SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 2-78658
INTRUST FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Kansas 48-0937376
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
105 North Main Street
Box One
Wichita, Kansas 67202
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (316) 383-1111
Securities registered pursuant to Section 12(b) of the Act: 8.24%
Cumulative Trust Preferred Securities (issued by INTRUST Capital
Trust and guaranteed by its parent, INTRUST Financial Corporation)
Securities registered pursuant to Section 12(g) of the Act: NONE
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. X Yes 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.[ X ]
At February 3, 1999, there were 2,034,516 shares of the registrant's
common stock, par value $5 per share, outstanding. There is no established
public trading market for the registrant's common stock. Registrant is aware
that quotations for its common stock have become available through the National
Quotation Bureau, Inc. As reported by the National Quotation Bureau, Inc. as of
March 3, 1999, the bid price of $128.00 per share would indicate an aggregate
market value of $179,181,696 for shares held by nonaffiliates.
EXHIBIT INDEX: Part IV hereof.
<PAGE>
PART I
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ITEM 1. BUSINESS.
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GENERAL
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INTRUST Financial Corporation, a Kansas corporation (the "Company"), is
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended. The mailing address of the Company is 105 North Main, Box One,
Wichita, Kansas 67202.
In January 1998, INTRUST Capital Trust, a statutory business trust of
the Company, was formed.
In January 1998, INTRUST Financial Services, Inc. was formed as a
wholly-owned subsidiary of INTRUST Bank, N. A.
DESCRIPTION OF BUSINESS
-----------------------
As of December 31, 1998, the Company's direct wholly-owned banking
subsidiaries were INTRUST Bank, N.A. ("IB"), Wichita, Kansas, and Will Rogers
Bank ("WRB"), Oklahoma City, Oklahoma (collectively, the "Subsidiary Banks").
The Subsidiary Banks operate 37 banking locations. IB is a national banking
association organized under the laws of the United States. WRB is a state
banking association organized under the laws of Oklahoma. The Subsidiary Banks
provide a broad range of banking services to its customers, including checking
and savings accounts, NOW accounts, money market deposit accounts, certificates
of deposit, Individual Retirement Accounts, personal loans, real estate and
commercial loans, investment services, credit cards, automated teller machines,
and safe deposit facilities. In addition, IB offers fiduciary and trust
services, equipment and automobile leasing, cash management, data processing,
and correspondent bank services.
The direct and indirect non-banking subsidiaries of the Company are:
NestEgg Consulting, Inc. ("NCI"), INTRUST Community Development Corporation
("ICDC"), INTRUST Capital Trust ("Trust"), INTRUST Properties, Inc. ("IPI"),
INTRUST Financial Services, Inc. ("IFS") and INTRUST Investments, Inc. ("III")
(collectively, the "Non-Banking Subsidiaries"). NCI, ICDC and Trust are
wholly-owned subsidiaries of the Company; IPI, IFS and III are wholly-owned
subsidiaries of IB. NCI is engaged in the business of providing pension plan
consulting services. ICDC is in business to make equity and debt investments to
promote community welfare. Trust was formed to issue trust preferred securities.
IPI, formerly known as KSB Properties, Inc., owns banking facilities that it
leases to IB. IFS provides investment brokerage services. III performs portfolio
management activities by managing, investing and reinvesting the cash and
investment securities contributed to it by IB. All of the Non-Banking
Subsidiaries, except Trust, are based in Wichita, Kansas.
On January 21, 1998, Trust, a statutory business trust formed under
Delaware law, issued $57,500,000 in cumulative trust preferred securities (the
"Trust Preferred Securities"). In addition, the Trust issued 71,155 common
securities which are owned by the Company. The Trust Preferred Securities are
publicly held and listed on the American Stock Exchange, Inc. under the symbol
"IKT.PR.A." The Trust Preferred Securities, which qualify as Tier 1 capital for
regulatory reporting purposes, have a distribution rate of 8.24%. The only
assets of Trust consist of 8.24% subordinated debentures (and payments thereon)
due January 31, 2028 issued by the Company to Trust.
The Subsidiary Banks and the Non-Banking Subsidiaries are collectively
referred to as the "Subsidiaries."
At December 31, 1998, IB's trust division managed assets with a market
value of $2,272,000,000 in various fiduciary capacities.
As of December 31, 1998, the Company had 23 full-time employees. The
Subsidiaries collectively had approximately 780 full-time and 204 part-time
employees. None of the employees of the Company or the Subsidiaries are subject
to a collective bargaining agreement. The Company generally considers its
relationships with its employees and the employees of the Subsidiaries to be
good.
The Company and the Subsidiaries do not engage in any other business.
COMPETITION
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The Company offers a wide range of financial services through its
Subsidiary Banks (IB and WRB). The Company and its Subsidiary Banks encounter
intense competition in all of their activities. As lenders, the Subsidiary Banks
compete not only with other banks, but also with savings associations, credit
unions, finance companies, factoring companies, insurance companies and other
non-banking financial institutions. They compete for savings and time deposits
with other banks, savings associations, credit unions, mutual funds, money
market funds, and issuers of commercial paper and other securities. In addition,
large regional and national corporations have in recent years become
increasingly visible in offering a broad range of financial services to all
types of commercial and consumer customers. Many of such competitors have
greater financial resources available for lending and acquisition as well as
higher lending limits than the Subsidiary Banks and may provide services which
the Company or its Subsidiaries may not offer. In addition, non-banking
financial institutions are generally not subject to the same regulatory
constraints applicable to banks.
The Company is predominantly a retail bank committed to serving the
financial needs of customers in the local communities where the Subsidiary Banks
and their branches are located. IB's primary service areas are Sedgwick County
(including Wichita), Johnson County, El Dorado and Ottawa, Kansas; WRB's primary
service areas are Oklahoma City, Moore and Mustang, Oklahoma. The Company
believes that the primary source of competition comes from approximately twenty
other banks with locations in Sedgwick County, twelve in Johnson County, four in
El Dorado, three in Ottawa, six in Oklahoma City, and five in Mustang and Moore.
However, competition can also come from institutions that do not have offices
located in the Subsidiary Banks' service areas. The Company believes that the
principal competitive factors in its markets for deposits and loans are,
respectively, interest rates paid and interest rates charged.
As discussed more fully below, on September 29, 1994, the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 was enacted. This
legislation facilitates the interstate expansion and consolidation of banking
organizations by: (i) permitting bank holding companies that are adequately
capitalized and managed to acquire banks located in states outside their home
state regardless of whether such acquisitions are authorized under the law of
the host state; (ii) permitting the interstate merger of banks in all states
that did not "opt out" of the merger authority prior to June 1, 1997; (iii)
permitting banks to establish new branches on an interstate basis provided that
such action is specifically authorized by the law of the host state; (iv)
permitting foreign banks to establish, with approval of the regulators in the
United States, branches and agencies outside their home state to the same extent
that national or state banks located in the home state are authorized to do so;
and (v) permitting banks to receive deposits, renew time deposits, close loans,
service loans and receive payments on loans and other obligations as agent for
any bank or thrift affiliate, whether the affiliate is located in the same state
or a different state. Overall, this legislation increases competition and
promotes geographic diversification in the banking industry. See "Federal
Regulation of Bank Holding Companies" and "Legislation" below.
Generally, increased competition in the banking industry has the effect
of requiring banks to accept lower interest rates on loans and to pay higher
interest rates on a larger percentage of deposits.
SUPERVISION AND REGULATION
--------------------------
The Company and the Subsidiary Banks are subject to extensive regulation
by federal and state authorities. Such regulation is generally intended to
protect depositors, not stockholders.
FEDERAL REGULATION OF BANK HOLDING COMPANIES
--------------------------------------------
The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Act"), and is registered as such
with the Board of Governors of the Federal Reserve System (the "Board of
Governors"). The Board of Governors may make examinations of the Company and its
Subsidiaries, and the Company is required to file with the Board of Governors an
annual report and such other additional information as the Board of Governors
may require pursuant to the Act.
The Act requires every bank holding company to obtain the prior approval
of the Board of Governors before (i) acquiring direct or indirect ownership or
control of more than 5% of the outstanding shares of any class of the voting
shares or all or substantially all of the assets of any bank, or (ii) merging or
consolidating with another bank holding company. In determining whether to
approve such a proposed acquisition, merger or consolidation, the Board of
Governors is required to take into account the competitive effects of the
proposed transaction, the convenience and needs of the community to be served,
the Company's performance under the Community Reinvestment Act and the financial
and managerial resources and future prospects of the bank holding companies and
banks concerned. The Act provides that the Board of Governors shall not approve
any acquisition, merger or consolidation which would result in a monopoly, or
which would be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States,
or any other proposed acquisition, merger or consolidation, the effect of which
may be substantially to lessen competition or tend to create a monopoly in any
section of the country, or which in any other manner would be in restraint of
trade, unless the anti-competitive effects of the proposed transaction are
clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the community to be served.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorizes interstate acquisitions of banks and bank holding
companies by qualifying bank holding companies without geographic limitation .
In addition, as of June 1, 1997, the IBBEA also authorizes a bank to merge with
a bank in another state as long as neither of the states has opted out of
interstate branching between the date of enactment of the IBBEA and June 1,
1997. Such acquisitions and mergers may be subject to such state-imposed
contingencies as compliance with state age laws and nationwide and statewide
concentration limits. A bank may establish and operate a de novo branch in a
state in which the bank does not maintain a branch if that state expressly
permits de novo branching. Once a bank has established branches in a state
through an interstate merger transaction, the bank may establish and acquire
additional branches at any location in the state where any bank involved in the
interstate merger transaction could have established or acquired branches under
applicable federal or state law. A bank that has established a branch in a state
through de novo branching may establish and acquire additional branches in such
state in the same manner and to the same extent as a bank having a branch in
such state as a result of an interstate merger.
The Act also prohibits, with certain exceptions, a bank holding company
from engaging in and from acquiring direct or indirect ownership or control of
more than 5% of the outstanding shares of any class of the voting shares of any
company engaged in a business other than banking, managing and controlling
banks, or furnishing services to its affiliated banks. One of the exceptions to
this prohibition provides that a bank holding company may engage in, and may own
shares of companies engaged in, certain businesses that the Board of Governors
has determined to be so closely related to banking as to be a proper incident
thereto. In making such determination, the Board of Governors is required to
weigh the expected benefit 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.
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 any service. Subsidiary banks
of a bank holding company are also subject to certain restrictions imposed by
the Federal Reserve Act and the Federal Deposit Insurance Act on extensions of
credit to the bank holding company or any of its subsidiaries, investments in
the stock or other securities thereof, the taking of such stocks or securities
as collateral for loans and other transactions with the bank holding company and
its subsidiaries. These restrictions limit the Company's ability to obtain funds
from the Subsidiary Banks. In addition, the amount of loans or extensions of
credit that the Subsidiary Banks may make to the Company, or to third parties
secured by securities or obligations of the Company, are substantially limited
by the Federal Reserve Act and the Federal Deposit Insurance Act. The Board of
Governors possesses cease and desist and other administrative sanction powers
over bank holding companies if their actions constitute unsafe or unsound
practices or violations of law.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") established a cross guarantee provision pursuant to which the Federal
Deposit Insurance Corporation ("FDIC") may recover from a depository institution
losses that the FDIC incurs in providing assistance to, or paying off the
insured depositors of, any of such depository institution's affiliated insured
banks. The cross guarantee provision thus enables the FDIC to assess a holding
company's healthy insured subsidiaries for the losses of any of the holding
company's failed insured members. Cross guarantee liabilities are generally
superior in priority to obligations of the depository institution to its
stockholders due solely to their status as stockholders and obligations to other
affiliates.
The Board of Governors has promulgated "capital adequacy guidelines" for
use in its examination and supervision of bank holding companies. These
guidelines are described in detail below. A holding company's ability to pay
dividends and expand its business through the establishment or acquisition of
new subsidiaries can be restricted if its capital falls below levels established
by these guidelines. In addition, holding companies whose capital falls below
specified levels are required to implement a plan to increase capital.
STATE BANK HOLDING COMPANY REGULATION
-------------------------------------
Kansas statutes prohibit any bank holding company from acquiring
ownership or control of, or power to vote, any of the voting shares of any bank
which holds Kansas deposits if, after such acquisition, the bank holding company
and all subsidiaries would hold or control, in the aggregate, more than 15% of
total Kansas deposits. Kansas deposits means deposits, savings deposits, shares
or similar accounts held by financial institutions attributable to any office in
Kansas where deposits are accepted as determined by the Kansas banking
commissioner. Such limitation does not apply in situations where the Kansas
banking commissioner, in the case of a state bank, or the Comptroller of the
Currency ("OCC"), in the case of a national bank, determines that an emergency
exists and the acquisition is appropriate in order to protect the public
interest against the failure or probable failure of a bank. Acquisitions by bank
holding companies of control of state banks in Kansas require the approval of
the Kansas banking commissioner. Subject to certain limited exceptions, Kansas
statutes authorize out-of-state bank holding companies to acquire voting shares
of banks or bank holding companies domiciled in Kansas.
Subject to certain limited exceptions, Oklahoma law prohibits a
multi-bank holding company from acquiring ownership or control of any insured
financial institution located in Oklahoma if such acquisition would result in
the holding company owning or controlling banks located in Oklahoma with total
deposits in excess of 12.25% of the total deposits of insured depository
institutions in Oklahoma as determined by the Oklahoma Bank Commissioner
("OBC"). A bank cannot be acquired by a bank or a multi-bank holding company
until such bank has been in existence and continuous operation for a period of
five years; such restriction does not prevent a bank or a multi-bank holding
company from acquiring a bank whose charter was granted for the purpose of
purchasing the assets and liabilities of a bank located in Oklahoma closed by
regulators due to insolvency or impairment of capital. An out-of-state bank
holding company, upon approval by the Federal Reserve Board, may acquire an
unlimited number of banks and bank holding companies so long as each bank to be
acquired has been in existence and continuous operation for more than five
years.
Under Oklahoma law, each bank holding company that controls 25% or more
of the voting shares of a bank located in Oklahoma must furnish a copy of its
annual report to the Board of Governors and to the OBC.
FEDERAL REGULATION OF SUBSIDIARY BANKS
--------------------------------------
IB is a national bank. National banks are subject to regulation,
supervision and examination primarily by the OCC. They are also regulated, in
certain respects, by the Board of Governors and the FDIC. WRB is an Oklahoma
state nonmember (of the Federal Reserve System) bank, subject to regulation and
examination primarily by the Oklahoma Banking Department ("OBD"), and by the
FDIC. Regulation by these agencies is generally designed to protect depositors,
rather than stockholders.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Improvement Act") provides for, among other things, the strengthening of
internal control and auditing systems, the enhancement of credit underwriting
and loan documentation standards (particularly with respect to real estate), the
accounting for interest rate exposure and other off-balance sheet items,
restrictions on the compensation of officers and directors, and the adoption of
a risk-based deposit insurance system.
The FDIC Improvement Act also authorizes the regulator of an insured
depository institution to assess all costs and expenses of any regular or
special examination of the insured depository institution.
Under the Federal Reserve Act, extensions of credit by a bank to the
executive officers, directors, or principal stockholders of the bank or its
affiliates or any related interest of such persons must be on substantially the
same terms as, and following credit underwriting procedures that are not less
stringent than, those applicable to comparable transactions with nonaffiliated
persons and must not involve more than the normal risk of repayment or present
other unfavorable features.
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 which
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.
In addition to limiting the rate of interest charged by banks on certain
loans, federal law imposes additional restrictions on a national bank's lending
activities. For example, federal law regulates the amount of credit a national
bank may extend to an individual borrower and has in the past subjected real
estate lending activities to rigid statutory requirements. The Garn-St Germain
Depository Institutions Act of 1982 (the "1982 Act") liberalized federal law
with respect to both of these types of lending activities by increasing the
maximum amount of credit a national bank may extend to an individual borrower
and by simplifying the statutory framework pursuant to which national banks may
extend real estate loans.
The 1982 Act also authorizes banks to invest in service corporations
that can offer the same services as the banking related services which bank
holding companies are authorized to provide. However, the approval of the OCC
must be obtained before a national bank may make such an investment or perform
such services.
The Board of Governors has issued Community Reinvestment Act ("CRA")
regulations, pursuant to its authorization to conduct examinations and to
consider applications for the formation and merger of bank holding companies and
member banks, to encourage banks to help meet the credit needs of their local
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of those banks. The OCC has issued virtually
identical regulations with respect to applications of national banks. The FDIC
has issued virtually identical regulations with respect to applications of banks
which are incorporated under state law and are not members of the Federal
Reserve System.
STATE REGULATION OF SUBSIDIARY BANKS
------------------------------------
Kansas law permits a Kansas bank to install remote service units, also
known as automatic teller machines, throughout the state. Remote service units
which are not located at the principal place of business of the bank or at a
branch location of the bank must be available for use by other banks and their
customers on a non-discriminatory basis. Federal law generally allows national
banks to establish branches in locations which do not violate state law.
All limitations and restrictions of the Oklahoma Banking Code applicable
to Oklahoma chartered banks apply to such banks that become subsidiaries of a
foreign bank holding company. In addition, Oklahoma chartered banks that are
subsidiaries of foreign bank holding companies are required to maintain current
reports showing the bank's record of meeting the credit needs of its entire
community with the OBD. Subject to approval of the Oklahoma Banking Board
("OBB") and certain limited exceptions, any Oklahoma bank may maintain and
operate outside attached facilities and two detached branch facilities. Upon
written notice to the OBC, an Oklahoma state bank may also install and operate
consumer banking electronic facilities. An Oklahoma bank offering such services
to a bank which establishes or maintains a consumer banking electronic facility
must make the use thereof available to banks located in Oklahoma on a fair and
equitable basis of non-discriminatory access and rates.
Oklahoma banks are required to maintain reserves against deposits as
prescribed by the Board of Governors. The Oklahoma State Banking Board may
increase the reserve requirements of banks which are not members of the Federal
Reserve System if it is determined that the maintenance of sound banking
practices or the prevention of injurious credit expansion or contraction makes
such action advisable.
Notwithstanding any provision of state law, the FDIC Improvement Act
provides that an insured state chartered bank generally may not make an
investment or engage in an activity that is not permissible for a national bank,
unless the FDIC determines that such investment or activity would not pose a
significant risk to the insurance fund.
CAPITAL REQUIREMENTS
--------------------
The Board of Governors together with the other federal banking
regulatory agencies jointly promulgated guidelines defining regulatory capital
requirements based upon the level of risk associated with holding various
categories of assets (the "Guidelines"). The Guidelines, which are applicable to
all bank holding companies and federally supervised banking organizations, took
effect on March 15, 1989, and were fully phased into the existing supervisory
system as of the end of 1992. Under the Guidelines, balance sheet assets are
assigned to various risk weight categories (i.e., 0, 20, 50, or 100 percent),
and off-balance sheet items are first converted to on-balance sheet "credit
equivalent" amounts that are then assigned to one of the four risk-weight
categories. For risk-based capital purposes, capital is divided into two
categories: core capital ("Tier 1 capital") and supplementary capital ("Tier 2
capital"). Tier 1 capital generally consists of the sum of: common stock,
additional paid-in capital, retained earnings, qualifying perpetual preferred
stock (within certain limitations), minority interest in equity accounts of
consolidated subsidiaries; less intangibles, including goodwill (within certain
limitations). Tier 2 capital generally includes: reserve for loan losses (within
certain limitations), perpetual preferred stock not included in Tier 1 capital,
perpetual debt, mandatory convertible instruments, hybrid capital instruments,
and subordinated debt and intermediate-term preferred stock (within certain
limitations). The total amount of Tier 2 capital under the Guidelines is limited
to 100% of Tier 1 capital. The sum of Tier 1 and Tier 2 capital comprises total
capital ("Total Capital"). The Guidelines require minimum ratios of Tier 1 and
Total Capital to risk weighted assets, on a consolidated basis. The minimum
ratios required by the Guidelines are shown as follows in comparison with the
consolidated ratios of the Company and for each of the Subsidiary Banks at
December 31, 1998. Based on this financial data, the Company's capital ratios
exceed the Guidelines on a consolidated basis. All of the Subsidiary Banks also
exceeded the minimum guidelines at the individual bank level.
Company IB WRB
Guidelines Ratios Ratios Ratios
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Tier 1 Ratio 4.0% 9.3% 9.5% 15.3%
Total Capital Ratio 8.0% 11.4% 10.8% 16.3%
In addition to the Guidelines, the Board of Governors requires a minimum
leverage ratio ("leverage ratio") of Tier 1 capital (as described above) to
total assets of 3 percent. For all but the most highly rated bank holding
companies, the leverage ratio must be 3 percent plus an additional cushion of at
least 100 to 200 basis points. The Company's consolidated leverage ratio at
December 31, 1998 was 7.7%. Similar requirements also apply to the Subsidiary
Banks. At December 31, 1998, the leverage ratio for IB and WRB were 7.9% and
9.7%, respectively.
The FDIC Improvement Act requires all regulators of insured depository
institutions to classify such institutions according to the following "prompt
corrective action" categories: (1) well capitalized, (2) adequately capitalized,
(3) undercapitalized, (4) significantly undercapitalized or (5) critically
undercapitalized. "Undercapitalized", "significantly undercapitalized" and
"critically undercapitalized" institutions may be required to take or to refrain
from taking certain actions, such as, among other things, requiring a
recapitalization or divestiture of subsidiaries or restricting transactions with
affiliates, interest rates on deposits, asset growth or distributions to parent
bank holding companies, until such institution becomes adequately capitalized.
"Undercapitalized," "significantly undercapitalized" and "critically
undercapitalized" institutions are required to submit a capital restoration plan
to the appropriate federal banking agency. A company controlling an
undercapitalized institution is required to guarantee a bank subsidiary
institution's compliance with the capital restoration plan subject to an
aggregate limitation of the lesser of 5% of the institution's assets at the time
it received FDIC notice that it was "undercapitalized" or the amount of the
capital deficiency when the subsidiary institution first failed to comply with
its capital restoration plan. As of the last classification, all of the
Subsidiary Banks were categorized as "well capitalized".
The minimum capital level for an Oklahoma state bank is based in part on
the population of the community in which the bank is located. WRB exceeds the
applicable minimum capital requirements for its community.
DIVIDENDS
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The National Bank Act restricts the payment of dividends by a national
bank generally as follows: (i) no dividends may be paid which would impair the
bank's capital, (ii) until the surplus fund of a national banking association 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 in the case of quarterly or semi-annual 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 a national banking association in any
year 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 to a
fund for the retirement of any preferred stock. For further information
regarding dividends see Item 5 of this report.
No Oklahoma bank may permit the withdrawal, in the form of dividends
or otherwise, of any portion of its capital or surplus. If losses equal or
exceed a bank's undivided profits, no dividends shall be made and no dividends
shall ever be made by any Oklahoma bank in an amount greater than its net
profits then on hand less its losses and bad debts. The directors of any
Oklahoma bank may declare dividends of so much of the net profits as they judge
expedient, except that until the surplus fund of a bank equals its common
capital, no cash dividends shall be declared unless there has been carried to
the surplus fund not less than 1/10th of the Bank's net profits of the preceding
half year in the case of quarterly or semi-annual dividends, or not less then
1/10th of its net profits of the preceding two consecutive half-year periods in
the case of annual dividends. The approval of the OBC is required if the total
of all dividends declared by a bank in any calendar year exceeds the total of
its net profits of that year combined with its retained net profits of the
preceding two years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.
DEPOSIT INSURANCE
-----------------
Effective January 1, 1993, the FDIC established a risk-based deposit
insurance premium assessment system, with assessment rates ranging from .23% of
domestic deposits (the same rate as under the previous flat-rate assessment
system) for those banks deemed to pose the least risk to the insurance fund to
.31% for those banks deemed to pose greater risk. The assessment rate applicable
to a bank is subject to change with each semi-annual assessment period.
Effective September 15, 1995, in view of the successful recapitalization of the
Bank Insurance Fund ("BIF"), which insures deposits at U.S. banks, the FDIC
lowered the assessment rate schedule for BIF-insured institutions from a range
of 0.23% to 0.31% of domestic deposits to a range of 0.04% to 0.31% of domestic
deposits. This reduction in the assessment rate schedule was made retroactive to
June 1, 1995 because the FDIC determined that the BIF achieved its
statutorily-required reserve ratio of 1.25% on May 31, 1995. On November 14,
1995, the FDIC again lowered the assessment rate schedule for BIF-insured
institutions, effective for the semiannual assessment period beginning January
1, 1996, to a range of 0.00% to 0.27% of domestic deposits. The assessment rate
established for the semiannual period beginning January 1, 1996 continues in
effect.
The statutory semiannual minimum assessment of $1,000 per insured
institution was eliminated as part of the Economic Growth and Regulatory
Paperwork Reduction Act Of 1996 ("EGRPRA"), which was signed into law on
September 30, 1996. EGRPRA provided for the recapitalization of the Savings
Association Insurance Fund ("SAIF") through a one-time special assessment on
SAIF-insured deposits in order to bring it into parity with the BIF.
EGRPRA also requires BIF members to pay a portion of the annual interest
on the Financing Corporation ("FICO") bonds issued in 1987 to begin funding the
resolution of the problems of the savings and loan industry. Beginning January
1, 1997, BIF members paid a FICO premium on BIF deposits equal to 0.0129%.
Beginning January 1, 2000, BIF members will share in the payment of the FICO
assessment with SAIF members on a pro rata basis, with the annual assessment
expected to equal approximately 0.024% until retirement of the FICO bond
obligation in approximately 2017. This assessment is not expected to have a
material adverse effect on the Subsidiary Banks.
MONETARY POLICY
---------------
The earnings of the Company are affected not only by general economic
conditions, but also by the policies of various governmental regulatory
authorities in the U.S. and abroad. In particular, the Federal Reserve Board
regulates the national supply of money and credit in order to influence general
economic conditions, primarily through open market operations in U.S. Government
securities, varying the discount rate on member bank borrowings and setting
reserve requirements against deposits. Federal Reserve monetary policies have
had a significant effect on the operating results of financial institutions in
the past and are expected to continue to do so in the future.
LEGISLATION
-----------
Over the past several years, Congress has focused on enacting financial
modernization legislation that would, among other provisions, repeal the
Glass-Steagall Act and certain provisions of the Bank Holding Company Act to
allow affiliations among banks, insurance underwriters and securities firms.
Again this year, major financial modernization legislation has been proposed in
both the House and Senate. While the major provisions of the various pending
bills appear to enjoy wide-spread support, various subsidiary provisions have
yet to be resolved in a manner that will allow the bills to move to enactment
during this Congressional term. If financial modernization is enacted, it may
significantly increase competition as larger, more geographically dispersed and
more diversified financial services companies merge with or acquire banks or
bank holding companies.
ITEM 2. PROPERTIES.
- ------- -----------
INTRUST FINANCIAL CORPORATION, INTRUST BANK, N.A. AND NON-BANKING
------------------------------------------------------------------------
SUBSIDIARIES
------------
The Company's principal offices and IB's main banking offices are
located at 105 North Main Street and 100 North Main Street, Wichita, Kansas.
Both offices are located in three office buildings owned by IPI. These three
buildings, together with the adjacent six-story garage and two-story garage
owned by IPI, occupy approximately one city block in downtown Wichita. The sixth
through tenth floors of the building at 105 North Main Street and sixth through
ninth floors of the building at 100 North Main are presently subleased by IB to
others. The Company subleases office space from IB on the third and fourth
floors of the building at 100 North Main. Employees of the Non-Banking
Subsidiaries occupy space within various IB office locations.
As of December 31, 1998, IB had nine detached branch facilities in
Wichita, Kansas, all leased from its subsidiary IPI. IPI owns the facilities and
the land at six offices. With respect to the three other detached offices, IPI
owns the facilities and leases the land on which such offices are located from
unaffiliated parties.
IB had two small branch offices which serve residents and staff members
of retirement communities located in Wichita, Kansas. IB leases office space at
both of these locations.
IB also had offices in ten Dillon supermarkets in Wichita. The office
space at each of these locations is leased from an unaffiliated party.
In addition to the above Wichita locations, IB had offices in the
following communities:
A branch owned by IPI and leased to IB, and a Dillon supermarket office
leased by IB from an unaffiliated party in El Dorado, Kansas.
A branch owned by IPI and leased to IB in Haysville, Kansas.
A branch owned by IPI and leased to IB in Ottawa, Kansas.
A main banking office, one detached facility and a Dillon supermarket
office in Johnson County, Kansas. IB owns the main office building and leases
the land where the main office building is located as well as the other two
offices from unaffiliated parties.
A branch owned by IPI and leased to IB in Valley Center, Kansas.
A Dillon supermarket office leased by IB from an unaffiliated party in
Andover, Kansas.
IB had loan production offices in Oklahoma City, Oklahoma and Tulsa,
Oklahoma. Both offices are leased from unaffiliated parties.
Total square footage of all facilities owned and occupied by IB, as of
December 31, 1998, was approximately 269,400 square feet.
WILL ROGERS BANK
----------------
WRB's main banking office is located at 5100 Northwest Tenth, Oklahoma
City, Oklahoma. Total square footage of the facility, which is owned by WRB, is
approximately 23,550 square feet.
WRB leases a branch facility located at 5909 N.W. Expressway, Oklahoma
City, Oklahoma, which has approximately 3,200 square feet of office space.
WRB also has offices located in Moore, Oklahoma and in Mustang,
Oklahoma. WRB owns both buildings, the total square footage of which is
approximately 19,000 square feet.
All facilities owned by the Company and the Subsidiary Banks are
maintained in good operating condition and are adequately insured. The Company
considers its properties and those of the Subsidiary Banks to be adequate for
their current and planned operations.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
There are no legal proceedings pending against the Company. Certain of
the subsidiaries of the Company are parties in a variety of legal proceedings,
none of which is considered to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1998.
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------- ----------------------------------------------------------------------
The common stock of the Company is traded in the local over-the-counter
market on a limited basis. Transactions in the common stock are relatively
infrequent. The following table sets forth the per share high and low bid
quotations for the periods indicated as reported by the National Quotation
Bureau, Incorporated (NQB).
1998 1997
- ------------------------------------------------------------------------
High Low High Low
- ------------------------------------------------------------------------
1st Quarter $110 $ 86 $63 $63
2nd Quarter 123 110 70 63
3rd Quarter 125 123 75 70
4th Quarter 127 127 86 75
The quotations in the above table reflect inter-dealer quotations,
without retail mark-up, mark-down, or commission and may not necessarily
represent actual transactions. On February 3, 1999, there were 391 stockholders
of record for the 2,034,516 shares of outstanding common stock. Approximately
74% of the shares are held by Kansas resident individuals, institutions or
trusts, with the remainder held by residents of twenty-eight other states, with
no singular concentrations. In 1998, the Company received cash dividends in the
amount of $1,400,000 from WRB and $138,000 from Trust. The Company declared and
paid cash dividends of $5,333,475, or $2.50 per share during 1998 and
$4,160,875, or $1.90 per share during 1997. During 1998, dividend declaration
dates were January 13, April 14, July 14, October 13 and December 8. During
1997, dividend declaration dates were January 14, April 8, July 8, October 14
and December 9. The payment of dividends by the Company is primarily dependent
upon receipt of cash dividends from the Subsidiary Banks. Regulatory authorities
can restrict the payment of dividends by national and state banks when such
payments might, in their opinion, impair the financial condition of the bank or
otherwise constitute unsafe and unsound practices in the conduct of banking
business. Additional information concerning dividend restrictions may be found
in the "Notes to Consolidated Financial Statements" (note 15) and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" under topic titled "Liquidity and Asset/Liability Management". The
priorities for use of cash dividends paid to the Company will be the quarterly
interest payments to holders of $11,078,000 in 9% Convertible Subordinated
Capital Notes due 1999 (the "Capital Notes"), payment of interest related to the
Trust Preferred Securities and the quarterly interest payments and annual
principal payments on the variable rate term loan payable to another financial
institution. Additional information concerning the Capital Notes, the Trust
Preferred Securities and the term loan may be found in the "Notes to
Consolidated Financial Statements" (notes 10 and 11). The Company's Board of
Directors will continue to review the cash dividends on the Company's common
stock each quarter with consideration given to the earnings, business
conditions, financial position of the Company and such other factors as may be
relevant at the time.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
- ------- ------------------------
<TABLE>
<CAPTION>
INTRUST Financial Corporation and Subsidiaries
Five Year Summary of Selected Financial Data
Dollars in thousands except per share data
- -----------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C> <C>
Interest income $146,883 $132,454 $132,463 $127,919 $110,383
Interest expense 69,325 60,147 56,436 53,460 38,267
- -----------------------------------------------------------------------------------------------------------------------
Net interest income 77,558 72,307 76,027 74,459 72,116
Provision for loan losses 11,090 8,240 20,151 18,118 2,962
Credit card valuation write-down 0 4,645 17,475 0 0
- -----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
loan losses and write-down 66,468 59,422 38,401 56,341 69,154
Other income 42,637 41,129 33,768 33,620 26,888
Other expenses 77,381 74,627 70,438 71,195 66,189
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 31,724 25,924 1,731 18,766 29,853
Provision for income taxes 12,190 9,260 51 6,379 10,884
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 19,534 $ 16,664 $1,680 $ 12,387 $ 18,969
- -------------------------------------------------======================================================================
Average shares outstanding 2,147,118 2,193,268 2,285,337 2,344,762 2,371,377
- -------------------------------------------------======================================================================
- -----------------------------------------------------------------------------------------------------------------------
Per share data assuming no dilution $9.10 $7.60 $0.74 $5.28 $8.00
- -------------------------------------------------======================================================================
- -----------------------------------------------------------------------------------------------------------------------
Per share data assuming full dilution $7.90 $6.74 $0.74 $4.77 $7.10
- -------------------------------------------------======================================================================
- -----------------------------------------------------------------------------------------------------------------------
Cash dividends per share $2.50 $1.90 $1.55 $1.50 $2.50
- -------------------------------------------------======================================================================
Balance sheet data at year-end:
Total assets $2,115,465 $1,923,822 $1,721,402 $1,666,984 $1,519,117
Total deposits 1,647,354 1,552,766 1,428,395 1,367,141 1,276,076
Long-term notes payable 12,500 23,000 17,660 20,310 22,950
Convertible capital notes 11,078 11,219 11,219 11,854 12,000
Subordinated debentures 57,500 0 0 0 0
Stockholders' equity 129,611 132,645 122,094 135,163 127,590
Book value per share 63.95 61.00 55.37 57.81 54.01
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
FINANCIAL OVERVIEW
------------------
Consolidated net income of INTRUST Financial Corporation in 1998
increased 17.2% over 1997 levels, reaching $19,534,000. 1998 earnings represent
the highest level of earnings recorded by the Company in its history. Continued
dislocation in the Company's principal markets, coupled with extensive business
development efforts, resulted in significant growth in its traditional loan and
deposit product offerings. Such growth substantially offset compression in the
interest margin experienced throughout 1998. In addition, the Company realized
significant growth in fee revenue arising from the sale of wealth management
products to both corporate and retail customers.
Unlike results for 1997 and 1996, 1998 results were not impacted by the
Company's decision in 1996 to sell its national credit card portfolio. As noted
in previous filings, the Company incurred pre-tax charges of approximately $4.5
million and $29.2 million in 1997 and 1996, respectively as a result of exiting
the national credit card market. Financial results in the Company's credit card
line of business were much improved this year, and are the main reason for the
71% increase in the consumer banking segment profit as reported in footnote 19
to the accompanying consolidated financial statements.
Significant progress was made by the Company in 1998 in addressing the
Year 2000 ("Y2K") issue. As has been noted in previous filings, all of the
Company's core systems are processed by third parties. The Company has been
actively engaged in working with these third parties to ensure the Y2K
compliance of these core processing systems. In addition, the Company has in
place a well-defined assessment, renovation, testing and implementation plan for
all of its systems. Specific details on the Company's Y2K compliance may be
found in the "Year 2000" section of this analysis.
ASSET QUALITY AND PROVISION FOR LOAN LOSSES
-------------------------------------------
The amount charged to the Company's earnings to provide for an adequate
allowance for loan losses is determined after giving consideration to a number
of factors. These include, but are not limited to, management's assessment of
the quality of existing loans, changes in economic conditions, evaluation of
specific industry risks, the need to support projected loan volumes and a
provision for the timely elimination of uncollectible receivables.
The Company has established credit analysis and review processes for
determining the propriety of its allowance for loan losses. Individual
commercial loans meeting certain size criteria are reviewed and graded
individually. A specific allowance is then computed for each reviewed credit
based on the overall grade assigned. A general allowance for those commercial
loans not individually reviewed is computed based on a factor applied to the
total dollar amount of commercial loans not subject to specific review. Credit
card loans are considered to be a homogeneous group of receivables, with the
allowance allocated to the credit card portfolio based on credit scoring,
bankruptcy trends and delinquency information of that portfolio. Other consumer
loans consist principally of loans secured by automobiles. These loans are also
reviewed in the aggregate. The Company's grading system is based on both
objective factors - principally financial information and ratios, and some more
subjective measures such as quality of management, projected industry trends and
competitive factors. A detailed analysis of the allowance for loan losses is
conducted quarterly. It is during this analysis that the Company may make
changes to the allocation of the allowance based on an assessment of specific
risk issues in each of its business lines.
The Company recorded a provision for loan losses and write-downs of
loans held-for-sale of $11,090,000 in 1998. Comparable amounts in 1997 and 1996
were $12,885,000 and $37,626,000 respectively. As discussed in previous filings,
the Company made a decision to exit the national credit card market in 1996,
which resulted in portfolio write-downs in both 1997 and 1996. These write-downs
resulted in the higher total provision amounts in 1997 and 1996.
The 1998 provision for loan losses totaled $11,090,000, representing an
increase of $2,850,000 over the 1997 provision (exclusive of the provision for
write-down of loans held for sale). The 1998 provision level, when combined with
net charge-offs of $7,319,000, resulted in an increase in the allowance for loan
losses of $3,771,000. Approximately 30% of the increase in the allowance was
attributable to an increase in reserves on specifically identified commercial
receivables. The remainder of the increase resulted from increased loan volumes
and from increased provisions in the consumer banking segment of the portfolio.
Total loans (including loans held-for-sale) at December 31, 1998 aggregated
$1.45 billion, an increase of 11.7%, or approximately $170 million over
comparable 1997 amounts.
The overall economies of the Company's principal markets remained sound
in 1998, resulting in favorable credit quality in the Company's loan portfolio.
The Company experienced significant growth in its commercial loan portfolio
again this year. It does not believe that this growth resulted from the
lessening of credit standards, but rather from the continued dislocation in the
Company's principal markets. Net charge-offs in the commercial, financial,
agricultural and real estate areas continued to be quite low. 1998 net
charge-offs were $1,809,000, compared to $672,000 in 1997. Average loans in
these business lines were approximately $860 million and $750 million in 1998
and 1997, respectively. The Company believes its ratio of net
charge-offs/average loans in the commercial sector compares favorably to
industry averages. Net charge-offs on installment loans did not change
appreciably from 1997 levels. While the Company believes its ratio of net credit
card charge-offs/average credit card loans compares favorably to industry
averages, net charge-offs in this lending category did increase $479,000 over
1997 levels. The Company has increased the dollar amount of allowance for loan
losses allocated to its credit card portfolio by $1.4 million in recognition of
the increased charge-off percentage in this line of business.
The Company's allowance for loan losses at year-end was equal to 355%
of nonaccrual, past due and restructured loans. Comparable percentages in 1997
and 1996 were 266% and 142%, respectively. The allowance for loan losses equaled
1.53%, 1.42%, and 1.47%, of total loans outstanding at December 31, 1998, 1997
and 1996, respectively. After declining 38.2% in 1997, non-performing loans
declined another 9.2% in 1998. Non-performing credit card loans comprised 26.4%
of total non-performing loans in 1998, and were 30.4% of the comparable 1997
total. Non-performing loans as a percentage of total year-end loans in 1998,
1997 and 1996 were .43%, .53% and 1.03%, respectively. The absence of the
national credit card portfolio in 1997 accounted for the significant change in
the 1997 and 1996 percentages.
While the dollar amount of non-performing loans has declined, the
Company increased its allowance for loan losses because of the significant
volume of new business recorded in 1998. In addition, certain forward-looking
indicators, such as delinquency levels, do not seem to have the direct
relationship to subsequently charged-off accounts that they once had. The
Company has experienced more loans, particularly in the consumer segment, going
directly from a performing status to bankruptcy.
The largest single net charge-off during 1998 was to a commercial
enterprise. No trends were noted during the year that would point to particular
exposure issues with respect to a given industry or segment of the loan
portfolio. Management continues to closely monitor its consumer lending
exposure. Management believes the allowance for loan losses to be adequate at
this time. Please refer to Table 9, Summary of Loan Loss Experience, for
additional information. Management is not aware of issues that would
significantly impact the overall credit quality of the loan portfolio in 1999.
With a continued favorable economic climate, the Company believes its provisions
for loan losses will be comparable to that recorded in 1998.
NET INTEREST INCOME
-------------------
The relatively flat yield curve environment that was present in 1997
continued throughout 1998. Even though the Federal Reserve eased interest rates
on three separate occasions, the easing had little impact on the slope of the
yield curve. At the end of 1998, the spread between three-month Treasury bill
rates and thirty-year Treasury notes was approximately 60 basis points. The
easing by the Federal Reserve was most evident in the yield on investment
securities, as the Company experienced a reduction in these yields of 40 basis
points in 1998. Competitive funding pressures, along with the Trust's issuance
of Trust Preferred Securities in January of 1998, resulted in a five basis point
increase in the cost of interest-bearing liabilities in 1998.
Dislocation in the Company's principal markets continued in 1998, with
the Company again benefiting through growth in its loan portfolio and its
funding sources. Total average net loans increased $75.7 million in 1998, after
increasing $145.1 million in 1997. Total average deposits and short-term debt
grew $180 million this year, after increasing $98.3 million and $100.5 in 1997
and 1996, respectively. Average non-interest bearing demand deposits increased
$42 million, as the Company continued to acquire corporate deposits in
connection with its commercial loan growth. The Company also experienced growth
in 1998 in short-term repurchase agreements, as the successful marketing of its
cash management products resulted in an increase in this funding source of $56.1
million in 1998.
Total interest income in 1998 increased $14,429,000, or 10.9%, over
1997 levels. This increase was volume-driven, as average interest-earning assets
increased 14.4% in 1998. The Company was able to successfully maintain its yield
on average loans, with only a one basis point change in 1998. However, the
Company does maintain an investment portfolio with a relatively short weighted
average maturity. With $177 million of investment securities maturing in 1998
and with the Federal Reserve easing that took place during the year, the Company
reinvested in securities carrying a lower yield. As a result, the yield on
investment securities declined 40 basis points. Also impacting the Company's
overall yield on interest-earning assets was the fact that the Company operated
with a higher level of liquidity in 1998. Loans as a percentage of average
interest-earning assets were 73.1% in 1998, compared to 78.8% in 1997. The
combination of these factors resulted in a decrease in the yield on total
interest-earning assets of 28 basis points in 1998.
Interest expense in 1998 totaled $69,325,000, an increase of 15.3% over
1997 amounts. 1998 average interest-bearing liabilities increased 14% over 1997
levels. The Company operates in what it considers to be a very competitive
environment with respect to the pricing of traditional deposit products. Even
though the Federal Reserve reduced borrowing rates by 75 basis points in 1998,
there was little change in the Company's cost of funds for its deposit products.
The average cost of funds for the Company's total deposits was 4.33%, declining
six basis points from 1997 levels. This decrease is the result of a shift in the
composition of total rate-related deposits, as the Company saw slightly more of
its deposit base invested in more liquid deposit vehicles. During 1998,
approximately 54% of total interest-bearing deposits were invested in relatively
more liquid savings and interest-bearing demand accounts. The comparable
percentage in 1997 was 50.5%. Because these more liquid products carry a lower
rate of interest, the Company did experience a modest decline in the cost of
funds of its deposit products.
The Trust's issuance of $57,500,000 in Trust Preferred Securities in
January 1998, had the greatest impact on the Company's overall cost of funds.
The Trust Preferred Securities have a distribution rate of 8.24%. This issuance
served to increase the long-term debt interest cost of the Company by 23 basis
points, and had a 14 basis point effect on the Company's overall cost of funds.
Had the Trust Preferred Securities not been outstanding in 1998, the Company's
overall cost of funds would have declined nine basis points from 1997 levels.
Total interest income recorded by the Company in 1997 was $132,454,000,
essentially unchanged from the comparable 1996 amount of $132,463,000. Strong
growth in loan demand enabled the Company to reach this level of interest
income, as this growth offset the negative impact on interest income in 1997 of
the sale of the relatively higher-yielding national credit card portfolio.
Yields on net loans in 1997 declined 76 basis points from 1996 levels. The
Company estimates that approximately 40% of this decline is attributable to the
affect on yields of the sale of the national credit card portfolio. Total
interest expense in 1997 increased 6.6% over 1996 levels, as average
interest-bearing liabilities increased 5.6%. Funding costs in 1997 were little
changed from 1996 levels. While the yield curve did flatten during the year, the
stable interest-rate environment meant that there was not a significant change
in the cost of deposit products on the short end of the curve. As a result, the
Company experienced only a four basis point change in the cost of its
interest-bearing liabilities in 1997.
The Company currently does not expect significant changes in the
overall interest rate environment in 1999, although any number of political
considerations could influence interest rates in 1999, as could events in Latin
America and Asia, and issues associated with Y2K could impact overall liquidity
levels. However, as noted above, the Company anticipates that changes in the
composition of the loan portfolio, combined with competitive changes in its
principal marketplace are expected to result in continued pressure on the
interest margin, and that the net yield on interest-earning assets will continue
to decline in 1999. Management will continue to place a major emphasis on the
maintenance of net interest margins within the overall framework of sound
interest-rate risk management.
NONINTEREST INCOME
-------------------
Total noninterest income increased $1,508,000, or 3.7% over 1997
levels. The Company experienced double-digit growth in both service charge and
fiduciary income in 1998, but the amortization of one of the credit card
securitization programs and the decision to exit the processing of national
merchant credit card activity resulted in a 32% decline in credit card fees in
1998.
Service charges on deposit accounts increased 10% this year, to
$11,008,000. As discussed in previous quarterly filings, the Company experienced
growth in each quarter of 1998 in the number of deposit accounts serviced,
concluding the year with account growth of 4.3%. As noted above, the Company's
cash management products were well received in the marketplace in 1998,
resulting in additional fee income from these product offerings.
Fiduciary income increased $2,530,000, or 31.7%, in 1998. During 1996
and 1997, the Company made significant investments in this line of business,
greatly expanding its product offering in the wealth management area. The
Company now provides funds management, record keeping, employee education and
actuarial consulting services for employee benefit plans in addition to
traditional personal trust services. Assets under management for which the
Company has a fiduciary responsibility increased 13%, to $2.27 billion at
December 31, 1998. The Company will continue to emphasize growth in this area in
1999.
As noted above, credit card fees declined this year as one of the
Company's credit card securitization transactions fully amortized in 1997 and
the Company elected, in the first quarter of 1998, to exit the national merchant
processing business. The Company recorded approximately $1.4 million in revenue
in 1997 attributable to the credit card securitization that fully amortized in
1997. Principally all of the remaining year-over-year difference in credit card
fee revenue is due to the cessation of national merchant processing.
Other service charges, fees and income increased $2,205,000, or 22.1%
in 1998. As discussed in previous quarterly filings, the Company recorded a gain
of approximately $1.4 million in the first quarter of 1998 when it sold its
national merchant processing business. In addition, the Company recorded an
increase in fee income of approximately $500,000 arising from a greater volume
of mortgage loans originated on behalf of others. The interest rate environment
in 1998 resulted in higher volumes of new residential loans and increased
refinancing activity. Fee income arising from the securitization of automobile
loans in December, 1997, along with increases in international banking revenue
and ATM fees, served to substantially offset revenue recorded in 1997 arising
from the servicing of the previously-sold portfolio of national credit card
accounts.
Securities gains of $126,000 were the result of a contractual agreement
to sell equity securities that the Company acquired in its acquisition of a
financial institution in 1993. The Company does not maintain a trading portfolio
of investment securities.
During 1997, the Company experienced growth in all categories of
noninterest income. Increased service charge income was due principally to
volume increases, and as noted above, the Company made significant investments
in its fiduciary line of business, resulting in increased revenue from new
products and services. Credit card fees increased 9.7% as the Company's revenues
in this area increased due to its processing of national merchant business.
