or description, independently or with others, similar
or dissimilar to the business of the Issuer Trust, and the Issuer
Trust and the Holders of Trust Securities shall have no rights by
virtue of this Trust Agreement in and to such independent
ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the
business of the Issuer Trust, shall not be deemed wrongful or
improper. Neither the Depositor, any Administrator, nor any
issuer Trustee shall be obligated to present any particular
investment or other opportunity to the Issuer Trust even if such
opportunity is of a character that, if presented to the Issuer
Trust, could be taken by the Issuer Trust, and the Depositor, any
Administrator or any Issuer Trustee shall have the right to take
for its own account (individually or as a partner or fiduciary)
or to recommend to others any such particular investment or other
opportunity. Any Issuer Trustee may engage or be interested in
any financial or other transaction with the Depositor or any
Affiliate of the Depositor, or may act as depository for, trustee
or agent for, or act on any committee or body of holders of,
securities or other obligations of the Depositor or its
Affiliates.
SECTION 8.7. Corporate Property Trustee Required;
Eligibility of Trustees and Administrators.
(a) There shall at all times be a Property Trustee
hereunder with respect to the Trust Securities. The Property
Trustee shall be a Person that is a national or state chartered
bank and 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 any such Person publishes reports of condition
at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time the
Property Trustee with respect to the Trust Securities shall cease
to be eligible in accordance with the provisions of this Section,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article. At the time of
appointment, the Property Trustee must have securities rated in
one of the three highest rating categories by a nationally
recognized statistical rating organization.
(b) There shall at all times be one or more Administrators
hereunder. Each Administrator shall be either a natural person
who is at least 21 years of age or a legal entity that shall act
through one or more persons authorized to bind that entity. An
employee, officer or Affiliate of the Depositor may serve as an
Administrator.
(c) There shall at all times be a Delaware Trustee. The
Delaware Trustee shall either be a natural person who is at least
21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of
Delaware and that otherwise meets the requirements of applicable
Delaware law that shall act through one or more persons
authorized to bind such entity.
SECTION 8.8. Conflicting Interests.
(a) If the Property Trustee has or shall acquire a
conflicting interest within the meaning of the Trust Indenture
Act, the Property Trustee shall either eliminate such interest or
resign, to the extent and in the manner provided by, and subject
to the provisions of, the Trust Indenture Act and this Trust
Agreement.
(b) The Guarantee Agreement and the Indenture shall be
deemed to be specifically described in this Trust Agreement for
the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.
SECTION 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the
legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the
time be located, the Property Trustee shall have power to
appoint, and upon the written request of the Property Trustee,
the Depositor and the Administrators shall for such purpose join
with the Property Trustee in the execution, delivery, and
performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the <PAGE> Property Trustee
either to act as co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to the extent
required by law to act as separate trustee of any such property,
in either case with such powers as may be provided in the
instrument of appointment, and to vest in such Person or Persons
in the capacity aforesaid, any property, title, right or power
deemed necessary or desirable, subject to the other provisions of
this Section. Any co-trustee or separate trustee appointed
pursuant to this Section shall either be (i) a natural person who
is at least 21 years of age and a resident of the United States
or (ii) a legal entity with its principal place of business in
the United States that shall act through one or more persons
authorized to bind such entity.
Should any written instrument from the Depositor be required
by any co-trustee or separate trustee so appointed for more fully
confirming to such co-trustee or separate trustee such property,
title, right, or power, any and all such instruments shall, on
request, be executed, acknowledged and delivered by the
Depositor.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject
to the following terms, namely:
(a) The Trust Securities shall be executed by one or more
Administrators, and the Trust Securities shall be countersigned,
registered and delivered and all rights, powers, duties, and
obligations hereunder in respect of the custody of securities,
cash and other personal property held by, or required to be
deposited or pledged with, the Property Trustees specified
hereunder, shall be exercised, solely by the Property Trustee and
not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or
imposed upon and exercised or performed by the Property Trustee
and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the
Property Trustee shall be incompetent or unqualified to perform
such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee
or separate trustee.
(c) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the
Depositor, may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section, and, in case a
Debenture Event of Default has occurred and is continuing, the
Property Trustee shall have power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the
concurrence of the Depositor. Upon the written request of the
property Trustee, the Depositor shall join with the Property
Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the
manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the
Property Trustee or any other trustee hereunder.
(e) The Property Trustee shall not be liable by reason of
any act of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee
and separate trustee.
SECTION 8.10. Resignation and Removal; Appointment of
Successor.
No resignation or removal of any Issuer Trustee (the
"Relevant Trustee") and no appointment of a successor Trustee
pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance
with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, a Relevant
Trustee may resign at any time by giving written notice thereof
to the Holders. The Holders of the Common Securities shall
appoint a successor by requesting from at least three Persons
meeting the eligibility requirements its expenses and charges to
serve as the successor Trustee on a form provided by the
Administrators, and selecting the Person who agrees to the lowest
expenses and charges. If the instrument of <PAGE> acceptance by the
successor Trustee required by Section 8.11 shall not have been
delivered to the Relevant Trustee within 60 days after the giving
of such notice of resignation, the Relevant Trustee may petition,
at the expense of the Issuer Trust, any court of competent
jurisdiction for the appointment of a successor Trustee.
The Property Trustee or the Delaware Trustee may be removed
at any time by Act of the Holders of at least a Majority in
Liquidation Amount of the Preferred Securities, delivered to the
Relevant Trustee (in its individual capacity and on behalf of the
Issuer Trust) (i) for cause (including upon the occurrence of an
Event of Default described in subparagraph (f) of the definition
thereof with respect to the Relevant Trustee), or (ii) if a
Debenture Event of Default shall have occurred and be continuing
at any time.
If a Relevant Trustee shall be removed or become incapable
of acting as Issuer Trustee, or if any vacancy shall occur in the
office of any Issuer Trustee for any cause, the Holders of the
Common Securities shall promptly appoint a successor Trustee or
Trustees, and such successor Issuer Trustee shall comply with the
applicable requirements of Section 8.11. If no successor Trustee
shall have been so appointed by the Holders of the Common
Securities and accepted appointment in the manner required by
Section 8.11, any Holder, on behalf of himself and all others
similarly situated, or any other Issuer Trustee, may petition any
court in the State of Delaware for the appointment of a successor
Trustee.
The Property Trustee shall give notice of each resignation
and each removal of a Relevant Trustee and each appointment of a
successor Trustee to all Holders in the manner provided in
Section 10.8 and shall give notice to the Depositor and to the
Administrators. Each notice shall include the name of the
Relevant Trustee and the address of its Corporate Trust Office if
it is the Property Trustee.
Notwithstanding the foregoing or any other provision of this
Trust Agreement, in the event any Delaware Trustee who is a
natural person dies or becomes, in the opinion of the Holders of
the Common Securities, incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled
by the Property Trustee following the procedures regarding
expenses and charges set forth above (with the successor in each
case being a Person who satisfies the eligibility requirement for
Administrators or Delaware Trustee, as the case may be, set forth
in Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee,
the retiring Relevant Trustee and each such successor Trustee
with respect to the Trust Securities shall execute, acknowledge
and deliver an instrument wherein each successor Trustee shall
accept such appointment and which 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
Trust Securities and the Issuer Trust, and upon the execution and
delivery of such instrument the resignation or removal of the
retiring Relevant 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 Relevant Trustee; but,
on request of the Issuer Trust or any successor Trustee such
Relevant Trustee shall duly assign, transfer and deliver to such
successor Trustee all Trust Property, all proceeds thereof and
money held by such Relevant Trustee hereunder with respect to the
Trust Securities and the Trust.
Upon request of any such successor Trustee, the Issuer Trust
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 the first or second
preceding paragraph, as the case may be.
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 8.12. Merger, Conversion, Consolidation or
Succession to Business.
Any Person into which the Property Trustee or the Delaware
Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion
or consolidation to which such Relevant Trustee shall be a party,
or any Person succeeding to all or substantially all the
corporate trust business of such Relevant Trustee, <PAGE> shall be the
successor of such Relevant Trustee hereunder, provided that such
Person shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
SECTION 8.13. Preferential Collection of Claims Against
Depositor or Issuer Trust.
If and when the Property Trustee shall be or become a
creditor of the Depositor (or any other obligor upon the Trust
Securities), the Property Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of
claims against the Depositor (or any such other obligor) as is
required by the Trust Indenture Act.