However, as previously noted herein, costs associated with this processing also
increased significantly, and the Company elected in January 1998 to exit this
business line. Other service charges, fees and income increased approximately
$3.2 million in 1997. One-half of this increase was attributable to fees
recorded on the servicing of the national portfolio accounts during 1997. The
Company also realized in excess of $400,000 in additional income in 1997 from
its securitization of automobile loans and increased ATM transaction volume. The
Company also recorded additional revenue from its introduction of international
banking services in 1997.
NONINTEREST EXPENSE
-------------------
Noninterest expense increased 3.7% in 1998, to $77,381,000, after
increasing 5.9% in 1997. The growth of the Company in 1998 resulted in
additional incremental costs in many categories of noninterest expense.
Salaries and employee benefits increased $3,361,000, or 9.6% in 1998.
During the year, the Company recorded approximately $700,000 in one-time costs
associated with an early retirement program and certain severance expenses. An
additional $1.2 million in compensation expense was recorded in 1998 as the
Company continued its investment in its fiduciary income lines of business.
After remaining relatively stable the last two years, health and life insurance
costs increased 15.4% in 1998. Absent these factors, salary and employee benefit
costs would have increased approximately 3.7%. At December 31, 1998, the Company
had a total staff (on a full-time equivalent basis) of 905, compared to 901 and
890 at the end of 1997 and 1996, respectively. Salary and employee benefit costs
in 1998 represented 1.92% of average total assets, as compared to 1.98% and
1.84% in 1997 and 1996, respectively.
During 1998, the Company continued the development of its internet
banking product, as well as upgrading technology equipment at many of its
locations. In addition, the Company continued to enhance its check imaging
solution during the year. As a result of making these investments, the Company
experienced increases in occupancy and equipment expense and data processing
expense. Occupancy costs were also impacted by rents paid to the largest-volume
convenience store chain in Kansas, as the Company consummated an agreement with
that company to place its ATMs inside those convenience stores located in the
Company's principal markets. Data processing expense also increased due to the
increase in the volume of accounts processed by the Company's third party data
processing provider. The implementation of the imaging technology for a full
year did, however, allow the Company to reduce its postage and dispatch costs
even with an increased statement volume.
Advertising and promotional activities increased $296,000 in 1998. The
Company actively promoted its new presence in the convenience store locations
referred to above, as well as engaging in activity-based marketing with two of
its largest credit card affinity groups.
Other noninterest expense declined $1,725,000 in 1998. Costs associated
with processing the national merchant accounts totaled approximately $2.8
million in 1997, and with the sale of these accounts in January of this year,
many of these costs were not incurred in 1998. The Company did experience
increased costs in connection with new affinity agreements reached with two of
its largest credit card affinity groups. As a result of new contracts signed
during the year with those two groups, affinity expenses increased $380,000 over
1997 levels. Volume increases also resulted in a 30% increase in item processing
costs, and increases in loan collection and legal costs.
Noninterest expense increased 5.9% in 1997, to $74,627,000. Increased
compensation costs and increases in other noninterest expenses exceeded
reductions realized in occupancy, postage and advertising costs.
Salaries and employee benefits increased $4,274,000, or 13.8% in 1997.
Approximately $1.7 million, or 40% of this increase, is attributable to the
expansion of the Company's fee-based businesses. In 1996, the Company
significantly reduced its variable pay awards to employees in recognition of the
Company's decreased level of profitability. With the Company's return to higher
levels of profitability, variable pay awards also returned to higher levels,
resulting in a $600,000 increase in salaries and employee benefits. Net
occupancy and equipment expense declined $488,000 in 1997, due principally to a
$450,000 reduction in impairment losses recorded on physical locations. Data
processing expense was essentially unchanged from 1996 levels. However, the
Company elected to bring certain personal computer data processing activities
in-house, after previously outsourcing these activities. As a result, data
processing costs were approximately $500,000 less than they otherwise would have
been. The Company expended significant efforts in 1997 upgrading its network
infrastructure and developing its Internet site and check imaging capabilities.
Supplies costs increased 10.4% in 1997, to $2,334,000. Increased volumes and
supplies required for the introduction of new products were the main reasons for
the increase.
Postage and dispatch costs declined in 1997, as investments in check
imaging technology resulted in reduced postage costs associated with the mailing
of customer statements. The sale of the national credit card portfolio, which
was concluded in August 1997, also resulted in a reduction in the volume of
statements mailed to the Company's credit card customers. Advertising and
promotional activities were $441,000 less in 1997 than they were in 1996. The
Company made greater use of targeted marketing campaigns in 1997, employing less
mass marketing techniques. Also, the Company utilized more internal resources to
more efficiently promote its credit card marketing efforts. Other noninterest
expenses increased $1,648,000 or 11% in 1997 to $16,434,000. Costs associated
with the Company's processing of its national credit card merchant portfolio
were responsible for much of this increase.
Included in other noninterest expenses are the Company's payments to
First Data Resources, Inc. for credit card processing.
Just as is the increase in noninterest income and the maintenance of
net interest income, the control of noninterest expense is a significant goal of
the Company's management.
CONCENTRATIONS OF CREDIT RISK
-----------------------------
Concentrations of credit risk are monitored on a continuous basis by
the Company. The Company's principal service area has been identified as the
Wichita MSA. Credit risk is therefore dependent on the economic vitality of this
region. Within the region, credit risk is widely diversified and does not rely
upon a particular industry, segment or borrower. As noted elsewhere, a generally
favorable economic environment was present in the region during 1998. The
Company believes a similar climate will be present in 1999. To a lesser extent,
the Company is also actively involved in certain areas of Oklahoma and the
Kansas City markets through the operations of its subsidiary locations in
Oklahoma City, Oklahoma and Prairie Village, Kansas.
The Company does not believe there are any significant concentrations
of risk in the commercial, financial and agricultural loan portfolio. The
Company's loan portfolio is comprised of customers in a number of industries,
with the manufacturing, agricultural and food service industries representing
important components of the portfolio. As the Company's principal market,
Wichita, Kansas, has a significant manufacturing presence in the general
aviation industry. The Boeing Company, Cessna Aircraft, Learjet, and Raytheon
Aircraft all have significant facilities in Wichita. During 1998, manufacturing
employment in Wichita increased 6%, principally as a result of the strength of
the general aviation market. The general aviation manufacturers are continuing
to operate with a backlog of orders that should result in relatively stable
employment in this industry segment in 1999. Food service industry borrowers
comprise an important part of the Company's commercial loan portfolio. The
Company believes that its risks in the food service industry are spread among a
number of different borrowers who are involved in a variety of different types
of food service in a number of geographic markets throughout the United States.
The agricultural industry is an important part of the overall Kansas economy. As
with its exposure in the food service industry, the Company's exposure in the
agricultural sector is spread among a number of different borrowers who are
engaged in different facets of the agricultural economy. The Company has very
limited exposure within the agricultural sector to pork producers. Each loan in
the commercial portfolio is analyzed independently based upon the financial risk
in that particular situation.
Consumer credit is comprised of credit card and installment loans, and
represents a large concentration of overall risk in the loan portfolio. In large
part, installment receivables represent loans made to acquire automobiles and
are secured by the automobiles. While losses in this area of the loan portfolio
have increased modestly, the Company believes its loss experience in this
segment of consumer lending generally compares favorably to industry averages.
The Company does not engage in sub-prime automobile lending. Credit card
receivables are represented by Mastercard(R) and VISA(R) customers, and are
unsecured. As has been discussed elsewhere herein, the Company has exited the
national market for credit cards. The Company intends to aggressively pursue
consumer lending opportunities in its trade territory, but it does not intend to
embark on a national marketing campaign of its products in the foreseeable
future. The volume and risk in all loans is continuously evaluated and reflected
in the allowance for loan losses.
During the past two years, and as a matter of general credit policy,
the Company has not participated in either real estate mortgage loans (either
construction or permanent loans) outside the service area described above or
loans defined as highly leveraged transactions (HLT's).
OFF-BALANCE-SHEET RISK
------------------------
Off-balance-sheet risk of the Company consists principally of the
issuance of commitments to extend credit and the issuance of letters of credit.
During the past two years, the Company has not entered into any financial
instruments of a derivative nature that involve other off-balance-sheet market
or credit risks, such as interest rate swaps, futures, options or similar types
of instruments. However, as disclosed in previous filings the Company has
entered into credit card receivable and automobile loan receivable
securitization transactions. These transactions allow the Company to free up
capital for other uses and to more effectively manage its balance sheet.
Previous filings have described the credit card securitizations that were
concluded in December 1994 and January 1995. During 1997, the Company's floating
rate credit card securitization was renewed, while the fixed rate transaction
commenced its contractual amortization, which concluded in December 1997. In
December 1997, the Company securitized and sold approximately $45 million of
automobile loans. The automobile paper securitization amortizes as principal
payments on the securitized loans are received. At December 31, 1998,
approximately $23 million in receivables remained outstanding. This transaction
also carries a floating interest rate, and provides that the Company may,
through December 1999, securitize and sell up to $100 million in automobile
receivables through this conduit. In both of the securitization transactions
that are presently in place, neither the loan receivables sold or the securities
outstanding are defined as financial instruments of the Company, but the Company
continues to service the related credit card and automobile accounts. The
Company no longer recognizes net interest income and certain fee revenue, nor
does it provide for loan losses on the securitized portfolios. Instead,
servicing fee income is received by the Company.
At December 31, 1998, the aggregate amount of commitments to extend
credit outstanding was $520,888,000, excluding credit card lines of
$801,720,000. Comparable amounts at December 31, 1997 and 1996 were $414,224,000
and $366,264,000, respectively. At December 31, 1998, the aggregate amount of
letters of credit outstanding was $55,556,000, compared to $39,654,000 at
December 31, 1997 and $33,756,000 at December 31, 1996.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on management's credit evaluation
of the counter-party.
Letters of credit consist of two principal types: commercial and
standby. Commercial letters of credit are generally issued to facilitate the
flow of commercial transactions, generally to finance goods in transit. Standby
letters of credit are used to ensure the performance of obligations in some
future period. Letter of credit expirations generally do not run beyond one year
from the date of issuance.
The issuance of letters of credit is governed by the same underwriting
standards as are applicable in any other credit transaction. Some are secured;
others are supported by the general credit standing of the obligor. Liabilities
under letters of credit are evaluated on a continuing basis, as are all other
loans in the credit review process.
INVESTMENT PORTFOLIO RISK
-------------------------
Analysis of the investment portfolio is included in Table 4, Investment
Portfolio, and Table 5, Maturities and Yield Analysis. The Company has the
ability, and management has the intent, to hold those investment securities
classified as held-to-maturity until maturity. In recognition of the significant
loan growth experienced by the Company, management elected, in 1997, to begin
classifying purchases of U.S. Government and Agency securities as
available-for-sale. While there has been no change in management's investment
philosophy or intentions, liquidity issues associated with continued loan growth
could result in some investment securities being sold prior to maturity, thus
the Company's decision to classify prospective purchases as available for sale.
The Company does not maintain a trading account or engage in trading activities.
On occasion, maturities will be pre-funded. Pre-funding occurs within a short
period prior to the maturity of the maturing obligations.
Management believes the average maturity of the Company's investment
security portfolio to be shorter than peer group averages and that maintenance
of a portfolio of this duration substantially reduces interest rate risk. At
December 31, 1998, the Company's investment security portfolio had a weighted
average maturity of 1 year and 8 months. The market value of the investment
portfolio exceeded its cost basis by approximately $3 million. The Company
maintains a conservative investment strategy and believes the diversification of
the portfolio results in very little credit risk existing in the portfolio.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
----------------------------------------
The principal functions of asset/liability management are to provide
adequate liquidity, maintaining a reasonable and prudent relationship between
rate sensitive assets and liabilities and to continuously evaluate risks,
including interest-rate risks. Adequate liquidity is described as "the ability
of the Company to provide funds to appropriately meet normal loan extensions,
and at the same time, meet deposit withdrawals." A variety of funding sources
are available to the Company, including core deposit acquisition, federal funds
purchases, acquisition of public funds and the normal run-off of
interest-earning assets.
The day-to-day liquidity needs of the Company are primarily met by the
management of the federal funds position. Adjustments in the Company's net
federal funds position have historically been sufficient to meet liquidity
needs. As previously noted, and as described in Table 5, the Company's
investment portfolio carries a relatively short weighted-average maturity. The
Company has contractual maturities of investment securities classified as
held-to-maturity (including mortgage-backed securities), in the next year of
$107,457,000. Interest rate risks are minimized by the maintenance of this
relatively short-term investment position, and the normal run-off of these
investment securities provides a secondary source of liquidity for the Company.
The Company also has approximately $209,000,000 in investment securities that
are classified as available-for-sale which could provide an additional source of
liquidity. Further, a significant portion of the loan portfolio is comprised of
installment instruments that provide an additional source of liquidity through
their normal run-off. As previously discussed in this analysis, the Company has
securitized and sold certain credit card and automobile paper receivables.
Proceeds from these transactions provide additional sources of liquidity.
A major component of the asset/liability management process is the
focus on the control of interest rate exposure. Emphasis is placed on
maintenance of acceptable net interest margins in various interest rate
environments, and in providing the Company the ability to change interest rates
should market circumstances warrant. The following table presents, at December
31, 1998, the Company's interest rate sensitivity based on contractual
maturities. The table reflects the actions taken by customers to shorten their
deposit maturities given the flat yield curve that presently exists. The table
reflects only contractual maturities; it does not consider prepayments that
typically occur on automobile loans and mortgage loans. The Company does not use
derivative financial instruments to control interest rate risk. Management
believes the sensitivity and gap ratios reflected in this table result in
acceptable management of interest rate exposure. Loans held-for-sale, net of
write-downs, are included in net loans in the table.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY
December 31, 1998 1 to 90 91 to 180 181 to 365 1 to 2 Over
(Dollars in thousands) Days Days Days Years 2 Years Total
- -----------------------------------------------------------------------------------------------------------------------------------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Net Loans $ 759,791 $ 115,790 $ 156,800 $141,802 $253,726 $1,427,909
Investment Securities 32,435 39,053 71,340 128,307 116,685 387,820
Federal funds sold 68,550 0 0 0 0 68,550
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $ 860,776 $ 154,843 $ 228,140 $270,109 $370,411 $1,884,279
- --------------------------------------------------------------------------------------------------------------------==========
Interest-bearing liabilities:
Interest-bearing deposits $ 807,615 $ 87,429 $ 209,685 $ 86,299 $ 54,148 $1,245,176
Federal funds purchased 241,955 0 0 0 0 241,955
Other borrowings 14,760 0 11,078 0 57,500 83,338
- ------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 1,064,330 $ 87,429 $ 220,763 $ 86,299 $111,648 $1,570,469
- --------------------------------------------------------------------------------------------------------------------==========
Interest rate sensitivity $ (203,554) $ 67,414 $ 7,377 $183,810 $258,763
Cumulative interest rate sensitivity $ (203,554) $(136,140) $(128,763) $ 55,047 $313,810
Cumulative interest rate sensitivity gap as a
percentage of total assets
(9.62)% (6.43)% (6.08)% 2.60% 14.83%
Cumulative ratio of interest-sensitive assets to
interest-sensitive liabilities 80.87 % 88.17% 90.61 % 103.77% 119.98%
</TABLE>
The following information should be read in conjunction with the
consolidated statement of cash flows, which appears under Item 8 of this report.
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, Federal funds sold and securities
purchased under agreements to resell. Cash and cash equivalents decreased
$60,503,000 for the year ended December 31, 1998, as the net cash absorbed by
investing activities exceeded the cash provided by operating and financial
activities. Operating activities provided cash of $16,414,000, resulting
primarily from net earnings of $19,534,000. Cash outflows from investing
activities totaled $246.2 million, increasing $102 million over 1997 levels. The
Company recorded loan growth of $161.7 million and increased its investment
portfolio by approximately $79 million. Financing activities provided $169.3
million in cash in 1998, decreasing $16.3 million from the comparable 1997
amount. The smaller increase in deposits and short-term borrowings in 1998 was
substantially offset by the proceeds received from the issuance of subordinated
debentures. However, the Company did repurchase $17.5 million in common stock
during the year, resulting in the overall decline in cash provided from
financing activities.
For the year ended December 31, 1997, cash and cash equivalents
increased $76,005,000 as the net cash provided by operating and financing
activities exceeded the cash used in investing activities. Operating activities
provided $34,147,000 in cash in 1997, resulting primarily from net earnings of
$16,664,000 and noncash provisions for losses and depreciation of $19,479,000.
Cash outflows from investing activities totaled $143,720,000. These outflows
were the result of $132,822,000 in loan growth during the year and a net
increase in the Company's investment portfolio of $11,911,000. Financing
activities provided appreciably more cash in 1997 than they had in 1996 or 1995.
Company deposits increased $124,371,000 and short-term-borrowings (principally
repurchase agreements) increased $62,310,000.
The Company's ability to pay dividends on its common stock and interest
on its capital notes is dependent upon funds provided by dividends from the
Subsidiary Banks and such other funding sources as may be available to the
Company. In addition, the Company's debt agreements provide for minimal capital
levels that must be maintained as long as the indebtedness remains outstanding.
Total capital of the Company exceeded these requirements at December 31, 1998.
In January 1998, the Company concluded a $57,500,000 public offering of Trust
Preferred Securities. Terms of the issuance provide that payment of dividends to
common stockholders will be prohibited unless the Company has funded the payment
of the distributions due the Trust Preferred Securities holders. The payment of
dividends by the Subsidiary Banks is restricted only by regulation. At December
31, 1998, approximately $13,274,000 was available from the Subsidiary Banks'
retained earnings for distribution as dividends to the Company in future periods
without regulatory approval. The availability of dividends from the Subsidiary
Banks combined with cash balances maintained by the parent company at December
31, 1998 provide the parent company with sufficient liquidity to meet its needs.
CAPITAL ADEQUACY
----------------
Capital strength is important to the success of INTRUST Financial
Corporation. Capital strength promotes depositor and investor confidence and
provides a solid foundation for future growth. As noted above, the Company
concluded an offering of Trust Preferred Securities in January 1998. The Trust
Preferred Securities are considered capital for regulatory purposes. At December
31, 1998, the Company's capital position exceeded all regulatory requirements.
The Company must maintain a minimum ratio of total capital to risk-weighted
assets of 8% of which at least 4% must qualify as Tier 1 capital. At December
31, 1998, the Company's total capital to risk-weighted assets was 11.4% and its
Tier 1 capital to risk-weighted assets ratio was 9.3%. These ratios were 9.2%
and 7.9%, respectively in 1997.
While the Company does not have a formal stock buyback program, it
may, from time to time, offer to repurchase stock from stockholders meeting
pre-determined criteria as to the size of their holdings, and it will consider
repurchasing stock if and when it becomes available.
Capital ratios of the Subsidiary Banks are as follows:
INTRUST Will Rogers
Bank, N.A. Bank
---------- -----------
Leverage Ratio 7.9% 9.7%
Core Capital/Risk Weighted Assets 9.5% 15.3%
Total Capital/Risk Weighted Assets 10.8% 16.3%
Dividends declared in 1998 were $5,333,000 ($2.50 per share). Dividends
of $4,161,000 ($1.90 per share) and $3,541,000 ($1.55 per share) were declared
in 1997 and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
As discussed in the accompanying financial statements, the Company has
disclosed estimated fair values for its financial instruments. As noted in the
financial statements, no ready market exists for a significant portion of the
Company's financial instruments, and a precise determination of the fair value
of these instruments, in the absence of a ready market, cannot be made.
The estimated fair value (as computed) of its financial assets exceeded
the book value of those assets by approximately $17.3 million at December 31,
1998. The estimated fair value of financial assets exceeded its book value by
$13.8 million at December 31, 1997. The year-over-year change is due to the
modest declines in interest rates experienced in 1998, which resulted in both
loans originated and investment securities purchased during prior periods
increasing in market value.
The estimated fair value of financial liabilities at December 31, 1998
exceeded their book value by $47.1 million. This difference was $25.1 million in
1997. During 1998, the market value of the Company's common stock increased
approximately 51%. Since the estimated fair value of the Company's convertible
capital notes is based on the conversion feature of these notes, this increase
in the market value of the Company's common stock resulted in a proportionate
increase in the estimated fair value of the convertible capital notes. In
addition, the guaranteed preferred beneficial interests in the Company's
subordinated debentures carry a distribution rate of 8.24%. With a decline in
interest rates during the year, the fair value of these financial liabilities
increased.
INFLATION AND CHANGING PRICES
-----------------------------
The impact of inflation on financial institutions differs from that
exerted on other types of commercial enterprises. The Company has a relatively
small portion of its resources invested in capital or fixed assets. The majority
of its assets are monetary in nature. For this reason, changes in interest rates
are a primary factor in determining their value. Fluctuations in interest rates
and efforts by the Federal Reserve Board to regulate money and credit conditions
have a greater effect on the Company's profitability than do the effects of
higher costs for goods and services.
YEAR 2000 ISSUES
----------------
The Company, along with other financial institutions, will face
potentially serious issues associated with the inability of existing data
processing hardware and software to appropriately recognize calendar dates
beginning in the year 2000. Many computer programs that can only distinguish the
final two digits of the year entered may read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency
amounts. During 1997, the Company began the process of identifying the many
software applications and hardware devices expected to be impacted by this
issue.
Throughout 1998 the Company has been actively engaged in efforts to
assess, renovate, test and implement necessary changes to its existing systems.
The Company outsources its principal data processing activities to third party
vendors, and all significant software application systems are also purchased
from third parties. These outsourced systems include its core loan, deposit,
credit card, trust and general ledger systems. The Company believes that its
vendors are actively addressing the problems associated with the Y2K issue. The
Company's Y2K project team is actively engaged in the development, monitoring
and updating of business unit workplans. At December 31, 1998, the Company has
completed its assessment phase, and 85% of identified Y2K issues had been
resolved. The Company had completed the validation and testing of 65% of the
renovated systems, and had completed 45% of their implementation plan. The
Company believes it is on schedule to complete its Y2K plan in the second
quarter.
As noted in previous filings, the Company does not expect its Y2K
efforts will have a material impact on its financial position or its results of
operations. During 1998, payments to third parties as a result of work performed
in connection with Y2K were not material. This is because its major systems are
outsourced to third parties, and the Company is not responsible for the actual
renovation of code for these core systems. Y2K has, however, delayed the
Company's ability to implement system enhancements that might otherwise have
increased efficiencies. The failure to have these enhancements in place does not
present the Company with operational difficulties or impact the Company's
ability to adequately serve its customers.
The failure of a commercial bank customer to prepare for Y2K
compatibility could have a significant adverse effect on such customer's
operations and profitability, thereby impacting that customer's ability to repay
loans in accordance with their terms. The Company has completed a survey of its
customer base on their Y2K efforts. Survey results were generally favorable. The
Company has addressed the prospect of any additional risk associated with its
lending portfolio arising from the Y2K issues in the normal course of its
overall risk analysis.
As a financial institution holding company, it is possible that Y2K may
result in a greater demand for liquidity at the Company's Subsidiary Banks. The
Company's overall liquidity plan for its Subsidiary Banks is substantially
complete. The Company intends to test this plan in the second quarter of 1999.
The Company is also in the process of updating and modifying its internal
contingency planning documents for the Y2K issue. It anticipates that this
contingency plan will be completed in the second quarter of 1999.
NEW ACCOUNTING STANDARDS
------------------------
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities", establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. This
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999.
Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise", conforms the subsequent
accounting for securities retained after the securitization of mortgage loans by
a mortgage banking enterprise with the subsequent accounting for securities
retained after the securitization of other types of assets by a nonmortgage
banking enterprise. This Statement is effective for the first fiscal quarter
beginning after December 15, 1998.
The Company does not anticipate that adoption of any of the above
Statements will have a material impact on operating results or its financial
condition.
<PAGE>
CONSOLIDATED STATISTICAL INFORMATION
- ------------------------------------
The following tables, charts and comments present selected financial information
relating to INTRUST Financial Corporation in compliance with the statistical
disclosure requirements of the Securities and Exchange Commission for bank
holding companies.
The scope of the Company does not include foreign operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Average Balance Sheet (Table 1)
- ------------------------------------------------------------------------------------------------------------------------
The daily average amounts by condensed categories for the past three years is presented below (Dollars in thousands):
Year Ended December 31 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
Average Percent Average Percent Average Percent
Balance of Total Balance of Total Balance of Total
Assets:
- -------
<S> <C> <C> <C> <C> <C> <C>
Cash and Due from Banks $ 128,090 6.4% $ 112,923 6.3% $ 89,060 5.3%
Taxable Investment Securities 343,512 17.1 266,962 15.0 308,299 18.4
Nontaxable Investment
Securities 16,186 0.8 20,640 1.2 27,333 1.6
Federal Funds Sold 121,146 6.0 43,961 2.5 78,083 4.7
Loans (net of allowance for loan losses) 1,305,639 65.1 1,229,924 69.4 1,084,774 64.6
Building and Equipment 26,984 1.4 27,821 1.6 28,415 1.7
Other 64,341 3.2 70,870 4.0 62,242 3.7
- ------------------------------------------------------------------------------------------------------------------------
Total $2,005,898 100.0% $1,773,101 100.0% $1,678,206 100.0%
- --------------------------------------------============================================================================
Liabilities and Stockholders' Equity:
- -------------------------------------
Demand Deposits $ 344,974 17.2% $ 302,901 17.1% $ 271,355 16.2%
Savings and Interest-Bearing
Demand Deposits 643,555 32.1 567,264 32.0 542,422 32.3
Time Deposits 550,898 27.5 555,129 31.3 542,414 32.3
Short-Term Debt 230,757 11.5 164,858 9.3 135,669 8.1
Long-Term Debt 80,808 4.0 33,627 1.9 30,840 1.8
Other Liabilities 17,842 0.9 20,993 1.2 18,846 1.1
Stockholders' Equity 137,064 6.8 128,329 7.2 136,660 8.2
- ------------------------------------------------------------------------------------------------------------------------
Total $2,005,898 100.0% $1,773,101 100.0% $1,678,206 100.0%
- --------------------------------------------============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest-Earnings Analysis (Table 2)
- ------------------------------------------------------------------------------------------------------------------------------------
The following table presents an analysis of the average yields on earning assets, average rates paid on interest bearing
liabilities, and the net interest differential for each of the past three years. Loans on nonaccrual basis and overdrafts are
included in the average loan amounts.
The Net Yield on Interest-Earning Assets is net interest income divided by average interest-earning assets.
Year Ended December 31 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Income or Rate Balance Income Or Rate Balance Income or Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Taxable Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities $ 343,512 $ 20,263 5.90% $ 266,962 $ 16,398 6.14% $ 308,299 $ 19,061 6.18%
Nontaxable Investment
Securities* 16,186 988 9.76 20,640 1,396 10.77 27,333 1,907 10.38
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities* 359,698 21,251 6.07 287,602 17,794 6.47 335,632 20,968 6.52
Federal Funds Sold 121,146 6,555 5.41 43,961 2,424 5.51 78,083 4,183 5.36
Net Loans 1,305,639 119,077 9.12 1,229,924 112,236 9.13 1,084,774 107,312 9.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning
Assets* $1,786,483 $146,883 8.26% $1,561,487 $132,454 8.54% $1,498,489 $132,463 8.90%
- ----------------------------------==================================================================================================
<FN>
* Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Average Total Yield Average Total Yield Average Total Yield
(Dollars in thousands) Balance Expense Or Rate Balance Expense Or Rate Balance Expense or Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Savings and Interest-
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bearing Demand Deposits $ 643,555 $19,645 3.05% $ 567,264 $17,002 3.00% $ 542,422 $15,292 2.82%
Time Deposits 550,898 32,088 5.82 555,129 32,282 5.82 542,414 32,042 5.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total Deposits 1,194,453 51,733 4.33 1,122,393 49,284 4.39 1,084,836 47,334 4.36
Short-Term Debt 230,757 11,021 4.78 164,858 8,278 5.02 135,669 6,739 4.97
Long-Term Debt 80,808 6,571 8.13 33,627 2,585 7.69 30,840 2,363 7.66
- ------------------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing
Liabilities $1,506,018 $69,325 4.60% $1,320,878 $60,147 4.55% $1,251,345 $56,436 4.51%
- ----------------------------------==================================================================================================
Net Differential $ 280,465 $77,558 $ 240,609 $72,307 $ 247,144 $76,027
- ----------------------------------====================--------------====================------------====================------------
Net Yield on Interest-
Earning Assets 4.34% 4.63% 5.07%
- ------------------------------------------------------==============--------------------============--------------------============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Change in Interest Income and Interest Expense (Table 3)
- -----------------------------------------------------------------------------------------------------------
Further insight into year-to-year changes in net interest income may be gained by segregating the rate and
volume components of the increases in interest income and expense associated with earning assets and
interest-bearing liabilities.
The following table presents this rate/volume analysis comparing changes in net interest income from 1998 to
1997 and from 1997 to 1996.
Net interest income increased in 1998 as a result of positive volume variances. The increase in 1998 due to
volume changes is primarily because of an increase in net loans. Decreases in yields on earning assets,
especially investment securities, coupled with increases in rates paid on interest-bearing liabilities
produced the negative rate variance. Average interest-earning assets grew to a greater extent than interest-
bearing liabilities, resulting in an increase in net interest income due to volume changes.
1998 vs. 1997 1997 vs. 1996
- -----------------------------------------------------------------------------------------------------------
Due to Changes in Due to Changes in
----------------- -----------------
Increase Increase
(Dollars in thousands) (Decrease) Volume Rates (Decrease) Volume Rates
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxable Investment Securities $3,865 $4,538 $ (673) $(2,663) $(2,540) $ (123)
Nontaxable Investment
Securities (408) (281) (127) (511) (454) (57)
- -----------------------------------------------------------------------------------------------------------
Total Investment Securities 3,457 4,257 (800) (3,174) (2,994) (180)
Federal Funds Sold 4,131 4,177 (46) (1,759) (1,878) 119
Net Loans 6,841 6,906 (65) 4,924 13,654 (8,730)
- -----------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 14,429 15,340 (911) (9) 8,782 (8,791)
- -----------------------------------------------------------------------------------------------------------
Savings and Interest-Bearing
Demand Deposits 2,643 2,323 320 1,710 719 991
Time Deposits (194) (246) 52 240 744 (504)
- -----------------------------------------------------------------------------------------------------------
Total Deposits 2,449 2,077 372 1,950 1,463 487
Short-Term Debt 2,743 3,165 (422) 1,539 1,465 74
Long-Term Debt 3,986 3,828 158 222 214 8
- -----------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 9,178 9,070 108 3,711 3,142 569
- -----------------------------------------------------------------------------------------------------------
Net Interest Income $5,251 $6,270 $(1,019) $(3,720) $ 5,640 $(9,360)
- ------------------------------------------=================================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Investment Portfolio (Table 4)
- --------------------------------------------------------------------------------
The book value of investment securities at December 31 for the past three years
is presented below (Dollars in thousands):
1998 1997 1996
- --------------------------------------------------------------------------------
U.S. Treasury Securities $ 53,538 $ 85,969 $129,701
U.S. Agency Securities 317,766 200,779 139,892
State, County and Municipal Securities 13,540 17,519 23,259
Other Securities 2,976 2,883 2,786
- --------------------------------------------------------------------------------
Total $387,820 $307,150 $295,638
- ------------------------------------------======================================
Except for total U.S. Treasury and U.S. Agency obligations, no investment in a
single issuer exceeds 10 percent of stockholders' equity.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Maturities and Yield Analysis (Table 5)
- ------------------------------------------------------------------------------------------------------------------------------------
The distribution of maturities and weighted average yields of investment securities (other than equity securities) at December 31,
1998 is as follows (Dollars in thousands):
Total Within 1 Year 1-5 Years 5-10 Years After 10 Years
--------------------------------------------------------------------------------------------------- Average
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Maturity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.Treasury $ 53,538 5.8% $ 36,342 5.9% $ 17,196 5.4% $ 0 0.0% $ 0 0.0% 3.9 mos.
1 year,
U.S. Agency 317,766 5.7 103,815 5.8 203,434 5.6 10,517 6.5 0 0.0 8.5 mos.
State, County and 4 years,
Municipal * 13,540 8.6 2,475 10.3 7,238 8.2 3,096 8.3 731 8.8 2.5 mos.
- ------------------------------------------------------------------------------------------------------------------------------------
1 year,
Total $384,844 5.8% $142,632 5.9% $227,868 5.7% $13,613 6.9% $731 8.8% 8.1 mos.
- ---------------------------=========================================================================================================
<FN>
*Yields on tax-exempt securities are shown on a fully taxable equivalent basis assuming a 35 percent tax rate.
</FN>
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Portfolio (Table 6)
- ------------------------------------------------------------------------------------------------------------------------------------
A breakdown of outstanding loans, by type, at year-end for the past five years
is as follows (Dollars in thousands):
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial, Financial
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
and Agricultural $ 707,326 50.0% $ 623,707 49.4% $ 485,891 46.1% $ 416,428 39.5% $ 377,553 35.7%
Real Estate-Construction 38,137 2.7 29,179 2.3 27,130 2.5 25,491 2.4 21,415 2.0
Real Estate-Mortgage 250,282 17.7 230,133 18.2 210,591 20.0 181,894 17.2 184,513 17.4
Installment, excluding
credit card 299,884 21.2 259,074 20.5 286,632 27.2 258,713 24.5 261,706 24.8
Credit card 119,149 8.4 120,366 9.6 43,868 4.2 173,270 16.4 212,051 20.1
- ------------------------------------------------------------------------------------------------------------------------------------
Subtotal 1,414,778 100.0% 1,262,459 100.0% 1,054,112 100.0% 1,055,796 100.0% 1,057,238 100.0%
Allowance for loan losses (21,703) (17,932) (15,536) (25,892) (19,886)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Loans $1,393,075 $1,244,527 $1,038,576 $1,029,904 $1,037,352
- ---------------------------=========================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Maturities and Sensitivity to Interest Rate Changes (Table 7)
- -------------------------------------------------------------------------------------------------------------------------
The maturity distribution of loans outstanding at December 31, 1998 (excluding Real Estate- Mortgage, and Installment) by
type and sensitivity to interest rate changes is as follows (Dollars in thousands):
Due Loans Due After One Year
- --------------------------------------------------------------------- ------------------------------------------------
One Year After 1 Year After Within After
or Less thru 5 Years 5 Years 5 Years 5 Years
- --------------------------------------------------------------------- ------------------------------------------------
Commercial, Financial
<S> <C> <C> <C> <C> <C>
and Agricultural $458,376 $207,153 $41,797 Fixed Rates $ 73,619 $10,316
Real Estate- Floating or
Construction 27,728 4,848 5,561 Adjustable Rate 138,382 37,042
- --------------------------------------------------------------------- ------------------------------------------------
Total $486,104 $212,001 $47,358 Total $212,001 $47,358
- ----------------------------========================================= -----------------------=========================
<FN>
Note: Demand loans, past due loans and overdrafts are reported in "One Year or Less."
</FN>
</TABLE>
Loans are renewed only after consideration of the borrower's creditworthiness at
maturity, except for installment loans which are written on a fully amortized
basis. Loans are not written on the basis of guaranteed renewals. Those loans
which are renewed are generally renewed for similar terms at market interest
rates.
- --------------------------------------------------------------------------------
Risk Elements (Table 8)
- --------------------------------------------------------------------------------
Loans considered risk elements include those which are accounted for on a
nonaccrual basis, loans which are contractually past due 90 days or more as to
interest or principal payments, and those renegotiated to provide a reduction of
interest or principal which would not otherwise be considered except in cases of
deterioration in the financial position of the borrower. The following is a
table of nonaccrual, past due and restructured loans at December 31 for each of
the past five years (Dollars in thousands):
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
Loan Categories
Nonaccrual Loans $5,027 $4,618 $ 5,208 $3,988 $2,843
Past Due Loans 1,090 2,120 5,695 5,383 3,074
Restructured Loans 0 0 0 0 336
- --------------------------------------------------------------------------------
Total $6,117 $6,738 $10,903 $9,371 $6,253
- -----------------------------------=============================================
Gross interest income that would have been recorded in 1998 on nonaccrual and
restructured loans, if the loans had been current in accordance with their
original terms and had been outstanding throughout the period or since
origination if held for part of the period, was $537,000. The amount of interest
on those loans that was actually included in income for the period was $282,000.
Loans are reported as being in nonaccrual status if: (a) they are maintained on
a cash basis because of deterioration in the financial position of the borrower,
(b) payment in full of interest or principal is not expected, or (c) principal
or interest has been in default for a period of 90 days or more unless the
obligation is both well secured and in the process of collection. Any accrued
but unpaid interest previously recorded on such loans is reversed against
current period interest income.
The classification of a loan as nonaccrual or reduced rate does not necessarily
indicate that the ultimate collection of the loan principal and interest is
doubtful. In fact, the Company's experience suggests that a significant
percentage of both principal and interest on loans so classified, particularly
commercial and real estate loans, is eventually recovered. Interest income on
nonaccrual loans is recognized only in the period when realized. At the same
time, however, management recognizes the lower quality and above normal risk
characteristics of these loans and, therefore, considers the potential risk of
principal loss on loans included in this category in evaluating the adequacy of
the allowance for possible loan losses.
Management has identified additional problem loans in the portfolio which are
not stated in Table 8. These loans are reviewed on a continuous basis. They
comprise less than 0.4 percent of the loan portfolio. The Company has developed
a credit risk rating system in which a high percentage of loans in each bank are
evaluated by Credit Review staff.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Summary of Loan Loss Experience (Table 9)
- -----------------------------------------------------------------------------------------------------------------------------
The table below presents, in summary form, for the past five years the year-end and average loans outstanding; the changes in
the allowance for loan losses, with loans charged off and recoveries on loans previously charged off by loan category; the
ratio of net charge-offs to average loans; and the ratio of the allowance for losses to year-end loans outstanding (Dollars
in thousands):
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amount of loans at year-end $1,414,778 $1,262,459 $1,054,112 $1,055,796 $1,057,238
- -------------------------------------------------============================================================================
Average loans outstanding $1,325,903 $1,246,145 $1,110,485 $1,037,067 $1,013,831
- -------------------------------------------------============================================================================
Beginning balance of allowance for loan losses $17,932 $15,536 $25,892 $19,886 $21,793
Allowance of banks acquired 0 0 0 172 164
Loans charged-off:
Commercial, Financial and Agricultural 2,317 1,613 1,414 2,672 845
Real Estate-Construction 0 0 46 0 0
Real Estate-Mortgage 34 61 15 85 248
Installment 1,916 1,972 1,584 999 662
Credit Cards 4,913 4,136 18,770 12,089 5,779
- -----------------------------------------------------------------------------------------------------------------------------
Total loans charged off 9,180 7,782 21,829 15,845 7,534
- -----------------------------------------------------------------------------------------------------------------------------
Recoveries on charge-offs:
Commercial, Financial and Agricultural 528 973 1,579 1,926 1,261
Real Estate-Construction 0 0 0 0 0
Real Estate-Mortgage 14 29 29 40 134
Installment 379 294 333 392 269
Credit Cards 940 642 1,026 1,203 837
- -----------------------------------------------------------------------------------------------------------------------------
Total recoveries 1,861 1,938 2,967 3,561 2,501
- -----------------------------------------------------------------------------------------------------------------------------
Net loans charged off 7,319 5,844 18,862 12,284 5,033
Provision charged to expense 11,090 8,240 20,151 18,118 2,962
Transfer to write down loans held for sale 0 0 11,645 0 0
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance of allowance for loan losses $21,703 $17,932 $15,536 $25,892 $19,886
Net charge-offs/average loans 0.55% 0.47% 1.70% 1.18% 0.50%
- -------------------------------------------------============================================================================
Allowance for loan losses/loans at year-end 1.53% 1.42% 1.47% 2.45% 1.88%
- -------------------------------------------------============================================================================
</TABLE>
<TABLE>
<CAPTION>
A breakdown of the allowance for loan losses, at the end of the past five years, is presented below (Dollars in thousands):
Allocation of the Allowance for Loan Losses
Balance at end of period applicable to: 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural $ 9,241 $ 7,590 $ 5,181 $ 7,613 $ 6,694
Real Estate-Construction 266 179 341 221 339
Real Estate-Mortgage 2,272 2,380 1,992 2,621 4,104
Installment 3,202 2,469 1,978 868 1,414
Credit Cards 6,722 5,314 6,044 14,569 7,335
- -----------------------------------------------------------------------------------------------------------------------------
Ending balance of allowance for loan losses $21,703 $17,932 $15,536 $25,892 $19,886
- ----------------------------------------------------=========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Percent of loans in each category to total loans 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agricultural 50.0% 49.4% 46.1% 39.5% 35.7%
Real Estate-Construction 2.7 2.3 2.5 2.4 2.0
Real Estate-Mortgage 17.7 18.2 20.0 17.2 17.4
Installment 21.2 20.5 27.2 24.5 24.8
Credit Cards 8.4 9.6 4.2 16.4 20.1
- -----------------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
- ------------------------------------------------------=======================================================================
</TABLE>
The Company's determinations of the level of the allowance and, correspondingly,
the provision for loan losses rests upon various judgments and assumptions
including, but not necessarily limited to, general economic conditions, loan
portfolio composition and prior loan loss experience. The Company considers the
allowance for loan losses of $21,703,000 adequate to cover losses inherent in
loans outstanding at December 31, 1998. While it is the Company's policy to
write off in the current period those loans or portions of loans on which a loss
is certain or probable, no assurance can be given that the Company will not in
any particular period sustain loan losses that are sizeable in relation to the
amount reserved, or that subsequent evaluations of the loan portfolio, in light
of conditions and factors then prevailing, will not require significant changes
in the allowance for loan losses. Credit card charge-offs constitute a
significant portion of total charge-offs. It is management's opinion that the
loan portfolio is well diversified. There are no concentrations of loans (in
excess of 10 percent of the total loan portfolio) to multiple borrowers engaged
in similar activities. You are encouraged to refer to the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section of this report, in which the provision for loan losses is discussed
further. Among the factors considered in establishing the provision for loan
losses are historical charge-offs, the level and composition of nonperforming
loans, the condition of industries experiencing particular financial pressures,
the review of specific loans involving more than a normal risk of collectability
and evaluation of underlying collateral for secured lending. Aided by a
specialized loan review process, senior management and the entire lending staff
continually review the entire loan portfolio to identify and manage loans
believed to possess unusually high degrees of risk. A portion of this review
involves the Board of Directors on a regular basis. Also taken into
consideration are classification judgments of bank regulators and the Company's
independent certified public accountants.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Deposits (Table 10)
- ---------------------------------------------------------------------------------------------------------------
A breakdown of average deposits by type for the past three years is as follows ( Dollars in thousands):
Year Ended December 31 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Rate Paid Balance Rate Paid Balance Rate Paid
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand Deposits $ 344,974 - $ 302,901 - $ 271,355 -
Interest-Bearing Demand 561,068 3.33% 498,464 3.14% 467,747 2.93%
Savings Deposits 82,487 2.48 68,800 2.08 74,676 2.10
Time Deposits 550,898 5.82 555,129 5.82 542,414 5.91
- ---------------------------------------------------------------------------------------------------------------
Total $1,539,427 $1,425,294 $1,356,192
- --------------------------------==========------------------==========-----------------==========--------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Time Deposits (Table 11)
- --------------------------------------------------------------------------------
The following table sets forth, by remaining time to maturity, time deposits in
amounts of $100,000 or more at year-end (Dollars in thousands):
At December 31 1998
---------------------------------------------------------------------------
Time deposits in amounts of $100,000 or more maturing in:
3 months or less $ 52,307
Over 3 months through 6 months 19,446
Over 6 months through 12 months 46,778
Over 12 months 16,332
---------------------------------------------------------------------------
Total $134,863
------------------------------------------------------------------=========
- --------------------------------------------------------------------------------
Return on Equity and Assets (Table 12)
- --------------------------------------------------------------------------------
The following table presents a three year history of certain operating ratios:
Year Ended December 31 1998 1997 1996
------------------------------------------------------------------------------
Return on Average Assets 0.97 0.94 0.10
Return on Average Equity 14.25 12.99 1.23
Dividend Payout Ratio 27.30 24.97 210.81
Average Equity to Average Assets Ratio 6.83 7.24 8.14
- --------------------------------------------------------------------------------
Short-Term Borrowings (Table 13)
- --------------------------------------------------------------------------------
Information for each category of short-term borrowings for which the average
balance outstanding for the period was at least 30 percent of stockholders'
equity at the end of the period is presented below (Dollars in thousands):
Year Ended December 31 1998 1997 1996
------------------------------------------------------------------------------
Federal Funds Purchased:
Ending Balance $53,530 $41,340 $35,155
Ending Balance Rate 4.49% 5.41% 5.34%
Largest Month-End Balance $54,170 $64,010 $53,164
Average Balance $42,375 $38,338 $34,597
Average Interest Rate 5.18% 5.45% 5.29%
Securities Sold Under Repurchase Agreements
Ending Balance $188,425 $142,338 $85,685
Ending Balance Rate 3.97% 4.76% 4.75%
Largest Month-End Balance $188,776 $145,164 $111,221
Average Balance $173,729 $117,647 $91,914
Average Interest Rate 4.56% 4.79% 4.74%
Federal funds purchased transactions are borrowings of immediately
available bank funds, for one business day, at a specified interest rate.
Securities sold under repurchase agreements are transactions in which the
Company sells securities and agrees to repurchase the identical securities
at a specified date for a specified price.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
- ---------- ------------------------------------------------------------
Information concerning this item may be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
topic titled "Liquidity and Asset/Liability Management".
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Financial Condition
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1998 1997
- --------------------------------------------------------------------------------
Assets
Cash and cash equivalents:
Cash and due from banks $ 132,056 $ 171,494
Federal funds sold and securities
purchased under agreements to resell 68,550 89,615
- --------------------------------------------------------------------------------
Total cash and cash equivalents 200,606 261,109
- --------------------------------------------------------------------------------
Investment securities:
Held-to-maturity 176,305 270,971
Available-for-sale 208,752 33,346
Equity, at cost 2,763 2,833
- --------------------------------------------------------------------------------
Total investment securities 387,820 307,150
- --------------------------------------------------------------------------------
Loans held-for-sale 34,834 16,422
Loans, net of allowance for loan losses of
$21,703 in 1998 and $17,932 in 1997 1,393,075 1,244,527
Land, buildings and equipment, net 29,509 26,529
Accrued interest receivable 15,223 12,955
Other assets 54,398 55,130
- --------------------------------------------------------------------------------
Total assets $2,115,465 $1,923,822
- ------------------------------------------------------==========================
Liabilities and Stockholders' Equity
Deposits:
Demand $ 402,178 389,053
Savings and interest-bearing demand 690,159 599,739
Time 555,017 563,974
- --------------------------------------------------------------------------------
Total deposits 1,647,354 1,552,766
- --------------------------------------------------------------------------------
Short-term borrowings:
Federal funds purchased and securities sold
under agreements to repurchase 241,955 183,678
Other 2,260 7,507
- --------------------------------------------------------------------------------
Total short-term borrowings 244,215 191,185
- --------------------------------------------------------------------------------
Accounts payable and accrued liabilities 13,207 13,007
Notes payable 12,500 23,000
Convertible capital notes 11,078 11,219
Guaranteed preferred beneficial interests
in the Company's subordinated debentures 57,500 0
- --------------------------------------------------------------------------------
Total liabilities 1,985,854 1,791,177
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,418,573 shares issued in 1998
and 2,415,071 issued in 1997 12,093 12,075
Capital surplus 12,464 12,377
Retained earnings 139,078 124,877
Treasury stock, at cost (391,824 shares in
1998 and 240,667 shares in 1997) (34,626) (17,081)
Unrealized securities gains, net of tax 602 397
- --------------------------------------------------------------------------------
Total stockholders' equity 129,611 132,645
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,115,465 $1,923,822
- ------------------------------------------------------==========================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTRUST FINANCIAL CORPORATION
Consolidated Statements of Income and Comprehensive Income
Years Ended December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1998 1997 1996
- --------------------------------------------------------------------------------
Interest income:
Loans $119,077 $112,236 $107,312
Investment securities:
Taxable 20,263 16,398 19,061
Nontaxable 988 1,396 1,907
Federal funds sold, securities purchased
under agreements to resell, and other 6,555 2,424 4,183
- --------------------------------------------------------------------------------
Total interest income 146,883 132,454 132,463
- --------------------------------------------------------------------------------
Interest expense:
Deposits:
Savings and interest-bearing demand 19,645 17,002 15,292
Time 32,088 32,282 32,042
Federal funds purchased and securities sold
under agreements to repurchase 10,613 7,879 6,395
Convertible capital notes 1,003 1,010 1,038
Subordinated debentures 4,475 0 0
Other borrowings 1,501 1,974 1,669
- --------------------------------------------------------------------------------
Total interest expense 69,325 60,147 56,436
- --------------------------------------------------------------------------------
Net interest income 77,558 72,307 76,027
Provision for write-down of
loans held-for-sale 0 4,645 17,475
Provision for loan losses 11,090 8,240 20,151
- --------------------------------------------------------------------------------
Net interest income after provision
for loan losses 66,468 59,422 38,401
- --------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 11,008 10,001 9,207
Fiduciary income 10,509 7,979 5,874
Credit card fees 8,824 13,019 11,871
Securities gains 126 165 37
Other service charges, fees and income 12,170 9,965 6,779
- --------------------------------------------------------------------------------
Total noninterest income 42,637 41,129 33,768
- --------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 38,548 35,187 30,913
Net occupancy and equipment expense 9,081 8,819 9,307
Advertising and promotional activities 4,578 4,282 4,723
Data processing expense 3,961 3,605 3,584
Supplies 2,508 2,334 2,113
Postage and dispatch 2,132 2,200 2,310
Goodwill amortization 1,620 1,615 1,599
Deposit insurance assessment 244 151 1,103
Other 14,709 16,434 14,786
- --------------------------------------------------------------------------------
Total noninterest expense 77,381 74,627 70,438
- --------------------------------------------------------------------------------
Income before provision for income taxes 31,724 25,924 1,731
Provision for income taxes 12,190 9,260 51
- --------------------------------------------------------------------------------
Net income 19,534 16,664 1,680
- --------------------------------------------------------------------------------
Other comprehensive income:
Unrealized holding gains arising during
period net of tax of $187 in 1998,
$286 in 1997 and $3 in 1996 281 429 5
Reclassification adjustment for gains
included in net income net of tax of
$50 in 1998, $66 in 1997 and $15 in 1996 (76) (99) (22)
- --------------------------------------------------------------------------------
Total other comprehensive income 205 330 (17)
- --------------------------------------------------------------------------------
Comprehensive income $ 19,739 $ 16,994 $ 1,663
- ----------------------------------------------==================================
Per share data:
- --------------------------------------------------------------------------------
Basic earnings per share $9.10 $7.60 $0.74
- ----------------------------------------------==================================
Diluted earnings per share $7.90 $6.74 $0.74
- ----------------------------------------------==================================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
INTRUST FINANCIAL CORPORATION Consolidated Statements of Stockholders' Equity Years Ended December 31, 1998, 1997 and 1996
Unrealized Total
Common Capital Retained Treasury Securities Stockholders'
Dollars in thousands except per share data Stock Surplus Earnings Stock Gains Equity
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 $12,000 $12,000 $114,235 $ (3,156) $ 84 $135,163
Net income 0 0 1,680 0 0 1,680
Cash dividends ($1.55 per share) 0 0 (3,541) 0 0 (3,541)
Capital notes converted to common stock 75 377 0 0 0 452
Purchase of treasury stock 0 0 0 (11,643) 0 (11,643)
Net change in unrealized gains on
available-for-sale securities 0 0 0 0 (17) (17)
- ------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1996 12,075 12,377 112,374 (14,799) 67 122,094
Net income 0 0 16,664 0 0 16,664
Cash dividends ($1.90 per share) 0 0 (4,161) 0 0 (4,161)
Purchase of treasury stock 0 0 0 (2,282) 0 (2,282)
Net change in unrealized gains on
available-for-sale securities 0 0 0 0 330 330
- ------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997 12,075 12,377 124,877 (17,081) 397 132,645
Net income 0 0 19,534 0 0 19,534
Cash dividends ($2.50 per share) 0 0 (5,333) 0 0 (5,333)
Capital notes converted to common stock 18 87 0 0 0 105
Purchase of treasury stock 0 0 0 (17,545) 0 (17,545)
Net change in unrealized gains on
available-for-sale securities 0 0 0 0 205 205
- ------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1998 $12,093 $12,464 $139,078 $(34,626) $602 $129,611
- -------------------------------------------------=======================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTRUST FINANCIAL CORPORATION Consolidated Statements of Cash Flows Years Ended
December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------------------------
Dollars in thousands 1998 1997 1996
- --------------------------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
<S> <C> <C> <C>
Net Income $ 19,534 $ 16,664 $ 1,680
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses and write-downs 11,090 12,885 37,626
Provision for depreciation and amortization 6,887 6,594 6,679
Amortization of premium and accretion of
discount on investment securities (947) (580) 31
Write-down of real estate to estimated market value 0 0 1,048
Gain on sale of investment securities (126) (165) (37)
Loss on retirement of convertible capital notes 114 0 241
Changes in assets and liabilities, net of effect
from purchase of acquired entity:
Loans held for sale (18,412) (3,518) (5,330)
Other assets (7,852) (1,589) (825)
Income taxes 8,586 4,975 (8,896)
Interest receivable (2,268) (1,493) 1,086
Interest payable (311) 167 (38)
Other liabilities (79) (15) (420)
Other 198 222 (213)
- --------------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,414 34,147 32,632
- --------------------------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Purchase of investment securities (256,235) (170,777) (101,770)
Investment securities matured or called 177,094 158,866 125,909
Proceeds from sale of investment securities 161 1,463 472
Net increase in loans (161,737) (235,519) (138,831)
Proceeds from sale of loans 0 102,697 0
Purchases of land, buildings and equipment (7,697) (4,770) (5,128)
Proceeds from sale of land, buildings and equipment 318 2,297 43
Proceeds from sale of other real estate and repossessions 2,679 3,364 3,657
Other (766) (1,341) (920)
- --------------------------------------------------------------------------------------------------
Net cash absorbed by investing activities (246,183) (143,720) (116,568)
- --------------------------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Net increase in deposits 94,588 124,371 61,254
Net increase in short-term borrowings 53,030 62,310 11,062
Payments on notes payable (10,500) (2,660) (2,650)
Proceeds from notes payable 0 8,000 0
Retirement of convertible capital notes (150) 0 (425)
Proceeds from subordinated debentures,
net of issuance costs 55,176 0 0
Cash dividends (5,333) (4,161) (3,541)
Purchase of treasury stock (17,545) (2,282) (11,643)
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities 169,266 185,578 54,057
- --------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (60,503) 76,005 (29,879)
Cash and cash equivalents at beginning of year 261,109 185,104 214,983
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 200,606 $ 261,109 $ 185,104
- ----------------------------------------------------------------==================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
INTRUST FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
December 31, 1998, 1997, and 1996
Dollars in thousands except per share data
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTRUST Financial Corporation (the "Company") is a bank holding company
incorporated under the laws of the state of Kansas and is registered under the
Bank Holding Company Act of 1956, as amended. The Company is the sole
shareholder of INTRUST Bank, N.A., Wichita, Kansas, Will Rogers Bank, Oklahoma
City, Oklahoma (the "Subsidiary Banks") (In 1996, The First Bank, Moore,
Oklahoma was merged into Will Rogers Bank), NestEgg Consulting Inc., INTRUST
Capital Trust and INTRUST Community Development Corporation (the
"Subsidiaries"). The Company's primary business is providing customers in Kansas
and Oklahoma with personal and commercial banking services, fiduciary services
and real estate and other mortgage services.
The accounting and reporting policies of the Company conform with generally
accepted accounting principles and general practices within the banking
industry. The following is a description of the more significant policies:
a) PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES - The consolidated
financial statements include the accounts of the Company and its wholly-owned
Subsidiaries. Intercompany accounts and transactions have been eliminated in
consolidation.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions. Those estimates relate principally to the
determination of the allowance for loan losses, income taxes and the fair value
of financial instruments.
Actual results could differ from those estimates.
b) INVESTMENT SECURITIES - Debt securities and equity securities which have a
readily determinable market value that may be sold in response to changes in
interest rates or prepayment risk are classified as available-for-sale and are
carried at estimated market value with unrealized gains and losses reported as a
separate component of stockholders' equity, net of income taxes. Debt securities
that management has the ability and intent to hold to maturity are classified as
held-to-maturity and are carried at cost, adjusted for amortization of premiums
and accretion of discounts. Equity securities, which do not have a readily
determinable market value, are carried at cost. Gains and losses on the sale of
investment securities are included as a component of noninterest income.
Applicable income taxes, if any, are included in income taxes. The basis of the
securities sold is determined by the specific identification of each security.
c) LOANS HELD-FOR-SALE - Loans originated and/or intended for sale are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized through a valuation allowance by charges to
income.
d) LOANS - Certain loans are made on a discount basis. The unearned discount
applicable to such loans is taken into income on scheduled payment dates by use
of the straight-line method. Income so recognized does not differ materially
from income that would be recognized under the interest method of accounting.
Loans are reported as being in nonaccrual status if: (a) they are maintained
on a cash basis because of deterioration in the financial position of the
borrower, (b) payment in full of interest or principal is not expected, or (c)
principal or interest has been in default for a period of 90 days or more unless
the obligation is both well secured and in the process of collection. Any
accrued but unpaid interest previously recorded on such loans is reversed
against current period interest income.
Loans are charged-off whenever the loan is considered uncollectible. Credit
card loans are charged-off at the earlier of when they are considered
uncollectible or are 210 days past the contractual due date. Other installment
loans are charged-off at the time they are considered uncollectible or are 120
days past due, whichever is earlier.
From time to time, the Company sells loans, primarily through individual loan
or bulk sale transactions and through securitization transactions. The carrying
amount of loans sold is removed from the Company's statements of financial
condition at the date of sale. The Company allocates the carrying amount of the
loans between the loans sold and any interest retained based on their relative
fair values. Fair value of any interest retained is based on discounted cash
flow analysis performed by the Company. Gains and losses on the sale of loans
are recorded based on the net proceeds received less the allocated carrying
amount of the loans sold.
e) PROVISION FOR LOAN LOSSES - Each period the provision for loan losses in
the consolidated statements of income and comprehensive income results from the
combination of a) an estimate by management of loan losses that occurred during
the current period and b) the ongoing adjustment of prior estimates of losses
occurring in prior periods.
To serve as a basis for making this provision each quarter, the Company
maintains an extensive credit risk monitoring process that considers several
factors including: current economic conditions affecting bank customers, the
payment performance of individual large loans and pools of homogeneous small
loans, portfolio seasoning, changes in collateral values, and detailed reviews
of specific large loan relationships. For large loans deemed to be impaired due
to an expectation that all contractual payments will probably not be received,
impairment is measured by comparing the recorded investment in the loan to the
present value of expected cash flows discounted at the loan's effective interest
rate, the fair value of the collateral or the loan's observable market price.
The provision for loan losses increases the allowance for loan losses, a
valuation account which is netted against loans on the consolidated statements
of financial condition. As the specific customer and amount of a loan loss is
confirmed by gathering additional information, taking collateral in full or
partial settlement of the loan, bankruptcy of the borrower, etc., the loan is
written down, reducing the allowance for loan losses. If, subsequent to a
write-down, the Company is able to collect additional amounts from the customer
or obtain control of collateral worth more than earlier estimated, a recovery is
recorded, increasing the allowance for loan losses.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in economic
conditions. The Subsidiary Banks are subject to the regulations of certain
federal agencies and undergo periodic examinations by those regulatory
authorities. As an integral part of those examinations, the various regulatory
agencies periodically review the Subsidiary Banks' allowances for loan losses.
Such agencies may require the Subsidiary Banks to recognize changes to the
allowances based on their judgments about information available to them at the
time of their examination.
f) LAND, BUILDINGS AND EQUIPMENT - Land is stated at cost, and buildings and
equipment are stated at cost less accumulated depreciation. Depreciation is
computed on the straight-line or declining balance method depending upon the
type of asset and year of acquisition. The following useful lives have been
established:
Buildings and improvements 15 to 40 years
Furniture, fixtures and equipment 3 to 20 years
g) OTHER REAL ESTATE OWNED AND REPOSSESSED ASSETS - Other real estate owned
and repossessed assets may include assets acquired from loan settlements,
foreclosure, or abandonment of plans to use real estate previously acquired for
future expansion of banking premises. These assets are recorded at the lower of
cost or fair market value at the date of settlement, foreclosure or abandonment.
Any initial write-downs on assets acquired from loan settlements and
foreclosures are charged to the allowance for loan losses. Subsequent
write-downs, due to a decline in fair value, are charged to current expense.
Revenues and expenditures related to the operation or maintenance of these
assets are recorded in operating income as incurred. These assets are included
as a component of other assets in the consolidated statements of financial
condition and amounted to $114 and $665 at December 31, 1998 and 1997,
respectively.
h) GOODWILL AND CORE DEPOSIT PREMIUM - The excess of cost over fair value of
net assets acquired is amortized using the straight-line method over 15 years.
Core deposit premiums are amortized using accelerated methods over the estimated
life of the deposit relationship. These assets are included as a component of
other assets and amounted to $13,369 and $15,001, net of accumulated
amortization, at December 31, 1998 and 1997, respectively.
i) STOCK-BASED COMPENSATION - The Company accounts for stock options using
the intrinsic value based method of accounting. Pro forma disclosures, as if the
fair value based method of accounting had been applied, have not been presented
since such disclosures would not result in material differences from the
intrinsic value method.
j) INCOME TAXES - The Company and its Subsidiaries file a consolidated
federal income tax return on an accrual basis. Deferred tax assets and
liabilities are recognized for the future income tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are included in the financial statements at currently enacted income
tax rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled. The effect on deferred tax
assets and liabilities as a result of a change in tax rates is recognized in
income in the period that includes the enactment date.
k) FIDUCIARY INCOME - Fiduciary income is recorded on the accrual basis.
l) EARNINGS PER SHARE - Basic earnings per share is computed based upon the
weighted average number of shares outstanding. Diluted earnings per share
includes shares issuable upon exercise of stock options and with the assumption
that the 9% convertible subordinated capital notes (note 10) had been converted
into common stock as of the beginning of each respective period presented with
related adjustments to interest and income tax expense. The following is a
reconciliation of the numerators and denominators of basic and diluted earnings
per share:
1998 1997 1996
- --------------------------------------------------------------------------------
Net income for basic earnings per share $19,534 $16,664 $1,680
Interest expense on convertible debt,
net of taxes 652 656 *
- --------------------------------------------------------------------------------
Net income for diluted earnings per share $20,186 $17,320 $1,680
- ---------------------------------------------------=============================
Weighted average shares for basic earnings
per share 2,147,118 2,193,268 2,285,337
Shares issuable upon exercise of stock options 35,468 2,262 *
Shares issuable upon conversion of capital notes 371,644 373,967 *
- --------------------------------------------------------------------------------
Weighted average shares for diluted earnings
per share 2,554,230 2,569,497 2,285,337
- -------------------------------------------------===============================
* For 1996, diluted earnings per share is considered to be the same as basic
earnings per share, since the effect of exercise of stock options (285 shares)
and the conversion of subordinated capital notes (387,178 shares) would be
antidilutive.
m) STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, federal funds
sold and securities purchased under agreements to resell. Generally, federal
funds are purchased and sold for one-day periods and securities purchased under
agreements to resell mature within 90 days. The following amounts of cash were
paid for interest and income taxes:
1998 1997 1996
- --------------------------------------------------------------------------------
Interest $69,636 $59,974 $56,474
Income taxes 3,626 4,285 8,947
Noncash investing and financing activities included the following:
1998 1997 1996
- --------------------------------------------------------------------------------
Loans transferred to other assets $2,098 $3,145 $3,281
Investments transferred from
held-to-maturity at amortized cost 0 (3,651) 0
Investments transferred to available-
for-sale at estimated market value 0 4,118 0
2) ACQUISITIONS
The following acquisition was made during 1996:
Company Acquired Acquisition Date Purchase Price
---------------- ---------------- --------------
NestEgg Consulting Inc. November 1, 1996 $75
The above transaction has been accounted for as a purchase, and accordingly,
the acquired assets and liabilities have been recorded at their fair value at
acquisition date and the operating results of the acquisition is included in the
Company's consolidated income and comprehensive income statements from the date
of acquisition. Excess of cost over fair value of the net assets acquired
arising from this transaction is amortized using the straight-line method over a
15-year period.
The effect on results of operations, had the transaction occurred at the
beginning of the year of acquisition, was not significant.
3) INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities are as
follows at December 31:
Gross Gross
1998 Amortized Unrealized Unrealized Fair
---- Cost Gains Losses Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Held-to-maturity $ 33,310 $ 218 $ 0 $ 33,528
Available-for-sale 20,063 165 0 20,228
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 116,656 784 17 117,423
Available-for-sale 187,015 815 231 187,599
U.S. Government Agency
mortgage-backed securities
Held-to-maturity 12,901 453 0 13,354
Available-for-sale 517 93 0 610
Obligations of state and
political subdivisions:
Held-to-maturity 13,438 562 0 14,000
Available-for-sale 102 0 0 102
Equity Securities:
Carried at cost 2,763 0 0 2,763
Available-for-sale 51 162 0 213
- --------------------------------------------------------------------------------
Total held-to-maturity $176,305 $2,017 $ 17 $178,305
- ----------------------------------==============================================
Total available-for-sale $207,748 $1,235 $231 $208,752
- ----------------------------------==============================================
Total equity at cost $ 2,763 $ 0 $ 0 $ 2,763
- ----------------------------------==============================================
Gross Gross
1998 Amortized Unrealized Unrealized Fair
---- Cost Gains Losses Value
- --------------------------------------------------------------------------------
U.S. Treasury Securities:
Held-to-maturity $ 85,969 $ 179 $ 18 $ 86,130
Obligations of U.S. Government
Agencies and Corporations:
Held-to-maturity 153,037 291 145 153,183
Available-for-sale 29,968 0 25 29,943
U.S. Government Agency
mortgage-backed securities:
Held-to-maturity 14,532 528 1 15,059
Available-for-sale 2,580 687 0 3,267
Obligations of state and
political subdivisions:
Held-to-maturity 17,383 699 14 18,068
Available-for-sale 136 0 0 136
Other Securities:
Held-to-maturity 50 0 0 50
Equity Securities at cost 2,833 0 0 2,833
- --------------------------------------------------------------------------------
Total held-to-maturity $270,971 $1,697 $178 $272,490
- ----------------------------------==============================================
Total available-for-sale $ 32,684 $ 687 $ 25 $ 33,346
- ----------------------------------==============================================
Total equity at cost $ 2,833 $ 0 $ 0 $ 2,833
- ----------------------------------==============================================
Proceeds from sales of investment securities during 1998, 1997 and 1996 were
$161, $1,463 and $472, respectively. Gross realized gains on sales of
available-for-sale securities were $126, $165 and $37 in 1998, 1997 and 1996,
respectively. No losses were realized on sales of available-for-sale securities
in 1998, 1997 or 1996.
The amortized cost and estimated fair value of investment securities (other
than equity securities) at December 31, 1998, by contractual maturity, are shown
as follows. Expected maturities will differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Cost Value
- --------------------------------------------------------------------------------
Due in one year or less:
Held-to-maturity $107,457 $108,040
Available-for-sale 35,071 35,175
Due after one year through five years:
Held-to-maturity 54,606 55,566
Available-for-sale 172,524 173,262
Due after five years through ten years:
Held-to-maturity 13,613 14,000
Available-for-sale 0 0
Due after ten years:
Held-to-maturity 629 699
Available-for-sale 102 102
- --------------------------------------------------------------------------------
Total held-to-maturity $176,305 $178,305
- -------------------------------------------------------=========================
Total available-for-sale $207,697 $208,539
- -------------------------------------------------------=========================
For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings based
on the weighted-average contractual maturities of the underlying collateral. The
mortgage-backed securities may mature earlier than their weighted-average
contractual maturities because of principal prepayments.
Investment securities, which are under the Company's control, with a book
value of $326,120 and $262,873 at December 31, 1998 and 1997, respectively, were
pledged as collateral for public and trust deposits and for other purposes as
required by law.
4) LOANS HELD-FOR-SALE
Loans held-for-sale at December 31, 1998 and 1997 consisted of $34,834 and
$16,422, respectively, of mortgage loans accounted for at cost, which
approximated market value.
During 1997, the Company sold a portion of its credit card portfolio to a
third party. These loans, which aggregated $118,728, had been written down to
their estimated market value of $89,158 in 1996, and then were written down an
additional $4,645 prior to their ultimate disposition in 1997.
5) LOANS
The composition of the loan portfolio at December 31, is as follows:
1998 1997
- --------------------------------------------------------------------------------
Commercial, financial and agricultural $ 707,326 $ 623,707
Real estate-construction 38,137 29,179
Real estate-mortgage 250,282 230,133
Installment, excluding credit card 299,884 259,074
Credit card 119,149 120,366
- --------------------------------------------------------------------------------
Subtotal 1,414,778 1,262,459
Allowance for loan losses (21,703) (17,932)
- --------------------------------------------------------------------------------
Net Loans $1,393,075 $1,244,527
- ----------------------------------------------------============================
Certain directors of the Company or related parties of these directors had
loans from the Subsidiary Banks aggregating $32,176 and $36,051 at December 31,
1998 and 1997, respectively. Such loans were made in the ordinary course of
business and on substantially the same terms as those prevailing at the time for
comparable loans to other borrowers.
Transactions involving loans to directors or related parties of these
directors were as follows:
- --------------------------------------------------------------------------------
Loans at December 31, 1997 $ 36,051
Additions 54,133
Repayments (58,008)
- --------------------------------------------------------------------------------
Loans at December 31, 1998 $ 32,176
- -----------------------------------------------------------------------=========
The following table discloses information about the recorded investment in
loans that the Company has classified as impaired:
(A) (B) (C) (D)
Amount in (A) for Amount in (A) for
Which There Is a Allowance Which There Is No
Total Impaired Related Allowance Associated With Related Allowance
Year End Loans for Credit Losses Amounts in (B) for Credit Losses
-------- -------------- ----------------- --------------- -----------------
1998 $2,054 $ 262 $130 $1,792
1997 $3,397 $1,879 $665 $1,518
The average recorded investment in impaired loans for the years ended
December 31, 1998 and 1997, was $2,655 and $3,579, respectively. Interest
payments received on impaired loans are recorded as interest income unless
collection of the remaining recorded investment is doubtful, at which time
payments received are recorded as reductions of principal. The Company
recognized interest income on impaired loans of $0 and $240 for the years ended
December 31, 1998 and 1997.
6) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Balance at beginning of year $17,932 $15,536 $ 25,892
Provision charged to expense 11,090 8,240 20,151
Transfer to write down loans held-for-sale 0 0 (11,645)
Loans charged off (9,180) (7,783) (21,829)
Recoveries 1,861 1,939 2,967
- --------------------------------------------------------------------------------
Balance at end of year $21,703 $17,932 $ 15,536
- --------------------------------------------------==============================
The Company recorded net charge-offs on its credit card portfolio in 1998,
1997 and 1996 of $4,000, $3,500 and $17,700, respectively. The 1996 provision
for loan losses was increased in recognition of the increased level of
charge-offs.
7) LAND, BUILDINGS AND EQUIPMENT
A summary of land, buildings and equipment is as follows:
December 31,
1998 1997
- --------------------------------------------------------------------------------
Land $ 5,043 $ 5,495
Buildings and improvements 32,544 30,418
Furniture, fixtures and equipment 30,099 27,244
- --------------------------------------------------------------------------------
67,686 63,157
Less accumulated depreciation (38,177) (36,628)
- --------------------------------------------------------------------------------
Total $29,509 $26,529
- ----------------------------------------------------------======================
Depreciation expense for the years 1998, 1997 and 1996 was approximately
$4,161, $4,099 and $4,269, respectively.
8) TIME DEPOSITS
Time certificates of deposit and other time deposits of $100 or more included
in total deposit liabilities at December 31, 1998 and 1997 were $134,863 and
$139,729, respectively. Interest expense on this classification of time deposits
for the years ended December 31, 1998, 1997 and 1996 totaled $7,897, $7,569 and
$7,116, respectively.
At December 31, 1998, the scheduled maturities of time deposits are as
follows:
1999 $413,403
2000 86,299
2001 21,492
2002 11,561
2003 and thereafter 22,262
- --------------------------------------------------------------------------------
Total $555,017
- -----------------------------------------------------------------------=========
9) SHORT-TERM BORROWINGS
All short-term borrowings generally mature in less than 30 days. The maximum
amount of these borrowings at any month-end for the years ended December 31,
1998, 1997 and 1996, was $244,215, $191,185 and $173,645, respectively. For the
years ended December 31, 1998, 1997 and 1996, the weighted average interest rate
on these borrowings was 4.8%, 5.0% and 5.0%, respectively, on average balances
outstanding of $230,757, $164,858 and $135,669, respectively.
10) LONG-TERM DEBT AND CAPITAL SECURITIES
NOTES PAYABLE
Notes payable at December 31, 1998 consists of a term loan from another
financial institution with an unpaid principal balance of $12,500. The term loan
carries a floating rate of interest and is repayable in annual principal
installments of $2,500, with the final payment due in 2003. The floating
interest rate reprices based on a Eurodollar interest period selected by the
Company. The rate on the indebtedness is computed based on a premium to the
lender's Eurodollar Base Rate. The indebtedness is secured by the outstanding
common stock of INTRUST Bank N.A. At December 31, 1998, the interest rate on the
term loan was 6.89%.
The Company has a $10,000 line of credit agreement, subject to annual
renewal, with the financial institution that has issued the term loan. At
December 31, 1998, there was no outstanding principal balance under this credit
facility. There was an outstanding balance of $8,000 as of December 31, 1997.
The interest rate on the line of credit is calculated in the same manner as the
term loan.
In accordance with the term loan and line of credit agreements, certain
covenants exist that require the Company to meet specifications regarding levels
of capitalization, nonperforming assets, total indebtedness and net worth, among
others. At December 31, 1998, the Company was in compliance with these
covenants.
CONVERTIBLE CAPITAL NOTES
The convertible subordinated capital notes (the "notes") bear interest at 9%.
The notes are convertible, at the note holder's option, into the Company's
common stock at a conversion price of $30 per share. The principal amount of the
notes matures on December 22, 1999, and may be redeemed, at the option of the
Company, at any time at par. At maturity, to the extent that the notes have not
been previously retired through redemption or conversion, the principal amount
of the notes will be repaid either in cash, if the note holder so elects, but
only to the extent the Company has qualified funds (as defined) to do so or by
exchange for the Company's common stock based upon the market value (as defined)
of the Company's common stock at the maturity date of the notes.
At December 31, 1998, 381,427 shares of the Company's unissued common stock
were reserved for conversion of the notes. In 1998, notes, with a face value of
$36 were redeemed for cash, and notes, with a face value of $105, were converted
into 3,502 shares of the Company's common stock. There were no notes redeemed
for cash or converted to common stock during 1997.
11) GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE COMPANY'S SUBORDINATED
DEBENTURES
In January 1998, INTRUST Capital Trust ("Trust"), a special purpose
subsidiary of the Company, issued $57,500,000 in cumulative trust preferred
securities. These preferred securities, which qualify as capital for regulatory
reporting purposes, have a dividend rate of 8.24%, and will mature on January
31, 2028, unless called or extended by the Company.
The Company owns 100% of the common stock of Trust, and the only assets of
Trust consist of the 8.24% subordinated debentures due January 31, 2028 issued
by the Company to Trust. The Company has issued Back-up Obligations to Trust,
which, when taken in the aggregate, constitute the full and unconditional
guaranty by the Company of all of the Trust's obligations under the preferred
securities.
The subordinated debentures may be called by the Company at any time after
January 30, 2003, provided the Company has received prior approval by the
Federal Reserve. Also, the Company may call the subordinated debentures, subject
to regulatory approval, in the event changes are made to existing income tax law
or regulations that would affect the income tax treatment of the preferred
securities or subordinated debentures, or if the Company is advised that there
is more than an insubstantial risk of impairment of the Company's ability to
treat the preferred securities as capital for regulatory reporting purposes. In
the event the Company elects to redeem the subordinated debentures prior to
their stated maturity, a mandatory redemption of the preferred securities will
occur. As long as the Company is not in default in the payment of interest on
the subordinated debentures and Trust is not in arrears on any payments due on
the preferred securities, the Company may elect to extend the maturity of the
subordinated debentures to a date not later than January 31, 2037.
Interest on the subordinated debentures and distributions on the preferred
securities are payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year.
12) EMPLOYEE BENEFIT PLANS
EMPLOYEE RETIREMENT PLAN
The Company's employee retirement plan covers substantially all full-time
employees who meet eligibility requirements as to age and tenure. The plan
provides retirement benefits that are a function of both the years of service
and the highest level of compensation during any consecutive five-year period
during the ten-year period preceding retirement. The Company's funding policy is
to fund the amount necessary to meet the minimum funding requirements set forth
by the Employee Retirement Income Security Act of 1974, plus such additional
amounts, if any, as the Company may determine to be appropriate from time to
time. Plan assets are invested primarily in U.S. Government and Federal agency
securities, corporate obligations, mutual funds and listed stocks. Pension
expense for 1998, 1997 and 1996 was $943, $321 and $357, respectively.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements.
December 31,
1998 1997
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $ 7,649 $ 6,887
Non-vested 178 123
- --------------------------------------------------------------------------------
Total $ 7,827 $ 7,010
- --------------------------------------------------------------==================
Change in projected benefit obligation
Projected benefit obligation at beginning of year $ 8,821 $ 7,838
Service cost 781 647
Interest cost 596 514
Plan amendments 372 0
Actuarial gain 506 208
Benefits paid (1,207) (386)
Special termination benefits 527 0
- --------------------------------------------------------------------------------
Projected benefit obligation at end of year 10,396 8,821
- --------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 10,288 8,572
Actual return on plan assets 938 1,430
Employer contribution 604 672
Benefits paid (1,207) (386)
- --------------------------------------------------------------------------------
Fair value of plan assets at end of year 10,623 10,288
- --------------------------------------------------------------------------------
Funded status 227 1,467
Unrecognized net transition asset being
amortized over 15 years (285) (380)
Unrecognized net (gain) loss due from assumptions made 348 (85)
Unrecognized prior service cost (7) (380)
- --------------------------------------------------------------------------------
Prepaid pension cost $ 283 $ 622
- --------------------------------------------------------------==================
Pension expense is comprised of the following:
1998 1997 1996
- --------------------------------------------------------------------------------
Service cost-benefits earned during the year $ 781 $ 647 $ 649
Interest cost on projected benefit obligation 596 514 517
Return on plan assets (865) (698) (667)
Amortization of transition asset (95) (95) (95)
Prior service cost recognized (1) (47) (47)
Net loss from settlement 527 0 0
- --------------------------------------------------------------------------------
Total $ 943 $ 321 $ 357
- --------------------------------------------------------========================
The weighted average discount rate used was 7.00% for each of the past three
years. The expected long-term rate of return on plan assets and increase in
compensation levels used in determining the projected benefit obligation were
8.25% and 4.00%, respectively, for each of the past three years.
During 1998, the Company recognized $527 in pension expense arising from an
early retirement program that was offered to employees that met certain
eligibility requirements as to age. No such program was offered in 1997 or 1996.
DEFERRED COMPENSATION
The Company has entered into deferred compensation agreements with certain
officers and directors. Under the provisions of these agreements, the officers
and directors will receive monthly payments for specified periods. The
liabilities under these agreements are being accrued over the officers'
remaining periods of employment or the directors' assumed retirement ages so
that, on the date of their retirement, the then-present value of the payments
will have been accrued. The liabilities are being accrued at interest rates that
exceed market rates at the times the plans were adopted with the above market
spread varying between 3% and 9%, depending on individual agreements. At
December 31, 1998 and 1997, $4,091 and $4,043 had been accrued for the liability
under these agreements and is included in accounts payable and accrued
liabilities in the accompanying consolidated statements of financial condition.
Expense recognized in 1998, 1997 and 1996 was $726, $656 and $603, respectively,
and is included in salaries and employee benefits in the accompanying
consolidated statements of income and comprehensive income.
DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan in which all employees who have
been with the Company at least one year may elect to participate. The Company
matches employee contributions up to 6% of salary. The matching percentage
varies based on employee tenure with the Company. The Company's contributions to
the defined contribution plan in 1998, 1997 and 1996 were $675, $622 and $402,
respectively, and are included in salaries and employee benefits in the
accompanying consolidated statements of income and comprehensive income.
STOCK INCENTIVE PLAN
The Board of Directors of the Company on May 9, 1995, adopted, with
subsequent shareholder approval, the INTRUST Financial Corporation 1995
Incentive Plan (the "Plan"). The Plan provides that the Company may grant
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Performance Shares, Phantom Stock and Restricted Stock to officers and key
employees of the Company, as defined in the Plan. The Plan provides for the
issuance or transfer of a maximum of 240,000 shares of the Company's common
stock. The exercise price of any options granted under the Plan cannot be less
than the fair market value of the Company's common stock at the date of grant.
The maximum term for options or rights cannot exceed ten years from the date
they are granted. Options under the plan may vest no more rapidly than 20% per
year from the date of grant. Options to acquire 750 shares of the Company's
common stock were exercised in 1998. At December 31, 1998, there were options
granted and unexercised for a total of 119,750 shares. The options outstanding
have exercise prices between $58 and $130, with a weighted average exercise
price of $88. Of the 119,750 shares granted, 33,750 were exercisable at December
31, 1998.
13) INCOME TAXES
The provision (benefit) for income taxes from operations includes the
following components:
1998 1997 1996
- --------------------------------------------------------------------------------
Current:
Federal $12,379 $(4,717) $ 7,174
State 83 424 686
- --------------------------------------------------------------------------------
12,462 (4,293) 7,860
- --------------------------------------------------------------------------------
Deferred:
Federal (2,203) 13,276 (6,631)
State 1,931 277 (1,178)
- --------------------------------------------------------------------------------
(272) 13,553 (7,809)
- --------------------------------------------------------------------------------
Total $12,190 $ 9,260 $ 51
- ------------------------------------------======================================
The provision (benefit) for income taxes noted above produced effective
income tax rates of 38.4%, 35.7% and 2.9% for the years ended December 31, 1998,
1997 and 1996, respectively. The reconciliations of these effective income tax
rates to the federal statutory rates are shown below:
1998 1997 1996
- --------------------------------------------------------------------------------
Total income tax as reported 38.4% 35.7% 2.9%
Tax exempt income 1.3 2.0 38.1
Amortization of excess purchase price over
net assets acquired (1.8) (2.1) (19.2)
State income tax, net of federal income
tax benefit (4.1) (1.7) 18.5
Other 1.2 1.1 (5.3)
- --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
- -------------------------------------------------===============================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998 and
1997 are presented as follows:
1998 1997
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $ 8,218 $ 6,936
Deposits 2,036 2,084
Deferred compensation 1,549 1,568
Net operating loss carryforwards 1,194 2,854
Buildings and equipment 328 232
Investment securities 181 392
Other real estate owned 172 176
Other 341 328
- --------------------------------------------------------------------------------
Total gross deferred tax assets 14,019 14,570
Less valuation allowances 773 1,273
- --------------------------------------------------------------------------------
Deferred tax assets, net of valuation allowances 13,246 13,297
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Unrealized gain on available-for-sale securities (402) (265)
Pension (324) (475)
Prepaid loan fees (265) (314)
Loans (206) (292)
Core deposit premium (22) (43)
Other (26) (43)
- --------------------------------------------------------------------------------
Total gross deferred tax liabilities (1,245) (1,432)
- --------------------------------------------------------------------------------
Net deferred tax assets $12,001 $11,865
- -------------------------------------------------------=========================
At December 31, 1998, current income taxes payable of $590 were included in
accounts payable and accrued liabilities. At December 31, 1997, current income
taxes receivable of $8,268 were included in other assets. The net deferred tax
assets noted above were included in other assets.
At December 31, 1998, the Company had net operating loss deductions available
for carryforward of approximately $16,538 for state purposes that expire in
varying amounts from 1999 through 2006.
The valuation allowance at December 31, 1998 is attributable to certain net
operating loss carryforwards for state tax purposes.
14) COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1998, the Subsidiary Banks were required to have $9,637 held
as reserves with the Federal Reserve Bank.
At December 31, 1998, the Company was committed to make future payments under
several long-term lease and data processing agreements. The minimum payments
required by these agreements are summarized as follows:
Minimum
Payments
- ---------------------------------------------------------------------------
1999 $ 3,219
2000 3,208
2001 3,040
2002 2,894
2003 2,045
Remainder 7,644
- ---------------------------------------------------------------------------
Total $22,050
- --------------------------------------------------------------------=======
Lease rentals included in net occupancy and equipment expense for the years
ended December 31, 1998, 1997 and 1996 amounted to $1,462, $1,057 and $912,
respectively.
Payments on long-term data processing agreements included in data processing
expense for the years ended December 31, 1998, 1997 and 1996 totaled
approximately $1,621, $1,559 and $1,499, respectively.
One of the Company's data processing agreements has a term of eight years
ending in the year 2003. The Company has the option to terminate this data
processing agreement by paying a cancellation fee that is based on the number of
months remaining under the original contract term.
The Company and its Subsidiaries are involved in certain claims and suits
arising in the ordinary course of business. In the opinion of management, based
in part on the advice of legal counsel, potential liabilities arising from these
claims, if any, would not have a significant effect on the Company's
consolidated financial position or future results of operations.
15) STOCKHOLDERS' EQUITY
DIVIDEND RESTRICTION
The Company's ability to pay dividends on its common stock and interest on
its indebtedness is dependent upon funds provided by dividends from the
Subsidiaries and such other funding sources as may be available to the Company.
In addition, the Company's debt agreements provide for minimum capital levels
that must be maintained as long as the indebtedness remains outstanding. Total
capital of the Company exceeded these requirements at December 31, 1998. The
payment of dividends by the Subsidiaries is restricted only by regulatory
authority. At December 31, 1998, approximately $13,274 was available from the
Subsidiaries' retained earnings for distribution as dividends to the Company
without regulatory approval.
REGULATORY CAPITAL
The Company and its Subsidiary Banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material affect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Subsidiary Banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require minimum amounts and ratios (set forth in the table below) of total and
Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital (as defined) to average assets (as defined). As
of December 31, 1998, the consolidated ratios of the Company and for each of the
Subsidiary Banks meet all capital adequacy requirements to which they are
subject.
As of the most recent notification, the Subsidiary Banks were categorized as
"well capitalized" under the regulatory framework for prompt corrective action.
To be categorized as "well capitalized" the Subsidiary Banks must maintain
minimum ratios as set forth in the table. There are no conditions or events
since that notification that management believes have changed the Subsidiary
Banks' categories.
Actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
---------------- --------------- -----------------
Amount Ratio Amount Ratio Amount Ratio
-------- ----- ------- ----- -------- ------
As of December 31, 1998:
Total Capital (to Risk Weighted Assets):
<S> <C> <C> <C> <C> <C> <C>
Consolidated $194,282 11.4% $136,689 8.0% N/A
INTRUST Bank, N.A. $175,217 10.8% $129,845 8.0% $162,306 10.0%
Will Rogers Bank $ 12,755 16.3% $ 6,277 8.0% $ 7,846 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $158,423 9.3% $ 68,344 4.0% N/A
INTRUST Bank, N.A. $154,921 9.5% $ 64,922 4.0% $ 97,384 6.0%
Will Rogers Bank $ 11,965 15.3% $ 3,138 4.0% $ 4,707 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $158,423 7.7% $ 83,332 4.0% N/A
INTRUST Bank, N.A. $154,921 7.9% $ 78,444 4.0% $ 98,055 5.0%
Will Rogers Bank $ 11,965 9.7% $ 5,008 4.0% $ 6,260 5.0%
As of December 31, 1997:
Total Capital (to Risk Weighted Assets):
Consolidated $136,903 9.2% $118,870 8.0% N/A
INTRUST Bank, N.A. $149,456 10.7% $111,365 8.0% $139,206 10.0%
Will Rogers Bank $ 12,352 13.9% $ 7,104 8.0% $ 8,880 10.0%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated $116,728 7.9% $ 59,435 4.0% N/A
INTRUST Bank, N.A. $132,477 9.5% $ 55,682 4.0% $ 83,524 6.0%
Will Rogers Bank $ 11,400 12.8% $ 3,552 4.0% $ 5,328 6.0%
Tier 1 Capital (to Average Assets):
Consolidated $116,728 6.4% $ 73,672 4.0% N/A
INTRUST Bank, N.A. $132,477 7.8% $ 68,757 4.0% $ 85,946 5.0%
Will Rogers Bank $ 11,400 9.5% $ 4,885 4.0% $ 6,106 5.0%
</TABLE>
16) BUSINESS AND CREDIT CONCENTRATIONS
The Company provides a wide range of banking services to individual and
corporate customers through its Kansas and Oklahoma subsidiaries. The Company
makes a variety of loans including commercial, agricultural, real estate
construction, real estate mortgage, installment and credit card loans. The
majority of the loans are made to borrowers located in Kansas, although some
loans are made to out-of-state borrowers. Credit risk is therefore dependent
upon economic conditions in Kansas; however, loans granted within the Company's
trade area have been granted to a wide variety of borrowers and management does
not believe that any significant concentrations of credit exist with respect to
individual borrowers or groups of borrowers which are engaged in similar
activities that would be similarly affected by changes in economic or other
conditions. Approximately 30% of the Company's total loan portfolio is comprised
of unsecured credit card loans and installment loans (a large part of which are
collateralized by automobiles). Consequently, the Company's credit risk with
respect to these loans is dependent upon the ability of consumers in general to
repay their indebtedness. The Company considers the composition of the loan
portfolio in establishing the allowance for loan losses as described in note 1.
17) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the statements of financial
condition. The following summarizes those financial instruments, excluding
credit card lines of $801,720, with contract amounts representing credit risk:
Commitments to extend credit $520,888
Commercial and standby letters of credit $ 55,556
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Company upon extension
of credit is based on management's credit evaluation of the counter-party.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The Company has, in the ordinary course of business, securitized and sold
both credit card receivables and consumer automobile loans. The most recent
transaction was in November 1997, when the Company sold approximately $45,000 of
automobile loans. Neither the credit card receivables or the consumer automobile
loans sold, or the securities outstanding as a result of these transactions are
defined as financial instruments of the Company, however the Company continues
to service the related credit card accounts and automobile loans. During 1997,
$50,000 of securities related to a previous credit card receivable
securitization was repaid.
As a result of the securitization transactions, the Company no longer
recognizes net interest income and certain fee revenue, nor does it provide for
loan losses on the securitized portfolio. Instead, the Company receives
servicing fee income. During 1998, 1997 and 1996, the Company recognized $3,465,
$4,813 and $6,595, respectively, in servicing fee income, which is included in
credit card fees and other service charges, fees and income in the accompanying
consolidated statements of income and comprehensive income.
In connection with these securitization transactions, the Company was
required to establish cash reserve accounts for the benefit of the purchasers.
These cash reserve accounts represent retained interests in the loans sold as
described in Note 1. The retained interests, consisting primarily of the cash
reserve accounts, totaled $4,121 and $5,256 at December 31, 1998 and 1997,
respectively, and are included in other assets in the accompanying consolidated
statements of financial condition.
18) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures
About Fair Value of Financial Instruments", requires that the Company disclose
estimated fair values for its financial instruments. The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments:
CASH AND CASH EQUIVALENTS
The carrying amounts for cash and cash equivalents are considered reasonable
estimates of fair value.
INVESTMENT SECURITIES
The fair values of investment securities are based on quoted market price or
dealer quotations, if available. The fair value of certain state and municipal
obligations is not readily available through market sources. Fair value
estimates for these instruments are based on quoted market prices for similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued.
LOANS HELD-FOR-SALE
The carrying amounts for loans held-for-sale are considered reasonable
estimates of fair value.
LOANS
Fair values are estimated for portfolios of loans with similar
characteristics. Loans are segregated by type, and then further broken down into
fixed and adjustable rate components, and by performing and non-performing
categories.
The fair value of loans is estimated by discounting scheduled cash flows
through the estimated maturity using the current rates at which similar loans
could be made to borrowers with similar credit ratings and for similar
maturities.
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE
The carrying amounts for accrued interest receivable and accrued interest
payable are considered reasonable estimates of fair value.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings and interest-bearing demand
deposits is the amount payable on demand at December 31, 1998 and 1997. The fair
value of time deposits is based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates offered for deposits of
similar remaining maturities as of each valuation date.
SHORT-TERM BORROWINGS
The carrying amount approximates fair value because of the short maturity of
these instruments.
NOTES PAYABLE
Interest rates currently available to the Company for debt instruments with
similar terms and remaining maturities are used to estimate the fair value of
notes payable as of each valuation date.
CONVERTIBLE CAPITAL NOTES
The fair value of the convertible capital notes is based on market price
quotations obtained from securities dealers.
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE COMPANY'S SUBORDINATED
DEBENTURES
The fair value of the preferred beneficial interests in the subordinated
debentures is based on market price quotations obtained from the American Stock
Exchange listings.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of the
agreement and the present creditworthiness of the counterparties. The fair value
of letters of credit is based on fees currently charged to enter into similar
agreements. The fees associated with the commitments and letters of credit
currently outstanding reflect a reasonable estimate of fair value. For further
discussion concerning financial instruments with off-balance-sheet risk, refer
to note 17.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
-------------------------- ---------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
- -----------------------------------------------------------------------------------------------------------
Financial assets:
<S> <C> <C> <C> <C>
Cash and due from banks $ 132,056 $ 132,056 $ 171,494 $ 171,494
Federal funds sold and securities
purchased under agreements to resell 68,550 68,550 89,615 89,615
Investment securities 387,820 389,820 307,150 308,669
Loans held-for-sale 34,834 34,834 16,422 16,422
Loans, net 1,393,075 1,408,357 1,244,527 1,256,826
Accrued interest receivable 15,223 15,223 12,955 12,955
- -----------------------------------------------------------------------------------------------------------
Financial liabilities:
Deposits:
Demand $ 402,178 $ 402,178 $ 389,053 $ 389,053
Savings and interest-bearing demand 690,159 690,159 599,739 599,739
Time 555,017 562,578 563,974 568,083
Short-term borrowings 244,215 244,215 191,185 191,185
Accrued interest payable 4,367 4,367 4,678 4,678
Notes payable 12,500 12,500 23,000 23,000
Convertible capital notes 11,078 46,897 11,219 32,255
Guaranteed preferred beneficial interests
in the Company's subordinated debentures 57,500 61,238 0 0
</TABLE>
LIMITATIONS
No ready market exists for a significant portion of the Company's financial
instruments. It is necessary to estimate the fair value of these financial
instruments based on a number of subjective factors, including expected future
loss experience, risk characteristics and economic performance. Because of the
significant amount of judgment involved in the estimation of the accompanying
fair value information, the amounts disclosed cannot be determined with
precision.
The fair value of a given financial instrument may change substantially over
time as a result of, among other things, changes in scheduled or forecasted cash
flows, movement of current interest rates, and changes in management's estimates
of the related credit risk or operational costs. Consequently, significant
revisions to fair value estimates may occur during future periods. Management
believes it has taken reasonable efforts to ensure that fair value estimates
presented are accurate. However, adjustments to fair value estimates may occur
in the future and actual amounts realized from financial instruments may differ
from the amounts presented herein.
The fair values presented apply only to financial instruments and, as such,
do not include such items as fixed assets, other real estate and assets owned,
other assets and liabilities as well as other intangibles which have resulted
over the course of business. As a result, the aggregation of the fair value
estimates presented herein does not represent, and should not be construed to
represent, the underlying value of the Company.
19) SEGMENT REPORTING
The Company's operations are divided into operating segments using individual
products or services or groups of related products and services. Each segment
has a manager that reports to a person that makes decisions about performance
assessment and resource allocation for all segments. The Company has four
operating segments: consumer banking, commercial banking, wealth management, and
community banking. The consumer banking segment provides personal banking
services to customers of the Company. Commercial banking provides banking
services to the business customers of the Company. Wealth management offers
fiduciary, trust and investment services to its customers. The community banking
segment provides comprehensive banking services to customers through bank
offices located in communities outside of the Wichita, Kansas metropolitan area,
including locations in Kansas and Oklahoma. Each operating segment uses the same
accounting principles as reported in Note 1, Summary of Significant Accounting
Policies, and the Company evaluates the performance of each segment using
before-tax income or loss from continuing operations. Transactions between
segments are accounted for as if each segment is an external customer.
Listed below is a presentation of profit or loss and asset information for
all segments. The only significant noncash items are the loan loss provision,
depreciation, and amortization. Taxes are not allocated to segment operations,
and the Company did not have discontinued operations, extraordinary items or
accounting changes for any of the segments.