SECTION 8.14. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition
or other similar judicial proceeding relative to the Issuer Trust
or any other obligor upon the Trust Securities or the property of
the Issuer Trust or of such other obligor, the Property Trustee
(irrespective of whether any Distributions on the Trust
Securities shall then be due and payable and irrespective of
whether the Property Trustee shall have made any demand on the
Issuer Trust for the payment of any past due Distributions) shall
be entitled and empowered, to the fullest extent permitted by
law, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities
and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Property Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents
and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Property Trustee and, in the event the Property
Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Property Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances
of the Property Trustee, its agents and counsel, and any other
amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the
Property Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or compensation affecting the Trust Securities or the
rights of any Holder thereof or to authorize the Property Trustee
to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 8.15. Reports by Property Trustee.
(a) Not later than January 31 of each year commencing with
January 31, 1998, the Property Trustee shall transmit to all
Holders in accordance with Section 10.8, and to the Depositor, a
brief report dated as of the immediately preceding December 31
with respect to:
(i) its eligibility under Section 8.7 or, in lieu
thereof, if to the best of its knowledge it has continued to be
eligible under said Section, a written statement to such effect;
and
(ii) any change in the property and funds in its
possession as Property Trustee since the date of its last report
and any action taken by the Property Trustee in the performance
of its duties hereunder which it has not previously reported and
which in its opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to
Holders such reports concerning the Property Trustee and its
actions under this Trust Agreement as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided
pursuant thereto as set forth in Section 10.10 of this Trust
Agreement.
<PAGE>
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with
the Depositor.
SECTION 8.16. Reports to the Property Trustee.
The Depositor and the Administrators on behalf of the Issuer
Trust shall provide to the Property Trustee such documents,
reports and information as required by Section 314 of the Trust
Indenture Act and the compliance certificate required by Section
314(a) of the Trust Indenture Act in the form, in the manner and
at the times required by Section 314 of the Trust Indenture Act,
as set forth in Section 10.10 of this Trust Agreement. The
Depositor and the Administrators shall annually file with the
Property Trustee a certificate specifying whether such Person is
in compliance with all the terms and covenants applicable to such
Person hereunder.
SECTION 8.17. Evidence of Compliance with Conditions
Precedent.
Each of the Depositor and the Administrators on behalf of
the Issuer Trust shall provide to the Property Trustee such
evidence of compliance with any conditions precedent, if any,
provided for in this Trust Agreement that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act as
set forth in Section 10.10 of this Trust Agreement. Any
certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) of the Trust Indenture Act shall be
given in the form of an Officers' Certificate.
SECTION 8.18. Number of Issuer Trustees.
(a) The number of Issuer Trustees shall be two. The
Property Trustee and the Delaware Trustee may be the same Person.
(b) If an Issuer Trustee ceases to hold office for any
reason, a vacancy shall occur. The vacancy shall be filled with
an Issuer Trustee appointed in accordance with Section 8.10.
(c) The death, resignation, retirement, removal,
bankruptcy, incompetence or incapacity to perform the duties of
an Issuer Trustee shall not operate to annul the Issuer Trust.
SECTION 8.19. Delegation of Power.
(a) Any Administrator may, by power of attorney consistent
with applicable law, delegate to any other natural person over
the age of 21 his or her power for the purpose of executing any
documents contemplated in Section 2.7(a) or making any
governmental filing; and
(b) The Administrators shall have power to delegate from
time to time to such of their number the doing of such things and
the execution of such instruments either in the name of the
Issuer Trust or the names of the Administrators or otherwise as
the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the
provisions of this Trust Agreement.
SECTION 8.20. Appointment of Administrators.
(a) The Administrators (other than the initial
Administrators) shall be appointed by the Holders of a Majority
in Liquidation Amount of the Common Securities and all
Administrators (including the initial Administrators) may be
removed by the Holders of a Majority in Liquidation Amount of the
Common Securities or may resign at any time. Each Administrator
shall sign an agreement agreeing to comply with the terms of this
Trust Agreement. If at any time there is no Administrator, the
Property Trustee or any Holder who has been a Holder of Trust
Securities for at least six months may petition any court of
competent jurisdiction for the appointment of one or more
Administrators.
<PAGE>
(b) Whenever a vacancy in the number of Administrators
shall occur, until such vacancy is filled by the appointment of
an Administrator in accordance with this Section 8.20, the
Administrators in office, regardless of their number (and
notwithstanding any other provision of this Trust Agreement),
shall have all the powers granted to the Administrators and shall
discharge all the duties imposed upon the Administrators by this
Trust Agreement.
(c) Notwithstanding the foregoing, or any other provision
of this Trust Agreement, in the event any Administrator or a
Delaware Trustee who is a natural person dies or becomes, in the
opinion of the Holders of a Majority in Liquidation Amount of the
Common Securities, incompetent, or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled
by the remaining Administrators, if there were at least two of
them prior to such vacancy, and by the Depositor, if there were
not two such Administrators immediately prior to such vacancy
(with the successor in each case being a Person who satisfies the
eligibility requirement for Administrators or Delaware Trustee,
as the case may be, set forth in Section 8.7).
(d) Except as otherwise provided in this Trust Agreement,
or by applicable law, any one Administrator may execute any
document or otherwise take any action which the Administrators
are authorized to take under this Trust Agreement.
ARTICLE IX
DISSOLUTION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Issuer Trust shall
automatically dissolve on June 30, 2028 (the "Expiration Date"),
following the distribution of the Trust Property in accordance
with Section 9.4.
SECTION 9.2. Early Termination.
The first to occur of any of the following events is an
"Early Termination Event":
(a) the occurrence of the appointment of a receiver or
other similar official in any liquidation, insolvency or similar
proceeding with respect to the Depositor or all or substantially
all of its property, or a court or other governmental agency
shall enter a decree or order and such decree or order shall
remain unstayed and undischarged for a period of 60 days, unless
the Depositor shall transfer the Common Securities as provided by
Section 5.11, in which case this provision shall refer instead to
any such successor Holder of the Common Securities;
(b) the written direction to the Property Trustee from the
Holder of the Common Securities at any time to dissolve the
Issuer Trust and to distribute the Junior Subordinated Debentures
to Holders in exchange for the Preferred Securities (which
direction, subject to Section 9.4(a), is optional and wholly
within the discretion of the Holders of the Common Securities);
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all the Junior Subordinated
Debentures; and
(d) the entry of an order for dissolution of the Issuer
Trust by a court of competent jurisdiction.
SECTION 9.3. Dissolution.
The respective obligations and responsibilities of the
Issuer Trustees, the Administrators and the Issuer Trust created
and continued hereby shall terminate upon the latest to occur of
the following: (a) the distribution by the Property Trustee to
Holders of all amounts required to be distributed hereunder upon
the liquidation of the Issuer Trust pursuant to Section 9.4, or
upon the redemption of all of the Trust Securities pursuant to
Section 4.2, (b) the payment of any expenses <PAGE> owed by the Issuer
Trust, (c) the discharge of all administrative duties of the
Administrators, including the performance of any tax reporting
obligations with respect to the Issuer Trust or the Holders and
(d) the filing by the Issuer Trustees of a certificate of
cancellation with the Delaware Secretary of State.
SECTION 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a),
(b) or (d) of Section 9.2 occurs or upon the Expiration Date, the
Issuer Trust shall be liquidated by the Property Trustee as
expeditiously as the Property Trustee determines to be possible
by distributing, after satisfaction of liabilities to creditors
of the Issuer Trust as provided by applicable law, to each Holder
a Like Amount of Junior Subordinated Debentures, subject to
Section 9.4(d). Notice of liquidation shall be given by the
Property Trustee by first-class mail, postage prepaid, mailed not
later than 15 nor more than 45 days prior to the Liquidation Date
to each Holder of Trust Securities at such Holder's address
appearing in the Securities Register. All notices of liquidation
shall:
(i) state the Liquidation Date;
(ii) state that, from and after the Liquidation Date,
the Trust Securities will no longer be deemed to be Outstanding
and any Trust Securities Certificates not surrendered for
exchange will be deemed to represent a Like Amount of Junior
Subordinated Debentures; and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities
Certificates for Junior Subordinated Debentures, or if Section
9.4(d) applies receive a Liquidation Distribution, as the
Administrators or the Property Trustee shall deem appropriate,
(b) Except where Section 9.2(c) or 9.4(d) applies, in order
to effect the liquidation of the Issuer Trust and distribution of
the Junior Subordinated Debentures to Holders, the Property
Trustee shall establish a record date for such distribution
(which shall be not more than 30 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the
appointment of a separate exchange agent, shall establish such
procedures as it shall deem appropriate to effect the
distribution of Junior Subordinated Debentures in exchange for
the Outstanding Trust Securities Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after
the Liquidation Date, (i) the Trust Securities will no longer be
deemed to be Outstanding, (ii) the Clearing Agency for the
Preferred Securities or its nominee, as the registered holder of
the Global Preferred Securities Certificate, shall receive a
registered global certificate or certificates representing the
Junior Subordinated Debentures to be delivered upon such
distribution with respect to Preferred Securities held by the
Clearing Agency or its nominee, and, (iii) any Trust Securities
Certificates not held by the Clearing Agency for the Preferred
Securities or its nominee as specified in clause (ii) above will
be deemed to represent Junior Subordinated Debentures having a
principal amount equal to the stated Liquidation Amount of the
Trust Securities represented thereby and bearing accrued and
unpaid interest in an amount equal to the accumulated and unpaid
Distributions on such Trust Securities until such certificates
are presented to the Securities Registrar for transfer or
reissuance.