<TABLE>
<CAPTION>
Consumer Commercial Wealth Community
Year ended December 31, 1998 Banking Banking Management Banking Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income-external $ 50,182 $ 22,856 $ 28 $ 13,540 $ 86,606
Net interest income-intercompany (5,606) 0 0 1,046 (4,560)
Noninterest income-external 21,309 5,204 12,593 3,579 42,685
Noninterest income-intercompany 127 25 346 15 513
Provision for loan losses 6,207 3,927 0 956 11,090
Depreciation and amortization 3,068 417 681 1,573 5,739
Segment profit/loss 16,527 17,228 502 2,156 36,413
Assets 370,148 841,066 4,853 345,375 1,561,442
Asset expenditures 5,021 119 661 762 6,563
</TABLE>
<TABLE>
<CAPTION>
Consumer Commercial Wealth Community
Year ended December 31, 1998 Banking Banking Management Banking Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income-external $ 41,898 $ 19,719 $ 3 $ 13,154 $ 74,774
Net interest income-intercompany (2,674) 0 0 206 (2,468)
Noninterest income-external 23,994 3,172 9,543 3,675 40,384
Noninterest income-intercompany 187 34 199 39 459
Provision for loan losses 5,360 1,550 0 1,330 8,240
Depreciation and amortization 3,443 422 665 1,629 6,159
Segment profit/loss 9,660 15,682 (525) 1,559 26,376
Assets 318,786 745,486 2,269 309,706 1,376,247
Asset expenditures 3,374 126 338 888 4,726
</TABLE>
<TABLE>
<CAPTION>
Consumer Commercial Wealth Community
Year ended December 31, 1998 Banking Banking Management Banking Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income-external $ 47,674 $ 15,079 $ 1 $ 15,071 $ 77,825
Net interest income-intercompany (301) 0 0 603 302
Noninterest income-external 20,992 1,264 6,640 4,597 33,493
Noninterest income-intercompany 82 13 14 25 134
Write-down of loans held-for-sale 17,475 0 0 0 17,475
Provision for loan losses 20,064 (824) 0 911 20,151
Depreciation and amortization 3,307 368 548 1,962 6,185
Segment profit/loss (9,473) 12,074 (816) 3,482 5,267
Assets 349,326 573,431 1,141 325,151 1,249,049
Asset expenditures 2,350 24 344 1,788 4,506
</TABLE>
Reconciliations of segment revenue, profit or loss, assets, and other items
of significance to consolidated amounts are presented below. Corporate level
items are derived from the Company's investment portfolio, fixed assets and
other activities not considered by management to be operating segments. Revenues
are net of interest expense.
Net Revenues: 1998 1997 1996
- --------------------------------------------------------------------------------
Net revenue from segments $125,244 $113,149 $111,754
Net revenue from corporate level
not allocated to segments (9,096) (1,722) (1,523)
Net revenue from intercompany income 4,047 2,009 (436)
- --------------------------------------------------------------------------------
Consolidated net revenue $120,195 $113,436 $109,795
- ----------------------------------------========================================
Profit: 1998 1997 1996
- --------------------------------------------------------------------------------
Profit from segments $36,413 $26,376 $ 5,267
Expenses at corporate level
not allocated to segments (4,689) (452) (3,536)
- --------------------------------------------------------------------------------
Income before tax $31,724 $25,924 $ 1,731
- ----------------------------------------========================================
Assets: 1998 1997 1996
- --------------------------------------------------------------------------------
Assets of segments $1,561,442 $1,376,247 $1,249,049
Corporate level assets 554,023 547,575 472,353
- ------------------------------------------------------------------- ------------
Consolidated assets $2,115,465 $1,923,822 $1,721,402
- ----------------------------------------========================================
Amounts Amounts not
Reported by Reported at Consolidated
Other Items of Significance: Year Segments Segment Level Amounts
- --------------------------------------------------------------------------------
Net interest income 1998 $86,606 $(9,048) $77,558
1997 74,774 (2,467) 72,307
1996 77,825 (1,798) 76,027
Provision for loan losses
and write-down of loans
held-for-sale 1998 $11,090 $ 0 $11,090
1997 8,240 0 8,240
1996 37,626 0 37,626
Depreciation and amortization 1998 $ 5,739 $ 1,148 $ 6,887
1997 6,159 435 6,594
1996 6,185 494 6,679
Asset expenditures 1998 $ 6,563 $ 1,855 $ 8,418
1997 4,726 657 5,383
1996 4,506 793 5,299
The Company has no operations in foreign countries; therefore, geographic
information is not presented.
20) NEW ACCOUNTING STANDARDS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. This Statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise", conforms the subsequent accounting for securities retained after
the securitization of mortgage loans by a mortgage banking enterprise with the
subsequent accounting for securities retained after the securitization of other
types of assets by a nonmortgage banking enterprise. This Statement is effective
for the first fiscal quarter beginning after December 15, 1998.
The Company does not anticipate that adoption of any of the above Statements
will have a material impact on its operating results or its financial condition.
<PAGE>
21) PARENT COMPANY ONLY FINANCIAL STATEMENTS
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Financial Condition
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1998 1997
- --------------------------------------------------------------------------------
Assets
Cash $ 22,349 $ 1,852
Investment securities, held-to-maturity 607 441
Equipment 65 305
Investment in subsidiaries 184,300 161,250
Current and deferred income taxes 0 407
Other 6,152 3,550
- --------------------------------------------------------------------------------
Total assets $213,473 $167,805
- ---------------------------------------------------------=======================
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 764 $ 859
Accrued interest payable 99 82
Current and deferred income taxes 143 0
Notes payable 12,500 23,000
Convertible capital notes payable 11,078 11,219
Subordinated debentures 59,278 0
- --------------------------------------------------------------------------------
Total liabilities 83,862 35,160
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $5 par value; 10,000,000 shares
authorized, 2,418,573 shares issued in 1998
and 2,415,071 issued in 1997 12,093 12,075
Capital surplus 12,464 12,377
Retained earnings 139,078 124,877
Treasury stock (34,626) (17,081)
Unrealized securities gains, net of tax 602 397
- --------------------------------------------------------------------------------
Total stockholders' equity 129,611 132,645
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $213,473 $167,805
- ---------------------------------------------------------=======================
<PAGE>
21) PARENT COMPANY ONLY FINANCIAL STATEMENTS (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Income
Years Ended December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
Dollars in thousands except per share data 1998 1997 1996
- --------------------------------------------------------------------------------
Dividends from subsidiaries $ 1,538 $ 5,850 $ 1,300
Interest income 1,930 126 342
Fees charged subsidiary banks 2,196 2,110 1,619
Other income 244 439 0
- --------------------------------------------------------------------------------
Total income 5,908 8,525 3,261
- --------------------------------------------------------------------------------
Operating expenses:
Interest expense 6,709 2,571 2,339
Salaries and employee benefits 2,313 2,161 1,972
Other expense 1,276 1,035 1,360
- --------------------------------------------------------------------------------
Total operating expenses 10,298 5,767 5,671
- --------------------------------------------------------------------------------
Income (loss) before income tax benefit and equity
in undistributed net income of subsidiaries (4,390) 2,758 (2,410)
Income tax benefit 2,858 1,614 1,470
- --------------------------------------------------------------------------------
Income (loss) before equity in undistributed net
income of subsidiaries (1,532) 4,372 (940)
Equity in undistributed net income of subsidiaries 21,066 12,292 2,620
- --------------------------------------------------------------------------------
Net income $19,534 $16,664 $ 1,680
- -----------------------------------------------------===========================
Note: Parent Company Only Statements of Stockholders' Equity are the same as the
Consolidated Statements of Stockholders' Equity.
<PAGE>
21) PARENT COMPANY ONLY FINANCIAL STATEMENTS (continued)
INTRUST FINANCIAL CORPORATION
(Parent Company Only)
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
Dollars in thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Cash provided (absorbed) by operating activities:
Net income $ 19,534 $ 16,664 $ 1,680
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed net income
of subsidiaries (21,066) (12,292) (2,620)
Depreciation 367 466 475
Accretion of discount on investment securities (19) (30) (41)
Loss on retirement of capital notes 114 0 241
Increase in other assets (278) (968) (772)
Increase (decrease) in accounts payable and
accrued liabilities (78) 97 (483)
Increase (decrease) in current and deferred
income taxes 550 (890) 150
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by operating
activities (876) 3,047 (1,370)
- --------------------------------------------------------------------------------
Cash provided (absorbed) by investing activities:
Capital expenditures (127) (26) (13)
Investments purchased (751) 0 0
Investment securities matured or called 604 165 165
Investment in subsidiaries (1,779) (1,884) (1,147)
- --------------------------------------------------------------------------------
Net cash absorbed by investing activities (2,053) (1,745) (995)
- --------------------------------------------------------------------------------
Cash provided (absorbed) by financing activities:
Payments on notes payable (10,500) (2,500) (2,500)
Proceeds from notes payable 0 8,000 0
Retirement of capital notes (150) 0 (424)
Proceeds from subordinated debt, net of
issuance costs 56,954 0 0
Dividends paid (5,333) (4,161) (3,542)
Purchase of treasury stock, net (17,545) (2,282) (11,643)
- --------------------------------------------------------------------------------
Net cash provided (absorbed) by financing
activities 23,426 (943) (18,109)
- --------------------------------------------------------------------------------
Increase (decrease) in cash 20,497 359 (20,474)
Cash at beginning of year 1,852 1,493 21,967
- --------------------------------------------------------------------------------
Cash at end of year $ 22,349 $ 1,852 $ 1,493
- --------------------------------------------------==============================
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To INTRUST Financial Corporation:
We have audited the accompanying consolidated statements of financial condition
of INTRUST Financial Corporation and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income and comprehensive
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of INTRUST Financial Corporation
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
February 19, 1999
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
This item is not applicable to the Company.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
Set forth below are the names of the directors, nominees for director,
executive officers as designated by the Board of Directors, and nominees for
executive officer of the Company, together with certain related information. All
of the executive officers of the Company will hold office until the next annual
meeting of directors. The directors of the Company are divided into three
classes; the terms of office of the first class, second class and third class
expire at the 1999, 2000 and 2001 annual meetings of stockholders, respectively.
Directors will be elected for a full three year term to succeed those whose
terms expire. The year in which each director's term expires is indicated after
his name and age. Directors and executive officers will serve as indicated or
until their successors are duly elected and qualified, unless sooner terminated
by death, resignation, removal or otherwise. There are no arrangements or
understandings between any of the directors, executive officers or any other
persons pursuant to which any of the directors or executive officers have been
selected to their respective positions.
RONALD L. BALDWIN, 45, 1999, has been director of the Company and Vice
Chairman of IB since 1996. From 1976 until 1996, Mr. Baldwin was employed by
Fourth Financial Corporation, an $8 billion banking institution headquartered in
Wichita, Kansas. He served Fourth Financial Corporation as executive
vice-president.
RICK L. BEACH, 48, has been Executive Vice President and Chief Credit
Officer of the Company since January 1997. He was Senior Vice President of the
Company from 1995 to 1997 and Vice President from 1988 to 1995.
C. ROBERT BUFORD, 65, 2000, has been a director of the Company since
1982. During the past five years, he has been President and owner of Zenith
Drilling Corporation, an oil and gas drilling and exploration firm, managing
partner of Grand Bluffs Development Co., a real estate development firm, and a
director of Barrett Resources Corporation, an oil and gas production and
operation firm.
FRANK L. CARNEY, 60, 2001, has been a director of the Company since
1982. Since 1979, he has been self-employed in a private investment company,
Carney Enterprises. From January 1994 to December 1994, Mr. Carney was
vice-chairman of Turbochef, Inc. Since January 1994, Mr. Carney has been with
Houston Pizza Venture L.L.C., as President and Manager. In June 1995, he became
President and Manager of Devlin Partners, L.L.C., a development stage company.
In June 1996, he became President and Manager of P.J. Wichita, L.L.C., a
development stage company. In December 1997, he became President and Manager of
P.J. Nor-Cal, L.L.C., a development stage company.
RICHARD G. CHANCE, 51, 1999, has been a director of the Company since
1990. During the past five years, he has been President and Chief Executive
Officer of Chance Industries, Inc., producer of amusement rides and manufacturer
of transit coaches, trams, and replica trolleys.
CHARLES Q. CHANDLER, 72, 2001, has been Chairman of the Board and Chief
Executive Officer of the Company since 1982. He was Chairman of the Board and
Chief Executive Officer of IB from 1975 until 1996. Mr. Chandler was employed by
IB since 1950. In 1992, he became a director of Western Resources, Inc., a
Kansas utility company. Mr. Chandler is the father of Charles Q. Chandler IV and
the nephew of George T. Chandler.
CHARLES Q. CHANDLER IV, 45, 2000, has been a director of the Company
since 1985. Since April 1990, he has been President of the Company. From January
1988 through March 1990, he was Executive Vice President of the Company. He was
Executive Vice President of IB from January 1988 until July 1993 when he was
elected Vice Chairman. In 1996, he was elected Chairman and President of IB.
Mr. Chandler is the son of Charles Q. Chandler.
GEORGE T. CHANDLER, 77, 2000, has been a director of the Company since
1982. During the past five years, Mr. Chandler has been Chairman of the Board of
First National Bank, Pratt, Kansas. Mr. Chandler is an uncle of Charles Q.
Chandler.
STEPHEN L. CLARK, 57, 2000, has been a director of the Company since
April 1997 and director of IB since 1993. During the past five years, Mr. Clark
has been owner of Clark Investment Group which primarily invests in real estate
development including office buildings and self-storage units.
ROBERT L. DARMON, 74, 2000, has been a director of the Company since
1982. He was President of the Company from 1982 until April 1990, and Vice
Chairman of the Board of IB until his retirement January 31, 1990. He had been
employed by IB since 1970.
CHARLES W. DIEKER, 63, 2001, has been a director of the Company since
1982. Mr. Dieker had been Executive Vice President-Marketing of Beech Aircraft
Corporation from 1985 until his retirement January 1, 1992.
MARTIN K. EBY Jr., 64, 2000, has been a director of the Company since
1982. During the past five years, Mr. Eby has been Chief Executive Officer and
Chairman of the Board of Eby Corporation, which is the parent company of Martin
K. Eby Construction Co. Inc. He is Chairman of the Company's Audit Committee. In
1992, Mr. Eby became a director of SBC Communications, Inc.
RICHARD M. KERSCHEN, 57, 2001, has been a director of the Company since
April 1997 and director of IB since 1993. During the past five years, Mr.
Kerschen has been Chairman of the Board and President of The Law Company, Inc. a
commercial real estate construction company.
THOMAS D. KITCH, 55, 2001, has been a director of the Company since
April 1997 and director of IB since 1993. During the past five years, Mr. Kitch
has been a practicing attorney with the law firm of Fleeson, Gooing, Coulson &
Kitch, LLC.
ERIC T. KNORR, 56, 1999, has been a director of the Company since 1990.
He was Chairman of the Board of Dulaney, Johnston & Priest, general insurance
(property and casualty) independent agents, for ten years until January 1996
when he became Chairman Emeritus.
CHARLES G. KOCH, 63, 2001, has been a director of the Company since
1982. For the past five years, Mr. Koch has been Chairman of the Board and Chief
Executive Officer of Koch Industries Inc., an integrated energy company.
J.V. LENTELL, 60, 1999, has been a director of the Company since April
1994. Mr. Lentell has been Vice Chairman of IB since July 1993. In 1995, he
became a director of Renters Choice, Inc.
WILLIAM B. MOORE, 46, 1999, has been a director of the Company since
April 1997 and an advisory director of IB from 1993 to 1997. Mr. Moore has been
Chairman of the Board of Kansas Gas and Electric Company since 1995. From 1992
to 1995, he was Vice President-Finance of Western Resources, the parent company
of Kansas Gas and Electric Company. In 1997, he became Executive Vice President,
Chief Financial Officer, Treasurer of Western Resources.
PAUL A. SEYMOUR Jr., 75, 1999, has been a director of the Company since
1982. Mr. Seymour was President of Arrowhead Petroleum Inc. until it ceased
operations in 1990. Since that time he has been active as a private investor.
DONALD C. SLAWSON, 65, 1999, has been a director of the Company since
1982. During the past five years, Mr. Slawson has been the Chairman of the Board
and President of Slawson Companies, Inc., a group of companies involved in the
acquisition of oil and gas properties, exploration and production of oil and
gas, purchasing and reselling of crude oil and natural gas, and real estate
development.
JOHN T. STEWART III, 63, 2000, has been a director of the Company since
1982. During the past five years, Mr. Stewart's principal occupation has been
Chairman of the Board and Director of First National Bank, Medford, Oklahoma,
Caldwell State Bank, Caldwell, Kansas and First National Bank, Wellington,
Kansas.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
SUMMARY COMPENSATION TABLE
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and each of the Company's other four executive officers during each of
the last three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
---------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Other Annual Securities All Other
Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Options (#) ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 1998 $229,175 $ 85,545 $38,923 3,000 $84,383
COB & CEO of the Company 1997 $263,333 $ 62,500 $22,360 5,000 $74,148
1996 $330,000 $ 0 $22,360 0 $69,006
C.Q. Chandler IV 1998 $346,673 $171,080 $12,729 7,500 $19,610
President of the Company, 1997 $325,000 $148,500 $12,729 10,000 $20,209
Chairman, President of IB 1996 $262,500 $ 0 $ 0 7,500 $15,735
J.V. Lentell 1998 $236,673 $ 90,488 $ 0 3,000 $10,000
Director of the Company 1997 $228,333 $ 80,500 $ 0 5,000 $ 9,500
Vice Chairman of IB 1996 $219,167 $ 0 $ 0 5,000 $ 9,500
R.L. Baldwin 1998 $218,341 $ 83,644 $ 0 3,000 $ 2,500
Director of the Company 1997 $206,667 $ 73,500 $ 0 5,000 $ 2,188
Vice Chairman of IB 1996 $168,455 $ 0 $ 0 5,000 $ 0
R.L. Beach 1998 $126,672 $ 42,354 $ 0 2,000 $ 5,244
Executive Vice President of the 1997 $108,333 $ 33,000 $ 0 2,500 $ 3,250
Company and of IB
</TABLE>
R.L. Baldwin became an employee and executive officer of IB in February
of 1996; the table reflects compensation paid to Mr. Baldwin subsequent to such
time. R.L. Beach became an executive officer in January of 1997. There were no
other individuals who were considered executive officers of the Company at
December 31, 1998.
(1) The amounts shown represent the above-market amounts paid on
distributions from the 1983, 1984, 1986, or 1990 Executive Deferred Compensation
Plans during each of the last three fiscal years. Does not include perquisites
which certain of the executive officers received, the aggregate amount of which
did not exceed the lessor of $50,000 or 10% of any such officer's salary and
bonus.
(2) The amounts shown for "All other Compensation" include the
following for the current year:
C.Q. C.Q. J.V. R.L. R.L.
Chandler Chandler IV Lentell Baldwin Beach
-----------------------------------------------
Above-market amounts earned on
deferred compensation plans $77,602 $ 9,610 $ 0 $ 0 $ 0
Company contributions to
401(k) plan 6,781 10,000 10,000 2,500 5,244
-----------------------------------------------
$84,383 $19,610 $10,000 $2,500 $5,244
==============================================
STOCK OPTION PLAN
The Board of Directors of the Company on May 9, 1995, adopted, with
subsequent shareholder approval, the INTRUST Financial Corporation 1995
Incentive Plan (the "Plan"). The Plan provides that the Company may grant
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Performance Shares, Phantom Stock and Restricted Stock to officers and key
employees of the Company, as defined in the Plan. The Plan provides for the
issuance or transfer of a maximum of 240,000 shares of the Company's common
stock. The exercise price, of any options granted under the Plan, cannot be less
than the fair market value of the Company's common stock at the date of grant.
The maximum term for options or rights cannot exceed ten years from the date
they are granted. Options under the plan may vest no more rapidly than 20% per
year from the date of grant. Options to acquire 750 shares of the Company's
common stock were exercised in 1998. At December 31, 1998, there were options
granted and unexercised for a total of 119,750 shares. The options outstanding
have exercise prices between $58 and $130, with a weighted average exercise
price of $88. Of the 119,750 shares granted, 33,750 were exercisable at December
31, 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
- --------------------------------------------------------------------------------- ------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Securities % of Total Exercise
Underlying Options Granted or Base
Options to Employees in Price
Name (#) Fiscal Year ($/Sh) Expiration Date 5%($) 10%($)
- --------------------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
C.Q. Chandler 3,000 8.5% $130 12/08/08 $377,271 $ 753,559
C.Q. Chandler IV 7,500 21.1% $130 12/08/08 $943,178 $1,883,898
J.V. Lentell 3,000 8.5% $130 12/08/08 $377,271 $ 753,559
R.L. Baldwin 3,000 8.5% $130 12/08/08 $377,271 $ 753,559
R.L. Beach 2,000 5.6% $130 12/08/08 $251,514 $ 502,373
</TABLE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at December 31, 1998 at December 31, 1998
------------------------------ -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------- ------------------------- -------------------------
C.Q. Chandler 13,000/15,000 $908,000/$752,000
C.Q. Chandler IV 10,550/23,700 $682,600/$910,900
J.V. Lentell 4,500/11,000 $282,000/$443,000
R.L. Baldwin 3,000/10,000 $174,000/$371,000
R.L. Beach 1,500/5,500 $87,000/$185,500
The fair market value of the Company's common stock, used to calculate
the value of in-the-money options, was $130.00 per share as determined in the
local over-the-counter market by the National Quotation Bureau, Incorporated.
DEFINED BENEFIT PLANS
The Company has adopted a defined benefit retirement plan for all of
its employees. Employees become participants in the plan on the next January
first or July first following the satisfaction of the following requirements:
(i) twelve consecutive months of employment in which the employee worked 1,000
or more hours, and (ii) attainment of age 21, provided that the employee was
less than 60 years of age on the date of his employment. Although benefits under
the plan are payable in a variety of ways, the normal form of benefit payment
provides monthly payments to an employee for fifteen years. An employee's Normal
Retirement Benefit (as defined in the plan) is a monthly benefit equal to 1.0%
of such employee's Final Average Monthly Compensation (as defined in the plan),
plus 0.5% of his Final Average Monthly Compensation in excess of his Social
Security Covered Compensation (as defined in the plan), and multiplied by such
employee's number of completed years of Benefit Service (as defined in the plan)
not to exceed 35 years. Final Average Monthly Compensation is equal to the
average of an employee's monthly cash compensation (exclusive of bonuses) during
the five-year period prior to such employee's Normal or Early Retirement, or
termination of employment prior to Normal Retirement Date (as defined in the
plan).
As an addition to the defined benefit retirement plan, IB maintains a
supplemental retirement plan which is an unfunded excess benefit plan. The
purpose of this plan is to provide retirement benefits to its employees that
cannot be provided through its defined benefit retirement plan due to the
benefit limits imposed by Internal Revenue Code Section 415. Code Section 415
places a limit on the amount of annual benefits which can be provided to
individual employee participants in the defined benefit retirement plan.
The following table illustrates combined estimated annual benefits
payable upon retirement or upon written election of the participant if the
participant continues to work after his Normal Retirement Date, under the
Company's defined benefit retirement and IB's supplemental retirement plan, to
persons in the specified remuneration and years of service classifications.
Because the covered remuneration equals cash compensation, excluding bonuses,
the remuneration categories below reflect the base salary amounts in the summary
compensation table. The amounts presented are straight life annuity amounts and
are not subject to any deduction for social security or other offset amounts.
The following amounts are overstated to the extent that social security covered
compensation for an individual may exceed $15,000.
PENSION PLAN TABLE
REMUNERATION YEARS OF CREDITED SERVICE
- ------------ ----------------------------------------------------------------
15 20 25 30 35 40
$100,000 $20,021 $ 26,694 $ 33,368 $ 40,041 $ 46,715 $ 51,715
150,000 31,271 41,694 52,118 62,541 72,965 80,465
200,000 42,521 56,694 70,868 85,041 99,215 109,215
250,000 53,771 71,694 89,618 107,541 125,465 137,965
300,000 65,021 86,694 108,368 130,041 151,715 166,715
350,000 76,271 101,694 127,118 152,541 177,965 195,465
400,000 87,521 116,694 145,868 175,041 204,215 224,215
The following table sets forth the covered compensation and years of
credited service for pension plan purposes for each of the executive officers
listed in the summary compensation table as of December 31, 1998, as well as the
number of years of credited service which will have been completed by each of
said persons if they retire at the age of 65.
COVERED COMPLETED YEARS OF TOTAL YEARS OF CREDITED
COMPENSATION AS CREDITED SERVICE AS SERVICE AT NORMAL
NAME OF 12/31/98 OF 12/31/98 RETIREMENT AGE(65)
- --------------------------------------------------------------------------------
C.Q. Chandler (1) $229,175 48.75 41.50
C.Q. Chandler IV 346,673 23.00 42.50
J.V. Lentell 236,673 32.83 37.42
R.L. Baldwin 218,341 2.92 21.40
R.L. Beach 126,672 11.00 28.00
(1) C.Q. Chandler elected in writing, as permitted under the plan, to
commence receipt of his normal retirement benefit in the form of a lump sum
payment. This payment was received by C.Q. Chandler in December 1992.
COMPENSATION OF DIRECTORS
The directors of the Company receive no remuneration for serving in that
capacity. However, the directors of the Company are also directors of IB, and in
that capacity receive fees of $1,250 per quarter and $600 for each board meeting
attended. In addition, directors who are not full-time bank employees of IB
receive $150 for each Discount Committee and CRA Committee meeting attended,
$200 for each Audit Committee meeting attended and for attendance by the
chairman at the Trust Department Examining Committee, and $100 for all other
committee meetings attended.
In 1983, 1984, and 1986, the Board of Directors of IB adopted unfunded
Outside Directors' Deferred Compensation Plans which were open to directors of
IB who are not full-time bank employees and who chose to participate. Under
these plans, a participating director had the option to defer up to 100 percent
of his quarterly fee. Benefit payment amounts relate to the fee deferred and
accrual of interest at an above market rate. At retirement (age 70), benefits
will be paid on a monthly basis for 120 months, with any installments not paid
prior to a participant's death being paid to his designated beneficiary. If a
director ceases to serve as such prior to attaining age 70, the participating
director will receive reduced benefit payments related to the fees deferred and
the duration of his participation.
The Board of Directors of the Company adopted an unfunded Outside
Directors' Deferred Compensation Plan in 1990 which was open to directors of the
Company who were not full-time Company or IB employees and who chose to
participate. Under the plan, a participating director had the option to defer
100 percent of his 1990 quarterly fee paid by IB. Benefit payments and other
terms of the plan are the same as the IB plans described in the previous
paragraph.
CHANGE-IN-CONTROL ARRANGEMENTS
Under unfunded Executive Deferred Compensation Plans established in
1983, 1984, and 1986 by IB and in 1990 by the Company, in which C.Q. Chandler
and C.Q. Chandler IV are participants, if the employee's employment with the
Company terminates for any reason other than death or voluntary separation of
employment after the date on which a Change in Control (as described below)
occurs, then the Company shall pay to the employee within 60 days after such
termination, a single lump sum in lieu of any other subsequent payments under
the Plan. The lump sum payment shall be equal to the sum of all amounts that the
employee would have received if the employee had retired on the employee's 65th
birthday. Such payment shall include all unpaid Interim Distributions, if any,
and all Retirement Payments. The entire lump sum payment shall be discounted by
a one-time charge of 8%. The amount of such payments, as of December 31, 1998,
for C.Q. Chandler and C.Q. Chandler IV, would have been $1,711,543 and
$3,090,855 respectively.
If the employee dies after termination of employment but before payment
of any amount under this paragraph, then such amount shall be paid to the
beneficiary or beneficiaries named as soon as practical after the employee's
death.
A Change in Control of the Company shall be deemed to have occurred if:
1) any person, partnership, corporation, trust, or similar entity or group shall
acquire or control more than 20%, after October 16, 1991, of the voting
securities of the Company in a transaction or series of transactions; or 2) at
any time during any two-year period a majority of the Board of Directors of the
Company is not comprised of individuals who were members of such Board of
Directors at the commencement of such two-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's compensation committee are C.
Robert Buford, Richard G. Chance, and Donald C. Slawson. None of the members of
the committee have ever served as an officer or employee of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
The following table sets forth information as of February 3, 1999
relating to the beneficial ownership of the Company's common stock and capital
notes by each person known by the Company to own beneficially more than five
percent of the outstanding shares of the Company's common stock, by each
director, by each nominee for director, by each executive officer and by all
directors and executive officers of the Company as a group. The information as
to beneficial ownership of the Company's common stock was supplied by the
individuals involved. For purposes of this table, beneficial ownership is as
defined in the rules and regulations of the Securities and Exchange Commission.
Unless otherwise indicated, the individual possesses sole voting and investment
power as to the shares shown as being beneficially owned:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------------
SHARES ISSUABLE
OWNED AT UPON CONVERSION FACE AMOUNT
FEBRUARY 3, OF CAPITAL OF CAPITAL
NAME ADDRESS 1999(2) NOTES(3) NOTES
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ronald L. Baldwin 9414 E. Woodspring 5,217(4) 93(4) $ 2,800
Wichita, KS 67226
Rick L. Beach 123 E. Hamlin Rd. 1,630(5) 0 $ 0
Andover, KS 67002
C. Robert Buford 9176 E. 13th St. 2,053 293 $ 8,800
Wichita, KS 67206
Frank L. Carney 1740 Barrier Cove 1,132 732 $ 22,000
Wichita, KS 67206
Richard G. Chance 676 S. 119th St. W. 180 0 $ 0
Wichita, KS 67235
Charles Q. Chandler Box One 78,274(6) 16,802(6) $ 504,100
Wichita, KS 67201
Charles Q. Chandler IV Box One 50,536(7) 20,766(7) $ 623,000
Wichita, KS 67201
Anderson W. Chandler 4718 West Hills Dr. 276,932(8) 37,752(8) $1,132,600
Topeka, KS 66606
David T. Chandler c/o First National Bank 266,836(8) 38,144(8) $1,144,400
Pratt, KS 67124
George T. Chandler c/o First National Bank 225,206(8) 18,546(8) $ 556,400
Pratt, KS 67124
Stephen L. Clark 1625 N. Gatewood 25 0 $ 0
Wichita, KS 67206
Robert L. Darmon 8509 Huntington 5,880(9) 1,140(9) $ 34,200
Wichita, KS 67206
Charles W. Dieker 632 Birkdale Dr. 2,866 366 $ 11,000
Wichita, KS 67230
Martin K. Eby, Jr. P.O. Box 1679 6,798 2,398 $ 72,000
Wichita, KS 67201
Richard M. Kerschen 144 Rutland 25 0 $ 0
Wichita, KS 67206
Thomas D. Kitch 115 S. Rutan 25 0 $ 0
Wichita, KS 67218
Eric T. Knorr P.O. Box 206 31,590(10) 2,455(10) $ 73,690
Wichita, KS 67201
Charles G. Koch P.O. Box 2256 99,084 8,566 $ 257,000
Wichita, KS 67201
J.V. Lentell 1700 Laurel Cove 4,625(11) 0 $ 0
Wichita, KS 67206
William B. Moore 2764 N. North Shore Ct. 100 0 $ 0
Wichita, KS 67205
Paul A. Seymour, Jr. 8500 Killarney Place 121,031(12) 20,131(12) $ 604,000
Wichita, KS 67206
Donald C. Slawson 104 South Broadway, 4,420(13) 2,320 $ 69,600
Suite 200
Wichita, KS 67202
John T. Stewart III P.O. Box 2 145,226 24,106 $ 723,200
Wellington, KS 67152
Directors and Executive
Officers as a Group (22 persons) 785,923(14) 118,714(14) $3,561,790
</TABLE>
(1) Including and excluding shares issuable upon conversion of the Convertible
Capital Notes ("capital notes"), the officers, executive officers, and
directors who beneficially owned more than 1.0% of the outstanding shares
and other persons who beneficially owned more than 5.0% of the outstanding
shares were:
Percentage Ownership of Common Stock
------------------------------------
Including Shares Excluding Shares
Issuable Upon Issuable Upon Percentage
Conversion of Conversion of Ownership of
Capital Notes Capital Notes Capital Notes
------------- ------------- -------------
Charles Q. Chandler III 3.79% 3.00% 4.55%
Charles Q. Chandler IV 2.45% 1.46% 5.62%
Anderson W. Chandler* 13.36% 11.76% 10.22%
David T. Chandler* 12.87% 11.24% 10.33%
George T. Chandler* 10.97% 10.16% 5.02%
Eric T. Knorr 1.55% 1.43% 0.67%
Charles G. Koch 4.85% 4.45% 2.32%
Paul A. Seymour, Jr. 5.89% 4.96% 5.45%
John T. Stewart III 7.05% 5.95% 6.53%
*Includes shares directly owned and shares controlled as co-trustees. See (8).
The Directors and Executive Officers as a group beneficially owned 35.96%
of the Company's common stock including shares issuable upon conversion of
the capital notes, 32.28% of the common stock excluding shares issuable
upon conversion of the capital notes, and 32.15% of the capital notes.
(2) Includes shares issuable upon conversion of the capital notes and upon
exercise of common stock options.
(3) Shares issuable upon conversion in accordance with the terms of the
Convertible Capital Notes issued December 22, 1987. The capital notes are
convertible into common stock, at any time prior to the close of business
on the fifteenth day prior to maturity on December 22, 1999, at a
conversion price of $30.00 per share, subject to adjustment in certain
circumstances.
(4) Mr. Baldwin's beneficial ownership includes 2,124 share of common stock,
currently exercisable options to purchase 3,000 shares of common stock and
$2,800 of capital notes (93 shares) over which he shares voting and
investment powers with his wife, Cindy Baldwin.
(5) Includes currently exercisable options to purchase 1,500 shares of common
stock.
(6) Includes currently exercisable options to purchase 13,000 shares of Common
Stock. Does not include 206,660 shares of common stock and $556,400 of
capital notes, convertible into 18,546 shares of common stock, beneficially
owned by George T. Chandler (uncle), and 19,220 shares of common stock and
$623,000 of capital notes, convertible into 20,766 shares of common stock,
beneficially owned by Charles Q. Chandler IV (son).
(7) Includes currently exercisable options to purchase 10,550 shares of common
stock. Does not include 95 shares of common stock owned by Marla J.
Chandler (wife).
(8) Anderson, David and George Chandlers' beneficial ownership is comprised of
the following:
(a) Shares beneficially owned by all three over which they share voting
and investment power:
(1) 110,120 shares of common stock and $550,600 of capital notes
(18,353 shares) held as co-trustees for the Olive C. Clift Trust.
(b) Shares beneficially owned by David and George Chandler over which they
share voting and investment power:
(1) 10 shares of common stock held as co-trustees for the George T.
Chandler Trust #1.
(2) 1,160 shares of common stock and $5,800 of capital notes (193
shares) held as co-trustees for the Barbara A. Chandler Trust #1.
(3) 95,370 shares of common stock held as partners in Chandler
Enterprises, L. P.
(c) Shares beneficially owned by David Chandler who has sole voting and
investment power:
(1) 4,545 shares of common stock and $141,900 of capital notes (4,730
shares) held in the George T. Chandler Trust #2 for benefit of
David T. Chandler.
(2) 4,545 shares of common stock and $142,000 of capital notes (4,733
shares) held in the George T. Chandler Trust #2 for benefit of
George T. Chandler, Jr.
(3) 4,545 shares of common stock and $141,900 of capital notes (4,730
shares) held in the George T. Chandler Trust #2 for benefit of
Paul T. Chandler.
(4) 4,545 shares of common stock and $142,000 of capital notes (4,733
shares) held in the George T. Chandler Trust #2 for benefit of
Barbara Ann Chandler.
(d) 129,060 shares of common stock and $582,000 of capital notes (19,399
shares) held in Anderson Chandler's name over which he has sole voting
and investment power.
(e) 2,852 shares of common stock and $15,200 of capital notes (506 shares)
held in David Chandler's name over which he has sole voting and
investment power.
(f) 1,000 shares of common stock and $5,000 of capital notes (166 shares)
held by Michele M. Chandler (wife of David Chandler) over which David
Chandler has shared voting and investment power.
(9) Mr. Darmon's beneficial ownership is comprised of 45 shares of common stock
held in his name over which he has sole voting and investment power and
4,695 shares of common stock and $34,200 of capital notes (1,140 shares)
held in a trust with his wife, Beatrice F. Darmon, with whom he shares
voting and investment power.
(10) Mr. Knorr's beneficial ownership is comprised of: (a) $29,200 of capital
notes (973 shares) held in his name; (b) 1,252 shares of common stock held
by him in an Individual Retirement Account; (c) 20,855 shares of common
stock and $8,400 of capital notes (280 shares) held in a trust with his
wife, Darlene R. Knorr over which he has sole voting and investment power;
(d) 1,488 shares of common stock and $8,890 of capital notes (296 shares)
held in a trust over which he has sole voting and investment power, (e)
5,440 shares of common stock and $27,200 of capital notes (906 shares) held
jointly with his wife over which he has shared voting and investment power;
and (f) 100 shares of common stock held by Eric T. Knorr, Custodian for
Elizabeth T. Knorr under the Uniform Gifts To Minors Act over which he has
sole voting and investment power. Does not include 200 shares of common
stock, owned by Darlene R. Knorr, in which Mr. Knorr disclaims beneficial
ownership.
(11) Includes currently exercisable options to purchase 4,500 shares of common
stock.
(12) Mr. Seymour's beneficial ownership is comprised of the following: (a) 100
shares of common stock held in his name over which he has sole voting and
investment power; (b) 26,800 shares of common stock and $39,000 of capital
notes (1,300 shares) held by John Wofford Seymour and $120,000 of capital
notes (4,000 shares) held in the John Wofford Seymour family trust over
which he shares voting and investment power with Dorothea W. Seymour; (c)
26,160 shares of common stock and $155,800 of capital notes (5,193 shares)
held by William Todd Seymour over which he shares voting and investment
power with Dorothea W. Seymour; (d) 23,920 shares of common stock and
$144,600 of capital notes (4,819 shares) held by INTRUST Bank, N.A.,
Trustee of Elizabeth Seymour Trust U/A dated June 1, 1980 over which he
shares voting and investment power with Dorothea W. Seymour; (e) 23,920
shares of common stock and $144,600 of capital notes (4,819 shares) held by
INTRUST Bank, N.A., Trustee of Katherine Seymour Trust U/A dated February
11, 1981 over which he shares voting and investment power with Dorothea W.
Seymour.
(13) Mr. Slawson's beneficial ownership is comprised of (a) 100 shares of common
stock held in his name over which he has sole voting and investment power;
(b) 1,400 shares of common stock and $34,800 of capital notes (1,160
shares) held by Judith A. Slawson (wife) over which he has shared voting
and investment power; and (c) $34,800 of capital notes (1,160 shares) held
by Kathryn A. Slawson (Mother) and Donald C. Slawson, co-trustees of the
Kathryn A. Slawson Living Trust over which he has shared voting and
investment power.
(14) Includes shares as to which beneficial owner shares investment and/or
voting power with others, after eliminating duplication within the table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
CERTAIN BUSINESS RELATIONSHIPS
Neither the Company nor any of its subsidiaries entered into during 1998
or has proposed to enter into any other material transactions with officers,
directors or principal stockholders of the Company or its subsidiaries, or any
immediate family member of the foregoing persons who has the same home as such
person.
INDEBTEDNESS OF MANAGEMENT
There are outstanding loans by certain of the Subsidiary Banks to other
officer and directors of the Company or its subsidiaries or to their immediate
family members or associates, but all such loans have been made in compliance
with applicable regulations, in the ordinary course of business, and on
substantially the same terms, including interest rates and collateral, and the
same underwriting standards as those prevailing at the time for comparable
transactions with other persons. These loans did not involve more than the
normal risk of collectibility or present other unfavorable features.
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT.SCHEDULES, AND REPORTS ON FORM 8-K.
- -------- -----------------------------------------------------------------
(a) The following documents are filed as a part of this Report.
1. Financial Statements - The following financial statements of INTRUST
Financial Corporation are included in PART II, Item 8 of this report:
Report of Independent Public Accountants
Consolidated Statements of Financial Condition as of December 31, 1998
and 1997
Consolidated Statements of Income for the years ended December 31,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules: All schedules are omitted because they
are not applicable, or not required, or because the required
information is included in the financial statements or notes thereto.
3. Exhibits:
Number Description
------ -----------
3(a) Restated Bylaws of the Registrant, as amended through December
1997 (incorporated herein by reference to Exhibit 3(a) to
Registrant's 1997 10-K, File No. 2-78658)
3(b) Restated Articles of Incorporation of Registrant, as amended
through December 1997 (incorporated herein by reference to
Exhibit 3(b) to Registrant's 1997 10-K, File No. 2-78658)
4(a) Trust Indenture, dated as of December 1, 1987, between First
Bancorp of Kansas and Boatmen's First National Bank of Kansas
City (incorporated herein by reference to Exhibit 4.1 to
Registrant's Registration Statement No. 33-17564)
4(b) Amended and Restated Trust Agreement, dated as of January 21,
1998 among INTRUST Financial Corporation, State Street Bank and
Trust Company, Wilmington Trust Company, the Administrative
Trustees, and several Holders described therein (appears herein
as exhibit)
4(c) Indenture, dated as of January 21, 1998 between INTRUST
Financial Corporation and State Street Bank and Trust Company
(appears herein as exhibit)
4(d) Preferred Securities Guaranty Agreement, dated as of January 21,
1998 between INTRUST Financial Corporation and State Street Bank
and Trust Company (appears herein as exhibit)
4(e) Agreement as to Expenses and Liabilities, dated as of January
21, 1998 between INTRUST Financial Corporation and INTRUST
Capital Trust (appears herein as exhibit)
10(a)* Description of INTRUST Bank, N.A. Executive Officers' Deferred
Compensation Plans (incorporated herein by reference to Exhibit
10(h) to Registrant's 1993 10-K, File No. 2-78658)
10(b)* Description of INTRUST Financial Corporation Executive Deferred
Compensation Plan (incorporated herein by reference to Exhibit
10(i) to Registrant's 1993 10-K, File No. 2-78658)
10(c)* Description of INTRUST Bank, N.A. Salary Continuation Plan
(incorporated herein by reference to Exhibit 10(j) to
Registrant's 1993 10-K, File No. 2-78658)
10(d)* Description of INTRUST Bank, N.A. Deferred Compensation Plans
for Directors (incorporated herein by reference to Exhibit 10(k)
to Registrant's 1993 10-K, File No. 2-78658)
10(e)* Description of INTRUST Financial Corporation Deferred
Compensation Plan for Directors (incorporated herein by
reference to Exhibit 10(l) to Registrant's 1993 10-K, File No.
2-78658)
10(f)* Registrant's 1995 Incentive Plan (incorporated herein by
reference to Exhibit 10(i) to Registrant's 1995 10-K, File No.
2-78658)
10(g)* Registrant's Grant of Incentive Stock Options as provided by the
1995 Incentive Plan (incorporated herein by reference to Exhibit
10(j) to Registrant's 1995 10-K, File No. 2-78658)
10(h)* Registrant's Non-Qualified Stock Option Agreement as provided by
the 1995 Incentive Plan (incorporated herein by reference to
Exhibit 10(k) to Registrant's 1995 10-K, File No. 2-78658)
11 Computation of Earnings Per Share (appears herein as exhibit)
21 Subsidiaries of the Registrant (appears herein as exhibit)
27 Financial Data Schedule (appears herein as exhibit)
* Exhibit relates to management compensation
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1998.
(c) See above
(d) See attached Exhibit 27.
<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.
INTRUST Financial Corporation
Date: March 9, 1999 By /s/ C. Q. Chandler
-------------------------------
C. Q. Chandler
Chairman of the Board
and Chief Executive Officer
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 date indicated.
Date: March 9, 1999 /s/ C. Q. Chandler
------------------------------
C. Q. Chandler
Director, Chairman of the Board
and Chief Executive Officer
Date: March 9, 1999 /s/ Jay L. Smith
------------------------------
Jay L. Smith
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 9, 1999 /s/ Ronald L. Baldwin
------------------------------
Ronald L. Baldwin
Director
Date: March 9, 1999 /s/ C. Robert Buford
------------------------------
C. Robert Buford
Director
Date: March 9, 1999 /s/ Frank L. Carney
------------------------------
Frank L. Carney
Director
Date: March 9, 1999 /s/ Richard G. Chance
------------------------------
Richard G. Chance
Director
Date: March 9, 1999 /s/ C. Q. Chandler IV
------------------------------
C. Q. Chandler IV
Director
Date: March 9, 1999 /s/ George T. Chandler
------------------------------
George T. Chandler
Director
Date: March 9, 1999 /s/ Stephen L. Clark
------------------------------
Stephen L. Clark
Director
Date: March 9, 1999 /s/ R. L. Darmon
------------------------------
R. L. Darmon
Director
Date: March 9, 1999 /s/ Charles W. Dieker
------------------------------
Charles W. Dieker
Director
Date: March 9, 1999 /s/ Martin K. Eby, Jr.
------------------------------
Martin K. Eby Jr.
Director
Date: March 9, 1999 /s/ Richard M. Kerschen
------------------------------
Richard M. Kerschen
Director
Date: March 9, 1999 /s/ Thomas D. Kitch
------------------------------
Thomas D. Kitch
Director
Date: March 9, 1999 /s/ Eric T. Knorr
------------------------------
Eric T. Knorr
Director
Date: March 9, 1999
------------------------------
Charles G. Koch
Director
Date: March 9, 1999 /s/ J. V. Lentell
------------------------------
J. V. Lentell
Director
Date: March 9, 1999 /s/ William B. Moore
------------------------------
William B. Moore
Director
Date: March 9, 1999 /s/ Paul A. Seymour, Jr.
------------------------------
Paul A. Seymour, Jr.
Director
Date: March 9, 1999 /s/ Donald C. Slawson
------------------------------
Donald C. Slawson
Director
Date: March 9, 1999 /s/ John T. Stewart III
------------------------------
John T. Stewart III
Director
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants which have not Registered Securities Pursuant to
Section 12 of the Act. Concurrently with the filing of this Form 10-K,
Registrant is furnishing the Commission, for its information, four copies of
INTRUST Financial Corporation's Annual Report to Shareholders.
<PAGE>
INDEX TO EXHIBITS
EXHIBIT # DESCRIPTION
- --------- -----------
4(b) Amended and Restated Trust Agreement (Trust Preferred Securities)
4(c) Indenture (Trust Preferred Securities)
4(d) Guaranty Agreement (Trust Preferred Securities)
4(e) Agreement as to Expenses and Liabilities (Trust Preferred Securities)
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
27 Financial Data Schedule
EXHIBIT 4(b)
=====================================================================
INTRUST CAPITAL TRUST
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
INTRUST FINANCIAL CORPORATION, AS DEPOSITOR
STATE STREET BANK AND TRUST COMPANY, AS PROPERTY TRUSTEE
WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE,
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF JANUARY 21, 1998
==================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINED TERMS.......................................................2
Section 101. Definitions...................................................2
ARTICLE II ESTABLISHMENT OF THE TRUST.........................................10
Section 201. Name.........................................................10
Section 202. Office of the Delaware Trustee; Principal Place
of Business..................................................10
Section 203. Initial Contribution of Trust Property;
Organizational Expenses......................................10
Section 204. Issuance of the Preferred Securities.........................10
Section 205. Issuance of the Common Securities; Subscription
and Purchase of the Debentures...............................10
Section 206. Declaration of Trust.........................................11
Section 207. Authorization to Enter Into Certain Transactions.............11
Section 208. Assets of Trust..............................................14
Section 209. Title to Trust Property......................................14
ARTICLE III. PAYMENT ACCOUNT..................................................14
Section 301. Payment Account..............................................14
ARTICLE IV. DISTRIBUTIONS; REDEMPTION.........................................15
Section 401. Distributions................................................15
Section 402. Redemption...................................................16
Section 403. Subordination of the Common Securities.......................17
Section 404. Payment Procedures...........................................17
Section 405. Tax Returns and Reports......................................17
Section 406. Payment of Taxes, Duties, Etc. of the Trust..................17
Section 407. Payments under the Indenture.................................17
ARTICLE V. THE TRUST SECURITIES CERTIFICATES..................................17
Section 501. Initial Ownership............................................17
Section 502. The Trust Securities Certificates............................17
Section 503. Execution, Authentication and Delivery of the
Trust Securities Certificates................................18
Section 504. Registration of Transfer and Exchange of the
Preferred Securities Certificates............................18
Section 505. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates......................................20
Section 506. Persons Deemed the Securityholders...........................20
Section 507. Access to List of the Securityholders'Names
and Addresses................................................20
Section 508. Maintenance of Office or Agency..............................20
Section 509. Appointment of the Paying Agent..............................21
Section 510. Ownership of the Common Securities by the Depositor..........21
Section 511. The Preferred Securities Certificates........................21
Section 512. [Intentionally Omitted]......................................22
Section 513. [Intentionally Omitted]......................................22
Section 514. Rights of the Securityholders................................22
ARTICLE VI. ACTS OF THE SECURITYHOLDERS; MEETINGS; VOTING.....................22
Section 601. Limitations on Voting Rights.................................22
Section 602. Notice of Meetings...........................................23
Section 603. Meetings of the Preferred Securityholders....................24
Section 604. Voting Rights................................................24
Section 605. Proxies, Etc.................................................24
Section 606. Securityholder Action by Written Consent.....................24
Section 607. Record Date for Voting and Other Purposes....................24
Section 608. Acts of the Securityholders..................................25
Section 609. Inspection of Records........................................26
ARTICLE VII. REPRESENTATIONS AND WARRANTIES...................................26
Section 701. Representations and Warranties of the Bank and
the Property Trustee.........................................26
Section 702. Representations and Warranties of the Delaware
Bank and the Delaware Trustee................................27
Section 703. Representations and Warranties of the Depositor..............28
ARTICLE VIII TRUSTEES........................................................28
Section 801. Certain Duties and Responsibilities..........................28
Section 802. Certain Notices..............................................29
Section 803. Certain Rights of the Property Trustee.......................30
Section 804. Not Responsible for Recitals or Issuance of Securities.......32
Section 805. May Hold Securities..........................................32
Section 806. Compensation; Indemnity; Fees................................32
Section 807. Corporate Property Trustee Required; Eligibility
of Trustees..................................................33
Section 808. Conflicting Interests........................................33
Section 809. Co-Trustees and Separate Trustee.............................33
Section 810. Resignation and Removal; Appointment of Successor............34
Section 811. Acceptance of Appointment by Successor.......................36
Section 812. Merger, Conversion, Consolidation or Succession
to Business..................................................36
Section 813. Preferential Collection of Claims Against
Depositor or Trust...........................................36
Section 814. Reports by the Property Trustee..............................37
Section 815. Reports to the Property Trustee..............................37
Section 816. Evidence of Compliance with Conditions Precedent.............37
Section 817. Number of Trustees...........................................37
Section 818. Delegation of Power..........................................38
Section 819. Voting.......................................................38
ARTICLE IX. TERMINATION, LIQUIDATION AND MERGER...............................38
Section 901. Termination upon Expiration Date.............................38
Section 902. Early Termination............................................38
Section 903. Termination..................................................38
Section 904. Liquidation..................................................39
Section 905. Mergers, Consolidations, Amalgamations or
Replacements of the Trust....................................40
ARTICLE X. MISCELLANEOUS PROVISIONS...........................................41
Section 1001. Limitation of Rights of the Securityholders.................41
Section 1002. Amendment...................................................41
Section 1003. Separability................................................43
Section 1004. Governing Law...............................................43
Section 1005. Payments Due on Non-Business Day............................43
Section 1006. Successors..................................................43
Section 1007. Headings....................................................43
Section 1008. Reports, Notices and Demands................................43
Section 1009. Agreement not to Petition...................................44
Section 1010. Trust Indenture Act; Conflict with Trust Indenture Act......44
Section 1011. Acceptance of Terms of the Trust Agreement,
the Guarantee and the Indenture.............................45
EXHIBITS
Exhibit A Certificate of Trust
Exhibit B [Intentionally Omitted]
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
<PAGE>
CROSS-REFERENCE TABLE
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
310(a)(1)....................................................................807
310(a)(2)....................................................................807
310(a)(3)....................................................................807
310(a)(4).............................................................207(a)(ii)
310(b).......................................................................808
311(a).......................................................................813
311(b).......................................................................813
312(a).......................................................................507
312(b).......................................................................507
312(c).......................................................................507
313(a)....................................................................814(a)
313(a)(4).................................................................814(b)
313(b)....................................................................814(b)
313(c)......................................................................1008
313(d)....................................................................814(c)
314(a).......................................................................815
314(b)............................................................Not Applicable
314(c)(1)....................................................................816
314(c)(2)....................................................................816
314(c)(3).........................................................Not Applicable
314(d)............................................................Not Applicable
314(e)..................................................................101, 816
315(a)............................................................801(a), 803(a)
315(b).................................................................802, 1008
315(c)....................................................................801(a)
315(d)..................................................................801, 803
316(a)(2).........................................................Not Applicable
316(b)............................................................Not Applicable
316(c).......................................................................607
317(a)(1).........................................................Not Applicable
317(a)(2).........................................................Not Applicable
317(b).......................................................................509
318(a)......................................................................1010
Note:This Cross-Reference Table does not constitute part of this Agreement and
shall not affect any interpretation of any of its terms or provisions.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of January 21, 1998,
among (a) INTRUST FINANCIAL CORPORATION, a Kansas corporation (including any
successors or assigns, the "Depositor"), (b) STATE STREET BANK AND TRUST
COMPANY, a trust company duly organized and existing under the laws of the
Commonwealth of Massachusetts, as property trustee (the "Property Trustee" and,
in its separate corporate capacity and not in its capacity as Property Trustee,
the "Bank"), (c)WILMINGTON TRUST COMPANY, a Delaware banking corporation duly
organized and existing under the laws of the State of Delaware, as Delaware
trustee (the "Delaware Trustee," and, in its separate corporate capacity and not
in its capacity as Delaware Trustee, the "Delaware Bank"), (d) C. Q. Chandler
IV, an individual, Jay L. Smith, an individual, and Brian E. Sullivan, an
individual, each of whose address is c/o INTRUST Financial Corporation, 105
North Main Street, Box One, Wichita, Kansas 67202 (each an "Administrative
Trustee" and collectively the "Administrative Trustees") (the Property Trustee,
the Delaware Trustee and the Administrative Trustees referred to collectively as
the "Trustees"), and (e) the several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, and C. Q. Chandler IV,
Jay L. Smith and Brian E. Sullivan, each as an Administrative Trustee, have
heretofore duly declared and established a business trust pursuant to the
Delaware Business Trust Act (as hereinafter defined) by the entering into of
that certain Trust Agreement, dated as of November 19, 1997 (the "Original Trust
Agreement"), and by the execution and filing by the Delaware Trustee, the
Depositor and the Administrative Trustees with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on November 19, 1997, the
form of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Delaware Trustee, the Property Trustee and
the Administrative Trustees desire to amend and restate the Original Trust
Agreement in its entirety as set forth herein to provide for, among other
things, (a) the issuance of the Common Securities (as defined herein) by the
Trust (as defined herein) to the Depositor; (b) the issuance and sale of the
Preferred Securities (as defined herein) by the Trust pursuant to the
Underwriting Agreement (as defined herein); (c) the acquisition by the Trust
from the Depositor of all of the right, title and interest in the Debentures (as
defined herein); and (d) the appointment of the Trustees;
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 Securityholders (as defined herein),
hereby amends and restates the Original Trust Agreement in its entirety and
agrees as follows:
ARTICLE I.
DEFINED TERMS
Section 101. 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 I have the meanings assigned
to them in this Article I and include the plural as well as the singular;
(b)......all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c)......unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d)......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.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of additional interest
accrued on interest in arrears and paid by the Depositor on a Like Amount of
Debentures for such period.
"Additional Payments" has the meaning specified in Section 1.1 of the
Indenture.
"Administrative Trustee" means each of C. Q. Chandler IV, Jay L. Smith
and Brian E. Sullivan, solely in his or her capacity as Administrative Trustee
of the Trust formed and continued hereunder and not in his or her individual
capacity, or such Administrative Trustee's successor in interest in such
capacity, or any successor trustee appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Preferred Securities appointed by the Property Trustee pursuant to
Section 503.
"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 adjudging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of or in respect
of such Person under the United States Bankruptcy Code of 1978, as amended, or
any other similar applicable federal or state law, and the continuance of any
such decree or order unvacated and unstayed for a period of 90 days; or the
commencement of an involuntary case under the United States Bankruptcy Code of
1978, as amended, in respect of such Person, which shall continue undismissed
for a period of 90 days or entry of an order for relief in such case; or the
entry of a decree or order of a court having jurisdiction in the premises for
the appointment on the ground of insolvency or bankruptcy of a receiver,
custodian, liquidator, trustee or assignee in bankruptcy or insolvency of such
Person or of its property, or for the winding up or liquidation of its affairs,
and such decree or order shall have remained in force unvacated and unstayed for
a period of 90 days; or
(b)......the institution by such Person of proceedings to be
adjudicated a voluntary bankrupt, or the consent by such Person to the filing of
a bankruptcy proceeding against it, or the filing by such Person of a petition
or answer or consent seeking liquidation or reorganization under the United
States Bankruptcy Code of 1978, as amended, or other similar applicable Federal
or State law, or the consent by such Person to the filing of any such petition
or to the appointment on the ground of insolvency or bankruptcy of a receiver or
custodian or liquidator or trustee or assignee in bankruptcy or insolvency of
such Person or of its property, or shall make a general assignment for the
benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"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 appropriate Trustee.
"Business Day" means any day other than a Saturday or Sunday or a day
on which federal or state banking institutions in the Borough of Manhattan, the
City of New York are authorized or required by law, executive order or
regulation to close, or a day on which the Corporate Trust Office of the
Property Trustee or the Corporate Trust Office of the Debenture Trustee is
closed for business.
"Certificate of Trust" means the certificate of trust filed with the
Secretary of State of the State of Delaware with respect to the Trust, as
amended or restated from time to time.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"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 Security" means an undivided beneficial interest in the assets
of the Trust, having a Liquidation Amount of $25 and having the rights provided
therefor in this Trust Agreement, including the right to receive Distributions
and a Liquidation Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means the office at which, at any particular
time, the corporate trust business of the Property Trustee or the Debenture
Trustee, as the case may be, shall be principally administered, which office at
the date hereof, in each such case, is located at Two International Place, 4th
Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Department.
"Debenture Event of Default" means an "Event of Default" as defined in
Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Trustee" means State Street Bank and Trust Company, a
banking corporation organized under the laws of the Commonwealth of
Massachusetts and any successor thereto, as trustee under the Indenture.
"Debentures" means the $59,278,375 aggregate principal amount of the
Depositor's 8.24% Subordinated Debentures due 2028, issued pursuant to the
Indenture.
"Delaware Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may be amended from
time to time.
"Delaware Trustee" means the commercial bank or trust company
identified as the "Delaware Trustee" in the Preamble to this Trust Agreement
solely in its capacity as Delaware Trustee of the Trust formed and continued
hereunder and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the Preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 401(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401.
"Early Termination Event" has the meaning specified in Section 902.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a)......the occurrence of a Debenture Event of Default; or
(b)......default by the Trust or the Property Trustee in the payment of
any Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(c)......default by the Trust or the Property Trustee in the payment of
any Redemption Price of any Trust Security when it becomes due and payable; or
(d)......default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in this 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 defaulting Trustee or Trustees 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
(e)......the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a successor
Property Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
between the Depositor and the Trust, substantially in the form attached as
Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extension Period" has the meaning specified in Section 4.1 of the
Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement executed
and delivered by the Depositor and State Street Bank and 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.
"Indenture" means the Indenture, dated as of January 21, 1998, between
the Depositor and the Debenture Trustee, as trustee, as amended or supplemented
from time to time pertaining to the Debentures of the Depositor.
"Investment Company Act," means the Investment Company Act of 1940, as
amended, as in effect at the date of execution of this instrument.
"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 the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture and the proceeds of which shall be used to pay the Redemption Price of
such Trust Securities; and (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a termination or liquidation of
the Trust, Debentures having a principal amount equal to the Liquidation Amount
of the Trust Securities of the Holder to whom such Debentures are distributed.
Each Debenture distributed pursuant to clause (b) above shall carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Debenture.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be
distributed to Holders of Trust Securities in connection with a termination and
liquidation of the Trust pursuant to Section 904(a).
"Liquidation Distribution" has the meaning specified in Section 904(d).
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the appropriate Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 816
shall be the principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Trust Agreement shall include:
(a)......a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b)......a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c)......a statement that each such officer has made such examination
or investigation as, in such Officers' 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 an opinion in writing of legal counsel, who
may be counsel for the Trust, the Property Trustee, the Delaware Trustee or the
Depositor, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the Recitals to
this Trust Agreement.
"Outstanding", when used with respect to the Preferred Securities,
means, as of the date of determination, all of the Preferred Securities
theretofore executed and delivered under this Trust Agreement, except:
(a)......the Preferred Securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b)......the Preferred 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 Preferred Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Trust Agreement; and
(c)......the Preferred Securities which have been paid or in exchange
for or in lieu of which other Preferred Securities have been executed and
delivered pursuant to Sections 504, 505 and 511; 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, the Preferred Securities owned
by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee
shall be disregarded and deemed not to be Outstanding, except that (i) in
determining whether any Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only the
Preferred Securities that such Trustee knows to be so owned shall be so
disregarded; and (ii) 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
Trustees and/or any such Affiliate. The 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 Administrative Trustees the pledgee's
right so to act with respect to such Preferred Securities and the pledgee is not
the Depositor or any other Obligor upon the Preferred Securities or a Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Depositor or any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Debentures shall be held and from which the Property Trustee
shall make payments to the Securityholders in accordance with Sections 401 and
402.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided beneficial interest in the
assets of the Trust, having a Liquidation Amount of $25 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Preferred Securities Certificate", means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
E.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee," in the Preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore 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 Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, paid by the Depositor upon the concurrent
redemption of a Like Amount of Debentures, allocated on a pro rata basis (based
on Liquidation Amounts) among the Trust Securities.
"Relevant Trustee" shall have the meaning specified in Section 810.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security is or Trust Securities are registered in the Securities Register; any
such Person is a beneficial owner within the meaning of the Delaware Business
Trust Act.
"Trust" means the Delaware business trust created and continued hereby
and identified on the cover page to this Trust Agreement.
"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 all exhibits hereto, including, for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of the
Property Trustee under the Guarantee; (c) any cash on deposit in, or owing to,
the Payment Account; and (d) 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 Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
"Underwriter" means Stifel, Nicolaus & Company, Incorporated having its
business address at 500 North Broadway, St. Louis, Missouri 63102.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
January 14, 1998, among the Trust, the Depositor and the Underwriter.
ARTICLE II.
ESTABLISHMENT OF THE TRUST
Section 201. Name. The Trust created and continued hereby shall be
known as "INTRUST Capital Trust," as such name may be modified from time to time
by the Administrative Trustees following written notice to the Holders of Trust
Securities and the other Trustees, in which name the Trustees may engage in the
transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 202. Office of the Delaware Trustee; Principal Place of
Business. The address of the Delaware Trustee in the State of Delaware is c/o
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or
such other address in the State of Delaware as the Delaware Trustee may
designate by written notice to the Securityholders and the Depositor. The
principal executive office of the Trust is c/o INTRUST Financial Corporation,
105 North Main Street, Box One, Wichita, Kansas 67202, Attention: Chief
Executive Officer.
Section 203. Initial Contribution of Trust Property; Organizational
Expenses. The Trustees acknowledge receipt in trust from the Depositor in
connection with the Original Trust Agreement of the sum of $25, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Trust as they arise or shall, upon request of any Trustee,
promptly reimburse such Trustee for any such expenses paid by such Trustee. The
Depositor shall make no claim upon the Trust Property for the payment of such
expenses.
Section 204. Issuance of the Preferred Securities. On January 14, 1998,
the Depositor and an Administrative Trustee, on behalf of the Trust and pursuant
to the Original Trust Agreement, executed and delivered the Underwriting
Agreement. Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall execute in
accordance with Section 502, and deliver in accordance with the Underwriting
Agreement, Preferred Securities Certificates, registered in the name of the
Persons entitled thereto, in an aggregate amount of 2,300,000 Preferred
Securities having an aggregate Liquidation Amount of $57,500,000 against receipt
of the aggregate purchase price of such Preferred Securities of $57,500,000,
which amount such Administrative Trustee shall promptly deliver to the Property
Trustee.
Section 205. Issuance of the Common Securities; Subscription and
Purchase of the Debentures.
(a)......Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver to the Depositor, Common
Securities Certificates, registered in the name of the Depositor, in an
aggregate amount of 71,135 Common Securities having an aggregate Liquidation
Amount of $1,778,375 against payment by the Depositor of such amount.
Contemporaneously therewith, an Administrative Trustee, on behalf of the Trust,
shall subscribe to and purchase from the Depositor Debentures, registered in the
name of the Property Trustee on behalf of the Trust and having an aggregate
principal amount equal to $59,278,375, and, in satisfaction of the purchase
price for such Debentures, the Property Trustee, on behalf of the Trust, shall
deliver to the Depositor the sum of $59,278,375.
Section 206. Declaration of Trust. The exclusive purposes and functions
of the Trust are (a) to issue and sell Trust Securities and use the proceeds
from such sale to acquire the Debentures; and (b) to engage in those activities
necessary, convenient or incidental thereto. The Depositor hereby appoints the
Trustees as trustees of the Trust, to have all the rights, powers and duties to
the extent set forth herein, and the Trustees hereby accept such appointment.
The Property Trustee hereby declares that it shall hold the Trust Property in
trust upon and subject to the conditions set forth herein for the benefit of the
Securityholders. The Administrative Trustees shall have all rights, powers and
duties set forth herein and in accordance with applicable law with respect to
accomplishing the purposes of the Trust. The Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of the Trustees of
the Trust for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Delaware Business Trust Act.
Section 207. Authorization to Enter Into Certain Transactions.
(a)......The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section 207 and Article VIII, and in
accordance with the following provisions (i) and (ii), the Administrative
Trustees shall have the authority to enter into all transactions and agreements
determined by the Administrative Trustees to be appropriate in exercising the
authority, express or implied, otherwise granted to the Administrative Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including without limitation, the following:
(i) As among the Trustees, each Administrative Trustee, acting
singly or jointly, shall have the power and authority to act on behalf
of the Trust with respect to the following matters:
(A) the issuance and sale of the Trust Securities;
(B) to cause the Trust to enter into, and to execute,
deliver and perform on behalf of the Trust, the Expense
Agreement and such other agreements or documents as may be
necessary or desirable in connection with the purposes and
function of the Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act of 1933, as amended, and
under state securities or blue sky laws, and the qualification
of this Trust Agreement as a trust indenture under the Trust
Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon the American Stock Exchange, Inc. or such
securities exchange or exchanges as shall be determined by the
Depositor and the registration of the Preferred Securities
under the Exchange Act, and the preparation and filing of all
periodic and other reports and other documents pursuant to the
foregoing;
(E) the sending of notices (other than notices of
default) and other information regarding the Trust Securities
and the Debentures to the Securityholders in accordance with
this Trust Agreement;
(F) the appointment of a Paying Agent, Authenticating
Agent and Securities Registrar in accordance with this Trust
Agreement;
(G) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust
and the preparation, execution and filing of the certificate
of cancellation with the Secretary of State of the State of
Delaware;
(H) to take all action that may be necessary or
appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges as
a statutory business trust under the laws of the State of
Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the
Holders of the Preferred Securities or to enable the Trust to
effect the purposes for which the Trust was created; and
(I) the taking of any action incidental to the
foregoing as the Administrative Trustees may from time to time
determine is necessary or advisable to give effect to the
terms of this Trust Agreement for the benefit of the
Securityholders (without consideration of the effect of any
such action on any particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall have
the power, duty and authority to act on behalf of the Trust with
respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any
other payments made in respect of the Debentures in the
Payment Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in
accordance with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures
to the Securityholders in accordance with this Trust
Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust;
(I) after an Event of Default, the taking of any
action incidental to the foregoing as the Property Trustee may
from time to time determine is necessary or advisable to give
effect to the terms of this Trust Agreement and protect and
conserve the Trust Property for the benefit of the
Securityholders (without consideration of the effect of any
such action on any particular Securityholder);
(J) registering transfers of the Trust Securities in
accordance with this Trust Agreement; and
(K) except as otherwise provided in this Section
207(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the
Administrative Trustees set forth in Section 207(a)(i).
(b)......So long as this Trust Agreement remains in effect, the Trust
(or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Trustees shall not (i) acquire any
investments or engage in any activities not authorized by this 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
Securityholders, except as expressly provided herein; (iii) take any action that
would cause the Trust to fail or cease to qualify as a "grantor trust" 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
Administrative Trustees shall defend all claims and demands of all Persons at
any time claiming any Lien on any of the Trust Property adverse to the interest
of the Trust or the Securityholders in their capacity as Securityholders.
(c)......In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on the appropriate form in relation to the Preferred
Securities and the Debentures, including any amendments thereto;
(ii) the determination of the States in which to take
appropriate action to qualify or register for sale all or part of the
Preferred Securities and to do any and all such acts, other than
actions which must be taken by or on behalf of the Trust, and advise
the Trustees of actions they must take on behalf of the Trust, and
prepare for execution and filing any documents to be executed and filed
by the Trust or on behalf of the Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of
any such States;
(iii) the preparation for filing by the Trust and execution on
behalf of the Trust of an application to the American Stock Exchange,
Inc. or a national stock exchange or other organization for listing or
quotation upon notice of issuance of any Preferred Securities and to
file or cause an Administrative Trustee to file thereafter with such
exchange or organization such notifications and documents as may be
necessary from time to time;
(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a registration
statement on Form 8-A relating to the registration of the Preferred
Securities under Section 12(b) or 12(g) of the Exchange Act, including
any amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d)......Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust shall not be deemed to be
an "investment company" required to be registered under the Investment Company
Act, shall be classified as a "grantor trust" and not as an association taxable
as a corporation for United States federal income tax purposes and so that the
Debentures shall be treated as indebtedness of the Depositor for United States
federal income tax purposes. In this connection, subject to Section 1002, the
Depositor and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law or this Trust Agreement, that each of the
Depositor and the Administrative Trustees determines in their discretion to be
necessary or desirable for such purposes.
Section 208. Assets of Trust. The assets of the Trust shall consist of
the Trust Property.
Section 209. 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 Securityholders in accordance with this Trust Agreement.
ARTICLE III.
PAYMENT ACCOUNT
Section 301. Payment Account.
(a)......On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits 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 Securityholders 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 Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
Section 401. Distributions.
(a)......Distributions on the Trust Securities shall be cumulative, and
shall accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions shall accumulate from January 21, 1998,
and, except during any Extension Period with respect to the Debentures, shall be
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing on March 31, 1998. 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 (and without any interest or other payment in respect of any such
delay) with the same force and effect as if made on such date (each date on
which distributions are payable in accordance with this Section 401(a), a
"Distribution Date").
(b)......The Trust Securities represent undivided beneficial interests
in the Trust Property. Distributions on the Trust Securities shall be payable at
a rate of 8.24% per annum of the Liquidation Amount of the Trust Securities. The
amount of Distributions payable for any full period shall be computed on the
basis of a 360-day year of twelve 30-day months. The amount of Distributions for
any partial period shall be computed on the basis of the number of days elapsed
in a 360-day year of twelve 30-day months. During any Extension Period with
respect to the Debentures, Distributions on the Preferred Securities shall be
deferred for a period equal to the Extension Period. The amount of Distributions
payable for any period shall include the Additional Amounts, if any.
(c)......Distributions on the Trust Securities shall be made by the
Property Trustee solely from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
immediately available by 12:30 p.m. on each Distribution Date in the Payment
Account for the payment of such Distributions.
(d)......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 on the relevant record date, which
shall be the 15th day of the month in which the Distribution is payable.
Section 402. Redemption.
(a)......On each Debenture Redemption Date and at maturity of the
Debentures, the Trust shall 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 Securities Register. The Property
Trustee shall have no responsibility for the accuracy of any CUSIP number
contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the outstanding Trust Securities are to
be redeemed, the identification and the aggregate Liquidation Amount of
the particular Trust Securities to be redeemed; and
(v) that, on the Redemption Date, the Redemption Price shall
become due and payable upon each such Trust Security to be redeemed and
that Distributions thereon shall cease to accumulate on and after said
date.
(c)......The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of the 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 Trust has immediately available 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 of the Preferred Securities, then, by 12:00 noon, New York City
time, on the Redemption Date, subject to Section 402(c), the Property Trustee
shall deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and shall give the Paying Agent irrevocable instructions and
authority to pay the Redemption Price to the Holders thereof 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 Securities 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 Securityholders holding Trust Securities so
called for redemption shall cease, except the right of such Securityholders to
receive the Redemption Price and any Distribution payable on or prior to the
Redemption Date, but without interest, and such Trust Securities shall cease to
be Outstanding. In the event that any date on which any Redemption Price is
payable is not a Business Day, then payment of the Redemption Price payable on
such date shall be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) 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 Trust or by the
Depositor pursuant to the Guarantee, Distributions on such Trust Securities
shall continue to accumulate, at the then applicable rate, from the Redemption
Date originally established by the Trust for such Trust Securities to the date
such Redemption Price is actually paid, in which case the actual payment date
shall be the date fixed for redemption for purposes of calculating the
Redemption Price.
(e)......Payment of the Redemption Price on the Trust Securities shall
be made to the record holders thereof as they appear on the Securities Register
for the Trust Securities on the relevant record date, which shall be the date 15
days prior to the relevant Redemption Date.
(f)......Subject to Section 403(a), if less than all the Outstanding
Trust Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated on a
pro rata basis (based on Liquidation Amounts) among the Common Securities and
the Preferred Securities. 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, by such method (including, without limitation, by lot) as the
Property Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the Liquidation Amount or an
integral multiple of such Liquidation Amount in excess thereof) of the
Liquidation Amount of the Preferred Securities of a denomination larger than
such Liquidation Amount. The Property Trustee shall promptly notify the
Securities Registrar in writing of the Preferred Securities selected for
redemption and, in the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all purposes of
this Trust Agreement, unless the context otherwise requires, all provisions
relating to the redemption of the Preferred Securities shall relate, in the case
of any Preferred Securities redeemed or to be redeemed only in part, to the
portion of the Liquidation Amount of the Preferred Securities which has been or
is to be redeemed.
Section 403. Subordination of the Common Securities.
(a)......Payment of Distributions (including Additional Amounts, if
applicable) on, and the Redemption Price of, the Trust Securities, as
applicable, shall be made, subject to Section 402(f), pro rata among the Common
Securities and the Preferred Securities based on the Liquidation Amount of the
Trust Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture Event of Default
shall have occurred and be continuing, no payment of any Distribution (including
Additional Amounts, if applicable) on, or Redemption Price of, any Common
Security, and no other payment on account of the redemption, liquidation or
other acquisition of the Common Securities, shall be made unless payment in full
in cash of all accumulated and unpaid Distributions (including Additional
Amounts, if applicable) 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, shall have been
made or provided for, and all funds immediately available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable) on, or the
Redemption Price of, the Preferred Securities then due and payable.
(b)......In the case of the occurrence of any Event of Default
resulting from a Debenture Event of Default, the Holder of the Common Securities
shall be deemed to have waived any right to act with respect to any such Event
of Default under this Trust Agreement until the effect of all such Events of
Default with respect to the Preferred Securities shall have been cured, waived
or otherwise eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Preferred Securities shall 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 the Holder of the Common
Securities, and only the Holders of the Preferred Securities shall have the
right to direct the Property Trustee to act on their behalf.
Section 404. Payment Procedures. Payments of Distributions (including
Additional Amounts, if applicable) 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. Payments in respect of the
Common Securities shall be made in such manner as shall be mutually agreed
between the Property Trustee and the Common Securityholder.
Section 405. Tax Returns and Reports. The Administrative Trustees shall
prepare (or cause to be prepared), at the Depositor's expense, and file all
United States federal, state and local tax and information returns and reports
required to be filed by or in respect of the Trust. In this regard, the
Administrative Trustees shall (a) prepare and file (or cause to be prepared and
filed) the appropriate Internal Revenue Service form required to be filed in
respect of the Trust in each taxable year of the Trust; and (b) prepare and
furnish (or cause to be prepared and furnished) to each Securityholder the
appropriate Internal Revenue Service form required to be furnished to such
Securityholder or the information required to be provided on such form. The
Administrative Trustees shall provide the Depositor with a copy of all such
returns and reports promptly after such filing or furnishing. The Property
Trustee shall comply with United States federal withholding and backup
withholding tax laws and information reporting requirements with respect to any
payments to the Securityholders under the Trust Securities.
Section 406. Payment of Taxes, Duties, Etc. of the Trust. Upon receipt
under the Debentures of Additional Payments, the Property Trustee, at the
direction of an Administrative Trustee or the Depositor, shall promptly pay any
taxes, duties or governmental charges of whatsoever nature (other than
withholding taxes) imposed on the Trust by the United States or any other taxing
authority.
Section 407. Payments under the Indenture. 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 under the Indenture
pursuant to Section 514(b) or (c) hereof.
ARTICLE V.
THE TRUST SECURITIES CERTIFICATES
Section 501. Initial Ownership. Upon the creation of the Trust and the
contribution by the Depositor pursuant to Section 203 and until the issuance of
the Trust Securities, and at any time during which no Trust Securities are
outstanding, the Depositor shall be the sole beneficial owner of the Trust.
Section 502. The Trust Securities Certificates. The Preferred
Securities Certificates shall be issued in minimum denominations of the
Liquidation Amount and integral multiples of such Liquidation Amount in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of the Liquidation Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of at least one Administrative Trustee. The Trust Securities
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefits of
this 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 Securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Sections 504 and
511.
Section 503. Execution, Authentication and Delivery of the Trust
Securities Certificates.
(a)......On the Closing Date and on the date on which the Underwriter
exercises the Option, as applicable, the Administrative Trustees shall cause the
Trust Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 204 and 205, to be executed on behalf of the Trust by the manual or
facsimile signature of at least one of the Administrative Trustees and delivered
to or upon the written order of the Depositor, signed by its Chief Executive
Officer, President, any Vice President, the Treasurer or any Assistant Treasurer
without further corporate action by the Depositor, in authorized denominations.
(b)......A Preferred Securities Certificate shall not be valid until
authenticated by the manual signature of an authorized signatory of the Property
Trustee. The signature shall be conclusive evidence that the Preferred
Securities Certificate has been authenticated under this Trust Agreement. Each
Preferred Security Certificate shall be dated the date of its authentication.
(c)......Upon the written order of the Trust signed by an
Administrative Trustee, the Property Trustee shall authenticate and make
available for delivery the Preferred Securities Certificates.
(d)......The Property Trustee may appoint an Authenticating Agent
acceptable to the Trust to authenticate the Preferred Securities. An
Authenticating Agent may authenticate the Preferred Securities whenever the
Property Trustee may do so. Each reference in this Trust Agreement to
authentication by the Property Trustee includes authentication by such agent. An
Authenticating Agent has the same rights as the Property Trustee to deal with
the Depositor or the Trust.
Section 504. Registration of Transfer and Exchange of the Preferred
Securities Certificates.
(a)......The Depositor shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 508, a register or registers for the
purpose of registering the Trust Securities Certificates and transfers and
exchanges of the Preferred Securities Certificates (herein referred to as the
"Securities Register") in which the registrar designated by the Depositor (the
"Securities Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of the Preferred Securities
Certificates and the Common Securities Certificates (subject to Section 510 in
the case of the Common Securities Certificates) and registration of transfers
and exchanges of the Preferred Securities Certificates as herein provided. The
Property Trustee shall be the initial Securities Registrar.
(b)......Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to Section
508, the Administrative Trustees or any one of them shall execute and deliver,
in the name of the designated transferee or transferees, one or more new
Preferred Securities Certificates in authorized denominations of a like
aggregate Liquidation Amount dated the date of execution by the manual or
facsimile signature of such Administrative Trustee or Trustees. The Securities
Registrar shall not be required to register the transfer of any of the Preferred
Securities that have been called for redemption. At the option of a Holder, the
Preferred Securities Certificates may be exchanged for other Preferred
Securities Certificates in authorized denominations of the same class and of a
like aggregate Liquidation Amount upon surrender of the Preferred Securities
Certificates to be exchanged at the office or agency maintained pursuant to
Section 508.
(c)......Every Preferred Securities Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the Property Trustee and
the Securities Registrar duly executed by the Holder or his attorney duly
authorized in writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently disposed
of by the Property Trustee in accordance with its customary practice. The Trust
shall not be required to (i) issue, register the transfer of, or exchange any of
the Preferred Securities during a period beginning at the opening of business 15
calendar days before the date of mailing of a notice of redemption of any of the
Preferred Securities called for redemption and ending at the close of business
on the day of such mailing; or (ii) register the transfer of or exchange any of
the Preferred Securities so selected for redemption, in whole or in part, except
the unredeemed portion of any such Preferred Securities being redeemed in part.
(d)......No service charge shall be made for any registration of
transfer or exchange of Preferred Securities Certificates, but the Securities
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of the Preferred Securities Certificates.
Section 505. 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, the Property Trustee and the Administrative Trustees such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrative Trustees, or any one of
them, on behalf of the Trust shall execute and make available for delivery, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Securities Certificate, a new Trust Securities Certificate of like class, tenor
and denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section 505, the Administrative Trustees or the
Securities Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Securities Certificate issued pursuant to this Section 505
shall constitute conclusive evidence of an undivided beneficial interest in the
assets of the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Trust Securities Certificate shall be found at any time.
Section 506. Persons Deemed the Securityholders. The Trustees, the
Paying Agent and the Securities Registrar shall treat the Person in whose name
any Trust Securities Certificate shall be registered in the Securities Register
as the owner of such Trust Securities Certificate for the purpose of receiving
Distributions and for all other purposes whatsoever, and neither the Trustees
nor the Securities Registrar shall be bound by any notice to the contrary.
Section 507. Access to List of the Securityholders' Names and
Addresses. At any time when the Property Trustee is not also acting as the
Securities Registrar, the Administrative Trustees or the Depositor shall furnish
or cause to be furnished to the Property Trustee (a) semi-annually on or before
January 15 and July 15 in each year, a list, in such form as the Property
Trustee may reasonably require, of the names and addresses of the
Securityholders as of the most recent record date; and (b) promptly after
receipt by any Administrative Trustee or the Depositor of a request therefor
from the Property Trustee in order to enable the Property Trustee to discharge
its obligations under this Trust Agreement, in each case to the extent such
information is in the possession or control of the Administrative Trustees or
the Depositor and is not identical to a previously supplied list or has not
otherwise been received by the Property Trustee in its capacity as Securities
Registrar. The rights of the Securityholders to communicate with other
Securityholders with respect to their rights under this Trust Agreement or under
the Trust Securities, and the corresponding rights of the Trustee shall be as
provided in the Trust Indenture Act. Each Holder, by receiving and holding a
Trust Securities Certificate, and each owner shall be deemed to have agreed not
to hold the Depositor, the Property Trustee or the Administrative Trustees
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
Section 508. Maintenance of Office or Agency. The Administrative
Trustees shall maintain in a location or locations designated by the
Administrative Trustees, an office or offices or agency or agencies where the
Preferred Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustees in
respect of the Trust Securities Certificates may be served. The Administrative
Trustees initially designate the Corporate Trust Office of the Property Trustee,
Two International Place, 4th Floor, Boston, Massachusetts 02110, as the
principal corporate trust office for such purposes. The Administrative Trustees
shall give prompt written notice to the Depositor and to the Securityholders of
any change in the location of the Securities Register or any such office or
agency.
Section 509. Appointment of the Paying Agent. The Paying Agent shall
initially be the Property Trustee, and any co-paying agent chosen by the
Property Trustee must be acceptable to the Administrative Trustees and the
Depositor. The Paying Agent shall make Distributions to the Securityholders from
the Payment Account and shall report the amounts of such Distributions to the
Property Trustee and the Administrative Trustees. Any Paying Agent shall have
the revocable power to withdraw funds from the Payment Account for the purpose
of making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. Any Person
acting as Paying Agent shall be permitted to resign as Paying Agent upon 30
days' written notice to the Administrative Trustees, the Property Trustee and
the Depositor. In the event that the Property Trustee shall no longer be the
Paying Agent or a successor Paying Agent shall resign or its authority to act be
revoked, the Administrative Trustees shall appoint a successor that is
acceptable to the Property Trustee and the Depositor to act as the Paying Agent
(which shall be a bank or trust company). The Administrative Trustees shall
cause such successor Paying Agent or any additional Paying Agent appointed by
the Administrative Trustees to execute and deliver to the Trustees an instrument
in which such successor Paying Agent or additional Paying Agent shall agree with
the Trustees that as Paying Agent, such successor Paying Agent or additional
Paying Agent shall hold all sums, if any, held by it for payment to the
Securityholders in trust for the benefit of the Securityholders entitled thereto
until such sums shall be paid to such Securityholders. The Paying Agent shall
return all unclaimed funds to the Property Trustee and, upon removal of a Paying
Agent, such Paying Agent shall also return all funds in its possession to the
Property Trustee. The provisions of Sections 801, 803 and 806 shall apply to the
Property Trustee also in its role as the Paying Agent, for so long as the
Property Trustee 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 unless the context requires
otherwise.
Section 510. Ownership of the Common Securities by the Depositor. On
the Closing Date, the Depositor shall acquire and retain beneficial and record
ownership of the Common Securities. To the fullest extent permitted by law, any
attempted transfer of the Common Securities (other than a transfer in connection
with a merger or consolidation of the Depositor into another corporation
pursuant to Section 12.1 of the Indenture) shall be void. The Administrative
Trustees shall cause each Common Securities Certificate issued to the Depositor
to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE".
Section 511. The Preferred Securities Certificates.
(a)......Each owner shall receive a Preferred Securities Certificate
representing such owner's interest in such Preferred Securities. Upon the
issuance of the Preferred Securities Certificates, the Trustees shall recognize
the record holders of the Preferred Securities Certificates as the
Securityholders. The Preferred Securities Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Administrative Trustees, as evidenced by the execution thereof
by the Administrative Trustees or any one of them.
(b)......A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
Section 512. [Intentionally Omitted].
Section 513. [Intentionally Omitted].
Section 514. Rights of the Securityholders.
(a)......The legal title to the Trust Property is vested exclusively in
the Property Trustee (in its capacity as such) in accordance with Section 209,
and the Securityholders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Trust Securities and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights. When issued and delivered to Holders
of the Preferred Securities against payment of the purchase price therefor, the
Preferred Securities shall be fully paid and nonassessable interests in the
Trust. The Holders of the Preferred 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.
(b)......For so long as any of the 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
Debentures fail to declare the principal of all of the 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 by a notice
in writing to the Depositor and the Debenture Trustee; and upon any such
declaration such principal amount of and the accrued interest on all of the
Debentures shall become immediately due and payable, provided that the payment
of principal and interest on such Debentures shall remain subordinated to the
extent provided in the Indenture.
(c)......For so long as any of the Preferred Securities remain
Outstanding, upon a Debenture Event of Default arising from the failure to pay
interest or principal on the Debentures, the Holders of any of the Preferred
Securities then Outstanding shall, to the fullest extent permitted by law, have
the right to directly institute proceedings for enforcement of payment to such
Holders of principal of or interest on the Debentures having a principal amount
equal to the Liquidation Amount of the Preferred Securities of such Holders.
ARTICLE VI.
ACTS OF THE SECURITYHOLDERS; MEETINGS; VOTING
Section 601. Limitations on Voting Rights.
(a)......Except as provided in this Section 601, in Sections 514, 810
and 1002 and in the Indenture and as otherwise set forth in the Guarantee or
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 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 Securityholders from time to time as partners
or members of an association.
(b)......So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such
Debentures; (ii) waive any past default which is waivable under Article VII of
the Indenture; (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; or (iv) consent to
any amendment, modification or termination of the Indenture or the 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 all the
Outstanding Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of outstanding Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior written consent of each Holder of the Preferred Securities. The
Trustees shall not revoke any action previously authorized or approved by a vote
of the Holders of the Outstanding Preferred Securities, except when authorized
by a subsequent vote of the Holders of the Outstanding Preferred Securities. The
Property Trustee shall notify each Holder of the Outstanding Preferred
Securities of any notice of default received from the Debenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion
of Counsel experienced in such matters to the effect that the Trust shall
continue to be classified as a grantor trust and not as an association taxable
as a corporation for United States federal income tax purposes on account of
such action.
(c)......If any proposed amendment to the Trust Agreement provides for,
or the Trustees otherwise propose to effect, (i) any action that would adversely
affect the powers, preferences or special rights of the holders of the Preferred
Securities, whether by way of amendment to the Trust Agreement or otherwise; or
(ii) the dissolution, winding-up or termination of the Trust, other than
pursuant to the terms of this Trust Agreement, then the Holders of the
Outstanding Preferred Securities as a class shall 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, with respect to matters described in
(i) above, at least 66 2/3% in Liquidation Amount of the Outstanding Preferred
Securities and with respect to matters described in (ii) above, at least a
Majority in Liquidation Amount of the Outstanding Preferred Securities. No
amendment to this Trust Agreement may be made if, as a result of such amendment,
the Trust would cease to be classified as a grantor trust or would be classified
as an association taxable as a corporation for United States federal income tax
purposes.
Section 602. Notice of Meetings. Notice of all meetings of the
Preferred Securityholders, stating the time, place and purpose of the meeting,
shall be given by the Property Trustee pursuant to Section 1008 to each
Preferred Securityholder of record, at his or her 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 603. Meetings of the Preferred Securityholders.
(a)......No annual meeting of the Securityholders is required to be
held. The Administrative Trustees, however, shall call a meeting of the
Securityholders to vote on any matter in respect of which the Preferred
Securityholders are entitled to vote upon the written request of the Preferred
Securityholders of 25% of the Outstanding Preferred Securities (based upon their
aggregate Liquidation Amount) and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of the Preferred
Securityholders to vote on any matters as to which the Preferred Securityholders
are entitled to vote.
(b)......The Preferred Securityholders of record of 50% of the
Outstanding Preferred Securities (based upon their aggregate Liquidation
Amount), present in person or by proxy, shall constitute a quorum at any meeting
of the Securityholders.
(c)......If a quorum is present at a meeting, an affirmative vote by
the Preferred Securityholders of record present, in person or by proxy, holding
more than a majority of the Preferred Securities (based upon their aggregate
Liquidation Amount) held by the Preferred Securityholders of record present,
either in person or by proxy, at such meeting shall constitute the action of the
Securityholders, unless this Trust Agreement requires a greater number of
affirmative votes.
Section 604. Voting Rights. The Securityholders shall be entitled to
one vote for each dollar value of Liquidation Amount represented by their Trust
Securities in respect of any matter as to which such Securityholders are
entitled to vote (and such dollar value shall be $25 per Preferred Security
until such time, if any, as the Liquidation Amount is changed as provided
herein).
Section 605. Proxies, Etc. At any meeting of the Securityholders, any
Securityholder entitled to vote thereat may vote by proxy, provided that no
proxy, shall be voted at any meeting unless it shall have been placed on file
with the Administrative Trustees, or with such other officer or agent of the
Trust as the Administrative Trustees may direct, for verification prior to the
time at which such vote shall be taken. When Trust Securities are held jointly
by several persons, any one of them may vote at any meeting in person or by
proxy in respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be executed
by or on behalf of a Securityholder shall be deemed valid unless challenged at
or prior to its exercise, and, the burden of proving invalidity shall rest on
the challenger. No proxy shall be valid more than three years after its date of
execution.
Section 606. Securityholder Action by Written Consent. Any action which
may be taken by the Securityholders at a meeting may be taken without a meeting
if the Securityholders holding more than a majority of all of the Outstanding
Trust Securities (based upon their aggregate Liquidation Amount) entitled to
vote in respect of such action (or such larger proportion thereof as shall be
required by any express provision of this Trust Agreement) shall consent to the
action in writing.
Section 607. Record Date for Voting and Other Purposes. For the
purposes of determining the Securityholders who are entitled to notice of and to
vote at any meeting or by written consent, or to participate in any Distribution
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 Administrative Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of the Securityholders or the payment of
Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
Section 608. Acts of the Securityholders.
(a)......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 the Securityholders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such
Securityholders in person or by an agent duly appointed in writing; and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders
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 801) conclusive in favor
of the Trustees, if made in the manner provided in this Section 608.
(b)......The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Where such execution is by a signer acting in a capacity other than his or her
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his or her 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 Trustee receiving the
same deems sufficient.
(c)......The ownership of the Preferred Securities shall be proved by
the Securities Register.
(d)......Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Trust Security shall
bind every future Securityholder of the same Trust Security and the
Securityholder of every Trust Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustees or the Trust in reliance thereon,
whether or not notation of such action is made upon such Trust Security.
(e)......Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the Liquidation Amount of
such Trust Security or by one or more duly appointed agents each of which may do
so pursuant to such appointment with regard to all or any part of such
Liquidation Amount.
(f)......A Securityholder may institute a legal proceeding directly
against the Depositor under the Guarantee to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee (as defined in the Guarantee), the Trust or any Person.
Section 609. Inspection of Records. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust shall
be open to inspection and copying by any Securityholder and its authorized
representatives during normal business hours for any purpose reasonably related
to such Securityholder's interest as a Securityholder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
Section 701. Representations and Warranties of the Bank and the
Property Trustee. The Bank and the Property Trustee, each severally on behalf of
and as to itself, as of the date hereof, and each successor Property Trustee at
the time of the successor Property Trustee's acceptance of its appointment as
Property Trustee hereunder (the term "Bank" being used to refer to such
successor Property Trustee in its separate corporate capacity) hereby represents
and warrants (as applicable) for the benefit of the Depositor and the
Securityholders that:
(a)......the Bank is a trust company duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation;
(b)......the Bank has full corporate power, authority and legal right
to execute, deliver and perform its obligations under this Trust Agreement and
has taken all necessary action to authorize the execution, delivery and
performance by it of this Trust Agreement;
(c)......this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and constitutes the valid and legally binding
agreement of the Property Trustee enforceable against it in accordance with its
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;
(d)......the execution, delivery and performance by the Property
Trustee of this Trust Agreement has been duly authorized by all necessary
corporate or other action on the part of the Property Trustee and does not
require any approval of stockholders of the Bank and such execution, delivery
and performance shall not (i) violate the Bank's charter or by-laws; (ii)
violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of, any Lien on
any properties included in the Trust Property pursuant to the provisions of, any
indenture, mortgage, credit agreement, license or other agreement or instrument
to which the Property Trustee or the Bank is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the United States or
its jurisdiction of incorporation, as the case may be, governing the banking or
trust powers of the Bank or the Property Trustee (as appropriate in context) or
any order, judgment or decree applicable to the Property Trustee or the Bank;
(e)......neither the authorization, execution or delivery by the
Property Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Property Trustee contemplated herein requires the consent or
approval of, the giving of notice to, the registration with or the taking of any
other action with respect to any governmental authority or agency under any
existing federal law governing the banking or trust powers of the Bank or the
Property Trustee, as the case may be, under the laws of the United States or its
jurisdiction of incorporation; and
(f)......there are no proceedings pending or, to the best of the
Property Trustee's knowledge, threatened against or affecting the Bank or the
Property Trustee in any court or before any governmental authority, agency or
arbitration board or tribunal which, individually or in the aggregate, would
materially and adversely affect the Trust or would question the right, power and
authority of the Property Trustee to enter into or perform its obligations as
one of the Trustees under this Trust Agreement.
Section 702. Representations and Warranties of the Delaware Bank and
the Delaware Trustee. The Delaware Bank and the Delaware Trustee, each severally
on behalf of and as to itself, as of the date hereof, and each successor
Delaware Trustee at the time of the successor Delaware Trustee's acceptance of
appointment as Delaware Trustee hereunder (the term "Delaware Bank" being used
to refer to such successor Delaware Trustee in its separate corporate capacity),
hereby represents and warrants (as applicable) for the benefit of the Depositor
and the Securityholders that:
(a)......the Delaware Bank is a Delaware banking corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(b)......the Delaware Bank has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(c)......this Trust Agreement has been duly authorized, executed and
delivered by the Delaware Trustee and constitutes the valid and legally binding
agreement of the Delaware Trustee enforceable against it in accordance with its
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;
(d)......the execution, delivery and performance by the Delaware
Trustee of this Trust Agreement has been duly authorized by all necessary
corporate or other action on the part of the Delaware Trustee and does not
require any approval of stockholders of the Delaware Bank and such execution,
delivery and performance shall not (i) violate the Delaware Bank's charter or
by-laws; (ii) violate any provision of, or constitute, with or without notice or
lapse of time, a default under, or result in the creation or imposition of, any
Lien on any properties included in the Trust Property pursuant to the provisions
of, any indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Delaware Bank or the Delaware Trustee is a party or by
which it is bound; or (iii) violate any law, governmental rule or regulation of
the United States or the State of Delaware, as the case may be, governing the
banking or trust powers of the Delaware Bank or the Delaware Trustee (as
appropriate in context) or any order, judgment or decree applicable to the
Delaware Bank or the Delaware Trustee;
(e)......neither the authorization, execution or delivery by the
Delaware Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Delaware Trustee contemplated herein or therein requires the
consent or approval of, the giving of notice to, the registration with or the
taking of any other action with respect to any governmental authority or agency
under any existing federal law governing the banking or trust powers of the
Delaware Bank or the Delaware Trustee, as the case may be, under the laws of the
United States or the State of Delaware; and
(f)......there are no proceedings pending or, to the best of the
Delaware Trustee's knowledge, threatened against or affecting the Delaware Bank
or the Delaware Trustee in any court or before any governmental authority,
agency or arbitration board or tribunal which, individually or in the aggregate,
would materially and adversely affect the Trust or would question the right,
power and authority of the Delaware Trustee to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
Section 703. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants for the benefit of the Securityholders
that:
(a)......the Trust Securities Certificates issued on the Closing Date
on behalf of the Trust have been duly authorized and, shall be, as of such date,
duly and validly executed, issued and delivered by the Administrative Trustees
pursuant to the terms and provisions of, and in accordance with the requirements
of, this Trust Agreement and the Securityholders shall be, as of such date,
entitled to the benefits of this Trust Agreement; and
(b)......there are no taxes, fees or other governmental charges payable
by the Trust (or the Trustees on behalf of the Trust) under the laws of the
State of Delaware or any political subdivision thereof in connection with the
execution, delivery and performance by the Bank, the Property Trustee or the
Delaware Trustee, as the case may be, of this Trust Agreement.