(d) If, notwithstanding the other provisions of this
Section 9.4, whether because of an order for dissolution entered
by a court of competent jurisdiction or otherwise, distribution
of the Junior Subordinated Debentures is not practical, or if any
Early Termination Event specified in clause (c) of Section 9
occurs, the Trust Property shall be liquidated, and the Issuer
Trust shall be dissolved by the Property Trustee in such manner
as the Property Trustee determines. In such event, on the date
of the dissolution of the Issuer Trust, Holders will be entitled
to receive out of the assets of the Issuer Trust available for
distribution to Holders, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, an
amount equal to the aggregate of Liquidation Amount per Trust
Security plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution
"). If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Issuer Trust has
insufficient assets available to pay in full the aggregate
Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Issuer Trust on the Trust
Securities shall be paid on a pro rata basis (based upon
Liquidation Amounts). The Holders of the Common Securities will
be entitled to receive Liquidation Distributions upon any such
dissolution pro rata (determined as aforesaid) <PAGE> with Holders of
Preferred Securities, except that, if a Debenture Event of
Default has occurred and is continuing, the Preferred Securities
shall have a priority over the Common Securities as provided in
Section 4.3.
SECTION 9.5. Mergers, Consolidations, Amalgamations or
Replacements of the Issuer Trust.
The Issuer Trust may not merge with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to, any
entity, except pursuant to this Section 9.5. At the request of
the Holders of the Common Securities, and with the consent of the
Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, the Issuer Trust may merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a
trust organized as such under the laws of any State; provided,
however, that (i) such successor entity either (a) expressly
assumes all of the obligations of the Issuer Trust with respect
to the Preferred Securities or (b) substitutes for the Preferred
Securities other securities having substantially the same terms
as the Preferred Securities (the "Successor Securities") so long
as the Successor Securities have the same priority as the
Preferred Securities with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) a trustee of
such successor entity possessing the same powers and duties as
the Property Trustee is appointed to hold the Junior Subordinated
Debentures, (iii) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating
organization if the Preferred Securities were rated by any
nationally recognized statistical rating organization immediately
prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor
Securities) in any material respect, (v) such successor entity
has a purpose substantially identical to that of the Issuer
Trust, (vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Issuer Trustee
has received an Opinion of Counsel from independent counsel
experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights preferences and
privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Issuer Trust nor such
successor entity will be required to register as an "investment
company" under the Investment Company Act and (vii) the Depositor
or any permitted transferee to whom it has transferred the Common
Securities hereunder own all of the Common Securities of such
successor entity and guarantees the obligations of such successor
entity under the Successor Securities at least to the extent
provided by the Guarantee Agreement. Notwithstanding the
foregoing, the Issuer Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Preferred
Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other entity or permit
any other entity to consolidate, amalgamate, merge with or into,
or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Issuer
Trust or the successor entity to be taxable as a corporation for
United States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the death or incapacity
of any person having an interest, beneficial or otherwise, in
Trust Securities shall not operate to terminate this Trust
Agreement, nor entitle the legal representatives or heirs of such
person or any Holder for such person, to claim an accounting,
take any action or bring any proceeding in any court for a
partition or winding-up of the arrangements contemplated hereby,
nor otherwise affect the rights, obligations and liabilities of
the parties hereto or any of them. Any merger or similar
agreement shall be executed by the Administrators on behalf of
the issuer Trust.
<PAGE>
SECTION 10.2. Amendment.
(a) This Trust Agreement may be amended from time to time
by the Property Trustee and the Holders of a Majority in
Liquidation Amount of the Common Securities, without the consent
of the Delaware Trustee or the Administrators or any Holder of
the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provision herein which may be inconsistent with
any other provision herein, or to make any other provisions with
respect to matters or questions arising under this Trust
Agreement, provided, however, that such amendment shall not
adversely affect in any material respect the interests of any
Holder or (ii) to modify, eliminate or add to any provisions of
this Trust Agreement to such extent as shall be necessary to
ensure that the Issuer Trust will not be taxable as a corporation
for United States federal income tax purposes at any time that
any Trust Securities are Outstanding or to ensure that the Issuer
Trust will not be required to register as an investment company
under the Investment Company Act.
(b) Except as provided in Section 10.2(c) hereof, any
provision of this Trust Agreement may be amended by the Property
Trustee and the Holders of a Majority in Liquidation Amount of
the Common Securities without the consent of the Delaware Trustee
or the Administrators but with (i) the consent of Holders of at
least a Majority in Liquidation Amount of the Preferred
Securities and (ii) receipt by the Issuer Trustees of an Opinion
of Counsel to the effect that such amendment or the exercise of
any power granted to the Issuer Trustees in accordance with such
amendment will not cause the Issuer Trust to be taxable as a
corporation for United States federal income tax purposes or
affect the Issuer Trust's exemption from status of an "investment
company" under the Investment Company Act.
(c) In addition to and notwithstanding any other provision
in this Trust Agreement, without the consent of each affected
Holder (such consent being obtained in accordance with Section
6.3 or 6.6 hereof), this Trust Agreement may not be amended to
(i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust
Securities as of a specified date or (ii) restrict the right of a
Holder to institute suit for the enforcement of any such payment
on or after such date.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Issuer Trustee shall enter into or consent to any
amendment to this Trust Agreement which would cause the Issuer
Trust to fail or cease to qualify for the exemption from status
as an "investment company" under the Investment Company Act or be
taxable as a corporation for United States federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor and the
Administrators, this Trust Agreement may not be amended in a
manner which imposes any additional obligation on the Depositor
or the Administrators.
(f) In the event that any amendment to this Trust Agreement
is made, the Administrators or the Property Trustee shall
promptly provide to the Depositor a copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee
shall be required to enter into any amendment to this Trust
Agreement which affects its own rights, duties or immunities
under this Trust Agreement. The Property Trustee shall be
entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is
in compliance with this Trust Agreement.
(h) Any amendments to this Trust Agreement shall become
effective when notice of such amendment is given to the holders
of the Trust Securities.
SECTION 10.3. Separability.
In case any provision in this Trust Agreement or in the
Trust Securities Certificates shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
<PAGE>
SECTION 10.4. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH
OF THE HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, THE ISSUER
TRUSTEES AND THE ADMINISTRATORS WITH RESPECT TO THIS TRUST
AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE.
SECTION 10.5. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security
shall be a day that is not a Business Day, then such payment need
not be made on such date but may be made on the next succeeding
day that is a Business Day (except as otherwise provided in
Sections 4.2(d)), with the same force and effect as though made
on the date fixed for such payment, and no Distributions shall
accumulate on such unpaid amount for the period after such date.
SECTION 10.6. Successors.
This Trust Agreement shall be binding upon and shall inure
to the benefit of any successor to the Depositor, the Issuer
Trust, the Administrators and any Issuer Trustee, including any
successor by operation of law. Except in connection with a
consolidation, merger or sale involving the Depositor that is
permitted under Article VIII of the Indenture and pursuant to
which the assignee agrees in writing to perform the Depositor's
obligations hereunder, the Depositor shall not assign its
obligations hereunder.
SECTION 10.7. Headings.
The Article and Section headings are for convenience only
and shall not affect the construction of this Trust Agreement.
SECTION 10.8. Reports, Notices and Demands.
Any report, notice, demand or other communication that by
any provision of this Trust Agreement is required or permitted to
be given or served to or upon any Holder or the Depositor may be
given or served in writing by deposit thereof, first class
postage prepaid, in the United States mail, hand delivery or
facsimile transmission, in each case, addressed, (a) in the case
of a Holder of Preferred Securities, to such Holder as such
Holder's name and address may appear on the Securities Register;
and (b) in the case of the Holder of Common Securities or the
Depositor, to Broad National Bancorporation, 905 Broad Street,
Newark, New Jersey 07102, Attention: Office of the Secretary,
facsimile no.: (201) 596-2699 or to such other address as may be
specified in a written notice by the Depositor to the property
Trustee. Such notice, demand or other communication to or upon a
Holder shall be deemed to have been sufficiently given or made,
for all purposes, upon hand delivery, mailing or transmission.
Such notice, demand or other communication to or upon the
Depositor shall be deemed to have been sufficiently given or made
only upon actual receipt of the writing by the Depositor.