ARTICLE VIII.
TRUSTEES
Section 801. Certain Duties and Responsibilities.
(a)......The duties and responsibilities of the Trustees 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 Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it. No Administrative Trustee nor the Delaware Trustee shall be liable for its
act or omissions hereunder except as a result of its own gross negligence or
willful misconduct. The Property Trustee's liability shall be determined under
the Trust Indenture Act. 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 Trustees shall be subject to the
provisions of this Section 801. To the extent that, at law or in equity, the
Delaware Trustee or an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the Securityholders,
the Delaware Trustee or such Administrative Trustee shall not be liable to the
Trust or to any Securityholder for such Trustee's good faith reliance on the
provisions of this Trust Agreement. The provisions of this Trust Agreement, to
the extent that they restrict the duties and liabilities of the Delaware Trustee
or the Administrative Trustees otherwise existing at law or in equity, are
agreed by the Depositor and the Securityholders to replace such other duties and
liabilities of the Delaware Trustee and the Administrative Trustees, as the case
may be.
(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. With respect
to the relationship of each Securityholder and the Trustee, each Securityholder,
by its acceptance of a Trust Security, agrees that it shall look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees are not personally
liable to it for any amount distributable in respect of any Trust Security or
for any other liability in respect of any Trust Security. This Section 801(b)
does not limit the liability of the Trustees expressly set forth elsewhere in
this Trust Agreement or, in the case of the Property Trustee, in the Trust
Indenture Act.
(c)......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:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
majority in Liquidation Amount of the Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the 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;
(iv) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree with the
Depositor and money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
maintained by the Property Trustee pursuant to Section 301 and except
to the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for the negligence, default or
misconduct of the Administrative Trustees or the Depositor.
Section 802. Certain Notices.
(a)......Within 5 Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 1008, notice of
such Event of Default to the Securityholders, the Administrative Trustees and
the Depositor, unless such Event of Default shall have been cured or waived. For
purposes of this Section 802, the term "Event of Default" means any event that
is, or after notice or lapse of time or both would become, an Event of Default.
(b)......The Administrative Trustees shall transmit to the
Securityholders in the manner and to the extent provided in Section 1008 notice
of the Depositor's election to begin or further extend an Extension Period on
the Debentures (unless such election shall have been revoked), and of any
election by the Depositor to extend or accelerate the Maturity Date of the
Debentures within the time specified for transmitting such notice to the holders
of the Debentures pursuant to the Indenture as originally executed.
Section 803. Certain Rights of the Property Trustee. Subject to the
provisions of Section 801:
(a)......the Property Trustee may rely and shall be protected in acting
or refraining from acting in good faith upon any resolution, Opinion of Counsel,
certificate, written representation of a Holder or transferee, certificate of
auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b)......if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of action; or
(ii) in construing any of the provisions of this Trust Agreement, the Property
Trustee finds the same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application of any
provision of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting written instructions of the Depositor as to the course of action to
be taken and the Property Trustee shall take such action, or refrain from taking
such action, as the Property Trustee shall be instructed in writing to take, or
to refrain from taking, by the Depositor; provided, however, that if the
Property Trustee does not receive such instructions of the Depositor within 10
Business Days after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent practicable shall
not be less than 2 Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Trust Agreement as
it shall deem advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for its own bad
faith, negligence or willful misconduct;
(c)......any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d)......whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established before
undertaking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e)......the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement, any filing under tax or securities laws or any filing
under tax or securities laws) or any rerecording, refiling or reregistration
thereof;
(f)......the Property Trustee may consult with counsel of its choice
(which counsel may be counsel to the Depositor or any of its Affiliates) 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, such counsel
may be counsel to the Depositor or any of its Affiliates, and may include any of
its employees; the Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Trust Agreement from any
court of competent jurisdiction;
(g)......the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request,
order or direction of any of the Securityholders, pursuant to this Trust
Agreement, unless such Securityholders shall have offered to the Property
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Property Trustee of the obligation, upon the
occurrence of an Event of Default (that has not been cured or waived) to
exercise such of the rights and powers vested in it by this Trust Agreement, and
to use the same degree of care and skill in their exercise as a prudent man
would exercise or use under the circumstances in the conduct of his own affairs;
(h)......the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by the Holders of not less
than a majority in Liquidation Amount of the Securities, but the Property
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit;
(i)......the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys, provided that the Property Trustee shall be responsible for
its own negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j)......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 of the Trust Securities
which instructions may only be given by the Holders of the same proportion in
Liquidation Amount of the Trust Securities as would be entitled to direct the
Property Trustee under the terms of the Trust Securities in respect of such
remedy, right or action; (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received; and (iii) shall
be protected in acting in accordance with such instructions; and
(k)......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 the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
Section 804. 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 Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees shall not be accountable for
the use or application by the Depositor of the proceeds of the Debentures.
Section 805. May Hold Securities. Any Trustee or any other agent of any
Trustee or the Trust, in its individual or any other capacity, may become the
owner or pledgee of the Trust Securities and, subject to Sections 808 and 813
and except as provided in the definition of the term "Outstanding" in Article I,
may otherwise deal with the Trust with the same rights it would have if it were
not a Trustee or such other agent.
Section 806. Compensation; Indemnity; Fees. The Depositor agrees:
(a)......to pay to the 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)......except as otherwise expressly provided herein, to reimburse
the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Trust Agreement (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 such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees or the
Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct); and
(c)......to indemnify each of the Trustees or any predecessor Trustee
for, and to hold the Trustees harmless against, any loss, damage, claims,
liability, penalty or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this Trust Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except any such expense, disbursement or
advance as may be attributable to such Trustee's negligence, bad faith or
willful misconduct (or, in the case of the Administrative Trustees or the
Delaware Trustee, any such expense, disbursement or advance as may be
attributable to its, his or her gross negligence, bad faith or willful
misconduct).
No Trustee may claim any Lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 806.
Section 807. Corporate Property Trustee Required; Eligibility of
Trustees.
(a)......There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
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
807, 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 807, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII.
(b)......There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more persons authorized to bind that
entity.
(c)......There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural person
who is at least 21 years of age and a resident of the State of Delaware; or (ii)
a legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity.
Section 808. Conflicting Interests. If the Property Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Property Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Trust Agreement.
Section 809. Co-Trustees and Separate Trustee.
(a)......Unless an Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property may at the time be located, the Depositor shall have power
to appoint, and upon the written request of the Property Trustee, the Depositor
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 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 809. If the Depositor does not
join in such appointment within 15 days after the receipt by it of a request so
to do, or in case a Debenture Event of Default has occurred and is continuing,
the Property Trustee alone shall have power to make such appointment. Any
co-trustee or separate trustee appointed pursuant to this Section 809 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.
(b)......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.
(c)......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:
(i) The Trust Securities shall be executed 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 Trustees specified
hereunder, shall be exercised, solely by such Trustees and not by such
co-trustee or separate trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Property Trustee or by the Property
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall
be incompetent or unqualified to perform such act, in which event such
rights, powers, duties and obligations shall be exercised and performed
by such co-trustee or separate trustee.
(iii) 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 809, and, in case a Debenture
Event of Default has occurred and is continuing, the Property Trustee
shall have the 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 809.
(iv) 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.
(v) The Property Trustee shall not be liable by reason of any
act of a co-trustee or separate trustee.
(vi) Any Act of the Holders delivered to the Property Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
Section 810. Resignation and Removal; Appointment of
Successor.
(a)......No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to this Article
VIII shall become effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of Section 811.
(b)......Subject to the immediately preceding paragraph, the Relevant
Trustee may resign at any time with respect to the Trust Securities by giving
written notice thereof to the Securityholders. If the instrument of acceptance
by the successor Trustee required by Section 811 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Depositor,
any court of competent jurisdiction for the appointment of a successor Relevant
Trustee with respect to the Trust Securities.
(c)......Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by an Act of the Common
Securityholder. If a Debenture Event of Default shall have occurred and be
continuing, the Property Trustee or the Delaware Trustee, or both of them, may
be removed at such time by an Act of the Holders of a majority in Liquidation
Amount of the Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative Trustee may
be removed by the Common Securityholder at any time.
(d)......If any Trustee shall resign, be removed or become incapable of
acting as Trustee, or if a vacancy shall occur in the office of any Trustee for
any cause, at a time when no Debenture Event of Default shall have occurred and
be continuing, the Common Securityholder, by an Act of the Common Securityholder
delivered to the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and the successor
Trustee shall comply with the applicable requirements of Section 811. If the
Property Trustee or the Delaware Trustee shall resign, be removed or become
incapable of continuing to act as the Property Trustee or the Delaware Trustee,
as the case may be, at a time when a Debenture Event of Default shall have
occurred and is continuing, the Preferred Securityholders, by an Act of the
Securityholders of a majority in Liquidation Amount of the Preferred Securities
then Outstanding delivered to the retiring Relevant Trustee, shall promptly
appoint a successor Relevant Trustee or Trustees with respect to the Trust
Securities and the Trust, and such successor Trustee shall comply with the
applicable requirements of Section 811. If an Administrative Trustee shall
resign, be removed or become incapable of acting as an Administrative Trustee,
at a time when a Debenture Event of Default shall have occurred and be
continuing, the Common Securityholder, by an Act of the Common Securityholder
delivered to an Administrative Trustee, shall promptly appoint a successor
Administrative Trustee or Administrative Trustees with respect to the Trust
Securities and the Trust, and such successor Administrative Trustee or
Administrative Trustees shall comply with the applicable requirements of Section
811. If no successor Relevant Trustee with respect to the Trust Securities shall
have been so appointed by the Common Securityholder or the Preferred
Securityholders and accepted appointment in the manner required by Section 811,
any Securityholder who has been a Securityholder of Trust Securities for six
consecutive months on behalf of himself or herself and all others similarly
situated may petition a court of competent jurisdiction for the appointment of a
successor Relevant Trustee with respect to the Trust Securities.
(e)......The Property Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all the
Securityholders in the manner provided in Section 1008 and shall give notice to
the Depositor. Each notice shall include the name of the successor Relevant
Trustee and the address of its Corporate Trust Office if it is the Property
Trustee.
(f)......Notwithstanding the foregoing or any other provision of this
Trust Agreement, in the event any Administrative Trustee or a Delaware Trustee
who is a natural person dies or becomes, in the opinion of the Depositor,
incompetent or incapacitated, the vacancy created by such death, incompetence or
incapacity may be filled by (a) the unanimous act of the remaining
Administrative Trustees if there are at least two of them; or (b) otherwise by
the Depositor (with the successor in each case being a Person who satisfies the
eligibility requirement for Administrative Trustees set forth in Section 807).
Section 811. Acceptance of Appointment by Successor.
(a)......In case of the appointment hereunder of a successor Relevant
Trustee with respect to the Trust Securities and the Trust, the retiring
Relevant Trustee and each successor Relevant Trustee with respect to the Trust
Securities shall execute and deliver an instrument hereto wherein each successor
Relevant 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 Relevant Trustee all the rights, powers, trusts and
duties of the retiring Relevant Trustee with respect to the Trust Securities and
the 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 Relevant Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Relevant Trustee with respect to the Trust Securities
and the Trust; but, on request of the Trust or any successor Relevant Trustee
such retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant Trustee all the Trust Property, all proceeds thereof and
money held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Trust.
(b)......Upon request of any such successor Relevant Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the immediately preceding paragraph, as the case may be.
(c)......No successor Relevant Trustee shall accept its appointment
unless at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
Section 812. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative 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
corporation succeeding to all or substantially all the corporate trust business
of such Relevant Trustee, shall be the successor of such Relevant Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article VIII, without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
Section 813. Preferential Collection of Claims Against the Depositor or
the Trust. If and when the Property Trustee or the Delaware Trustee shall be or
become a creditor of the Depositor or the Trust (or any other obligor upon the
Debentures or the Trust Securities), the Property Trustee or the Delaware
Trustee, as the case may be, shall be subject to and shall take all actions
necessary in order to comply with the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or the Trust (or any
such other obligor).
Section 814. Reports by the Property Trustee.
(a)......The Property Trustee shall transmit to the Securityholders
such reports concerning the Property Trustee, its actions under this Trust
Agreement and the property and funds in its possession as the Property Trustee
as may be required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
(b)......A copy of each such report shall, at the time of such
transmission to the Holders, be filed by the Property Trustee with the American
Stock Exchange, Inc., and each national securities exchange or other
organization upon which the Trust Securities are listed, and also with the
Commission and the Depositor. Section 815. Reports to the Property Trustee. The
Depositor and the Administrative Trustees on behalf of the Trust shall provide
to the Property Trustee such documents, reports and information as required by
Section 314 of the Trust Indenture Act (if any) and the compliance certificate
required by Section 314(a) of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
Section 816. Evidence of Compliance with Conditions Precedent. Each of
the Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent, if any, provided for in this Trust 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) of the Trust Indenture Act shall be given in the form of an Officers'
Certificate.
Section 817. Number of Trustees.
(a)......The number of Trustees shall be five, provided that the Holder
of all of the Common Securities by written instrument may increase or decrease
the number of the Administrative Trustees. The Property Trustee and the Delaware
Trustee may be the same Person.
(b)......If a Trustee ceases to hold office for any reason and the
number of the Administrative Trustees is not reduced pursuant to Section 817(a),
or if the number of the Trustees is increased pursuant to Section 817(a), a
vacancy shall occur. The vacancy shall be filled with a Trustee appointed in
accordance with Section 810.
(c)......The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of the Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 810, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
Section 818. Delegation of Power.
(a)......Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 207(a); and
(b)......The Administrative Trustees shall have power to delegate from
time to time to such of their number or to the Depositor the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 819. Voting. Except as otherwise provided in this Trust
Agreement, the consent or approval of the Administrative Trustees shall require
consent or approval by not less than a majority of the Administrative Trustees,
unless there are only two, in which case both must consent.
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
Section 901. Termination upon Expiration Date. Unless earlier
dissolved, the Trust shall automatically dissolve December 31, 2052 (the
"Expiration Date") subject to distribution of the Trust Property in accordance
with Section 904.
Section 902. Early Termination. The first to occur of any of the
following events is an "Early Termination Event:"
(a)......the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor;
(b)......delivery of written direction to the Property Trustee by the
Depositor at any time (which direction is wholly optional and within the
discretion of the Depositor) to dissolve the Trust and distribute the Debentures
to the Securityholders in exchange for the Preferred Securities in accordance
with Section 904;
(c)......the redemption of all of the Preferred Securities in
connection with the redemption of all of the Debentures; and
(d)......the entrance of an order for dissolution of the Trust by a
court of competent jurisdiction.
Section 903. Termination. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall terminate upon the latest to occur of the following: (a) the distribution
by the Property Trustee to the Securityholders upon the liquidation of the Trust
pursuant to Section 904, or upon the redemption of all of the Trust Securities
pursuant to Section 402, of all amounts required to be distributed hereunder
upon the final payment of the Trust Securities; (b) the payment of any expenses
owed by the Trust; (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders; and (d) the filing
of a Certificate of Cancellation by the Administrative Trustee under the
Delaware Business Trust Act.
Section 904. Liquidation.
(a)......If an Early Termination Event specified in clause (a), (b), or
(d) of Section 902 occurs or upon the Expiration Date, the Trust shall be
liquidated by the Trustees as expeditiously as the Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, to each Securityholder a Like Amount of
Debentures, subject to Section 904(d). Notice of liquidation shall be given by
the Property Trustee by first-class mail, postage prepaid, mailed not later than
30 nor more than 60 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 shall no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange shall be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics
by which the Holders may exchange the Trust Securities Certificates for
the Debentures, or, if Section 904(d) applies, receive a Liquidation
Distribution, as the Administrative Trustees or the Property Trustee
shall deem appropriate.
(b)......Except where Section 902(c) or 904(d) applies, in order to
effect the liquidation of the Trust and distribution of the Debentures to the
Securityholders, the Property Trustee shall establish a record date for such
distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, either itself acting as exchange agent or through the appointment of
a separate exchange agent, shall establish such procedures as it shall deem
appropriate to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c)......Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be deemed to be
outstanding; (ii) certificates representing a Like Amount of the Debentures
shall be issued to the Holders of Trust Securities Certificates upon surrender
of such certificates to the Administrative Trustees or their agent for exchange;
(iii) the Depositor shall use its reasonable efforts to have the Debentures
listed on the American Stock Exchange, Inc. or on such other securities exchange
or other organization as the Preferred Securities are then listed or traded;
(iv) any Trust Securities Certificates not so surrendered for exchange shall be
deemed to represent a Like Amount of Debentures, accruing interest at the rate
provided for in the Debentures from the last Distribution Date on which a
Distribution was made on such Trust Securities Certificates until such
certificates are so surrendered (and until such certificates are so surrendered,
no payments of interest or principal shall be made to Holders of the Trust
Securities Certificates with respect to such Debentures); and (v) all rights of
the Securityholders holding the Trust Securities shall cease, except the right
of such Securityholders to receive the Debentures upon surrender of the Trust
Securities Certificates.
(d)......In the event that, notwithstanding the other provisions of
this Section 904, whether because of an order for dissolution entered by a court
of competent jurisdiction or otherwise, distribution of the Debentures in the
manner provided herein is determined by the Property Trustee not to be
practical, the Trust Property shall be liquidated, and the Trust shall be
dissolved, wound-up or terminated, by the Property Trustee in such manner as the
Property Trustee determines. In such event, on the date of the dissolution,
winding-up or other termination of the Trust, the Securityholders shall be
entitled to receive out of the assets of the Trust available for distribution to
the Securityholders, after satisfaction of liabilities to creditors of the Trust
as provided by applicable law, an amount equal to the 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, winding-up or termination, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be paid
on a pro rata basis (based upon Liquidation Amounts, subject to Section 407).
The Holder of the Common Securities shall be entitled to receive the Liquidation
Distributions upon any such dissolution, winding-up or termination pro rata
(determined as aforesaid) with the Holders of the 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.
Section 905. Mergers, Consolidations, Amalgamations or Replacements of
the Trust. The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Section 905. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, 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, that (a) such successor
entity either (i) expressly assumes all of the obligations of the Trust with
respect to the Preferred Securities; or (ii) 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 rank
the same as the Preferred Securities rank in priority with respect to
distributions and payments upon liquidation, redemption and otherwise; (b) the
Depositor expressly appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as the holder
of the Debentures; (c) the Successor Securities are listed or traded, or any
Successor Securities shall be listed or traded upon notification of issuance, on
any national securities exchange or other organization on which the Preferred
Securities are then listed, if any; (d) 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; (e)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Depositor has received an Opinion of Counsel to the
effect that (i) 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 (ii) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity shall be required to register as an
"investment company" under the Investment Company Act; and (f) the Depositor
owns all of the Common Securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee, the Debentures, the Indenture, this Trust
Agreement and the Expense Agreement. Notwithstanding the foregoing, the Trust
shall not, except with the consent of the 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 Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
ARTICLE X.
MISCELLANEOUS PROVISIONS
Section 1001. Limitation of Rights of the Securityholders. The death or
incapacity of any Person having an interest, beneficial or otherwise, in the
Trust Securities shall not operate to terminate this Trust Agreement, nor
entitle the legal representatives or heirs of such Person or any Securityholder
for such Person to claim an accounting, take any action or bring any proceeding
in any court for a partition or winding-up of the arrangements contemplated
hereby, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
Section 1002. Amendment.
(a)......This Trust Agreement may be amended from time to time by the
Trustees and the Depositor, without the consent of any Securityholders, (i) as
provided in Section 811 with respect to acceptance of appointment by a successor
Trustee; (ii) to cure any ambiguity, correct or supplement any provision herein
or therein which may be inconsistent with any other provision herein or therein,
or to make any other provisions with respect to matters or questions arising
under this Trust Agreement, that shall not be inconsistent with the other
provisions of this Trust Agreement; (iii) to modify, eliminate or add to any
provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust shall be classified for United States federal income tax
purposes as a grantor trust at all times that any of the Trust Securities are
outstanding or to ensure that the Trust shall not be required to register as an
"investment company" under the Investment Company Act; or (iv) to reduce or
increase the Liquidation Amount per Trust Security and simultaneously to
correspondingly increase or decrease the number of Trust Securities issued and
outstanding solely for the purpose of maintaining the eligibility of the
Preferred Securities for quotation or listing on any national securities
exchange or other organization on which the Preferred Securities are then quoted
or listed (including, if applicable, the American Stock Exchange, Inc.);
provided, however, that in the case of clause (ii), such action shall not
adversely affect the interests of any Securityholder, and provided further, that
in the case of clause (iv) the aggregate Liquidation Amount of the Trust
Securities outstanding upon completion of any such reduction must be the same as
the aggregate Liquidation Amount of the Trust Securities outstanding immediately
prior to such reduction or increase, and any amendments of this Trust Agreement
shall become effective when notice thereof is given to the Securityholders (or,
in the case of an amendment pursuant to clause (iv), as of the date specified in
the notice).
(b)......Except as provided in Section 601(c) or Section 1002(c)
hereof, any provision of this Trust Agreement may be amended by the Trustees and
the Depositor (i) with the consent of the Trust Securityholders representing not
less than a majority (based upon Liquidation Amounts) of the Trust Securities
then Outstanding; and (ii) upon receipt by the Trustees of an Opinion of Counsel
to the effect that such amendment or the exercise of any power granted to the
Trustees in accordance with such amendment shall not affect the Trust's status
as a grantor trust for United States federal income tax purposes or the 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 Securityholder (such
consent being obtained in accordance with Section 603 or 606 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 Securityholder to institute suit
for the enforcement of any such payment on or after such date; notwithstanding
any other provision herein, without the unanimous consent of the Securityholders
(such consent being obtained in accordance with Section 603 or 606 hereof), this
paragraph (c) of this Section 1002 may not be amended.
(d)......Notwithstanding any other provisions of this Trust Agreement,
no Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an "investment company" under the Investment Company Act or to fail or
cease to be classified as a grantor trust for United States federal income tax
purposes.
(e)......Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust Agreement may not be
amended in a manner which imposes any additional obligation on the Depositor.
(f)......In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor a copy
of such amendment.
(g)......Upon the request of the Depositor, accompanied by its board
resolutions authorizing the execution of any such amendments to this Trust
Agreement, and upon the filing with the Property Trustee and the Delaware
Trustee of evidence of the consent of the Securityholders required to consent
thereto as aforesaid, the Property Trustee and the Delaware Trustee shall join
with the Depositor in the execution of such amendment to this Trust Agreement
unless such amendment affects the Property Trustee's or the Delaware Trustee's
own rights, duties, immunities under this Trust Agreement or otherwise in which
case the Property Trustee and Delaware Trustee may in their own discretion but
shall not be obligated to enter into such amendment to this Trust Agreement. The
Property Trustee and Delaware Trustee, subject to the provisions of Section 801,
may receive an Opinion of Counsel as conclusive evidence that any amendment to
this Trust Agreement executed pursuant to this Article X is authorized or
permitted by, and conforms to, the terms of this Article X and that it is proper
for the Property Trustee and Delaware Trustee under the provisions of this
Article X to join in the execution thereof.
Section 1003. 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.
Section 1004. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES 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 (WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES).
Section 1005. 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 which is a Business Day, with the same force and effect as though
made on the date fixed for such payment, and no distribution shall accumulate
thereon for the period after such date.
Section 1006. Successors. This Trust Agreement shall be binding upon
and shall inure to the benefit of any successor to the Depositor, the Trust or
the Relevant Trustee(s), including any successor by operation of law. Except in
connection with a consolidation, merger or sale involving the Depositor that is
permitted under Article XII 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 1007. Headings. The Article and Section headings are for
convenience only and shall not affect the construction of this Trust Agreement.
Section 1008. Reports, Notices and Demands. Any report, 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 any Securityholder or the
Depositor may be given or served in writing by deposit thereof, first-class
postage prepaid, in the United States mail, hand delivery or facsimile
transmission, in each case, addressed, (a) in the case of a Preferred
Securityholder, to such Preferred Securityholder as such Securityholder's name
and address may appear on the Securities Register; and (b) in the case of the
Common Securityholder or the Depositor, to INTRUST Financial Corporation, 105
North Main Street, Box One, Wichita, Kansas 67202, Attention: Chief Executive
Officer, facsimile no.: (316) 383-1828. Any notice to the Preferred
Securityholders shall also be given to such owners as have, within two years
preceding the giving of such notice, filed their names and addresses with the
Property Trustee for that purpose. Such notice, demand or other communication to
or upon a Securityholder shall be deemed to have been sufficiently given or
made, for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(a) with respect to the Property Trustee to State Street Bank and Trust Company,
Two International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Department; (b) with respect to the Delaware Trustee, to
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration; and
(c) with respect to the Administrative Trustees, to them at the address above
for notices to the Depositor, marked "Attention: Administrative Trustees of
INTRUST Capital Trust, c/o Chief Executive Officer, INTRUST Financial
Corporation." Such notice, demand or other communication to or upon the Trust or
the Property Trustee shall be deemed to have been sufficiently given or made
only upon actual receipt of the writing by the Trust or the Property Trustee.
Section 1009. Agreement Not to Petition. Each of the Trustees and the
Depositor agrees for the benefit of the Securityholders that, until at least one
year and 1 day after the Trust has been terminated in accordance with Article
IX, they shall not file, or join in the filing of, a petition against the Trust
under any bankruptcy, insolvency, reorganization or other similar law
(including, without limitation, the United States Bankruptcy Code of 1978, as
amended) (collectively, "Bankruptcy Laws") or otherwise join in the commencement
of any proceeding against the Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 1009, the Property Trustee
agrees, for the benefit of the Securityholders, that at the expense of the
Depositor (which expense shall be paid prior to the filing), it shall file an
answer with the bankruptcy court or otherwise properly contest the filing of
such petition by the Depositor against the Trust or the commencement of such
action and raise the defense that the Depositor has agreed in writing not to
take such action and should be stopped and precluded therefrom. The provisions
of this Section 1009 shall survive the termination of this Trust Agreement.
Section 1010. Trust Indenture Act; Conflict with Trust Indenture Act.
(a)......This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions.
(b)......The Property Trustee shall be the only Trustee which is a
trustee for the purposes of the Trust Indenture Act.
(c)......If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control. If any provision of this Trust Agreement modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Trust Agreement
as so modified or to be excluded, as the case may be.
(d)......The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
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Section 1011. Acceptance of Terms of the Trust Agreement, the Guarantee
and the Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY
INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER,
WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE
UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A
BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER
TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF
THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF
THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE
TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
INTRUST FINANCIAL CORPORATION,
as Depositor
By: _________________________________________
Name: C. Q. Chandler
Title: Chairman of the Board and
Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY,
as Property Trustee
By: _________________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By: _________________________________________
Name:
Title:
C. Q. Chandler IV, as Administrative Trustee
____________________________________________
Jay L. Smith, as Administrative Trustee
____________________________________________
Brian E. Sullivan, as Administrative Trustee
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
OF
INTRUST CAPITAL TRUST
THIS CERTIFICATE OF TRUST OF INTRUST CAPITAL TRUST (the "Trust"), dated
as of November 19, 1997, is being duly executed and filed by WILMINGTON TRUST
COMPANY, a Delaware banking corporation, C. Q. Chandler IV, Jay L. Smith and
Brian E. Sullivan, each an individual, as trustees, to form a business trust
under the Delaware Business Trust Act (12 Del. C. Section 3801 et seq.).
1 NAME. The name of the business trust formed hereby is INTRUST
Capital Trust.
2. DELAWARE TRUSTEE. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
on November 19, 1997.
IN WITNESS WHEREOF, each of the undersigned, being a trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY, as trustee
By: _________________________________
Name: _______________________________
Title:_______________________________
_____________________________________
C. Q. Chandler IV, as Trustee
_____________________________________
Jay L. Smith, as Trustee
_____________________________________
Brian E. Sullivan, as Trustee
<PAGE>
EXHIBIT B
[Intentionally Omitted]
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER C-1 NUMBER OF COMMON SECURITIES
71,135
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
INTRUST CAPITAL TRUST
COMMON SECURITIES
LIQUIDATION AMOUNT $25 PER COMMON SECURITY
INTRUST CAPITAL TRUST, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that INTRUST
FINANCIAL CORPORATION (the "Holder") is the registered owner of seventy one
thousand one hundred thirty five (71,135) common securities of the Trust
representing undivided beneficial interests in the assets of the Trust and
designated the 8.24% Common Securities (liquidation amount $25 per Common
Security) (the "Common Securities"). In accordance with Section 510 of the Trust
Agreement (as defined below), the Common Securities are not transferable and any
attempted transfer hereof shall be void. The designations, rights, privileges,
restrictions, preferences, and other terms and provisions of the Common
Securities are set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the Trust dated
as of January 21, 1998, as the same may be amended from time to time (the "Trust
Agreement"), including the designation of the terms of the Common Securities as
set forth therein. The Trust shall furnish a copy of the Trust Agreement to the
Holder without charge upon written request to the 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.
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate this 21st day of January 21, 1998.
INTRUST CAPITAL TRUST
By: ______________________________________
Name: Jay L. Smith
Title: Administrative Trustee
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of
January 21, 1998, between INTRUST FINANCIAL CORPORATION, a Kansas corporation
(the "Company"), and INTRUST CAPITAL TRUST, a Delaware business trust (the
"Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common
Securities") to, and receive the Debentures from, the Company and to issue and
sell up to 2,300,000 8.24% Cumulative Trust Preferred Securities (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Amended and Restated Trust Agreement of the Trust dated
as of January 21, 1998, as the same may be amended from time to time (the "Trust
Agreement");
WHEREAS, the Company shall directly or indirectly own all of the Common
Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges shall be made in reliance
upon the execution and delivery of this Agreement, the Company, including in its
capacity as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
Section 1.1. Guarantee by the Company.
Subject to the terms and conditions hereof, the Company, including in
its capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment when
and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust other than obligations of the Trust to pay to the
holders of any Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Preferred Securities or
such other similar interests, as the case may be. This Agreement is intended to
be for the benefit of, and to be enforceable by, all such Beneficiaries, whether
or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise); and (b) the date on which there
are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of the Preferred Securities or any Beneficiary must restore
payment of any sums paid under the Preferred Securities, under any obligation
under the Preferred Securities Guarantee Agreement dated the date hereof by the
Company and State Street Bank and Trust Company as guarantee trustee, or under
this Agreement for any reason whatsoever. This Agreement is continuing,
irrevocable, unconditional and absolute.
Section 1.3. Waiver of Notice.
The Company hereby waives notice of acceptance of this Agreement and of
any obligation to which it applies or may apply, and the Company hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of the Company under
this 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 extension of time for the payment by the Trust of all
or any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Beneficiaries with respect to the Obligations
or any action on the part of the Trust granting indulgence or extension of any
kind; or
(c) 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 Trust or any of the
assets of the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or
obtain the consent of, the Company with respect to the happening of any of the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against the Company,
and the Company waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against the
Company.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains any Beneficiary or any Preferred Securities of
any series are outstanding, this Agreement shall not be modified or amended in
any manner adverse to such Beneficiary or to the holders of the Preferred
Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same by facsimile
transmission (confirmed by mail), telex, or by registered or certified mail,
addressed as follows (and if so given, shall be deemed given when mailed or upon
receipt of an answer back, if sent by telex):
INTRUST Capital Trust c/o INTRUST Financial Corporation, 105 North Main
Street, Box One, Wichita, Kansas 67202. Facsimile No.: (316) 383-1828.
Attention: Chief Executive Officer.
INTRUST Financial Corporation, 105 North Main Street, Box One, Wichita,
Kansas 67202. Facsimile No.: (316) 383-1828. Attention: Chief Executive Officer.
Section 2.4. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Kansas (without regard to conflict of
laws principles).
[The remainder of this page has been left blank intentionally]
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
INTRUST FINANCIAL CORPORATION
By: ______________________________
Name:
Title:
INTRUST CAPITAL TRUST
By: ______________________________
Name:
Title: Administrative Trustee
<PAGE>
EXHIBIT E
Certificate Number Number of Preferred Securities
P-
Certificate Evidencing Preferred Securities
of
INTRUST Capital Trust
8.24% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security)
CUSIP NO. _______
INTRUST CAPITAL TRUST, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
______________ (the "Holder") is the registered owner of _____ preferred
securities (the "Preferred Securities") of the Trust representing undivided
beneficial interests in the assets of the Trust and designated the 8.24%
Cumulative Trust Preferred Securities (Liquidation Amount $25 per Preferred
Security). The Preferred Securities are transferable on the books and records of
the Trust, in person or by a duly authorized attorney, upon surrender of this
Certificate duly endorsed and in proper form for transfer as provided in Section
504 of the Trust Agreement (as defined herein). 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
Trust dated as of January 21, 1998, as the same may be amended from time to time
(the "Trust Agreement"), including the designation of the terms of the Preferred
Securities as set forth therein. The Holder is entitled to the benefits of the
Preferred Securities Guarantee Agreement entered into by INTRUST Financial
Corporation, a Kansas corporation, and State Street Bank and Trust Company, as
guarantee trustee, dated as of January 21, 1998 (the "Guarantee"), to the extent
provided therein. The Trust shall furnish a copy of the Trust Agreement and the
Guarantee to the Holder without charge upon written request to the 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.
Unless the Certificate of Authentication has been manually executed by
the Authentication Agent, this Certificate is not valid or effective.
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
have executed this certificate as of the date hereof.
INTRUST CAPITAL TRUST
By: ______________________________________
______________________________________
Administrative Trustee
By: ______________________________________
______________________________________
Administrative Trustee
By: ______________________________________
______________________________________
Administrative Trustee
FORM OF CERTIFICATE OF AUTHENTICATION
CERTIFICATE OF AUTHENTICATION
This is one of the 8.24% Cumulative Trust Preferred Securities referred
to in the within-mentioned Amended and Restated Trust Agreement.
Dated:
STATE STREET BANK & TRUST COMPANY,
as Authenticating Agent and Registrar
By: ------------------------------
Authorized Signatory
<PAGE>
[FORM ON REVERSE OF CERTIFICATE]
The Trust will furnish without charge to any registered owner of
Preferred Securities who so requests, a copy of the Trust Agreement and the
Guarantee. Any such request should be in writing and addressed to INTRUST
Capital Trust, c/o INTRUST Financial Corporation, 105 North Main Street, Box
One, Wichita, Kansas 67202 or to the Registrar named on the face of this
Certificate.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-...Custodian...
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors
Act................
(State)
JT TEN as joint tenants with right of UNIF TRF MIN ACT -......Custodian
survivorship and not as tenants (until age)........
in common ......under Uniform
(Minor)
Transfers to Minors
Act................
(State)
TOD - transfer on death direction in
event owner's death, to person
named on face and subject to TOD
rules referenced
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ___________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Preferred Securities represented by the within Certificate, and do hereby
irrevocably constitute and appoint
` Attorney
to transfer the said Preferred Securities on the books of the within named Trust
with full power of substitution in the premises.
Dated,
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERNATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
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 MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
EXHIBIT 4(c)
=================================================================
INTRUST FINANCIAL CORPORATION
AND
STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE
INDENTURE
8.24% SUBORDINATED DEBENTURES DUE 2028
DATED AS OF JANUARY 21, 1998.
=================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS........................................................2
Section 1.1. Definitions of Terms...................................2
ARTICLE II. ISSUE, DESCRIPTION, TERMS, CONDITIONS REGISTRATION
AND EXCHANGE OF THE DEBENTURES..........................................10
Section 2.1 Designation and Principal Amount............................10
Section 2.2. Maturity...................................................10
Section 2.3. Form and Payment...........................................11
Section 2.4. [Intentionally Omitted]....................................11
Section 2.5. Interest...................................................11
Section 2.6. Execution and Authentication...............................12
Section 2.7. Registration of Transfer and Exchange......................13
Section 2.8. Temporary Debentures.......................................14
Section 2.9. Mutilated, Destroyed, Lost or Stolen Debentures............14
Section 2.10. Cancellation..............................................15
Section 2.11. Benefit of Indenture......................................15
Section 2.12. Authentication Agent......................................15
ARTICLE III. REDEMPTION OF DEBENTURES.........................................16
Section 3.1. Redemption.................................................16
Section 3.2. Special Event Redemption...................................16
Section 3.3. Optional Redemption by the Company.........................17
Section 3.4. Notice of Redemption.......................................17
Section 3.5. Payment upon Redemption....................................18
Section 3.6. No Sinking Fund............................................19
ARTICLE IV. EXTENSION OF INTEREST PAYMENT PERIOD..............................19
Section 4.1. Extension of Interest Payment Period.......................19
Section 4.2. Notice of Extension........................................19
Section 4.3. Limitation on Transactions.................................20
ARTICLE V. PARTICULAR COVENANTS OF THE COMPANY................................20
Section 5.1. Payment of Principal and Interest..........................20
Section 5.2. Maintenance of Agency......................................21
Section 5.3. Paying Agents..............................................21
Section 5.4. Appointment to Fill Vacancy in Office of the Trustee.......22
Section 5.5. Compliance with Consolidation Provisions...................22
Section 5.6. Limitation on Transactions.................................22
Section 5.7. Covenants as to the Trust..................................23
Section 5.8. Covenants as to Purchases..................................23
ARTICLE VI.. THE DEBENTUREHOLDERS'LISTS AND REPORTS.. BY THE
COMPANY AND THE TRUSTEE.................................................23
Section 6.1. The Company to Furnish the Trustee Names and Addresses
of the Debentureholders....................................23
Section 6.2. Preservation of Information Communications with the
Debentureholders...........................................23
Section 6.3. Reports by the Company.....................................23
Section 6.4. Reports by the Trustee.....................................24
ARTICLE VII. REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS ON
EVENT OF DEFAULT........................................................24
Section 7.1. Events of Default..........................................24
Section 7.2. Collection of Indebtedness and Suits for Enforcement
by the Trustee.............................................26
Section 7.3. Application of Moneys Collected............................27
Section 7.4. Limitation on Suits........................................28
Section 7.5. Rights and Remedies Cumulative; Delay or Omission
not Waiver.................................................28
Section 7.6. Control by the Debentureholders............................29
Section 7.7. Undertaking to Pay Costs...................................29
ARTICLE VIII..................................................................30
Section 8.1. Form of Debenture..........................................30
Section 8.2. Original Issue of the Debentures...........................30
ARTICLE IX. CONCERNING THE TRUSTEE............................................30
Section 9.1. Certain Duties and Responsibilities of the Trustee.........30
Section 9.2. Notice of Defaults.........................................31
Section 9.3. Certain Rights of the Trustee..............................32
Section 9.4. The Trustee not Responsible for Recitals, Etc..............33
Section 9.5. May Hold the Debentures....................................33
Section 9.6. Moneys Held in Trust.......................................33
Section 9.7. Compensation and Reimbursement.............................33
Section 9.8. Reliance on Officers'Certificate...........................34
Section 9.9. Disqualification; Conflicting Interests....................34
Section 9.10. Corporate Trustee Required; Eligibility...................34
Section 9.11. Resignation and Removal; Appointment of Successor.........34
Section 9.12. Acceptance of Appointment by Successor....................36
Section 9.13. Merger, Conversion, Consolidation or Succession
to Business...............................................36
Section 9.14. Preferential Collection of Claims against the Company.....37
ARTICLE X. CONCERNING THE DEBENTUREHOLDERS....................................37
Section 10.1. Evidence of Action by the Holders.........................37
Section 10.2. Proof of Execution by the Debentureholders................37
Section 10.3. Who May be Deemed Owners..................................38
Section 10.4. Certain Debentures Owned by Company Disregarded...........38
Section 10.5. Actions Binding on the Future Debentureholders............38
ARTICLE XI. SUPPLEMENTAL INDENTURES...........................................39
Section 11.1. Supplemental Indentures without the Consent
of the Debentureholders...................................39
Section 11.2. Supplemental Indentures with Consent of
the Debentureholders......................................39
Section 11.3. Effect of Supplemental Indentures.........................40
Section 11.4. The Debentures Affected by Supplemental Indentures........40
Section 11.5. Execution of Supplemental Indentures......................40
ARTICLE XII. SUCCESSOR CORPORATION............................................41
Section 12.1. The Company may Consolidate, Etc..........................41
Section 12.2. Successor Corporation Substituted.........................41
Section 12.3. Evidence of Consolidation, Etc. to Trustee................42
ARTICLE XIII. SATISFACTION AND DISCHARGE......................................42
Section 13.1. Satisfaction and Discharge of Indenture...................42
Section 13.2. Discharge of Obligations..................................42
Section 13.3. Deposited Moneys to be Held in Trust......................43
Section 13.4. Payment of Monies Held by Paying Agents...................43
Section 13.5. Repayment to the Company..................................43
ARTICLE XIV. IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS..................................................43
Section 14.1. No Recourse...............................................43
ARTICLE XV. MISCELLANEOUS PROVISIONS..........................................44
Section 15.1. Effect on Successors and Assigns..........................44
Section 15.2. Actions by Successor......................................44
Section 15.3. Surrender of the Company Powers...........................44
Section 15.4. Notices...................................................44
Section 15.5. Governing Law.............................................44
Section 15.6. Treatment of the Debentures as Debt.......................45
Section 15.7. Compliance Certificates and Opinions......................45
Section 15.8. Payments on Business Days.................................45
Section 15.9. Conflict with Trust Indenture Act.........................45
Section 15.10. Counterparts.............................................45
Section 15.11. Separability.............................................45
Section 15.12. Assignment...............................................46
Section 15.13. Acknowledgment of Rights; Right of Setoff................46
ARTICLE XVI. SUBORDINATION OF THE DEBENTURES..................................46
Section 16.1. Agreement to Subordinate..................................46
Section 16.2. Default on Senior Debt, Subordinated Debt or
Additional Senior Obligations.............................47
Section 16.3. Liquidation; Dissolution; Bankruptcy......................47
Section 16.4. Subrogation...............................................48
Section 16.5. The Trustee to Effectuate Subordination...................49
Section 16.6. Notice by the Company.....................................49
Section 16.7. Rights of the Trustee; Holders of the Senior Indebtedness.50
Section 16.8. Subordination may not be Impaired.........................51
<PAGE>
CROSS-REFERENCE TABLE
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
310(a).....................................................................9.10
310(b)................................................................9.9, 9.11
310(c)...........................................................Not Applicable
311(a).....................................................................9.14
311(b).....................................................................9.14
311(c)...........................................................Not Applicable
312(a)............................................................. 6.1, 6.2(a)
312(b).................................................................. 6.2(c)
312(c).................................................................. 6.2(c)
313(a).................................................................. 6.4(a)
313(b).................................................................. 6.4(b)
313(c)...........................................................6.4(a), 6.4(b)
313(d)...................................................................6.4(c)
314(a)...................................................................6.3(a)
314(b)...........................................................Not Applicable
314(c).....................................................................15.7
314(d)...........................................................Not Applicable
314(e).....................................................................15.7
314(f)...........................................................Not Applicable
315(a)..............................................................9.1(a), 9.3
315(b)......................................................................9.2
315(c)...................................................................9.1(a)
315(d)...................................................................9.1(b)
315(e)......................................................................7.7
316(a).................................................................1.1, 7.6
316(b)...................................................................7.4(b)
316(c)..................................................................10.1(b)
317(a)......................................................................7.2
317(b)......................................................................5.3
318(a).....................................................................15.9
Note: This Cross-Reference Table does not constitute part of this Indenture and
shall not affect the interpretation of any of its terms or provisions.
<PAGE>
INDENTURE
INDENTURE, dated as of January 21, 1998, between INTRUST FINANCIAL
CORPORATION, a Kansas corporation (the "Company") and STATE STREET BANK AND
TRUST COMPANY, a trust company duly organized and existing under the laws of the
Commonwealth of Massachusetts, as trustee (the "Trustee");
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the execution and delivery of this Indenture to provide for the
issuance of securities to be known as its 8.24% Subordinated Debentures due 2028
(hereinafter referred to as the "Debentures"), the form and substance of such
Debentures and the terms, provisions and conditions thereof to be set forth as
provided in this Indenture;
WHEREAS, INTRUST Capital Trust, a Delaware statutory business trust
(the "Trust"), has offered to the public $57,500,000 aggregate liquidation
amount of its Preferred Securities (as defined herein) and proposes to invest
the proceeds from such offering, together with the proceeds of the issuance and
sale by the Trust to the Company of $1,778,375 aggregate liquidation amount of
its Common Securities (as defined herein), in $59,278,375 aggregate principal
amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a valid
instrument in accordance with its terms, and to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been performed, and the execution and
delivery of this Indenture have been duly authorized in all respects; and
WHEREAS, to provide the terms and conditions upon which the Debentures
are to be authenticated, issued and delivered, the Company has duly authorized
the execution of this Indenture; 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, in consideration of the premises and the purchase of
the Debentures by the holders thereof, it is mutually covenanted and agreed as
follows for the equal and ratable benefit of the holders of the Debentures:
<PAGE>
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions of Terms. The terms defined in this Section
1.1 (except as in this Indenture otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section 1.1 and shall include the plural as well as the singular. All other
terms used in this Indenture that are defined in the Trust Indenture Act, or
that are by reference in the Trust Indenture Act defined in the Securities Act
(except as herein otherwise expressly provided or unless the context otherwise
requires), shall have the meanings assigned to such terms in the Trust Indenture
Act and in the Securities Act as in force at the date of the execution of this
instrument. All accounting terms used herein and not expressly defined shall
have the meanings assigned to such terms in accordance with Generally Accepted
Accounting Principles.
"Accelerated Maturity Date" means if the Company elects to accelerate
the Maturity Date in accordance with Section 2.2(c), the date selected by the
Company which is prior to the Scheduled Maturity Date, but is after January 31,
2003.
"Additional Payments" shall have the meaning set forth in Section 2.5.
"Additional Senior Obligations" means all indebtedness of the Company
whether incurred on or prior to the date of this Indenture or thereafter
incurred, for claims in respect of derivative products such as interest and
foreign exchange rate contracts, commodity contracts and similar arrangements;
provided, however, that Additional Senior Obligations does not include claims in
respect of Senior Debt or Subordinated Debt or obligations which, by their
terms, are expressly stated to be not superior in right of payment to the
Debentures or to rank pari passu in right of payment with the Debentures. For
purposes of this definition, "claim" shall have the meaning assigned thereto in
Section 101(4) of the United States Bankruptcy Code of 1978, as amended.
"Administrative Trustees" shall have the meaning set forth in the Trust
Agreement.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person; (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified Person is a
general partner; (e) any officer or director of the specified Person; and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" means an authenticating agent with respect to
the Debentures appointed by the Trustee pursuant to Section 2.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day" means, with respect to the Debentures, any day other
than a Saturday or a Sunday or a day on which federal or state banking
institutions in the Borough of Manhattan, the City of New York, are authorized
or required by law, executive order or regulation to close, or a day on which
the Corporate Trust Office of the Trustee or the Property Trustee is closed for
business.
"Capital Treatment Event" means the receipt by the Trust of an Opinion
of Counsel, rendered by a law firm having a recognized banking law practice, to
the effect that, as a result of any amendment to or any change (including any
announced prospective change) in the laws (or any regulations thereunder) of the
United States or any political subdivision thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change, pronouncement or decision is announced on or after the
date of issuance of the Preferred Securities under the Trust Agreement, there is
more than an insubstantial risk of impairment of the Company's ability to treat
the aggregate Liquidation Amount of the Preferred Securities (or any substantial
portion thereof) as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company, provided, however, that the inability of
the Company to treat all or any portion of the Liquidation Amount of the
Preferred Securities as Tier 1 Capital shall not constitute the basis for a
Capital Treatment Event if such inability results from the Company having
cumulative preferred stock, minority interests in consolidated subsidiaries, or
any other class of security or interest which the Federal Reserve now or may
hereafter accord Tier 1 Capital treatment in excess of the amount which may
qualify for treatment as Tier 1 Capital under applicable capital adequacy
guidelines of the Federal Reserve.
"Certificate" means a certificate signed by the principal executive
officer, the principal financial officer, the principal accounting officer, the
treasurer or any vice president of the Company. The Certificate need not comply
with the provisions of Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in the
definition of "Investment Company Event."
"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" means undivided beneficial interests in the assets
of the Trust which rank pari passu with the Preferred Securities; provided,
however, that upon the occurrence of an Event of Default, the rights of holders
of Common Securities to payment in respect of (i) distributions, and (ii)
payments upon liquidation, redemption and otherwise, are subordinated to the
rights of holders of Preferred Securities.
"Company" means INTRUST Financial Corporation, a corporation duly
organized and existing under the laws of the State of Kansas, and, subject to
the provisions of Article XII, shall also include its successors and assigns.
"Compounded Interest" shall have the meaning set forth in Section 4.1.
"Corporate Trust Office" means the office of the Trustee at which, at
any particular time, its corporate trust business shall be principally
administered, which office at the date hereof is located at Two International
Place, 4th Floor, Boston, Massachusetts 02110, Attention: Corporate Trust
Department.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Custodian" means any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals hereto.
"Debentureholder," "holder of Debentures," "registered holder," or
other similar term, means the Person or Persons in whose name or names a
particular Debenture shall be registered on the books of the Company or the
Trustee kept for that purpose in accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in Section
2.7(b).
"Debenture Registrar" shall have the meaning set forth in Section
2.7(b).
"Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (a) every
obligation of such Person for money borrowed; (b) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (d) every obligation of such Person 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); (e) every capital lease obligation of such Person; and (f) and every
obligation of the type referred to in clauses (a) through (e) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Deferred Payments" shall have the meaning set forth in Section 4.1.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Trust Agreement and the Debentures held by the Property Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Trust Agreement.
"Distribution" shall have the meaning set forth in the Trust Agreement.
"Event of Default" means, with respect to the Debentures, any event
specified in Section 7.1, which has continued for the period of time, if any,
and after the giving of the notice, if any, therein designated.
"Exchange Act," means the Securities Exchange Act of 1934, as amended,
as in effect at the date of execution of this instrument.
"Extended Maturity Date" means if the Company elects to extend the
Maturity Date in accordance with Section 2.2(b), the date selected by the
Company which is after the Scheduled Maturity Date but before January 31, 2037.
"Extension Period" shall have the meaning set forth in Section 4.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Generally Accepted Accounting Principles" means such accounting
principles as are generally accepted at the time of any computation required
hereunder.
"Governmental Obligations" means securities that are (a) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America that, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such Governmental
Obligation or a specific payment of principal of or interest on any such
Governmental Obligation held by such custodian for the account of the holder of
such depositary receipt; provided, however, that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount received by the
custodian in respect of the Governmental Obligation or the specific payment of
principal of or interest on the Governmental Obligation evidenced by such
depositary receipt.
"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.
"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 in accordance with the terms hereof.
"Interest Payment Date" shall have the meaning set forth in Section
2.5.
"Investment Company Act," means the Investment Company Act of 1940, as
amended, as in effect at the date of execution of this instrument.
"Investment Company Event" means the receipt by the Trust of an Opinion
of Counsel, rendered by a law firm having a recognized tax and securities law
practice, to the effect that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), the Trust is or shall be considered an "investment
company" that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature and on
which the principal shall be due and payable together with all accrued and
unpaid interest thereon including Compounded Interest and Additional Payments,
if any.
"Ministerial Action" shall have the meaning set forth in Section 3.2.
"Officers' Certificate" means a certificate signed by the President or
a Vice President and by the Treasurer or an Assistant Treasurer or the
Controller or an Assistant Controller or the Secretary or an Assistant Secretary
of the Company that is delivered to the Trustee in accordance with the terms
hereof. Each such certificate shall include the statements provided for in
Section 15.7, if and to the extent required by the provisions thereof.
"Opinion of Counsel" means an opinion in writing of legal counsel, who
may be an employee of or counsel for the Company, that is delivered to the
Trustee in accordance with the terms hereof. Each such opinion shall include the
statements provided for in Section 15.7, if and to the extent required by the
provisions thereof.
"Outstanding," when used with respect to the Debentures, means, as of
the date of determination, all of the Debentures theretofore executed and
delivered by the Trustee under this Indenture, except:
(a)......the Debentures theretofore canceled by the Trustee or any
Paying Agent, or delivered to the Trustee or any Paying Agent for cancellation;
(b)......the Debentures for whose payment or redemption Governmental
Obligations or money in the necessary amount has been theretofore deposited in
trust with the Trustee or any Paying Agent (other than the Company) or shall
have been set aside and segregated in trust by the Company (if the Company shall
act as its own paying agent) for the holders of such Debentures; provided that,
if such Debentures are to be redeemed, notice of such redemption has been duly
given pursuant to Article III hereof; and
(c)......the Debentures which have been paid or in lieu of which other
Debentures have been executed and delivered pursuant to Section 2.7; provided,
however, that in determining whether the holders of a majority or specified
percentage in aggregate principal amount of the Debentures have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
the Debentures owned by the Company or any other obligor on the Debentures or by
any Person directly or indirectly controlling or controlled by or under common
control with the Company or any other obligor on the Debentures shall be
disregarded and deemed not to be Outstanding, except that (i) in determining
whether any Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only the Debentures that
such Trustee knows to be so owned shall be so disregarded; and (ii) for purposes
hereof, the Trust shall be deemed not to be controlled by the Company. The
Debentures so owned which 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 Debentures and the pledgee is not
a Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any such other obligor.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.3.
"Person" means any individual, corporation, partnership, joint-venture,
trust, limited liability company, joint-stock company, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Debenture" means every previous Debenture evidencing all
or a portion of the same debt as that evidenced by such particular Debenture;
and, for the purposes of this definition, any Debenture authenticated and
delivered under Section 2.9 in lieu of a lost, destroyed or stolen Debenture
shall be deemed to evidence the same debt as the lost, destroyed or stolen
Debenture.
"Preferred Securities" means undivided beneficial interests in the
assets of the Trust which rank pari passu with Common Securities issued by the
Trust; provided, however, that upon the occurrence of an Event of Default, the
rights of holders of Common Securities to payment in respect of (a)
distributions, and (b) payments upon liquidation, redemption and otherwise, are
subordinated to the rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the Company
may enter into with the Trustee or other Persons that operates directly or
indirectly for the benefit of holders of Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust Agreement.
"Responsible Officer" when used with respect to the Trustee means the
Chairman of the Board of Directors, the President, any Vice President, the
Secretary, the Treasurer, any trust officer, any corporate trust officer or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Scheduled Maturity Date" means January 31, 2028.
"Securities Act," means the Securities Act of 1933, as amended, as in
effect at the date of execution of this instrument.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Debentures or to other Debt which is pari
passu with, or subordinated to, the Debentures; provided, however, that Senior
Debt shall not be deemed to include (a) any Debt of the Company which when
incurred and without respect to any election under section 1111(b) of the United
States Bankruptcy Code of 1978, as amended, was without recourse to the Company;
(b) any Debt of the Company to any of its subsidiaries; (c) Debt to any employee
of the Company; (d) Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the holders of the
Debentures as a result of the subordination provisions of this Indenture would
be greater than they otherwise would have been as a result of any obligation of
such holders to pay amounts over to the obligees on such trade accounts payable
or accrued liabilities arising in the ordinary course of business as a result of
subordination provisions to which such Debt is subject; and (e) Debt which
constitutes Subordinated Debt.
"Senior Indebtedness" shall have the meaning set forth in Section 16.1.
"Special Event" means a Tax Event, a Capital Treatment Event or an
Investment Company Event.
"Subordinated Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt (other than the Debentures), whether incurred on or prior to the date of
this Indenture or thereafter incurred, which is by its terms expressly provided
to be junior and subordinate to other Debt of the Company.
"Subsidiary" means, with respect to any Person, (a) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries; (b) any general partnership,
joint venture, trust or similar entity, at least a majority of whose outstanding
partnership or similar interests shall at the time be owned by such Person, or
by one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; and (c) any limited partnership of which such Person or any of its
Subsidiaries is a general partner.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel,
rendered by a law firm having a recognized tax and securities practice, 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 administrative pronouncement 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 under the Trust Agreement, there is more
than an insubstantial risk that (a) the Trust is, or shall be within 90 days
after the date of such Opinion of Counsel, subject to United States federal
income tax with respect to income received or accrued on the Debentures; (b)
interest payable by the Company on the Debentures is not, or within 90 days
after the date of such Opinion of Counsel, shall not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes; or
(c) the Trust is, or shall be within 90 days after the date of such Opinion of
Counsel, subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges. The Trust or the Company shall
request and receive such Opinion of Counsel with regard to such matters within a
reasonable period of time after the Trust or the Company shall have become aware
of the occurrence or the possible occurrence of any of the events described in
clauses (a) through (c) above.
"Trust" means INTRUST Capital Trust, a Delaware statutory business
trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated
January 21, 1998, of the Trust.
"Trustee" means State Street Bank and Trust Company and, subject to the
provisions of Article IX, shall also include its successors and assigns, and, if
at any time there is more than one Person acting in such capacity hereunder,
"Trustee" shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939, as
amended, subject to the provisions of Sections 11.1, 11.2, and 12.1, as in
effect at the date of execution of this instrument.
"Trust Securities" means the Common Securities and Preferred
Securities, collectively.
"Voting Stock," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
ARTICLE II.
ISSUE, DESCRIPTION, TERMS, CONDITIONS
REGISTRATION AND EXCHANGE OF THE DEBENTURES
Section 2.1. Designation and Principal Amount. There is hereby
authorized Debentures designated the "8.24% Subordinated Debentures due 2028,"
limited in aggregate principal amount up to $59,278,375, which amount shall be
as set forth in any written order of the Company for the authentication and
delivery of Debentures pursuant to Section 2.6.
Section 2.2. Maturity.
(a)......The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to extend the Maturity Date beyond
the Scheduled Maturity Date in accordance with Section 2.2(b), the
Extended Maturity Date; or
(iii) if the Company elects to accelerate the Maturity Date to
be a date prior to the Scheduled Maturity Date in accordance with
Section 2.2(c), the Accelerated Maturity Date.
(b)......The Company may at any time before the day which is 90 days
before the Scheduled Maturity Date, elect to extend the Maturity Date to the
Extended Maturity Date, provided that the Company has received the prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve and further provided that the
following conditions in this Section 2.2(b) are satisfied both at the date the
Company gives notice in accordance with Section 2.2(d) of its election to extend
the Maturity Date and at the Scheduled Maturity Date:
(i) the Company is not in bankruptcy, otherwise insolvent or
in liquidation;
(ii) the Company is not in default in the payment of interest
or principal on the Debentures; and
(iii) the Trust is not in arrears on payments of Distributions
on the Trust Securities issued by it and no deferred Distributions are
accumulated.
(c)......The Company may, on one occasion, at any time before the day
which is 90 days before the Scheduled Maturity Date and after January 31, 2003,
elect to shorten the Maturity Date to the Accelerated Maturity Date provided
that the Company has received the prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve.
(d)......If the Company elects to extend the Maturity Date in
accordance with Section 2.2(b), the Company shall give notice to the registered
holders of the Debentures, the Property Trustee and the Trust of the extension
of the Maturity Date and the Extended Maturity Date at least 90 days and no more
than 180 days before the Scheduled Maturity Date.
(e)......If the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(c), the Company shall give notice to the registered
holders of the Debentures, the Property Trustee and the Trust of the
acceleration of the Maturity Date and the Accelerated Maturity Date at least 90
days and no more than 180 days before the Accelerated. Maturity Date.
Section 2.3. Form and Payment. The Debentures shall be issued in fully
registered certificated form without interest coupons. Principal and interest on
the Debentures issued in certificated form shall be payable, the transfer of
such Debentures shall be registrable and such Debentures shall be exchangeable
for Debentures bearing identical terms and provisions at the office or agency of
the Trustee; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the holder at such address as shall
appear in the Debenture Register or by wire transfer to an account maintained by
the holder as specified in the Debenture Register, provided that the holder
provides proper transfer instructions by the regular record date.
Notwithstanding the foregoing, so long as the holder of any Debentures is the
Property Trustee, the payment of the principal of and interest (including
Compounded Interest and Additional Payments, if any) on such Debentures held by
the Property Trustee shall be made at such place and to such account as may be
designated by the Property Trustee.
Section 2.4. [Intentionally Omitted].
Section 2.5. Interest.
(a)......Each Debenture shall bear interest at a rate of 8.24% per
annum (the "Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on March
31, June 30, September 30, and December 31 of each year (each, an "Interest
Payment Date," commencing on March 31, 1998), to the Person in whose name such
Debenture or any Predecessor Debenture is registered, at the close of business
on the regular record date for such interest installment, which shall be the
fifteenth day of the last month of the calendar quarter.
(b)......The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
interest payable for any period shorter than a full quarterly period for which
interest is computed shall be computed on the basis of the number of days
elapsed in a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on the Debentures is not a Business Day, then payment
of interest payable on such date shall be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay) with the same force and effect as if made on the date such payment
was originally payable.
(c)......If, at any time while the Property Trustee is the holder of
any Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Company shall pay as additional payments ("Additional
Payments") on the Debentures held by the Property Trustee, such additional
amounts as shall be required so that the net amounts received and retained by
the Trust and the Property Trustee after paying such taxes, duties, assessments
or other governmental charges shall be equal to the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other government charges been imposed.
Section 2.6. Execution and Authentication.
(a)......The Debentures shall be signed on behalf of the Company by its
Chief Executive Officer, President or one of its Vice Presidents, under its
corporate seal attested by its Secretary or one of its Assistant Secretaries.
Signatures may be in the form of a manual or facsimile signature. The Company
may use the facsimile signature of any Person who shall have been a Chief
Executive Officer, President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof, notwithstanding the
fact that at the time the Debentures shall be authenticated and delivered or
disposed of such Person shall have ceased to be the Chief Executive Officer,
President or a Vice President, or the Secretary or an Assistant Secretary, of
the Company. The seal of the Company may be in the form of a facsimile of such
seal and may be impressed, affixed, imprinted or otherwise reproduced on the
Debentures. The Debentures may contain such notations, legends or endorsements
required by law, stock exchange rule or usage. Each Debenture shall be dated the
date of its authentication by the Trustee.
(b)......A Debenture shall not be valid until manually authenticated by
an authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture.
(c)......At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debentures executed by the
Company to the Trustee for authentication, together with a written order of the
Company for the authentication and delivery of such Debentures signed by its
Chief Executive Officer, President or any Vice President and its Treasurer or
any Assistant Treasurer, and the Trustee in accordance with such written order
shall authenticate and deliver such Debentures.
(d)......In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 9.1) shall be
fully protected in relying upon, an Opinion of Counsel stating that the form and
terms thereof have been established in conformity with the provisions of this
Indenture.
(e)......The Trustee shall not be required to authenticate such
Debentures if the issue of such Debentures pursuant to this Indenture shall
affect the Trustee's own rights, duties or immunities under the Debentures and
this Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
Section 2.7. Registration of Transfer and Exchange.
(a)......Debentures may be exchanged upon presentation thereof at the
office or agency of the Company designated for such purpose or at the office of
the Debenture Registrar, for other Debentures and for a like aggregate principal
amount, upon payment of a sum sufficient to cover any tax or other governmental
charge in relation thereto, all as provided in this Section 2.7. In respect of
any Debentures so surrendered for exchange, the Company shall execute, the
Trustee shall authenticate and such office or agency shall deliver in exchange
therefor the Debenture or Debentures that the Debentureholder making the
exchange shall be entitled to receive, bearing numbers not contemporaneously
outstanding.
(b)......The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose or at the office of the Debenture Registrar,
or such other location designated by the Company a register or registers (herein
referred to as the "Debenture Register") in which, the Company shall register
the Debentures and the transfers of Debentures as in this Article II provided
and which at all reasonable times shall be open for inspection by the Trustee.
The registrar for the purpose of registering Debentures and transfer of
Debentures as herein provided shall initially be the Trustee and thereafter as
may be appointed by the Company as authorized by Board Resolution (the
"Debenture Registrar"). Upon surrender for transfer of any Debenture at the
office or agency of the Company designated for such purpose, the Company shall
execute, the Trustee shall authenticate and such office or agency shall deliver
in the name of the transferee or transferees a new Debenture or Debentures for a
like aggregate principal amount. All Debentures presented or surrendered for
exchange or registration of transfer, as provided in this Section 2.7, shall be
accompanied (if so required by the Company or the Debenture Registrar) by a
written instrument or instruments of transfer, in form satisfactory to the
Company or the Debenture Registrar, duly executed by the registered holder or by
such holder's duly authorized attorney in writing.
(c)......No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new Debentures in case of
partial redemption, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge in relation thereto, other than
exchanges pursuant to Section 2.8, Section 3.5(b) and Section 11.4 not involving
any transfer.
(d)......The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
less than all the Outstanding Debentures and ending at the close of business on
the day of such mailing; nor (ii) to register the transfer of or exchange any
Debentures or portions thereof called for redemption.
Section 2.8. Temporary Debentures. Pending the preparation of
definitive Debentures, the Company may execute, and the Trustee shall
authenticate and deliver, temporary Debentures (printed, lithographed, or
typewritten). Such temporary Debentures shall be substantially in the form of
the definitive Debentures in lieu of which they are issued, but with such
omissions, insertions and variations as may be appropriate for temporary
Debentures, all as may be determined by the Company. Every temporary Debenture
shall be executed by the Company and be authenticated by the Trustee upon the
same conditions and in substantially the same manner, and with like effect, as
the definitive Debentures. Without unnecessary delay the Company shall execute
and shall furnish definitive Debentures and thereupon any or all temporary
Debentures may be surrendered in exchange therefor (without charge to the
holders), at the office or agency of the Company designated for the purpose and
the Trustee shall authenticate and such office or agency shall deliver in
exchange for such temporary Debentures an equal aggregate principal amount of
definitive Debentures, unless the Company advises the Trustee to the effect that
definitive Debentures need not be executed and furnished until further notice
from the Company. Until so exchanged, the temporary Debentures shall be entitled
to the same benefits under this Indenture as definitive Debentures authenticated
and delivered hereunder.
Section 2.9. Mutilated, Destroyed, Lost or Stolen Debentures.
(a)......In case any temporary or definitive Debenture shall become
mutilated or be destroyed, lost or stolen, the Company (subject to the next
succeeding sentence) shall execute, and upon the Company's request the Trustee
(subject as aforesaid) shall authenticate and deliver, a new Debenture bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated Debenture, or in lieu of and in substitution for the Debenture so
destroyed, lost or stolen. In every case the applicant for a substituted
Debenture shall furnish to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee evidence to their satisfaction of the destruction,
loss or theft of the applicant's Debenture and of the ownership thereof. The
Trustee shall authenticate any such substituted Debenture and deliver the same
upon the written request or authorization of the Chairman, President or any Vice
President and the Treasurer or any Assistant Treasurer of the Company. Upon the
issuance of any substituted Debenture, 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. In case any Debenture that has matured or is
about to mature shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debenture, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Debenture) if the applicant for such payment shall furnish to the Company and
the Trustee such security or indemnity as they may require to save them
harmless, and, in case of destruction, loss or theft, evidence to the
satisfaction of the Company and the Trustee of the destruction, loss or theft of
such Debenture and of the ownership thereof.
(b)......Every replacement Debenture issued pursuant to the provisions
of this Section 2.9 shall constitute an additional contractual obligation of the
Company whether or not the mutilated, destroyed, lost or stolen Debenture shall
be found at any time, or be enforceable by anyone, and shall be entitled to all
the benefits of this Indenture equally and proportionately with any and all
other Debentures duly issued hereunder. All Debentures shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
Section 2.10. Cancellation. All Debentures surrendered for the purpose
of payment, redemption, exchange or registration of transfer shall, if
surrendered to the Company or any Paying Agent, be delivered to the Trustee for
cancellation, or, if surrendered to the Trustee, shall be canceled by it, and no
Debentures shall be issued in lieu thereof except as expressly required or
permitted by any of the provisions of this Indenture. On request of the Company
at the time of such surrender, the Trustee shall deliver to the Company canceled
Debentures held by the Trustee. In the absence of such request the Trustee may
dispose of canceled Debentures in accordance with its standard procedures and
deliver a certificate of disposition to the Company. If the Company shall
otherwise acquire any of the Debentures, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by such
Debentures unless and until the same are delivered to the Trustee for
cancellation.
Section 2.11. Benefit of Indenture. Nothing in this Indenture or in the
Debentures, express or implied, shall give or be construed to give to any
Person, other than the parties hereto and the holders of the Debentures (and,
with respect to the provisions of Article XVI, the holders of the Senior
Indebtedness) any legal or equitable right, remedy or claim under or in respect
of this Indenture, or under any covenant, condition or provision herein
contained; all such covenants, conditions and provisions being for the sole
benefit of the parties hereto and of the holders of the Debentures (and, with
respect to the provisions of Article XVI, the holders of the Senior
Indebtedness).
Section 2.12. Authentication Agent.
(a)......So long as any of the Debentures remain Outstanding there may
be an Authenticating Agent for any or all such Debentures, which the Trustee
shall have the right to appoint. Said Authenticating Agent shall be authorized
to act on behalf of the Trustee to authenticate Debentures issued upon exchange,
transfer or partial redemption thereof, and Debentures 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. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent. Each Authenticating
Agent shall be acceptable to the Company and shall be a corporation that has a
combined capital and surplus, as most recently reported or determined by it,
sufficient under the laws of any jurisdiction under which it is organized or in
which it is doing business to conduct a trust business, and that is otherwise
authorized under such laws to conduct such business and is subject to
supervision or examination by federal or state authorities. If at any time any
Authenticating Agent shall cease to be eligible in accordance with these
provisions, it shall resign immediately.
(b)......Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company. The Trustee may
at any time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.
ARTICLE III.
REDEMPTION OF DEBENTURES
Section 3.1. Redemption. Subject to the Company having received prior
approval of the Federal Reserve, if then required under the applicable capital
guidelines or policies of the Federal Reserve, the Company may redeem the
Debentures issued hereunder on and after the dates set forth in and in
accordance with the terms of this Article III.
Section 3.2. Special Event Redemption. Subject to the Company having
received the prior approval of the Federal Reserve, if then required under the
applicable capital guidelines or policies of the Federal Reserve, if a Special
Event has occurred and is continuing, then, notwithstanding Section 3.3(a) but
subject to Section 3.3(b), the Company shall have the right upon not less than
30 days' nor more than 60 days' notice to the holders of the Debentures to
redeem the Debentures, in whole but not in part, for cash within 180 days
following the occurrence of such Special Event (the "180-Day Period") at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest thereon to the date of such redemption (the
"Redemption Price"), provided that if at the time there is available to the
Company the opportunity to eliminate, within the 180-Day Period, a Tax Event by
taking some ministerial action (a "Ministerial Action"), such as filing a form
or making an election, or pursuing some other similar reasonable measure which
has no adverse effect on the Company, the Trust or the holders of the Trust
Securities issued by the Trust, the Company shall pursue such Ministerial Action
in lieu of redemption, and, provided further, that the Company shall have no
right to redeem the Debentures while it is pursuing any Ministerial Action
pursuant to its obligations hereunder, and, provided further, that, if it is
determined that the taking of a Ministerial Action would not eliminate the Tax
Event within the 180 Day Period, the Company's right to redeem the Debentures
shall be restored and it shall have no further obligations to pursue the
Ministerial Action. The Redemption Price shall be paid prior to 12:00 noon, New
York time, on the date of such redemption or such earlier time as the Company
determines, provided that the Company shall deposit with the Trustee an amount
sufficient to pay the Redemption Price by 10:00 a.m., New York time, on the date
such Redemption Price is to be paid.
Section 3.3. Optional Redemption by the Company.
(a)......Subject to the provisions of Section 3.3(b), except as
otherwise may be specified in this Indenture, the Company shall have the right
to redeem the Debentures, in whole or in part, from time to time, on or after
January 31, 2003, at a Redemption Price equal to 100% of the principal amount to
be redeemed plus any accrued and unpaid interest thereon to the date of such
redemption, plus Deferred Payments, if any. Any redemption pursuant to this
Section 3.3(a) shall be made upon not less than 30 days' nor more than 60 days'
notice to the holder of the Debentures, at the Redemption Price. If the
Debentures are only partially redeemed pursuant to this Section 3.3, the
Debentures shall be redeemed pro rata or by lot or in such other manner as the
Trustee shall deem appropriate and fair in its discretion. The Redemption Price
shall be paid prior to 12:00 noon, New York time, on the date of such redemption
or at such earlier time as the Company determines provided that the Company
shall deposit with the Trustee an amount sufficient to pay the Redemption Price
by 10:00 a.m., New York time, on the date such Redemption Price is to be paid.
(b)......If a partial redemption of the Debentures would result in the
delisting of the Preferred Securities issued by the Trust from the American
Stock Exchange, Inc. or any national securities exchange or other organization
on which the Preferred Securities are then listed or quoted, the Company shall
not be permitted to effect such partial redemption and may only redeem the
Debentures in whole.
Section 3.4. Notice of Redemption.
(a)......In case the Company shall desire to exercise such right to
redeem all or, as the case may be, a portion of the Debentures in accordance
with the right reserved so to do, the Company shall, or shall cause the Trustee
to upon receipt of 45 days' written notice from the Company (which notice shall,
in the event of a partial redemption, include a representation to the effect
that such partial redemption shall not result in the delisting of the Preferred
Securities as described in Section 3.3(b) above), give notice of such redemption
to holders of the Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days' and not more than 60
days' before the date fixed for redemption to such holders at their last
addresses as they shall appear upon the Debenture Register unless a shorter
period is specified in the Debentures to be redeemed. Any notice that is mailed
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the registered holder receives the notice. In any case,
failure duly to give such notice to the holder of any Debenture designated for
redemption in whole or in part, or any defect in the notice, shall not affect
the validity of the proceedings for the redemption of any other Debentures. In
the case of any redemption of Debentures prior to the expiration of any
restriction on such redemption provided in the terms of such Debentures or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with any such restriction. Each such
notice of redemption shall specify the date fixed for redemption and the
Redemption Price and shall state that payment of the Redemption Price shall be
made at the Corporate Trust Office, upon presentation and surrender of such
Debentures, that interest accrued to the date fixed for redemption shall be paid
as specified in said notice and that from and after said date interest shall
cease to accrue. If less than all the Debentures are to be redeemed, the notice
to the holders of the Debentures shall specify the particular Debentures to be
redeemed. If the Debentures are to be redeemed in part only, the notice shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the redemption date, upon surrender of such Debenture, a new
Debenture or Debentures in principal amount equal to the unredeemed portion
thereof shall be issued.
(b)......If less than all the Debentures are to be redeemed, the
Company shall give the Trustee at least 45 days' written notice in advance of
the date fixed for redemption as to the aggregate principal amount of Debentures
to be redeemed, and thereupon the Trustee shall select, by lot or in such other
manner as it shall deem appropriate and fair in its discretion, the portion or
portions (equal to $25 or any integral multiple thereof) of the Debentures to be
redeemed and shall thereafter promptly notify the Company in writing of the
numbers of the Debentures to be redeemed, in whole or in part. The Company may,
if and whenever it shall so elect pursuant to the terms hereof, by delivery of
instructions signed on its behalf by its President or any Vice President,
instruct the Trustee or any Paying Agent to call all or any part of the
Debentures for redemption and to give notice of redemption in the manner set
forth in this Section 3.4, such notice to be in the name of the Company or its
own name as the Trustee or such Paying Agent may deem advisable. In any case in
which notice of redemption is to be given by the Trustee or any such Paying
Agent, the Company shall deliver or cause to be delivered to, or permit to
remain with, the Trustee or such Paying Agent, as the case may be, such
Debenture Register, transfer books or other records, or suitable copies or
extracts therefrom, sufficient to enable the Trustee or such Paying Agent to
give any notice by mail that may be required under the provisions of this
Section 3.4.
Section 3.5. Payment upon Redemption.
(a)......If the giving of notice of redemption shall have been
completed as above provided, the Debentures or portions of Debentures to be
redeemed specified in such notice shall become due and payable on the date and
at the place stated in such notice at the applicable Redemption Price, and
interest on such Debentures or portions of Debentures shall cease to accrue on
and after the date fixed for redemption, unless the Company shall default in the
payment of such Redemption Price with respect to any such Debenture or portion
thereof. On presentation and surrender of such Debentures on or after the date
fixed for redemption at the place of payment specified in the notice, said
Debentures shall be paid and redeemed at the Redemption Price (but if the date
fixed for redemption is an Interest Payment Date, the interest installment
payable on such date shall be payable to the registered holder at the close of
business on the applicable record date pursuant to Section 3.3).
(b)......Upon presentation of any Debenture that is to be redeemed in
part only, the Company shall execute and the Trustee shall authenticate and the
office or agency where the Debenture is presented shall deliver to the holder
thereof, at the expense of the Company, a new Debenture of authorized
denomination in principal amount equal to the unredeemed portion of the
Debenture so presented.
Section 3.6. No Sinking Fund. The Debentures are not entitled to the
benefit of any sinking fund.
ARTICLE IV.
EXTENSION OF INTEREST PAYMENT PERIOD
Section 4.1. Extension of Interest Payment Period. So long as no Event
of Default has occurred and is continuing, the Company shall have the right, at
any time and from time to time during the term of the Debentures, to defer
payments of interest by extending the interest payment period of such Debentures
for a period not exceeding 20 consecutive quarters (the "Extension Period"),
during which Extension Period no interest shall be due and payable; provided
that no Extension Period may extend beyond the Maturity Date. Interest, the
payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 4.1, shall bear interest thereon at the
Coupon Rate compounded quarterly for each quarter of the Extension Period
("Compounded Interest"). At the end of the Extension Period, the Company shall
calculate (and deliver such calculation to the Trustee) and pay all interest
accrued and unpaid on the Debentures, including any Additional Payments and
Compounded Interest (together, "Deferred Payments") that shall be payable to the
holders of the Debentures in whose names the Debentures are registered in the
Debenture Register on the first record date after the end of the Extension
Period. Before the termination of any Extension Period, the Company may further
extend such period, provided that such period together with all such further
extensions thereof shall not exceed 20 consecutive quarters, or extend beyond
the Maturity Date of the Debentures. Upon the termination of any Extension
Period and upon the payment of all Deferred Payments then due, the Company may
commence a new Extension Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extension Period, except at the end
thereof, but the Company may prepay at any time all or any portion of the
interest accrued during an Extension Period.
Section 4.2. Notice Of Extension.
(a)......If the Property Trustee is the only registered holder of the
Debentures at the time the Company selects an Extension Period, the Company
shall give written notice to the Administrative Trustees, the Property Trustee
and the Trustee of its selection of such Extension Period 2 Business Days before
the earlier of (i) the next succeeding date on which Distributions on the Trust
Securities issued by the Trust are payable; or (ii) the date the Trust is
required to give notice of the record date, or the date such Distributions are
payable, to the American Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities issued by the Trust, but
in any event at least 1 Business Day before such record date.
(b)......If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extension Period, the Company
shall give the holders of the Debentures and the Trustee written notice of its
selection of such Extension Period at least 2 Business Days before the earlier
of (i) the next succeeding Interest Payment Date; or (ii) the date the Company
is required to give notice of the record or payment date of such interest
payment to the American Stock Exchange or other applicable self-regulatory
organization or to holders of the Debentures.
(c)......The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one of the 20
quarters permitted in the maximum Extension Period permitted under Section 4.1.
Section 4.3. Limitation on Transactions. If (a) the Company shall
exercise its right to defer payment of interest as provided in Section 4.1; or
(b) there shall have occurred any Event of Default, then (i) the Company shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than (A) dividends or distributions in common stock of
the Company, or any declaration of a non-cash dividend in connection with the
implementation of a shareholder rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (B) purchases of common stock of the Company related to
the rights under any of the Company's benefit plans for its directors, officers
or employees); (ii) the Company shall not make any payment of interest,
principal or premium, if any, or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to the Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Debentures; provided, however, that
notwithstanding the foregoing the Company may make payments pursuant to its
obligations under the Preferred Securities Guarantee; and (iii) the Company
shall not redeem, purchase or acquire less than all of the Outstanding
Debentures or any of the Preferred Securities.
ARTICLE V.
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1. Payment of Principal and Interest. The Company shall duly
and punctually pay or cause to be paid the principal of and interest on the
Debentures at the time and place and in the manner provided herein. Each such
payment of the principal of and interest on the Debentures shall relate only to
the Debentures, shall not be combined with any other payment of the principal of
or interest on any other obligation of the Company, and shall be clearly and
unmistakably identified as pertaining to the Debentures.
Section 5.2. Maintenance of Agency. So long as any of the Debentures
remain Outstanding, the Company shall maintain an office or agency at such other
location or locations as may be designated as provided in this Section 5.2,
where (a) Debentures may be presented for payment; (b) Debentures may be
presented as hereinabove authorized for registration of transfer and exchange;
and (c) notices and demands to or upon the Company in respect of the Debentures
and this Indenture may be given or served, such designation to continue with
respect to such office or agency until the Company shall, by written notice
signed by its President or a Vice President and delivered to the Trustee,
designate some other office or agency for such purposes or any of them. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, 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, notices and demands. The Company shall give
the Trustee prompt written notice of any such designation or rescission thereof.
Section 5.3. Paying Agents.
(a)......The Trustee shall initially act as the Paying Agent. If the
Company shall appoint one or more Paying Agents for the Debentures, other than
the Trustee, the Company shall cause each such Paying Agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent for
the payment of the principal of or interest on the Debentures (whether
such sums have been paid to it by the Company or by any other obligor
of such Debentures) in trust for the benefit of the Persons entitled
thereto;
(ii) that it shall give the Trustee notice of any failure by
the Company (or by any other obligor of such Debentures) to make any
payment of the principal of or interest on the Debentures when the same
shall be due and payable;
(iii) that it shall, at any time during the continuance of any
failure referred to in the preceding paragraph (a)(ii) above, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent; and
(iv) that it shall perform all other duties of Paying Agent as
set forth in this Indenture.
(b)......If the Company shall act as its own Paying Agent with respect
to the Debentures, it shall on or before each due date of the principal of or
interest on such Debentures, set aside, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay such principal
or interest so becoming due on Debentures until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and shall promptly notify
the Trustee of such action, or any failure (by it or any other obligor on such
Debentures) to take such action. Whenever the Company shall have one or more
Paying Agents for the Debentures, it shall, prior to each due date of the
principal of or interest on any Debentures, deposit with the Paying Agent a sum
sufficient to pay the principal or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal or interest,
and (unless such Paying Agent is the Trustee) the Company shall promptly notify
the Trustee of this action or failure so to act.
(c)......Notwithstanding anything in this Section 5.3 to the contrary,
(i) the agreement to hold sums in trust as provided in this Section 5.3 is
subject to the provisions of Section 13.3 and 13.4; and (ii) 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 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 terms and conditions 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.
Section 5.4. Appointment to Fill Vacancy in Office of the Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
shall appoint, in the manner provided in Section 9.11, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.5. Compliance with Consolidation Provisions. The Company
shall not, while any of the Debentures remain Outstanding, consolidate with, or
merge into, or merge into itself, or sell or convey all or substantially all of
its property to any other company unless the provisions of Article XII hereof
are complied with.
Section 5.6. Limitation on Transactions. If Debentures are issued to
the Trust or a trustee of the Trust in connection with the issuance of Trust
Securities by the Trust and (a) there shall have occurred any event that would
constitute an Event of Default; (b) the Company shall be in default with respect
to its payment of any obligations under the Preferred Securities Guarantee
relating to the Trust; or (c) if the Company shall have given notice of its
election to defer payments of interest on such Debentures by extending the
interest payment period as provided in this Indenture and such Extension Period,
or any extension thereof, shall be continuing, then (i) the Company shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than (A) dividends or distributions in common stock of
the Company, or any declaration of a non-cash dividend in connection with the
implementation of a shareholder rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, and (B) purchases of common stock of the Company related to
the rights under any of the Company's benefit plans for its directors, officers
or employees); (ii) the Company shall not make any payment of principal,
interest or premium, if any, or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior in interest to the
Debentures; provided, however, that the Company may make payments pursuant to
its obligations under the Preferred Securities Guarantee; and (iii) the Company
shall not redeem, purchase or acquire less than all of the Outstanding
Debentures or any of the Preferred Securities.
Section 5.7. Covenants as to the Trust. For so long as the Trust
Securities of the Trust remain outstanding, the Company shall (a) maintain 100%
direct or indirect ownership of the Common Securities of the Trust; provided,
however, that any permitted successor of the Company under this Indenture may
succeed to the Company's ownership of the Common Securities; (b) not voluntarily
terminate, wind up or liquidate the Trust, except upon prior approval of the
Federal Reserve if then so required under applicable capital guidelines or
policies of the Federal Reserve; (c) use its reasonable efforts to cause the
Trust (i) to remain a business trust, except in connection with a distribution
of Debentures, the redemption of all of the Trust Securities of the Trust or
certain mergers, consolidations or amalgamations, each as permitted by the Trust
Agreement; and (ii) to otherwise continue not to be treated as an association
taxable as a corporation or partnership for United States federal income tax
purposes; and (d) use its reasonable efforts to cause each holder of Trust
Securities to be treated as owning an individual beneficial interest in the
Debentures. In connection with the distribution of the Debentures to the holders
of the Preferred Securities issued by the Trust upon a Dissolution Event, the
Company shall use its best efforts to list such Debentures on the American Stock
Exchange or on such other exchange as the Preferred Securities are then listed.
Section 5.8. Covenants as to Purchases. Except upon the exercise by the
Company of its right to redeem the Debentures pursuant to Section 3.2 upon the
occurrence and continuation of a Special Event, the Company shall not purchase
any Debentures, in whole or in part, from the Trust prior to January 31, 2003.
ARTICLE VI.
THE DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 6.1. The Company to Furnish the Trustee Names and Addresses of
the Debentureholders. The Company shall furnish or cause to be furnished to the
Trustee (a) on a quarterly basis on each regular record date (as described in
Section 2.5) a list, in such form as the Trustee may reasonably require, of the
names and addresses of the holders of the Debentures as of such regular record
date, provided that the Company shall not be obligated to furnish or cause to
furnish such list at any time that the list shall not differ in any respect from
the most recent list furnished to the Trustee by the Company (in the event the
Company fails to provide such list on a quarterly basis, the Trustee shall be
entitled to rely on the most recent list provided by the Company); 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;
provided, however, that, in either case, no such list need be furnished if the
Trustee shall be the Debenture Registrar.
Section 6.2. Preservation of Information Communications with the
Debentureholders.
(a)......The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Debentures contained in the most recent list furnished to it as
provided in Section 6.1 and as to the names and addresses of holders of
Debentures received by the Trustee in its capacity as Debenture Registrar for
the Debentures (if acting in such capacity).
(b)......The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(c)......Debentureholders may communicate as provided in Section 312(b)
of the Trust Indenture Act with other Debentureholders with respect to their
rights under this Indenture or under the Debentures.
Section 6.3. Reports by the Company.
(a)......The Company covenants and agrees to file with the Trustee,
within 15 days after the Company is required to file the same with the
Commission, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) that the
Company may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and the Commission, in accordance with the rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b)......The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from
time to time by the Commission, such additional information, documents and
reports with respect to compliance by the Company with the conditions and
covenants provided for in this Indenture as may be required from time to time by
such rules and regulations.
(c)......The Company covenants and agrees to transmit by mail, first
class postage prepaid, or reputable overnight delivery service that provides for
evidence of receipt, to the Debentureholders, as their names and addresses
appear upon the Debenture Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of this
Section 6.3 as may be required by rules and regulations prescribed from time to
time by the Commission.
Section 6.4. Reports by the Trustee.
(a)......On or before July 15 in each year in which any of the
Debentures are Outstanding, the Trustee shall transmit by mail, first class
postage prepaid, to the Debentureholders, as their names and addresses appear
upon the Debenture Register, a brief report dated as of the preceding May 15, if
and to the extent required under Section 313(a) of the Trust Indenture Act.
(b)......The Trustee shall comply with Section 313(b) and 313(c) of the
Trust Indenture Act.
(c)......A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with the Company, with
each stock exchange upon which any Debentures are listed (if so listed) and also
with the Commission. The Company agrees to notify the Trustee when any
Debentures become listed on any stock exchange.
ARTICLE VII.
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
Section 7.1. Events of Default.
(a)......Whenever used herein with respect to the Debentures, "Event of
Default" means any one or more of the following events that has occurred and is
continuing:
(i) the Company defaults in the payment of any installment of
interest upon any of the Debentures, as and when the same shall become
due and payable, and continuance of such default for a period of 30
days; provided, however, that a valid extension of an interest payment
period by the Company in accordance with the terms of this Indenture
shall not constitute a default in the payment of interest for this
purpose;
(ii) the Company defaults in the payment of the principal on
the Debentures as and when the same shall become due and payable
whether at maturity, upon redemption, by declaration or otherwise;
provided, however, that a valid extension of the maturity of such
Debentures in accordance with the terms of this Indenture shall not
constitute a default in the payment of principal;
(iii) the Company fails to observe or perform any other of its
covenants or agreements with respect to the Debentures for a period of
90 days after the date on which written notice of such failure,
requiring the same to be remedied and stating that such notice is a
"Notice of Default" hereunder, 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 principal amount of the
Debentures at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (A) commences a voluntary case; (B) consents to the
entry of an order for relief against it in an involuntary case; (C)
consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (D) makes a general assignment
for the benefit of its creditors;
(v) a court of competent jurisdiction enters an order under
any Bankruptcy Law that (A) is for relief against the Company in an
involuntary case; (B) appoints a Custodian of the Company for all or
substantially all of its property; or (C) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for 90
days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its existence
except in connection with (A) the distribution of Debentures to holders
of Trust Securities in liquidation of their interests in the Trust; (B)
the redemption of all of the outstanding Trust Securities of the Trust;
or (C) certain mergers, consolidations or amalgamations, each as
permitted by the Trust Agreement.
(b)......In each and every such case referred to in items (i) through
(vi) of Section 7.1(a), unless the principal of all the Debentures shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Debentures then Outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
such Debentureholders) may declare the principal of all the Debentures to be due
and payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, notwithstanding anything contained in this
Indenture or in the Debentures.
(c)......At any time after the principal of the Debentures shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the holders of a majority in aggregate principal amount of the
Debentures then Outstanding hereunder, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if: (i) the
Company has paid or deposited with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Debentures and the principal of
any and all Debentures that shall have become due otherwise than by acceleration
(with interest upon such principal, and upon overdue installments of interest,
at the rate per annum expressed in the Debentures to the date of such payment or
deposit) and the amount payable to the Trustee under Section 9.7; and (ii) any
and all Events of Default under this Indenture, other than the nonpayment of
principal on Debentures that shall not have become due by their terms, shall
have been remedied or waived as provided in Section 7.6. No such rescission and
annulment shall extend to or shall affect any subsequent default or impair any
right consequent thereon.
(d)......In case the Trustee shall have proceeded to enforce any right
with respect to Debentures under this Indenture and such proceedings shall have
been discontinued or abandoned because of such rescission or annulment or for
any other reason or shall have been determined adversely to the Trustee, then
and in every such case the Company and the Trustee shall be restored
respectively to their former positions and rights hereunder, and all rights,
remedies and powers of the Company and the Trustee shall continue as though no
such proceedings had been taken.
Section 7.2. Collection of Indebtedness and Suits for Enforcement by
the Trustee.
(a)......The Company covenants that (i) in case it shall default in the
payment of any installment of interest on any of the Debentures, and such
default shall have continued for a period of 30 days; or (ii) in case it shall
default in the payment of the principal of any of the Debentures when the same
shall have become due and payable, whether upon maturity of the Debentures or
upon redemption or upon declaration or otherwise, then, upon demand of the
Trustee, the Company shall pay to the Trustee, for the benefit of the holders of
the Debentures, the whole amount that then shall have been become due and
payable on all such Debentures for principal or interest, or both, as the case
may be, with interest upon the overdue principal; and (if the Debentures are
held by the Trust or a trustee of the Trust, without duplication of any other
amounts paid by the Trust or trustee in respect thereof) upon overdue
installments of interest at the rate per annum expressed in the Debentures; and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, and the amount payable to the Trustee under
Section 9.7.
(b)......If the Company shall fail to pay such amounts set forth in
Section 7.2(a) forthwith upon such demand, the Trustee, in its own name and as
trustee of an express trust, shall be entitled and empowered to institute any
action or proceedings at law or in equity for the collection of the sums so due
and unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such judgment or final decree against the Company or
other obligor upon the Debentures and collect the moneys adjudged or decreed to
be payable in the manner provided by law out of the property of the Company or
other obligor upon the Debentures, wherever situated.
(c)......In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition or judicial
proceedings affecting the Company or the creditors or property thereof, the
Trustee shall have power to intervene in such proceedings and take any action
therein that may be permitted by the court and shall (except as may be otherwise
provided by law) be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the claims of the
Trustee and of the holders of the Debentures allowed for the entire amount due
and payable by the Company under this Indenture at the date of institution of
such proceedings and for any additional amount that may become due and payable
by the Company after such date, and to collect and receive any moneys or other
property payable or deliverable on any such claim, and to distribute the same
after the deduction of the amount payable to the Trustee under Section 9.7; and
any receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of the holders of the Debentures to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to such Debentureholders, to pay to the Trustee any amount due
it under Section 9.7.
(d)......All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect to the Debentures,
may be enforced by the Trustee without the possession of any of such Debentures,
or the production thereof at any trial or other proceeding relative thereto, and
any such suit or proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment shall,
after provision for payment to the Trustee of any amounts due under Section 9.7,
be for the ratable benefit of the holders of the Debentures. In case of an Event
of Default hereunder, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
of such rights, either at law or in equity or in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law. Nothing contained herein shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Debentureholder any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Debentureholder in
any such proceeding.
Section 7.3. Application of Moneys Collected. Any moneys collected by
the Trustee pursuant to this Article VII with respect to the Debentures shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such moneys on account of principal or interest,
upon presentation of the Debentures, and notation thereon of the payment, if
only partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses of collection and
of all amounts payable to the Trustee under Section 9.7;
SECOND: To the payment of all Senior Indebtedness if and to
the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid upon
the Debentures for principal and 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 Debentures for principal and interest, respectively.
Section 7.4. Limitation on Suits.
(a)......Except as provided in Section 15.13 hereof, no holder of any
Debenture shall have any right by virtue or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless (i) such holder previously
shall have given to the Trustee written notice of an Event of Default and of the
continuance thereof with respect to the Debentures specifying such Event of
Default, as hereinbefore provided; (ii) the holders of not less than 25% in
aggregate principal amount of the Debentures then Outstanding shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as trustee hereunder; (iii) such holder or holders shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby; and (iv) the
Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action, suit or proceeding and
during such 60 day period, the holders of a majority in principal amount of the
Debentures do not give the Trustee a direction inconsistent with the request.
(b)......Notwithstanding anything contained herein to the contrary or
any other provisions of this Indenture, the right of any holder of the
Debentures to receive payment of the principal of and interest on the
Debentures, as therein provided, on or after the respective due dates expressed
in such Debenture (or in the case of redemption, on the redemption date), or to
institute suit for the enforcement of any such payment on or after such
respective dates or redemption date, shall not be impaired or affected without
the consent of such holder and by accepting a Debenture hereunder it is
expressly understood, intended and covenanted by the taker and holder of every
Debenture with every other such taker and holder and the Trustee that no one or
more holders of the Debentures shall have any right in any manner whatsoever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other of such Debentures, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of the
Debentures. For the protection and enforcement of the provisions of this Section
7.4, each and every Debentureholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
Section 7.5. Rights and Remedies Cumulative; Delay or Omission not
Waiver.
(a)......All powers and remedies given by this Article VII to the
Trustee or to the Debentureholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers and remedies available
to the Trustee or the holders of the Debentures, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture or otherwise established with respect to
such Debentures.
(b)......No delay or omission of the Trustee or of any holder of any of
the Debentures to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 7.4, every power and remedy
given by this Article VII or by law to the Trustee or the Debentureholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Debentureholders.