Any notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be
given or served to or upon the Issuer Trust, the Property
Trustee, the Delaware Trustee, the Administrators, or the Issuer
Trust shall be given in writing addressed (until another address
is published by the Issuer Trust) as follows: (a) with respect to
the Property Trustee to Bankers Trust Company, Four Albany
Street, 4th Floor, New York, NY 10006, Attention: Corporate Trust
and Agency Group Corporate Market Services; (b) with respect to
the Delaware Trustee to Bankers Trust (Delaware), 1001 Jefferson
Street, Suite 550, Wilmington, Delaware 19801, Attention: Lisa
Wilkins; and (c) with respect to the Administrators, to them at
the address above for notices to the Depositor, marked
"Attention: Office of the Secretary". Such notice, demand or
other communication to or upon the Issuer Trust or the Property
Trustee shall be deemed to have been sufficiently given or made
only upon actual receipt of the writing by the Issuer Trust, the
Property Trustee, or such Administrator.
<PAGE>
SECTION 10.9. Agreement Not to Petition.
Each of the Issuer Trustees, the Administrators and the
Depositor agree for the benefit of the Holders that, until at
least one year and one day after the Issuer Trust has been
dissolved in accordance with Article IX, they shall not file, or
join in the filing of, a petition against the Issuer Trust under
any bankruptcy, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy
Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Issuer Trust under any
Bankruptcy Law. In the event the Depositor takes action in
violation of this Section 10.9, the Property Trustee agrees, for
the benefit of Holders, that at the expense of the Depositor, it
shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor
against the Issuer Trust or the commencement of such action and
raise the defense that the Depositor has agreed in writing not to
take such action and should be estopped and precluded therefrom
and such other defenses, if any, as counsel for the Issuer
Trustee or the Issuer Trust may assert. If any Issuer Trustee or
Administrator takes action in violation of this Section 10.9, the
Depositor agrees, for the benefit of the Holders, that at the
expense of the Depositor, it shall file an answer with the
bankruptcy court or otherwise properly contest the filing of such
petition by such Person against the Depositor or the commencement
of such action and raise the defense that such Person has agreed
in writing not to take such action and should be estopped and
precluded therefrom and such other defenses, if any, as counsel
for the Issuer Trustee or the Issuer Trust may assert. The
provisions of this Section 10.9 shall survive the termination of
this Trust Agreement.
SECTION 10.10. Trust Indenture Act; Conflict with Trust
Indenture Act.
(a) Trust Indenture Act,- Application. (i) This Trust
Agreement is subject to the provisions of the Trust Indenture Act
that are required to be a part of this Trust Agreement and shall,
to the extent applicable, be governed by such provisions; (ii) if
and to the extent that any provision of this Trust Agreement
limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control; (iii) for purposes of this Trust
Agreement, the Property Trustee, to the extent permitted by
applicable law and/or the rules and regulations of the
commission, shall be the only Issuer Trustee which is a trustee
for the purposes of the Trust Indenture Act; and (iv) the
application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Preferred Securities and the
Common Securities as equity securities representing undivided
beneficial interests in the assets of the Issuer Trust.
(b) Lists of Holders of Preferred Securities. (i) Each of
the Depositor and the Administrators on behalf of the Trust shall
provide the Property Trustee with such information as is required
under Section 312(a) of the Trust Indenture Act at the times and
in the manner provided in Section 312(a) and (ii) the Property
Trustee shall comply with its obligations under Sections 310(b),
311 and 312(b) of the Trust Indenture Act.
(c) Reports by the Property Trustee. Within 60 days after
May 15 of each year, the Property Trustee shall provide to the
Holders of the Trust Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form, in
the manner and at the times provided by Section 313 of the Trust
Indenture Act. The Property Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
(d) Periodic Reports to Property Trustee. Each of the
Depositor and the Administrators on behalf of the Issuer Trust
shall provide to the Property Trustee, the Commission and the
Holders of the Trust Securities, as applicable, such documents,
reports and information as required by Section 314(a)(1)-(3) (if
any) of the Trust Indenture Act and the compliance certificates
required by Section 314(a)(4) and (c) of the Trust Indenture Act
(provided that any certificate to be provided pursuant to Section
314(a)(4) of the Trust Indenture Act shall be provided within 120
days of the end of each fiscal year of the Issuer Trust).
(e) Evidence of Compliance with Conditions Precedent. Each
of the Depositor and the Administrators on behalf of the Issuer
Trust shall provide to the Property Trustee such evidence of
compliance with any conditions precedent, if any, provided for in
this Trust Agreement which relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given pursuant to Section 314(c) shall
comply with Section 314(e) of the Trust Indenture Act.
<PAGE>
(f) Disclosure of Information. The disclosure of
information as to the names and addresses of the Holders of Trust
Securities in accordance with Section 312 of the Trust Indenture
Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing
law or any law hereafter enacted which does not specifically
refer to Section 312 of the Trust Indenture Act, nor shall the
Property Trustee be held accountable by reason of mailing any
material pursuant to a request made under Section 312(b) of the
Trust Indenture Act.
SECTION 10.11. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY
INTEREST THEREIN BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL
OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT,
SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER AND
ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF
ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE
GUARANTEE AGREEMENT AND THE INDENTURE, AND THE AGREEMENT TO THE
SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE
AGREEMENT AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT
OF THE ISSUER TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE TERMS
AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING,
OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH
HOLDER AND SUCH OTHERS.
BROAD NATIONAL BANCORPORATION
as Depositor
By:_____________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Property Trustee
By:_____________________________
Name:
Title:
BANKERS TRUST (DELAWARE),
as Delaware Trustee and not
in its individual capacity
By:____________________________
Name:
Title:
Subscribed to and Accepted by,
as the Initial Administrators:
____________________________
Donald M. Karp
____________________________
James Boyle
<PAGE>
EXHIBIT A
[INSERT CERTIFICATE OF TRUST FILED WITH DELAWARE]
<PAGE>
EXHIBIT B
[INSERT FORM OF CERTIFICATE DEPOSITARY AGREEMENT]
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR
AN AFFILIATE OF THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW
AND SECTION 5.11 OF THE TRUST AGREEMENT
Certificate Number Number of
Common Securities
C-________
Certificate Evidencing Common Securities
of
BNB Capital Trust
9.50% Common Securities
(liquidation amount $10 per Common Security)
BNB Capital Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Issuer Trust"), hereby
certifies that Broad National Bancorporation (the "Holder") is
the registered owner of (___) common securities of
the Issuer Trust representing undivided beneficial interests in
the assets of the Issuer Trust and has designated the 9.50%
Common Securities (liquidation amount $10 per Common Security)
(the "Common Securities"). Except in accordance with Section
5.11 of the Trust Agreement (as defined below) the Common
Securities are not transferable and any attempted transfer hereof
other than in accordance therewith shall be void. The
designations, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities are set forth
in, and this certificate and the Common Securities represented
hereby are issued and shall in all respects be subject to the
terms and provisions of, the Amended and Restated Trust Agreement
of the Issuer Trust, dated as of June 30, 1997, as the same may
be amended from time to time (the "Trust Agreement") among Broad
National Bancorporation, as Depositor, Bankers Trust Company, as
Property Trustee, Bankers Trust (Delaware), as Delaware Trustee,
and the Holders of Trust Securities, including the designation of
the terms of the Common Securities as set forth therein. The
Issuer Trust will furnish a copy of the Trust Agreement to the
Holder without charge upon written request to the Issuer Trust at
its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
Terms used but not defined herein have the meanings set
forth in the Trust Agreement.
<PAGE>
IN WITNESS WHEREOF, one of the Administrators of the Issuer
Trust has executed this certificate this 30th day of June, 1997.
BNB CAPITAL TRUST
By:_________________________
Name:
Administrator
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:____________________________
Name:
Signatory Officer
<PAGE>
EXHIBIT D
[IF THE PREFERRED SECURITIES CERTIFICATE IS TO BE A GLOBAL
PREFERRED SECURITIES CERTIFICATE, INSERT -- This Preferred
Securities Certificate is a Global Preferred Securities
Certificate within the meaning of the Trust Agreement hereinafter
referred to and is registered in the name of a Depositary or a
nominee of a Depositary. This Preferred Security Certificate is
exchangeable for Preferred Securities Certificates registered in
the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Trust
Agreement and may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the
Depositary, except in the limited circumstances described in the
Trust Agreement.
Unless this Preferred Security Certificate is presented by
an authorized representative of The Depository Trust Company, a
New York Corporation ("DTC), to BNB Capital Trust or its agent
for registration of transfer, exchange or payment, and any
Preferred Security Certificate issued is registered in the name
of such nominee as is requested by an authorized representative
of DTC (and any payment is made to such entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS
WRONGFUL inasmuch as the registered owner hereof, has an interest
herein.]
NO EMPLOYEE BENEFIT OR OTHER PLAN OR INDIVIDUAL RETIREMENT
ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH,
A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" BY REASON OF ANY PLAN's INVESTMENT IN THE ENTITY (A "PLAN
ASSET ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY
PLAN, MAY ACQUIRE OR HOLD THIS PREFERRED SECURITIES CERTIFICATE
OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE OR HOLDING IS
COVERED BY THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT
OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23,
95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION WITH
RESPECT TO SUCH PURCHASE OR HOLDING AND, IN THE CASE OF ANY
PURCHASER OR HOLDER RELYING ON ANY EXEMPTION OTHER THAN PTCE
96-23, 95-60, 91-38, 90-1 OR 84-14, HAS COMPLIED WITH ANY REQUEST
BY THE DEPOSITOR OR THE ISSUER TRUST FOR AN OPINION OF COUNSEL OR
OTHER EVIDENCE WITH RESPECT TO THE APPLICABILITY OF SUCH
EXEMPTION. ANY PURCHASER OR HOLDER OF THIS PREFERRED SECURITIES
CERTIFICATE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE
REPRESENTED BY ITS PURCHASE AND HOLDING HEREOF THAT EITHER (A)
THE PURCHASER AND HOLDER ARE NOT A PLAN OR A PLAN ASSET ENTITY
AND IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN
ASSETS" OF ANY PLAN, OR (B) THE PURCHASE AND HOLDING OF THE
PREFERRED SECURITIES IS COVERED BY THE EXEMPTIVE RELIEF PROVIDED
BY PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE
EXEMPTION.
<PAGE>
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P-____
CUSIP NO. 055948 20 2
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
BNB CAPITAL TRUST
9.50% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
BNB Capital Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Issuer Trust"), hereby
certifies that (the "Holder") is the registered owner of ________
(_____) preferred securities of the Issuer Trust representing a
preferred undivided beneficial interest in the assets of the
Issuer Trust and has designated the BNB Capital Trust 9.50%
Cumulative Trust Preferred Securities (liquidation amount $10 per
Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the
Issuer Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form
for transfer as provided in Section 5.5 of the Trust Agreement
(as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the
Preferred Securities are set forth in, and this certificate and
the Preferred Securities represented hereby are issued and shall
in all respects be subject to the terms and provisions of, the
Amended and Restated Trust Agreement of the Issuer Trust, dated
as of June 30, 1997, as the same may be amended from time to time
(the "Trust Agreement"), among Broad National Bancorporation, as
Depositor, Bankers Trust Company, as Property Trustee, Bankers
Trust (Delaware), as Delaware Trustee, and the Holders of Trust
Securities, including the designation of the terms of the
Preferred Securities as set forth therein. The Holder is
entitled to the benefits of the Guarantee Agreement entered into
by Broad National Bancorporation, a New Jersey corporation, and
Bankers Trust Company, as guarantee trustee, dated as of June 30,
1997 (the "Guarantee Agreement"), to the extent provided therein.
The Issuer Trust will furnish a copy of the Issuer Trust
Agreement and the Guarantee Agreement to the Holder without
charge upon written request to the Issuer Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrators of the
Issuer Trust has executed this certificate this 30th day of June,
1997.
BNB CAPITAL TRUST
By:____________________
Name:
Administrator
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:_________________________
Name:
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers
this Preferred Security to:
_____________________________________________________________
(Insert assignee's social security or tax
identification number)
____________________________________________________________
____________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
agent to transfer this Preferred Security Certificate on the
books of the Issuer Trust. The agent may substitute another
to act for him or her.
Date:_________________________
Signature:____________________
(Sign exactly as your name appears on
the other side of this Preferred Security
Certificate)
The signature(s) should be guaranteed by an eligible
guarantor institution (banks, stockbrokers, savings and loan
associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to S.E.C. Rule
17Ad-15.
This Preferred Securities Certificate is a Global Preferred
Securities Certificate within the meaning of the Trust Agreement
hereinafter referred to and is registered in the name of a
Depositary or a nominee of a Depositary. This Preferred Security
Certificate is exchangeable for Preferred Securities Certificates
registered in the name of a person other than the Depositary or
its nominee only in the limited circumstances described in the
Trust Agreement and may not be transferred except as a whole by
the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the
Depositary, except in the limited circumstances described in the
Trust Agreement.
Unless this Preferred Security Certificate is presented by
an authorized representative of The Depository Trust Company, a
New York Corporation (DTC), to BNB Capital Trust or its agent for
registration of transfer, exchange or payment, and any Preferred
Security Certificate issued is registered in the name of such
nominee as is requested by an authorized representative of DTC
(and any payment is made to such entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO A PERSON IS WRONGFUL
inasmuch as the registered owner hereof, has an interest herein.
<PAGE>
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
P-1 1,150,000
CUSIP NO. 055948 20 2
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
BNB CAPITAL TRUST
9.50% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $10 PER PREFERRED SECURITY)
BNB Capital Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Issuer Trust"), hereby
certifies that Cede & Co. (the "Holder") is the registered owner
of $11,500,000 aggregate liquidation amount of preferred
securities of the Issuer Trust representing a preferred undivided
beneficial interest in the assets of the Issuer Trust and has
designated the BNB Capital Trust 9.50% Cumulative Trust Preferred
Securities (liquidation amount $10 per Preferred Security) (the
"Preferred Securities"). The Preferred Securities are
transferable on the books and records of the Issuer Trust, in
person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as
provided in Section 5.5 of the Trust Agreement (as defined
below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the
Preferred Securities represented hereby are issued and shall in
all respects be subject to the terms and provisions of, the
Amended and Restated Trust Agreement of the Issuer Trust, dated
as of June 30, 1997, as the same may be amended from time to time
(the "Trust Agreement"), among Broad National Bancorporation, as
Depositor, Bankers Trust Company, as Property Trustee, Bankers
Trust (Delaware), as Delaware Trustee, and the Holders of Trust
Securities, including the designation of the terms of the
Preferred Securities as set forth therein. The Holder is
entitled to the benefits of the Guarantee Agreement entered into
by Broad National Bancorporation, a New Jersey corporation, and
Bankers Trust Company, as guarantee trustee, dated as of June 30,
1997 (the "Guarantee Agreement"), to the extent provided therein.
The Issuer Trust will furnish a copy of the Issuer Trust
Agreement and the Guarantee Agreement to the Holder without
charge upon written request to the Issuer Trust at its principal
place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrators of the Issuer
Trust has executed this certificate this 30th day of June, 1997.
BNB CAPITAL TRUST
By:____________________________
Name: James Boyle
Administrator
COUNTERSIGNED AND REGISTERED:
BANKERS TRUST COMPANY,
as Securities Registrar
By:___________________________
Name:
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers
this Preferred Security to:
_________________________________________________________________
(Insert assignee's social security or tax
identification number)
_________________________________________________________________
_________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints ________________________________________
_________________________________________________________________
agent to transfer this Preferred Security Certificate on the
books of the Issuer Trust. The agent may substitute another to
act for him or her.
Date:__________________
Signature:____________________
(Sign exactly as your name appears on
the other side of this Preferred Security
Certificate)
The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations
and credit unions with membership in an approved signature
guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15.
_________________________________________________________________
GUARANTEE AGREEMENT
Between
BROAD NATIONAL BANCORPORATION,
(as Guarantor)
and
BANKERS TRUST COMPANY
(as Trustee)
Dated as of
June 30, 1997
_________________________________________________________________
<PAGE>
BNB CAPITAL TRUST
Certain Sections of this Guarantee Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Guarantee
Agreement
Trust Indenture Act Section Section
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . 4.1(a)
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
(a)(3). . . . . . . . . . . . . . . . . . . .Not Applicable
(a)(4). . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . .2.8, 4.1(c)
Section 311(a) . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . .Not Applicable
Section 312(a) . . . . . . . . . . . . . . . . . . . . . 2.2(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
(c) . . . . . . . . . . . . . . . . . . . . .Not Applicable
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . .2.3
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . .2.3
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . .2.3
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . .2.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . .2.5
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . .2.5
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . .2.5
(e) . . . . . . . . . . . . . . . . . . . . . .1.1, 2.5, 3.2
Section 315(a) . . . . . . . . . . . . . . . . . . . . . 3.1(d)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .2.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
(e) . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 316(a) . . . . . . . . . . . . . . . . . .1.1, 2.6, 5.4
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . .5.4
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . .5.4
(a)(2) . . . . . . . . . . . . . . . . . . . .Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3
(c) . . . . . . . . . . . . . . . . . . . . .Not Applicable
Section 317(a)(1). . . . . . . . . . . . . . . . Not Applicable
(a)(2). . . . . . . . . . . . . . . . . . . .Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . .Not Applicable
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . .2.1
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Guarantee Agreement.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . .1
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application4
SECTION 2.2. List of Holders . . . . . . .4
SECTION 2.3. Reports by the Guarantee Trustee4
SECTION 2.4. Periodic Reports to the
Guarantee Trustee. . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.5. Evidence of Compliance with
Conditions Precedent . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.6. Events of Default; Waiver . .4
SECTION 2.7. Event of Default; Notice. . .5
SECTION 2.8. Conflicting Interests . . . .5
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE SECTION 3.1.
Powers and Duties of the Guarantee Trustee.. . . .5
SECTION 3.2. Certain Rights of Guarantee
Trustee. . . . . . . . . . . 6
SECTION 3.3. Indemnity . . . . . . . . . .7
SECTION 3.4. Expenses. . . . . . . . . . .7
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility7
SECTION 4.2. Appointment, Removal and
Resignation of the
Guarantee Trustee. . . . . . .8
ARTICLE V. GUARANTEE
SECTION 5.1. Guarantee . . . . . . . . . .8
SECTION 5.2. Waiver of Notice and Demand .9
SECTION 5.3. Obligations Not Affected. . .9
SECTION 5.4. Rights of Holders . . . . . .9
SECTION 5.5. Guarantee of Payment. . . . 10
SECTION 5.6. Subrogation . . . . . . . . 10
SECTION 5.7. Independent Obligations . . 10
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.l. Subordination . . . . . . . 10
SECTION 6.2. Pari Passu Guarantees . . . 10
ARTICLE VII. TERMINATION
SECTION 7.1. Termination . . . . . . . . 10
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. Successors and Assigns. . . 11
SECTION 8.2. Amendments. . . . . . . . . 11
SECTION 8.3. Notices . . . . . . . . . . 11
SECTION 8.4. Benefit . . . . . . . . . . 12
SECTION 8.5. Interpretation. . . . . . . 12
SECTION 8.6. Governing Law . . . . . . . 12
SECTION 8.7. Counterparts. . . . . . . . 13
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of June 30, 1997 is
executed and delivered by BROAD NATIONAL BANCORPORATION, a New
Jersey corporation (the "Guarantor"), having its principal office
at 905 Broad Street, Newark, New Jersey 07102, and BANKERS TRUST
COMPANY, a New York banking corporation, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of BNB
Capital Trust, a Delaware statutory business trust (the "Issuer
Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement
(the "Trust Agreement"), dated as of June 30, 1997, among Broad
National Bancorporation, as Depositor, Bankers Trust Company, as
Property Trustee (the "Property Trustee"), Bankers Trust
(Delaware), as Delaware Trustee (the "Delaware Trustee")
(collectively, the "Issuer Trustees") and the Holders from time to
time of preferred undivided beneficial ownership interests in the
assets of the Issuer Trust, the Issuer Trust is issuing $11,500,000
aggregate Liquidation Amount (as defined herein) of its 9.50%
Cumulative Trust Preferred Securities, Liquidation Amount $10 per
capital security (the "Preferred Securities"), representing
preferred undivided beneficial ownership interests in the assets of
the Issuer Trust and having the terms set forth in the Trust
Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer
Trust and the proceeds thereof, together with the proceeds from the
issuance of the Issuer Trust's Common Securities (as defined
herein), will be used to purchase the Junior Subordinated
Debentures due June 30, 2027 (as defined in the Trust Agreement)
(the "Junior Subordinated Debentures") of the Guarantor which will
be deposited with Bankers Trust Company, as Property Trustee under
the Trust Agreement, as trust assets; and
WHEREAS, as incentive for the Holders to purchase Preferred
Securities, the Guarantor desires irrevocably and unconditionally
to agree, to the extent set forth herein, to pay to the Holders of
the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the purchase of Preferred
Securities by each Holder, which purchase the Guarantor hereby
acknowledges shall benefit the Guarantor, and intending to be
legally bound hereby, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to
time of the Preferred Securities.
ARTICLE I. DEFINITIONS
SECTION 1.1. Definitions.
As used in this Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following
meanings. Capitalized terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Trust
Agreement as in effect on the date hereof .
"Additional Amounts" has the meaning specified in the Trust
Agreement.
"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.
"Common Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer Trust.
"Distributions" means preferential cumulative cash
distributions accumulating from June 30, 1997 and payable quarterly
in arrears on the last day of March, June, September and December
of each year, commencing September 30, 1997, at the annual rate of
9.50% of the Liquidation Amount.
<PAGE>
"Event of Default" means (i) a default by the Guarantor in any
of its payment obligations under this Guarantee Agreement, or (ii)
a default by the Guarantor in any other obligation hereunder that
remains unremedied for 30 days.
"Guarantee Agreement" means this Guarantee Agreement, as
modified, amended or supplemented from time to time.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred
Securities, to the extent not paid or made by or on behalf of the
Issuer Trust: (i) any accrued and unpaid Distributions (as defined
in the Trust Agreement) required to be paid on the Preferred
Securities, to the extent the Issuer Trust shall have funds on hand
available therefor at such time, (ii) the Redemption Price, with
respect to the Preferred Securities called for redemption by the
Issuer Trust to the extent that the Issuer Trust shall have funds
on hand available therefor at such time, and (iii) upon a voluntary
or involuntary termination, winding-up or liquidation of the Issuer
Trust, unless Junior Subordinated Debentures are distributed to the
Holders, the lesser of (a) the aggregate of the Liquidation Amount
and all accumulated and unpaid Distributions to the date of payment
to the extent the Issuer Trust shall have funds on hand available
to make such payment at such time and (b) the amount of assets of
the Issuer Trust remaining available for distribution to Holders in
liquidation of the Issuer Trust (in either case, the "Liquidation
Distribution").
"Guarantee Trustee" means Bankers Trust Company, until a
Successor Guarantee Trustee has been appointed and has accepted
such appointment pursuant to the terms of this Guarantee Agreement
and thereafter means each such Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first
paragraph of this Guarantee Agreement.
"Holder" means any holder, as registered on the books and
records of the Issuer Trust, of any Preferred Securities; provided,
however, that, in determining whether the holders of the requisite
percentage of Preferred Securities have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the
Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as
of June 30, 1997, between Broad National Bancorporation and Bankers
Trust Company, as trustee, as may be modified, amended or
supplemented from time to time.
"Issuer Trust" shall have the meaning specified in the first
paragraph of this Guarantee Agreement.
"Liquidation Amount" means the stated amount of $10 per
Preferred Security.
"Majority in Liquidation Amount of the Preferred Securities"
means, except as provided by the Trust Indenture Act, Preferred
Securities representing more than 50% of the aggregate Liquidation
Amount of all then outstanding Preferred Securities issued by the
Issuer Trust.
"Like Amount" means (a) with respect to a redemption of
Preferred Securities, Preferred securities having a Liquidation
Amount equal to the principal amount of Junior Subordinated
Debentures to be contemporaneously redeemed in accordance with the
Indenture, the proceeds of which will be used to pay the Redemption
Price of such Preferred Securities, (b) with respect to a
distribution of Junior Subordinated Debentures to Holders of
Preferred Securities in connection with a dissolution or
liquidation of the Issuer Trust, Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of the
Preferred Securities of the Holder to whom such junior Subordinated
Debentures are distributed, and (c) with respect to any
distribution of Additional Amounts to Holders of Preferred
Securities, Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Preferred Securities
in respect of which such distribution is made.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman and Chief Executive Officer,
President or a Vice President, and by the Treasurer, an Associate
Treasurer, an Assistant Treasurer, the Secretary <PAGE> or an Assistant
Secretary of such Person, and delivered to the Guarantee Trustee.
Any Officers' Certificate delivered with respect to compliance with
a condition or covenant provided for in this Guarantee Agreement
shall include:
(a) a statement by each officer signing the Officers'
Certificate that such officer has read the covenant or condition
and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in
rendering the Officers' Certificate;
(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated
association, or government or any agency or political subdivision
thereof, or any other entity of whatever nature.
"Preferred Securities" shall have the meaning specified in the
first recital of this Guarantee Agreement.
"Redemption Date" means, with respect to any Preferred
Security to be redeemed, the date fixed for such redemption by or
pursuant to the Trust Agreement; provided that each Junior
Subordinated Debenture Redemption Date (as such term is defined in
the Indenture) and the stated maturity of the Junior Subordinated
Debentures shall be a Redemption Date for a Like Amount of
Preferred Securities.
"Redemption Price" shall have the meaning specified in the
Trust Agreement.
"Responsible Officer" means, when used with respect to the
Guarantee Trustee, any officer assigned to the Corporate Trust
Office, including any managing director, vice president, assistant
vice president, assistant treasurer, assistant secretary or any
other officer of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of
the Indenture, and also, with respect to a particular matter, any
other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Senior Indebtedness" shall have the meaning specified in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee
under Section 4. 1.
"Trust Agreement" means the Amended and Restated Trust
Agreement, dated June 30, 1997, executed by Broad National
Bancorporation, as Depositor, Bankers Trust (Delaware), as Delaware
Trustee, and Bankers Trust Company, as Property Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb), as amended.
<PAGE>
ARTICLE II. TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
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 Guarantee Agreement, the
provision of the Trust Indenture Act shall control. If any
provision of this Guarantee Agreement 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
Guarantee Agreement as so modified or excluded, as the case may be.
SECTION 2.2. List of Holders.
(a) The Guarantor will furnish or cause to be furnished to
the Guarantee Trustee:
(i) quarterly, not more than 15 days after March 15,
June 15, September 15 and December 15 in each year, a list, in such
form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders as of such date; and
(ii) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the
Guarantor of any such request, a list of similar form and content
as of a date not more than 15 days prior to the time such list is
furnished.
(b) The Guarantee Trustee shall comply with the requirements
of Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than January 31 of each year, commencing January 31,
1998, the Guarantee Trustee shall provide to the Holders such
reports, if any, as are required by Section 313 of the Trust
Indenture Act in the form and in the manner provided by Section 313
of the Trust Indenture Act. The Guarantee Trustee shall also
comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, and the
Holders such documents, reports and information, if any, as
required by Section 314 of the Trust Indenture Act and the
compliance certificate required by Section 314 of the Trust
Indenture Act, in the form, in the manner and at the times required
by Section 314 of the Trust Indenture Act.
SECTION 2.5. Evidence of Compliance with Conditions
Precedent.
The Guarantor shall provide to the Guarantee Trustee such
evidence of compliance with such conditions precedent, if any,
provided for in this Guarantee Agreement that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of a Majority in Liquidation Amount of the
Preferred Securities may, by vote, on behalf of the Holders, waive
any past Event of Default and its consequences. Upon such waiver,
any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for
every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.
<PAGE>
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders, notices of all Events of Default
known to a Responsible Officer of the Guarantee Trustee, unless
such Events of Default have been cured before the giving of such
notice; provided that, except in the case of a default in the
payment of a Guarantee Payment, the Guarantee Trustee shall be
protected in withholding such notice if and so long as the Board of
Directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless a Responsible Officer
charged with the administration of this Guarantee Agreement shall
have received written notice of such Event of Default.
SECTION 2.8. Conflicting Interests.
The Trust Agreement shall be deemed to be specifically
described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee
Trustee for the benefit of the Holders, and the Guarantee Trustee
shall not transfer this Guarantee Agreement to any Person except a
Holder exercising his or her rights pursuant to Section 5.4(iv) or
to a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee hereunder. The right, title and interest of the Guarantee
Trustee, as such, hereunder shall automatically vest in any
Successor Guarantee Trustee, upon acceptance by such Successor
Guarantee Trustee of its appointment hereunder, and such vesting
and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to
the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing,
the Guarantee Trustee shall enforce this Guarantee Agreement for
the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may
have occurred, shall be obligated to perform only such duties as
are specifically set forth in this Guarantee Agreement (including
pursuant to Section 2.1), and no implied covenants shall be read
into this Guarantee Agreement against the Guarantee Trustee. If an
Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Guarantee Agreement,
and use the same degree of care and skill in its exercise thereof,
as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) Prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions of
this Guarantee Agreement (including pursuant to Section 2.1), and
the Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Guarantee Agreement (including pursuant to Section
2.1); and
<PAGE>
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely, as
to the truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Guarantee Trustee and conforming to the requirements of this
Guarantee Agreement; but in the case of any such certificates or
opinions that by any provision hereof or of the Trust Indenture Act
are specifically required to be furnished to the Guarantee Trustee,
the Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Guarantee Agreement;
(ii) The Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon
which such judgment was made;
(iii) The Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee, or exercising
any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and
(iv) No provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers
if the Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not
assured to it under the terms of this Guarantee Agreement or
adequate indemnity against such risk or liability is not reasonably
assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely and
shall be fully protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated
by this Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this
Guarantee Agreement, the Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or
omitting to take any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request
from the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal
counsel, and the advice or written opinion of such legal counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and
in accordance with such advice or opinion. Such legal counsel may
be legal counsel to the Guarantor or any of its Affiliates and may
be one of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of
competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Guarantee Agreement at the request or direction of any Holder,
unless such Holder shall have provided to the Guarantee Trustee
such security and indemnity as would satisfy a reasonable person in
the position of the Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses) and liabilities that might
be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Guarantee Trustee.
<PAGE>
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through its agents or attorneys, and the
Guarantee Trustee shall not be responsible for any negligence or
willful misconduct on the part of any such agent or attorney
appointed with due care by it hereunder.
(viii) Whenever in the administration of this
Guarantee Agreement the Guarantee Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Guarantee Trustee
(A) may request instructions from the Holders, (B) may refrain from
enforcing such remedy or right or taking such other action until
such instructions are received and (C) shall be fully protected in
acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which
it shall be illegal, or in which the Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power,
duty or obligation. No permissive power or authority available to
the Guarantee Trustee shall be construed to be a duty to act in
accordance with such power and authority.
SECTION 3.3. Indemnity.
The Guarantor agrees to indemnify the Guarantee Trustee, its
directors, officers, employees and agents for, and to hold them
harmless against, any loss, liability or expense incurred without
negligence, willful misconduct or bad faith on the part of the
Guarantee Trustee, its directors, officers, employees and agents,
arising out of or in connection with the acceptance or
administration of this Guarantee Agreement, including the costs and
expenses of defending against any claim or liability in connection
with the exercise or performance of any of its powers or duties
hereunder. The Guarantee Trustee will not claim or exact any lien
or charge on any Guarantee Payments as a result of any amount due
to it under this Guarantee Agreement.
SECTION 3.4. Expenses.
The Guarantor shall from time to time reimburse the Guarantee
Trustee for its reasonable expenses and costs (including reasonable
attorneys' or agents' fees) incurred in connection with the
performance of its duties hereunder.
ARTICLE IV. GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus
of at least $50,000,000, and shall be a corporation meeting the
requirements of Section 310(a) of the Trust Indenture Act. If such
corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or
examining authority, then, for the purposes of this Section and to
the extent permitted by the Trust Indenture Act, the combined
capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report
of condition so published.
<PAGE>
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Guarantee Trustee
shall immediately resign in the manner and with the effect set out
in Section 4.2(b).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the
Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the
Guarantee Trustee.
(a) No resignation or removal of the Guarantee Trustee and no
appointment of a Successor Guarantee Trustee pursuant to this
Article shall become effective until the acceptance of appointment
by the Successor Guarantee Trustee by written instrument executed
by the Successor Guarantee Trustee and delivered to the Holders and
the Guarantee Trustee.
(b) Subject to the immediately preceding paragraph, a
Guarantee Trustee may resign at any time by giving written notice
thereof to the Holders. The Guarantee Trustee shall appoint a
successor by requesting from at least three Persons meeting the
eligibility requirements such Person's expenses and charges to
serve as the Guarantee Trustee, and selecting the Person who agrees
to the lowest expenses and charges. If the instrument of
acceptance by the Successor Guarantee Trustee shall not have been
delivered to the Guarantee Trustee within 60 days after the giving
of such notice of resignation, the Guarantee Trustee may petition,
at the expense of the Guarantor, any court of competent
jurisdiction for the appointment of a Successor Guarantee Trustee.
(c) The Guarantee Trustee may be removed for cause at any
time by Act (within the meaning of Section 6.8 of the Trust
Agreement) of the Holders of at least a Majority in Liquidation
Amount of the Preferred Securities, delivered to the Guarantee
Trustee.
(d) If a resigning Guarantee Trustee shall fail to appoint a
successor, or if a Guarantee Trustee shall be removed or become
incapable of acting as Guarantee Trustee, or if any vacancy shall
occur in the office of any Guarantee Trustee for any cause, the
Holders of the Preferred Securities, by Act of the Holders of
record of not less than 25% in aggregate Liquidation Amount of the
Preferred Securities then outstanding delivered to such Guarantee
Trustee, shall promptly appoint a successor Guarantee Trustee. If
no Successor Guarantee Trustee shall have been so appointed by the
Holders of the Preferred Securities and such appointment accepted
by the Successor Guarantee Trustee, any Holder, on behalf of
himself and all others similarly situated, may petition any court
of competent jurisdiction for the appointment of a Successor
Guarantee Trustee.
ARTICLE V. GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in
full on a subordinated basis as set forth in Section 6.1 hereof to
the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer Trust), as and when
due, regardless of any defense, right of set-off or counterclaim
which the Issuer Trust may have or assert, except the defense of
payment. The Guarantor's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the
Guarantor to the Holders or by causing the Issuer Trust to pay such
amounts to the Holders. The Guarantor shall give prompt written
notice to the Guarantee Trustee in the event it makes any direct
payment hereunder.
SECTION 5.2. Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of the
Guarantee Agreement and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a
proceeding first against the Guarantee Trustee, the Issuer Trust or
any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and
all other notices and demands.
<PAGE>
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be
affected or impaired by reason of the happening from time to time
of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer Trust of any express
or implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Issuer
Trust;
(b) the extension of time for the payment by the Issuer Trust
of all or any portion of the Distributions (other than an extension
of time for payment of Distributions that results from the
extension of any interest payment period on the Junior Subordinated
Debentures as so provided in the Indenture), Redemption Price,
Liquidation Distribution or any other sums payable under the terms
of the Preferred Securities or the extension of time for the
performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the
Issuer Trust granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other
similar proceedings affecting, the Issuer Trust or any of the
assets of the Issuer Trust;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor
(other than payment of the underlying obligation), it being the
intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain the consent of, the Guarantor with respect to the
happening of any of the foregoing.
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held
for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders;
(iii) the Holders of a Majority in Liquidation Amount of the
Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of this Guarantee Agreement or
exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee Agreement; and (iv) any Holder may institute
a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Guarantee Trustee, the Issuer Trust or
any other Person.
SECTION 5.5. Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and
not of collection. This Guarantee Agreement will not be discharged
except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer Trust) or
upon the distribution of Junior Subordinated Debentures to Holders
as provided in the Trust Agreement.
<PAGE>
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of
the Holders against the Issuer Trust in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement;
provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to
enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in
all cases as a result of payment under this Guarantee Agreement, at
the time of any such payment, any amounts are due and unpaid under
this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to
the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments
pursuant to the terms of this Guarantee Agreement notwithstanding
the occurrence of any event referred to in subsections (a) through
(g), inclusive, of Section 5.3 hereof.
ARTICLE VI. COVENANTS AND SUBORDINATION
SECTION 6.l. Subordination.
This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank subordinate and junior in
right of payment to all Senior Indebtedness of the Guarantor to the
extent and in the manner set forth in the Indenture with respect to
the Junior Subordinated Debentures, and the provisions of Article
XIII of the Indenture will apply, mutatis mutandis, to the
obligations of the Guarantor hereunder. The obligations of the
Guarantor hereunder do not constitute Senior Indebtedness of the
Guarantor.
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee
Agreement shall rank pari passu with any similar guarantee
agreements issued by the Guarantor on behalf of the holders of
preferred or capital securities issued by the Issuer Trust and with
any other security, guarantee or other obligation that is expressly
stated to rank pari passu with the obligations of the Guarantor
under this Guarantee Agreement.
ARTICLE VII. TERMINATION
SECTION 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further
force and effect upon (i) full payment of the Redemption Price of
all Preferred Securities, (ii) the distribution of Junior
Subordinated Debentures to the Holders in exchange for all of the
Preferred Securities or (iii) full payment of the amounts payable
in accordance with Article IX of the Trust Agreement upon
liquidation of the Issuer Trust. Notwithstanding the foregoing,
this Guarantee Agreement will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder is
required to repay any sums paid with respect to Preferred
Securities or this Guarantee Agreement.
<PAGE>
ARTICLE VIII. MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit
of the Holders of the Preferred Securities then outstanding.
Except in connection with a consolidation, merger or sale involving
the Guarantor that is permitted under Article VIII of the Indenture
and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign
its obligations hereunder, and any purported assignment that is not
in accordance with these provisions shall be void.
SECTION 8.2. Amendments.
Except with respect to any changes that do not materially
adversely affect the rights of the Holders (in which case no
consent of the Holders will be required), this Guarantee Agreement
may only be amended with the prior approval of the Holders of not
less than a Majority in Liquidation Amount of the Preferred
Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of
such approval.
SECTION 8.3. Notices.
Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied (confirmed
by delivery of the original) or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address or telecopy
number set forth below or such other address or telecopy number or
to the attention of such other Person as the Guarantor may give
notice to the Holders:
Broad National Bancorporation
905 Broad Street
Newark, New Jersey 07102
Facsimile No.: (201) 596-2699
Attention: Office of the Secretary
(b) if given to the Issuer Trust, in care of the Guarantee
Trustee, at the Issuer Trust's (and the Guarantee Trustee's)
address set forth below or such other address or telecopy number or
to the attention of such other Person as the Guarantee Trustee on
behalf of the Issuer Trust may give notice to the Holders:
c/o Broad National Bancorporation
905 Broad Street
Newark, New Jersey 07102
Facsimile No.: (201) 596-2699
Attention: Office of the Secretary
with a copy to:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6961
Attention: Corporate Trust and Agency Group;
Corporate Market Services
<PAGE>
(c) if given to the Guarantee Trustee:
Bankers Trust Company
Four Albany Street - 4th Floor
New York, New York 10006
Facsimile No.: (212) 250-6961
Attention: Corporate Trust and Agency Group
Corporate Market Services
(d) if given to any Holder, at the address set forth on the
books and records of the Issuer Trust.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by
first class mail, postage prepaid, except that if a notice or other
document is refused delivery or cannot be delivered because of a
changed address of which no notice was given, such notice or other
document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
SECTION 8.4. Benefit.
This Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Preferred
Securities.
SECTION 8.5. Interpretation.
In this Guarantee Agreement, unless the context otherwise
requires:
(a) capitalized terms used in this Guarantee Agreement but
not defined in the preamble hereto have the respective meanings
assigned to them in Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has
the same meaning throughout;
(c) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(d) all references in this Guarantee Agreement to Articles
and Sections are to Articles and Sections of this Guarantee
Agreement unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise
defined in this Guarantee Agreement or unless the context otherwise
requires;
(f) a reference to the singular includes the plural and vice
versa; and
(g) the masculine, feminine or neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 8.6. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
<PAGE>
SECTION 8.7. Counterparts.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the
same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY HAS BEEN LEFT BLANK]
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
BROAD NATIONAL BANCORPORATION
By:_____________________________
Name:
Title:
BANKERS TRUST COMPANY,
as Guarantee Trustee
and not in its individual
capacity
By:_______________________________
Name:
Title:
BROAD NATIONAL BANCORPORATION
COMPUTATION OF NET INCOME PER SHARE
Year Ended December 31,
1997(1) 1996(1) 1995(1)
(Dollars in Thousands,
Except Per Share Amounts)
BASIC:
Net Income $6,410,820 $5,273,146 $4,419,660
Less cumulative
preferred dividends 0 0 579,548
Net income available
to common shareholders $6,410,820 $5,273,146 $3,840,112
Weighted average common
shares outstanding 4,788,131 4,789,119 3,407,335
BASIC EARNINGS PER
COMMON SHARE $1.34 $1.10 $1.13
DILUTED:
Net income available
to common shareholders $6,410,820 $5,273,146 $4,419,660
Weighted average common
shares outstanding 4,788,131 4,789,119 3,407,335
Less effects of
dilutive securities
Stock options 168,506 93,148 59,473
Convertible preferred
stock 0 115,569 1,492,370
Adjusted weighted average
common shares
outstanding 4,956,637 4,997,836 4,959,178
DILUTED EARNINGS PER
COMMON SHARE $1.29 $1.06 $0.89
/1/ All share and per share amounts have been adjusted to
reflect the 5% stock dividend which was declared
December 18, 1997 and distributed January 6, 1998.
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Broad National Bancorporation:
We consent to incorporation by reference in the Registration
Statement No. 33-28183 on Form S-8 of Broad National
Bancorporation of our report dated January 15, 1998, relating to
the consolidated statements of condition of Broad National
Bancorporation and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report appears
in the December 31, 1997 Annual Report on Form 10-K of Broad
National Bancorporation.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROAD
NATIONAL BANCORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 21,933
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 37,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 141,077
<INVESTMENTS-CARRYING> 65,330
<INVESTMENTS-MARKET> 65,203
<LOANS> 322,528
<ALLOWANCE> 6,974
<TOTAL-ASSETS> 601,669
<DEPOSITS> 518,238
<SHORT-TERM> 13,000
<LIABILITIES-OTHER> 10,700
<LONG-TERM> 20,500
0
0
<COMMON> 4,949
<OTHER-SE> 34,282
<TOTAL-LIABILITIES-AND-EQUITY> 601,669
<INTEREST-LOAN> 26,935
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<LOANS-NON> 3,891
<LOANS-PAST> 931
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