Section 7.6. Control by the Debentureholders. The holders of a majority
in aggregate principal amount of the Debentures at the time Outstanding,
determined in accordance with Section 10.4, 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;
provided, however, that such direction shall not be in conflict with any rule of
law or with this Indenture. Subject to the provisions of Section 9.1, the
Trustee shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of the
Trustee, determine that the proceeding so directed would involve the Trustee in
personal liability. The holders of a majority in aggregate principal amount of
the Debentures at the time Outstanding affected thereby, determined in
accordance with Section 10.4, may on behalf of the holders of all of the
Debentures waive any past default in the performance of any of the covenants
contained herein and its consequences, except (i) a default in the payment of
the principal of or interest on any of the Debentures as and when the same shall
become due by the terms of such Debentures otherwise than by acceleration
(unless such default has been cured and a sum sufficient to pay all matured
installments of principal and interest has been deposited with the Trustee (in
accordance with Section 7.1(c)); (ii) a default in the covenants contained in
Section 5.6; or (iii) in respect of a covenant or provision hereof which cannot
be modified or amended without the consent of the holder of each Outstanding
Debenture affected; provided, however, that if the Debentures are held by the
Trust or a trustee of the Trust, such waiver or modification to such waiver
shall not be effective until the holders of a majority in liquidation preference
of Trust Securities of the Trust shall have consented to such waiver or
modification to such waiver; provided further, that if the Debentures are held
by the Trust or a trustee of the Trust, and if the consent of the holder of each
Outstanding Debenture is required, such waiver shall not be effective until each
holder of the Trust Securities of the Trust shall have consented to such waiver.
Upon any such waiver, the default covered thereby shall be deemed to be cured
for all purposes of this Indenture and the Company, the Trustee and the holders
of the Debentures shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 7.7. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Debentures by such holder's 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 the
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 7.7 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Debentureholder, or group of the Debentureholders holding more
than 10% in aggregate principal amount of the Outstanding Debentures, or to any
suit instituted by any Debentureholder for the enforcement of the payment of the
principal of or interest on the Debentures, on or after the respective due dates
expressed in such Debenture or established pursuant to this Indenture.
ARTICLE VIII.
FORM OF THE DEBENTURE AND ORIGINAL ISSUE
Section 8.1. Form of Debenture. The Debenture and the Trustee's
Certificate of Authentication to be endorsed thereon are to be substantially in
the forms contained as Exhibit A attached hereto and incorporated herein by
reference.
Section 8.2. Original Issue of the Debentures. Debentures in the
aggregate principal amount of $59,278,375 may, upon execution of this Indenture,
be executed by the Company and delivered to the Trustee for authentication, and
the Trustee shall thereupon authenticate and deliver said Debentures to or upon
the written order of the Company, signed by its Chairman, its Vice Chairman, its
President, or any Vice President and its Treasurer or an Assistant Treasurer,
without any further action by the Company.
ARTICLE IX.
CONCERNING THE TRUSTEE
Section 9.1. Certain Duties and Responsibilities of the Trustee.
(a)......The Trustee, prior to the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform with respect to the Debentures such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
shall be read into this Indenture against the Trustee. In case an Event of
Default has occurred that has not been cured or waived, 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 its exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b)......No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an 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 Trustee shall
with respect to the Debentures be determined solely by the
express provisions of this Indenture, and the Trustee shall
not be liable with respect to the Debentures except for the
performance of such duties and obligations as are specifically
set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(B) in the absence of bad faith on the part of the
Trustee, the Trustee may with respect to the Debentures
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 Trustee and
conforming to the requirements of this Indenture; but in the
case of any such certificates or opinions that by any
provision 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;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in
principal amount of the Debentures at the time Outstanding 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 Debentures;
and
(iv) none of the provisions contained in this Indenture shall
require the 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 there is reasonable
ground for believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured to it.
Section 9.2. 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 Debentures, the Trustee shall
transmit by mail to all holders of the Debentures, as their names and
addresses appear in the Debenture 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
or interest (including any Additional Payments) on any Debenture, 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
the directors and/or Responsible Officers of the Trustee determines in
good faith that the withholding of such notice is in the interests of
the holders of such Debentures; and provided, further, that in the case
of any default of the character specified in section 7.1(a)(iii), no
such notice to holders of Debentures need be sent until at least 30
days after the occurrence thereof. For the purposes of this Section
9.2, the term "default" means any event which is, or after notice or
lapse of time or both, would become, an Event of Default with respect
to the Debentures.
Section 9.3. Certain Rights of the Trustee. Except as otherwise
provided in Section 9.1:
(a)......The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, security or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b)......Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board Resolution or an
instrument signed in the name of the Company by the President or any Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer thereof (unless other evidence in respect thereof is
specifically prescribed herein);
(c)......The Trustee shall not be deemed to have knowledge of a default
or an Event of Default, other than an Event of Default specified in Section
7.1(a)(i) or (ii), unless and until it receives written notification of such
Event of Default from the Company or by holders of at least 25% of the aggregate
principal amount of the Debentures at the time Outstanding;
(d)......The Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or omitted 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, order or
direction of any of the Debentureholders, pursuant to the provisions of this
Indenture, unless such Debentureholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee of the obligation, upon the occurrence of an Event
of Default (that has not been cured or waived) to exercise with respect to the
Debentures such of the rights and powers vested in it by this Indenture, and to
use the same degree of care and skill in its exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of his or her own
affairs;
(f)......The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture;
(g)......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, consent, order, approval, bond,
security, or other papers or documents, unless requested in writing so to do by
the holders of not less than a majority in principal amount of the Outstanding
Debentures (determined as provided in Section 10.4); provided, however, that if
the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a condition
to so proceeding, and the reasonable expense of every such examination shall be
paid by the Company or, if paid by the Trustee, shall be repaid by the Company
upon demand; and
(h)......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 9.4. The Trustee not Responsible for Recitals, Etc.
(a)......The Recitals contained herein and in the Debentures shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same.
(b)......The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Debentures.
(c)......The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the proceeds of such
Debentures, or for the use or application of any moneys paid over by the Trustee
in accordance with any provision of this Indenture, or for the use or
application of any moneys received by any Paying Agent other than the Trustee.
Section 9.5. May Hold the Debentures. The Trustee or any Paying Agent
or Debenture Registrar for the Debentures, in its individual or any other
capacity, may become the owner or pledgee of the Debentures with the same rights
it would have if it were not Trustee, Paying Agent or Debenture Registrar.
Section 9.6. Moneys Held in Trust. Subject to the provisions of Section
13.5, all moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
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 moneys received by
it hereunder except such as it may agree with the Company to pay thereon.
Section 9.7. Compensation and Reimbursement.
(a)......The Company covenants and agrees to pay to the Trustee, and
the Trustee shall be entitled to, such reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust), as the Company and the Trustee may from time to time agree in
writing, for all services rendered by it in the execution of the trusts hereby
created and in the exercise and performance of any of the powers and duties
hereunder of the Trustee, and, except as otherwise expressly provided herein,
the Company shall pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify the Trustee (and its officers, agents, directors and
employees) for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee and arising
out of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim of
liability in the premises.
(b)......The obligations of the Company under this Section 9.7 to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to that
of the Debentures upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the holders of particular
Debentures.
Section 9.8. Reliance on Officers' Certificate. Except as otherwise
provided in Section 9.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting to take any
action hereunder, such matter (unless other evidence in respect thereof be
herein specifically prescribed) may, in the absence of negligence or bad faith
on the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee and such certificate, in
the absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted to be taken by
it under the provisions of this Indenture upon the faith thereof.
Section 9.9. Disqualification; Conflicting Interests. If the Trustee
has or shall acquire any "conflicting interest" within the meaning of Section
310(b) of the Trust Indenture Act, the Trustee and the Company shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
Section 9.10. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee with respect to the Debentures issued hereunder which
shall at all times be a corporation organized and doing business under the laws
of the United States or any state or territory thereof or of the District of
Columbia, or a corporation or other Person permitted to act as trustee by the
Commission, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal, state, territorial, or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 9.10, 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. The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 9.10, the Trustee shall resign
immediately in the manner and with the effect specified in Section 9.11.
Section 9.11. Resignation and Removal; Appointment of Successor.
(a)......The Trustee or any successor hereafter appointed, may at any
time resign by giving written notice thereof to the Company and by transmitting
notice of resignation by mail, first class postage prepaid, to the
Debentureholders, as their names and addresses appear upon the Debenture
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee with respect to Debentures by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the mailing of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee with respect to
Debentures, or any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the provisions
of Section 9.10, on behalf of himself or herself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b)......In case at any time any one of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 9.9 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.10 and shall fail to resign after written
request therefor by the Company or by any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or shall
be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy
proceeding, or a receiver of the Trustee or of its property shall be
appointed or consented to, 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,
the Company may remove the Trustee with respect to all Debentures and
appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee, or, subject to the provisions of Section 9.10,
unless the Trustee's duty to resign is stayed as provided herein, any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months may, on behalf of that holder and
all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after such notice, if any,
as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c)......The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding may at any time remove the Trustee by so
notifying the Trustee and the Company and may appoint a successor Trustee with
the consent of the Company.
(d)......Any resignation or removal of the Trustee and appointment of a
successor trustee with respect to the Debentures pursuant to any of the
provisions of this Section 9.11 shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 9.12.
Section 9.12. Acceptance of Appointment by Successor.
(a)......In case of the appointment hereunder of a successor trustee
with respect to the Debentures, every 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 successor trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, powers and trusts referred
to in paragraph (a) of this Section 9.12.
(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 IX.
(d)......Upon acceptance of appointment by a successor trustee as
provided in this Section 9.12, the Company shall transmit notice of the
succession of such trustee hereunder by mail, first class postage prepaid, to
the Debentureholders, as their names and addresses appear upon the Debenture
Register. If the Company fails to transmit such notice within ten days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Company.
Section 9.13. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 9.9 and eligible under the provisions
of Section 9.10, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case any Debentures 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 Debentures so authenticated with the same effect as if such
successor Trustee had itself authenticated such Debentures.
Section 9.14. Preferential Collection of Claims against the Company.
The Trustee shall comply with Section 311(a) of the Trust Indenture Act,
excluding any creditor relationship described in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent included therein.
<PAGE>
ARTICLE X.
CONCERNING THE DEBENTUREHOLDERS
Section 10.1. Evidence of Action by the Holders.
(a)......Whenever in this Indenture it is provided that the holders of
a majority or specified percentage in aggregate principal amount of the
Debentures may take any action (including the making of any demand or request,
the giving of any notice, consent or waiver or the taking of any other action),
the fact that at the time of taking any such action the holders of such majority
or specified percentage have joined therein may be evidenced by any instrument
or any number of instruments of similar tenor executed by such holders of
Debentures in Person or by agent or proxy appointed in writing.
(b)......If the Company shall solicit from the Debentureholders any
request, demand, authorization, direction, notice, consent, waiver or other
action, the Company may, at its option, as evidenced by an Officers'
Certificate, fix in advance a record date for the determination of
Debentureholders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other action, but the Company shall have
no obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may be given
before or after the record date, but only the Debentureholders of record at the
close of business on the record date shall be deemed to be Debentureholders for
the purposes of determining whether Debentureholders of the requisite proportion
of Outstanding Debentures have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
action, and for that purpose the Outstanding Debentures shall be computed as of
the record date; provided, however, that no such authorization, agreement or
consent by such Debentureholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Indenture
not later than six (6) months after the record date.
Section 10.2. Proof of Execution by the Debentureholders. Subject to
the provisions of Section 9.1, proof of the execution of any instrument by a
Debentureholder (such proof shall not require notarization) or such
Debentureholder's agent or proxy and proof of the holding by any Person of any
of the Debentures shall be sufficient if made in the following manner:
(a)......The fact and date of the execution by any such Person of any
instrument may be proved in any reasonable manner acceptable to the Trustee.
(b)......The ownership of Debentures shall be proved by the Debenture
Register of such Debentures or by a certificate of the Debenture Registrar
thereof.
(c)......The Trustee may require such additional proof of any matter
referred to in this Section 10.2 as
it shall deem necessary.
Section 10.3. Who May be Deemed Owners. Prior to the due presentment
for registration of transfer of any Debenture, the Company, the Trustee, any
Paying Agent, any Authenticating Agent and any Debenture Registrar may deem and
treat the Person in whose name such Debenture shall be registered upon the books
of the Company as the absolute owner of such Debenture (whether or not such
Debenture shall be overdue and notwithstanding any notice of ownership or
writing thereon made by anyone other than the Debenture Registrar) for the
purpose of receiving payment of or on account of the principal of and interest
on such Debenture (subject to Section 2.3) and for all other purposes; and
neither the Company nor the Trustee nor any Paying Agent nor any Authenticating
Agent nor any Debenture Registrar shall be affected by any notice to the
contrary.
Section 10.4. Certain Debentures Owned by Company Disregarded. In
determining whether the holders of the requisite aggregate principal amount of
the Debentures have concurred in any direction, consent or waiver under this
Indenture, the Debentures that are owned by the Company or any other obligor on
the Debentures or by any Person directly or indirectly controlling or controlled
by or under common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that (a) for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, consent
or waiver, only Debentures that the Trustee actually knows are so owned shall be
so disregarded; and (b) for purposes of this Section 10.4, the Trust shall be
deemed not to be controlled by the Company. The Debentures so owned that have
been pledged in good faith may be regarded as Outstanding for the purposes of
this Section 10.4, if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Debentures and that
the pledgee is not a Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
Section 10.5. Actions Binding on the Future Debentureholders. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 10.1, of the taking of any action by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action, any holder of a Debenture that is
shown by the evidence to be included in the Debentures the holders of which have
consented to such action may, by filing written notice with the Trustee, and
upon proof of holding as provided in Section 10.2, revoke such action so far as
concerns such Debenture. Except as aforesaid any such action taken by the holder
of any Debenture shall be conclusive and binding upon such holder and upon all
future holders and owners of such Debenture, and of any Debenture issued in
exchange therefor, on registration of transfer thereof or in place thereof,
irrespective of whether or not any notation in regard thereto is made upon such
Debenture. Any action taken by the holders of the majority or percentage in
aggregate principal amount of the Debentures specified in this Indenture in
connection with such action shall be conclusively binding upon the Company, the
Trustee and the holders of all the Debentures.
ARTICLE XI.
SUPPLEMENTAL INDENTURES
Section 11.1. Supplemental Indentures without the Consent of the
Debentureholders. In addition to any supplemental indenture otherwise authorized
by this Indenture, the Company and the Trustee may from time to time and at any
time enter into an indenture or indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as then in effect), without
the consent of the Debentureholders, for one or more of the following purposes:
(a)......to cure any ambiguity, defect, or inconsistency herein, or in
the Debentures;
(b)......to provide for uncertificated Debentures in addition to or in
place of certificated Debentures;
(c)......to add to the covenants of the Company for the benefit of the
holders of all or any of the Debentures or to surrender any right or power
herein conferred upon the Company;
(d)......to make any change that does not adversely affect the rights
of any Debentureholder in any material respect;
(e)......to qualify or maintain the qualification of this Indenture
under the Trust Indenture Act; or
(f)......to evidence a consolidation or merger involving the Company as
permitted under Section 12.1.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee 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. Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debentures at the time Outstanding, notwithstanding
any of the provisions of Section 11.2.
Section 11.2. Supplemental Indentures with Consent of the
Debentureholders. With the consent (evidenced as provided in Section 10.1) of
the holders of not less than a majority in aggregate principal amount of the
Debentures at the time Outstanding, the Company, when authorized by Board
Resolutions, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as then in effect) for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner not covered by Section 11.1 the rights of the holders of the
Debentures under this Indenture; provided, however, that no such supplemental
indenture shall without the consent of the holders of each Debenture then
Outstanding and affected thereby, (a) extend the fixed maturity of any
Debentures, reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon; or (b) reduce the aforesaid percentage
of Debentures, the holders of which are required to consent to any such
supplemental indenture; provided further, that if the Debentures are held by the
Trust or a trustee of the Trust, such supplemental indenture shall not be
effective until the holders of a majority in liquidation preference of Trust
Securities of the Trust shall have consented to such supplemental indenture;
provided further, that if the Debentures are held by the Trust or a trustee of
the Trust and if the consent of the holder of each Outstanding Debenture is
required, such supplemental indenture shall not be effective until each holder
of the Trust Securities of the Trust shall have consented to such supplemental
indenture. It shall not be necessary for the consent of the Debentureholders
affected thereby under this Section 11.2 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Section 11.3. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture pursuant to the provisions of this Article XI, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 11.4. The Debentures Affected by Supplemental Indentures. The
Debentures affected by a supplemental indenture, authenticated and delivered
after the execution of such supplemental indenture pursuant to the provisions of
this Article XI, may bear a notation in form approved by the Company, provided
such form meets the requirements of any exchange upon which the Debentures may
be listed, as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Debentures so modified as to conform, in the
opinion of the Board of Directors of the Company, to any modification of this
Indenture contained in any such supplemental indenture may be prepared by the
Company, authenticated by the Trustee and delivered in exchange for the
Debentures then Outstanding.
Section 11.5. Execution of Supplemental Indentures.
(a)......Upon the request of the Company, accompanied by its Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of the
Debentureholders required to consent thereto as aforesaid, the Trustee shall
join with the Company in the execution of such supplemental indenture unless
such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion but shall not be obligated to enter into such supplemental
indenture. The Trustee, subject to the provisions of Sections 9.1, may receive
an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article XI is authorized or permitted by, and conforms
to, the terms of this Article XI and that it is proper for the Trustee under the
provisions of this Article XI to join in the execution thereof.
(b)......Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this Section 11.5, the
Trustee shall transmit by mail, first class postage prepaid, a notice, setting
forth in general terms the substance of such supplemental indenture, to the
Debentureholders as their names and addresses appear upon the Debenture
Register. Any failure of the Trustee to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
ARTICLE XII.
SUCCESSOR CORPORATION
Section 12.1. The Company may Consolidate, Etc. Nothing contained in
this Indenture or in any of the Debentures shall prevent any consolidation or
merger of the Company with or into any other corporation or corporations
(whether or not affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company, as the case may be, or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or other disposition of the property of the Company, as the
case may be, or its successor or successors as an entirety, or substantially as
an entirety, to any other corporation (whether or not affiliated with the
Company, as the case may be, or its successor or successors) authorized to
acquire and operate the same; provided, however, that the Company hereby
covenants and agrees that (a) upon any such consolidation, merger, sale,
conveyance, transfer or other disposition, the due and punctual payment, in the
case of the Company, of the principal of and interest on all of the Debentures,
according to their tenor and the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be kept or performed by
the Company as the case may be, shall be expressly assumed, by supplemental
indenture (which shall conform to the provisions of the Trust Indenture Act, as
then in effect) satisfactory in form to the Trustee executed and delivered to
the Trustee by the entity formed by such consolidation, or into which the
Company, as the case may be, shall have been merged, or by the entity which
shall have acquired such property; (b) in case the Company consolidates with or
merges into another Person or conveys or transfers its properties and assets
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any state or the District of Columbia;
and (c) immediately after giving effect thereto, an Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing.
Section 12.2. Successor Corporation Substituted.
(a)......In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and interest on all of the Debentures Outstanding and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Company, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named as the
Company herein and thereupon the predecessor corporation shall be relieved of
all obligations and covenants under this Indenture and the Debentures.
(b)......In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition such changes in phraseology and form (but not in
substance) may be made in the Debentures thereafter to be issued as may be
appropriate. (c)......Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from merging into itself or acquiring by
purchase or otherwise, all or any part of, the property of any other Person
(whether or not affiliated with the Company).
Section 12.3. Evidence of Consolidation, Etc. to Trustee. The Trustee,
subject to the provisions of Section 9.1, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance,
transfer or other disposition, and any such assumption, comply with the
provisions of this Article XII.
ARTICLE XIII.
SATISFACTION AND DISCHARGE
Section 13.1. Satisfaction and Discharge of Indenture. If at any time:
(a) the Company shall have delivered to the Trustee for cancellation all
Debentures theretofore authenticated (other than any Debentures that shall have
been destroyed, lost or stolen and that shall have been replaced or paid as
provided in Section 2.9) and all Debentures for whose payment money or
Governmental Obligations have theretofore been deposited in trust or segregated
and held in trust by the Company (and thereupon repaid to the Company or
discharged from such trust, as provided in Section 13.5); or (b) all such
Debentures not theretofore delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit or cause to be deposited with the Trustee as trust funds
the entire amount in moneys or Governmental Obligations sufficient, or a
combination thereof sufficient, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay at maturity or upon redemption all Debentures
not theretofore delivered to the Trustee for cancellation, including principal
and interest due or to become due to such date of maturity or date fixed for
redemption, as the case may be, and if the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company; then this Indenture shall
thereupon cease to be of further effect except for the provisions of Sections
2.3, 2.7, 2.9, 5.1, 5.2, 5.3, 9.7 and 9.10, that shall survive until the date of
maturity or redemption date, as the case may be, and Sections 9.6 and 13.5, that
shall survive to such date and thereafter, and the Trustee, on demand of the
Company and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture.
Section 13.2. Discharge of Obligations. If at any time all Debentures
not heretofore delivered to the Trustee for cancellation or that have not become
due and payable as described in Section 13.1 shall have been paid by the Company
by depositing irrevocably with the Trustee as trust funds moneys or an amount of
Governmental Obligations sufficient in the opinion of a nationally recognized
certified public accounting firm to pay at maturity or upon redemption all
Debentures not theretofore delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity or date
fixed for redemption, as the case may be, and if the Company shall also pay or
cause to be paid all other sums payable hereunder by the Company, then after the
date such moneys or Governmental Obligations, as the case may be, are deposited
with the Trustee, the obligations of the Company under this Indenture shall
cease to be of further effect except for the provisions of Sections 2.3, 2.7,
2.9, 5.1, 5.2, 5.3, 9.6, 9.7, 9.10 and 13.5 hereof that shall survive until such
Debentures shall mature and be paid. Thereafter, Sections 9.6 and 13.5 shall
survive.
Section 13.3. Deposited Moneys to be Held in Trust. All monies or
Governmental Obligations deposited with the Trustee pursuant to Sections 13.1 or
13.2 shall be held in trust and shall be available for payment as due, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent), to the holders of the Debentures for the payment or redemption of
which such moneys or Governmental Obligations have been deposited with the
Trustee.
Section 13.4. Payment Of Monies Held by Paying Agents. In connection
with the satisfaction and discharge of this Indenture, all moneys or
Governmental Obligations then held by any Paying Agent under the provisions of
this Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
Section 13.5. Repayment to the Company. Any monies or Governmental
Obligations deposited with any Paying Agent or the Trustee, or then held by the
Company in trust, for payment of principal of or interest on the Debentures that
are not applied but remain unclaimed by the holders of such Debentures for at
least two years after the date upon which the principal of or interest on such
Debentures shall have respectively become due and payable, shall be repaid to
the Company, as the case may be, on May 31 of each year or (if then held by the
Company) shall be discharged from such trust; and thereupon the Paying Agent and
the Trustee shall be released from all further liability with respect to such
moneys or Governmental Obligations, and the holder of any of the Debentures
entitled to receive such payment shall thereafter, as an unsecured general
creditor, look only to the Company for the payment thereof.
ARTICLE XIV.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1. No Recourse. No recourse under or upon any obligation,
covenant or agreement of this Indenture, or of the Debentures, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, either
directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever, shall
attach to, or is or shall be incurred by, the incorporators, stockholders,
officers or directors as such, of the Company or of any predecessor or successor
corporation, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Debentures or implied therefrom;
and that any and all such personal liability of every name and nature, either at
common law or in equity or by constitution or statute, and any and all such
rights and claims against, every such incorporator, stockholder, officer or
director as such, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements contained in
this Indenture or in any of the Debentures or implied therefrom, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issuance of such Debentures.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
Section 15.1. Effect on Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Indenture contained by or on
behalf of the Company shall bind its respective successors and assigns, whether
so expressed or not.
Section 15.2. Actions by Successor. Any act or proceeding by any
provision of this Indenture authorized or required to be done or performed by
any board, committee or officer of the Company shall and may be done and
performed with like force and effect by the corresponding board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 15.3. Surrender of the Company Powers. The Company by
instrument in writing executed by appropriate authority of its Board of
Directors and delivered to the Trustee may surrender any of the powers reserved
to the Company, and thereupon such power so surrendered shall terminate both as
to the Company, as the case may be, and as to any successor corporation.
Section 15.4. Notices. Except as otherwise expressly provided herein
any notice or demand that by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the holders of Debentures
to or on the Company may be given or served by being deposited first class
postage prepaid in a post-office letterbox addressed (until another address is
filed in writing by the Company with the Trustee), as follows: c/o INTRUST
Financial Corporation, 105 North Main Street, Box One, Wichita, Kansas 67202,
Attention: Chief Executive Officer. Any notice, election, request or demand by
the Company or any Debentureholder to or upon the Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or made in
writing at the Corporate Trust Office of the Trustee.
Section 15.5. Governing Law. This Indenture and each Debenture shall be
deemed to be a contract made under the internal laws of the State of Kansas and
for all purposes shall be construed in accordance with the laws of said State.
Section 15.6. Treatment of the Debentures as Debt. It is intended that
the Debentures shall be treated as indebtedness and not as equity for federal
income tax purposes. The provisions of this Indenture shall be interpreted to
further this intention.
Section 15.7. Compliance Certificates and Opinions.
(a)......Upon any application or demand by the Company to the Trustee
to take any action under any of the provisions of this Indenture, the Company
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent 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 have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.
(b)......Each certificate or opinion of the Company provided for in
this Indenture and delivered to the Trustee with respect to compliance with a
condition or covenant in this Indenture shall include (i) a statement that the
Person making such certificate or opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (iii) a statement that, in the opinion of such
Person, he or she has made such examination or investigation as, in the opinion
of such Person, 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 (iv)
a statement as to whether or not, in the opinion of such Person, such condition
or covenant has been complied with.
Section 15.8. Payments on Business Days. In any case where the date of
maturity of interest or principal of any Debenture or the date of redemption of
any Debenture shall not be a Business Day, then payment of interest or principal
may be made on the next succeeding Business Day with the same force and effect
as if made on the nominal date of maturity or redemption, and no interest shall
accrue for the period after such nominal date.
Section 15.9. Conflict with Trust Indenture Act. If and to the extent
that any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act,
such imposed duties shall control.
Section 15.10. Counterparts. This Indenture may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 15.11. Separability. In case any one or more of the provisions
contained in this Indenture or in the Debentures shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Indenture or
of the Debentures, but this Indenture and the Debentures shall be construed as
if such invalid or illegal or unenforceable provision had never been contained
herein or therein.
Section 15.12. Assignment. The Company shall have the right at all
times to assign any of its respective rights or obligations under this Indenture
to a direct or indirect wholly owned Subsidiary of the Company, provided that,
in the event of any such assignment, the Company shall remain liable for all
such obligations. Subject to the foregoing, this Indenture is binding upon and
inures to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties thereto.
Section 15.13. Acknowledgment of Rights; Right of Setoff.
(a)......The Company acknowledges that, with respect to any Debentures
held by the Trust or a trustee of the Trust, if the Property Trustee fails to
enforce its rights under this Indenture as the holder of the Debentures held as
the assets of the Trust, any holder of Preferred Securities may institute legal
proceedings directly against the Company to enforce such Property Trustee's
rights under this Indenture without first instituting any legal proceedings
against such Property Trustee or any other person or entity. Notwithstanding the
foregoing, and notwithstanding the provisions of Section 7.4(a) hereof, if an
Event of Default has occurred and is continuing and such event is attributable
to the failure of the Company to pay principal or interest on the Debentures on
the date such principal or interest is otherwise payable (or in the case of
redemption, on the redemption date), the Company acknowledges that a holder of
Preferred Securities may directly institute a proceeding for enforcement of
payment to such holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Debentures.
(b)......Notwithstanding anything to the contrary contained in this
Indenture, the Company shall have the right to setoff any payment it is
otherwise required to make hereunder in respect of any Trust Securities to the
extent that the Company has previously made, or is concurrently making, a
payment to the holder of such Trust Securities under the Preferred Securities
Guarantee or in connection with a proceeding for enforcement of payment of the
principal of or interest on the Debentures directly brought by holders of any
Trust Securities.
(c)......For so long as any of the Preferred Securities remain
Outstanding, if, upon an Event of Default, the Property Trustee fails or the
holders of not less than 25% in principal amount of the Outstanding Debentures
fail to declare the principal of all of the Debentures to be immediately due and
payable, the holders of at least 25% in liquidation amount of the Preferred
Securities then Outstanding shall have the right to make such declaration by a
notice in writing to the Depositor and the Property Trustee; and upon any such
declaration such principal amount of and the accrued interest on all of the
Debentures shall become immediately due and payable, provided that the payment
of principal and interest on such Debentures shall remain subordinated to the
extent provided in this Indenture.
ARTICLE XVI.
SUBORDINATION OF THE DEBENTURES
Section 16.1. Agreement to Subordinate. The Company covenants and
agrees, and each holder of the Debentures issued hereunder by such holder's
acceptance thereof likewise covenants and agrees, that all the Debentures shall
be issued subject to the provisions of this Article XVI; and each holder of a
Debenture, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions. The payment by the Company of
the principal of and interest on all the Debentures issued hereunder shall, to
the extent and in the manner hereinafter set forth, be subordinated and junior
in right of payment to the prior payment in full of all Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company
(collectively, "Senior Indebtedness") to the extent provided herein, whether
outstanding at the date of this Indenture or thereafter incurred. No provision
of this Article XVI shall prevent the occurrence of any default or Event of
Default hereunder.
Section 16.2. Default on Senior Debt, Subordinated Debt or Additional
Senior Obligations. In the event and during the continuation of any default by
the Company in the payment of principal, premium, interest or any other payment
due on any Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case, no
payment shall be made by the Company with respect to the principal (including
redemption payments) of or interest on the Debentures. In the event that,
notwithstanding the foregoing, any payment shall be received by the Trustee when
such payment is prohibited by the preceding sentence of this Section 16.2, such
payment shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that the holders of the Senior
Indebtedness (or their representative or representatives or a trustee) notify
the Trustee in writing within 90 days of such payment of the amounts then due
and owing on the Senior Indebtedness and only the amounts specified in such
notice to the Trustee shall be paid to the holders of the Senior Indebtedness.
Section 16.3. Liquidation; Dissolution; Bankruptcy.
(a)......Upon any payment by the Company or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding-up or liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
shall first be paid in full, or payment thereof provided for in money in
accordance with its terms, before any payment is made by the Company on account
of the principal or interest on the Debentures; and upon any such dissolution or
winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Debentures or the Trustee
would be entitled to receive from the Company, except for the provisions of this
Article XVI, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the holders of the Debentures or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the holders of the Debentures or to the Trustee.
(b)......In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee before all Senior Indebtedness is paid in full, or provision is made
for such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness, as the case may be,
remaining unpaid to the extent necessary to pay such Senior Indebtedness in full
in money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of such Senior
Indebtedness.
(c)......For purposes of this Article XVI, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XVI with respect
to the Debentures to the payment of all Senior Indebtedness, as the case may be,
that may at the time be outstanding, provided that (i) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment; and (ii) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article XII shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 16.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
XII. Nothing in Section 16.2 or in this Section 16.3 shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 9.7.
Section 16.4. Subrogation.
(a)......Subject to the payment in full of all Senior Indebtedness, the
rights of the holders of the Debentures shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of and interest on the Debentures
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the holders of the Debentures or the Trustee would be
entitled except for the provisions of this Article XVI, and no payment over
pursuant to the provisions of this Article XVI to or for the benefit of the
holders of such Senior Indebtedness by holders of the Debentures or the Trustee,
shall, as between the Company, its creditors other than holders of Senior
Indebtedness of the Company, and the holders of the Debentures, be deemed to be
a payment by the Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article XVI are and are intended solely
for the purposes of defining the relative rights of the holders of the
Debentures, on the one hand, and the holders of such Senior Indebtedness on the
other hand.
(b)......Nothing contained in this Article XVI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness), and the
holders of the Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Debentures the principal of and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holders of the Debentures and creditors of the Company, as the
case may be, other than the holders of Senior Indebtedness, as the case may be,
nor shall anything herein or therein prevent the Trustee or the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XVI of the holders of such Senior Indebtedness in respect of cash,
property or securities of the Company, as the case may be, received upon the
exercise of any such remedy.
(c)......Upon any payment or distribution of assets of the Company
referred to in this Article XVI, the Trustee, subject to the provisions of
Article IX, and the holders of the Debentures shall be entitled to conclusively
rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding-up, liquidation or reorganization proceedings
are pending, or a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment or distribution,
delivered to the Trustee or to the holders of the Debentures, for the purposes
of ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness and other indebtedness of the Company, as the
case may be, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XVI.
Section 16.5. The Trustee to Effectuate Subordination. Each holder of
Debentures by such holder's acceptance thereof authorizes and directs the
Trustee on such holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XVI and
appoints the Trustee such holder's attorney-in-fact for any and all such
purposes.
Section 16.6. Notice by the Company.
(a)......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 of monies to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article XVI. Notwithstanding the
provisions of this Article XVI 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 of monies to or by the Trustee in
respect of the Debentures pursuant to the provisions of this Article XVI, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder or holders of Senior Indebtedness or
from any trustee therefor; and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 9.1, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 16.6 at
least 2 Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the payment
of the principal of or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it within 2 Business Days prior to such date.
(b)......The Trustee, subject to the provisions of Section 9.1, shall
be entitled to conclusively 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 on behalf of such holder) to establish that such notice has been given
by a holder of such Senior Indebtedness or a trustee on behalf of any such
holder or holders. 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 such Senior Indebtedness to participate in any payment or distribution
pursuant to this Article XVI, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
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 XVI, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 16.7. Rights of the Trustee; Holders of the Senior
Indebtedness.
(a)......The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article XVI in respect of any Senior
Indebtedness at any time 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. The Trustee's right to compensation and
reimbursement of expenses as set forth in Section 9.7 shall not be subject to
the subordination provisions of the Article XVI.
(b)......With respect to the holders of the Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XVI, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Section 9.1, the Trustee shall not be liable to any
holder of such Senior Indebtedness if it shall pay over or deliver to holders of
Debentures, the Company or any other Person money or assets to which any holder
of such Senior Indebtedness shall be entitled by virtue of this Article XVI or
otherwise.
Section 16.8. Subordination may not be Impaired.
(a)......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 otherwise be charged with.
(b)......Without in any way limiting the generality of Section 16.8(a),
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
Debentures, without incurring responsibility to the holders of the Debentures
and without impairing or releasing the subordination provided in this Article
XVI or the obligations hereunder of the holders of the Debentures to the holders
of such Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same or any agreement
under which such Senior Indebtedness is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing such Senior Indebtedness; (iii) release any Person liable in any manner
for the collection of such Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
<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.
INTRUST FINANCIAL CORPORATION
By: _____________________________________
Name: C. Q. Chandler
Title: Chairman of the Board and
Chief Executive Officer
Attest:
.........
STATE STREET BANK AND TRUST COMPANY,
as trustee
By: _____________________________________
Name:
Title:
Attest:
.........
<PAGE>
STATE OF KANSAS... )
......... ) ss
COUNTY OF __________ )
On this 21st day of January, 1998, before me appeared C. Q. Chandler,
to me personally known, who, being by me duly sworn, did say that he is the
Chairman of the Board and Chief Executive Officer of INTRUST FINANCIAL
CORPORATION, and that the seal affixed to said instrument is the corporate seal
of said corporation, and that said instrument was signed and sealed in behalf of
said corporation by authority of its board of directors and said C. Q. Chandler
acknowledged said instrument to be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed my
official seal at my office in said county and state the day and year last above
written.
Notary Public
My term expires:
[seal]
COMMONWEALTH OF MASSACHUSETTS )
......... ) ss
COUNTY OF SUFFOLK. )
On this 21st day of January, 1998, before me appeared
___________________, to me personally known, who, being by me duly sworn, did
say that he is the _____________________ of STATE STREET BANK AND TRUST COMPANY,
and that the seal affixed to said instrument is the corporate seal of said
corporation, and that said instrument was signed and sealed in behalf of said
corporation by authority of its board of directors and said
_____________________________, acknowledged said instrument to be the free act
and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed my
official seal at my office in said county and commonwealth the day and year last
above written.
Notary Public
My term expires:
[seal]
<PAGE>
EXHIBIT A
(Form of Face of Debenture)
No. 1........ $59,278,375
CUSIP No. 46120F AA 2
INTRUST FINANCIAL CORPORATION
8.24% SUBORDINATED DEBENTURE
DUE January 31, 2028
INTRUST Financial Corporation, a Kansas corporation (the "Company,"
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to State Street Bank
and Trust Company as Property Trustee for INTRUST Capital Trust, or registered
assigns, the principal sum of Fifty Nine Million, Two Hundred Seventy Eight
Thousand Three Hundred Seventy Five Dollars ($59,278,375) on January 31, 2028
(the "Stated Maturity"), and to pay interest on said principal sum from
January 21, 1998, or from the most recent interest payment date (each such date,
an "Interest Payment Date") to which interest has been paid or duly provided
for, quarterly (subject to deferral as set forth herein) in arrears on March 31,
June 30, September 30 and December 31 of each year commencing March 31, 1998, at
the rate of 8.24% per annum until the principal hereof shall have become due and
payable, and on any overdue principal and (without duplication) on any overdue
installment of interest at the same rate per annum compounded quarterly. The
amount of interest payable on any Interest Payment Date shall be computed on the
basis of a 360-day year of twelve 30-day months. The amount of interest for any
partial period shall be computed on the basis of the number of days elapsed in a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on this Debenture is not a business day, then payment of
interest payable on such date shall be made on the next succeeding day that is a
Business Day (as defined in the Indenture) (and without any interest or other
payment in respect of any such delay) with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date shall, as provided in the Indenture,
be paid to the person in whose name this Debenture (or one or more Predecessor
Debentures, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be the
close of business on the fifteenth day of the last month of the calendar quarter
in which the Interest Payment Date occurs unless otherwise provided in the
Indenture. The principal of and the interest on this Debenture shall be payable
at the office or agency of the Trustee maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
registered holder at such address as shall appear in the Debenture Register.
Notwithstanding the foregoing, so long as the holder of this Debenture is the
Property Trustee, the payment of the principal of and interest on this Debenture
shall be made at such place and to such account as may be designated by the
Trustee.
This Debenture may be redeemed at any time by the Company on any date
not earlier than January 31, 2003, subject to the Company having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Such date may also be extended at
any time at the election of the Company for one or more periods, but in no event
to a date later than January 31, 2037, subject to certain limitations described
in the Indenture.
The indebtedness evidenced by this Debenture is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness (as defined in the Indenture). This
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each holder of this Debenture, 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 action as may be necessary or appropriate to
acknowledge or 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, hereby 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.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated: January 21, 1998
INTRUST FINANCIAL CORPORATION
By:
Name: C. Q. Chandler
Title: Chairman of the Board and
Chief Executive Officer
Attest:
By: _____________________________
Name:
Title:
<PAGE>
[Form of Certificate of Authentication]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the within-mentioned Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY, _____________________________
as Trustee........ or Authenticating Agent
By: _______________________________ By: __________________________
.........Authorized Signatory
<PAGE>
[Form of Reverse of Debenture]
8.24% SUBORDINATED DEBENTURE
(CONTINUED)
This Debenture is one of the subordinated debentures of the Company
(herein sometimes referred to as the "Debentures"), all issued or to be issued
under and pursuant to an Indenture dated as of January 21, 1998 (the
"Indenture") duly executed and delivered between the Company and State Street
Bank and Trust Company, as Trustee (the "Trustee"), to which Indenture reference
is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Debentures. The Debentures are limited in aggregate principal
amount as specified in the Indenture.
The Company shall have the right as set forth in the Indenture to
redeem this Debenture at the option of the Company, without premium or penalty,
in whole or in part at any time on or after January 31, 2003 (an "Optional
Redemption"), or at any time in certain circumstances upon the occurrence of a
Special Event (as defined in the Indenture), at a redemption price (the
"Redemption Price") equal to 100% of the principal amount hereof plus any
accrued but unpaid interest hereon, to the date of such redemption, plus
Additional Payments, if any. Any redemption pursuant to this paragraph shall be
made upon not less than 30 days nor more than 60 days notice, at the Redemption
Price. The Redemption Price shall be paid at the time and in the manner provided
therefor in the Indenture. If the Debentures are only partially redeemed by the
Company pursuant to an Optional Redemption, the Debentures shall be redeemed pro
rata or by lot or by any other method utilized by the Trustee as described in
the Indenture. In the event of an Optional Redemption of this Debenture in part
only, a new Debenture or Debentures for the unredeemed portion hereof shall be
issued in the name of the holder hereof upon the cancellation hereof.
In case an Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time Outstanding (as defined
in the Indenture), to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of the Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall without the consent of the holders of each
Debenture then Outstanding and affected thereby, (i) extend the fixed maturity
of the Debentures, reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon; or (ii) reduce the aforesaid
percentage of the Debentures, the holders of which are required to consent to
any such supplemental indenture. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding, on behalf of all of the holders of the
Debentures, to waive any past default in the performance of any of the covenants
contained in the Indenture, or established pursuant to the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any of the Debentures. Any such consent or waiver by the registered holder of
this Debenture (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such holder and upon all future holders and owners of this
Debenture and of any Debenture issued in exchange herefor or in place hereof
(whether by registration of transfer or otherwise), irrespective of whether or
not any notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal and interest on this
Debenture at the time and place and at the rate and in the money herein
prescribed.
The Company, as further described in the Indenture, shall have the
right at any time during the term of the Debentures and from time to time to
defer payments of interest by extending the interest payment period of such
Debentures for up to 20 consecutive quarters (each, an "Extension Period"), at
the end of which period the Company shall calculate (and deliver such
calculation to the Trustee) and pay all interest then accrued and unpaid on the
Debentures, including any Additional Payments and Compounded Interest (as
defined in the Indenture and together, the "Deferred Payments") that shall be
payable to the holders of the Debentures in whose names the Debentures are
registered in the Debenture Register on the first record date after the end of
the Extension Period. Before the termination of any such Extension Period, the
Company may further extend such Extension Period, provided that such Extension
Period together with all such further extensions thereof shall not exceed 20
consecutive quarters. At the termination of any such Extension Period and upon
the payment of all Deferred Payments then due, the Company may commence a new
Extension Period.
As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the registered holder hereof on the
Debenture Register (as defined in the Indenture) of the Company, upon surrender
of this Debenture for registration of transfer at the office or agency of the
Trustee accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company or the Trustee duly executed by the registered
holder hereof or his or her attorney duly authorized in writing, and thereupon
one or more new Debentures of authorized denominations and for the same
aggregate principal amount shall be issued to the designated transferee or
transferees. No service charge shall be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any Paying Agent (as defined in the
Indenture) and the Debenture Registrar may deem and treat the registered holder
hereof as the absolute owner hereof (whether or not this Debenture shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Debenture Registrar) for the purpose of receiving payment
of or on account of the principal hereof and interest due hereon and for all
other purposes, and neither the Company nor the Trustee nor any Paying Agent nor
any Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Debentures are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof (or such other
denominations and any integral multiple thereof as may be deemed necessary by
the Company for the purpose of maintaining the eligibility of the Debentures for
listing on the American Stock Exchange, Inc. or any successor thereto).
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
EXHIBIT 4(d)
------------
================================================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
INTRUST FINANCIAL CORPORATION
AND
STATE STREET BANK AND TRUST COMPANY
JANUARY 21, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS AND INTERPRETATION......................................1
Section 1.1. Definitions and Interpretation..............................1
ARTICLE II. TRUST INDENTURE ACT................................................4
Section 2.1. Trust Indenture Act; Application............................4
Section 2.2. The List of Holders of the Securities.......................5
Section 2.3. Reports by the Preferred Guarantee Trustee..................5
Section 2.4. Periodic Reports to the Preferred Guarantee Trustee.........5
Section 2.5. Evidence of Compliance with Conditions Precedent............5
Section 2.6. Events of Default; Waiver...................................5
Section 2.7. Event of Default; Notice....................................6
Section 2.8. Conflicting Interests.......................................6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE PREFERRED GUARANTEE TRUSTEE......6
Section 3.1. Powers and Duties of the Preferred Guarantee Trustee........6
Section 3.2. Certain Rights of the Preferred Guarantee Trustee...........8
Section 3.3. Not Responsible for Recitals or Issuance of Guarantee.......9
ARTICLE IV. THE PREFERRED GUARANTEE TRUSTEE...................................10
Section 4.1. The Preferred Guarantee Trustee; Eligibility...............10
Section 4.2. Appointment, Removal and Resignation of the Preferred
Guarantee Trustee..........................................10
ARTICLE V. GUARANTEE..........................................................11
Section 5.1. Guarantee..................................................11
Section 5.2. Waiver of Notice and Demand................................11
Section 5.3. Obligations not Affected...................................11
Section 5.4. Rights of the Holders......................................12
Section 5.5. Guarantee of Payment.......................................13
Section 5.6. Subrogation................................................13
Section 5.7. Independent Obligations....................................13
Section 5.8. Right to Elect Directors...................................13
ARTICLE VI. LIMITATION OF TRANSACTIONS; SUBORDINATION.........................13
Section 6.1. Limitation on Transactions.................................13
Section 6.2 Ranking.....................................................14
ARTICLE VII. TERMINATION......................................................14
Section 7.1. Termination................................................14
ARTICLE VIII. INDEMNIFICATION.................................................14
Section 8.1. Exculpation................................................14
Section 8.2. Indemnification............................................15
ARTICLE IX. MISCELLANEOUS.....................................................15
Section 9.1. Successors and Assigns.....................................15
Section 9.2. Amendments.................................................15
Section 9.3. Notices....................................................15
Section 9.4. Benefit....................................................16
Section 9.5. Governing Law..............................................16
<PAGE>
CROSS-REFERENCE TABLE
Section of........ Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
310(a)....................................................................4.1(a)
310(b)...............................................................4.1(c), 2.8
310(c)............................................................Not Applicable
311(a)....................................................................2.2(b)
311(b)....................................................................2.2(b)
311(c)............................................................Not Applicable
312(a)................................................................... 2.2(a)
312(b)................................................................... 2.2(b)
313......................................................................... 2.3
314(a).......................................................................2.4
314(b)............................................................Not Applicable
314(c).......................................................................2.5
314(d)............................................................Not Applicable
314(e)..............................................................1.1, 2.5,3.2
314(f)..................................................................2.1, 3.2
315(a)....................................................................3.1(d)
315(b).......................................................................2.7
315(c).......................................................................3.1
315(d)....................................................................3.1(d)
316(a).............................................................1.1, 2.6, 5.4
316(b).......................................................................5.3
317(a).......................................................................3.1
317(b)............................................................Not Applicable
318(a)....................................................................2.1(a)
318(b).......................................................................2.1
318(c)....................................................................2.1(b)
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions.
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of January 21, 1998, is executed and delivered
by INTRUST FINANCIAL CORPORATION, a Kansas corporation (the "Guarantor"), and
STATE STREET BANK AND TRUST COMPANY, a trust company organized and existing
under the laws of the Commonwealth of Massachusetts, as trustee (the "Preferred
Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Preferred Securities (as defined herein) of INTRUST CAPITAL
TRUST, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of January 21, 1998, among the trustees of the
Trust named therein, the Guarantor, as depositor, and the holders from time to
time of undivided beneficial interests in the assets of the Trust, the Trust is
issuing on the date hereof up to 2,300,000 preferred securities, having an
aggregate liquidation amount of $57,500,000, designated the 8.24% Cumulative
Trust Preferred Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, 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 by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I.
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation. In this Preferred
Securities Guarantee, unless the context otherwise requires:
(a)......capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;
(b)......terms defined in the Trust Agreement as at the date of
execution of this Preferred Securities Guarantee have the same meaning when used
in this Preferred Securities Guarantee;
(c)......a term defined anywhere in this Preferred Securities Guarantee
has the same meaning throughout;
(d)......all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred Securities Guarantee
as modified, supplemented or amended from time to time;
(e)......all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f)......a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless otherwise defined in
this Preferred Securities Guarantee or unless the context otherwise requires;
and
(g)......a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or a Sunday or a day
on which federal or state banking institutions in the Borough of Manhattan, the
City of New York are authorized or required by law, executive order or
regulation to close or a day on which the Corporate Trust Office of the
Preferred Guarantee Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Preferred Securities Guarantee is located at Two
International Place, 4th Floor, Boston, Massachusetts 02110, Attention:
Corporate Trust Department.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Debentures" means the 8.24% Subordinated Debentures due January 31,
2028, of the Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.
"Guarantor" means INTRUST Financial Corporation, a Kansas corporation.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Trust: (i) any accrued and unpaid Distributions that are
required to be paid on such Preferred Securities, to the extent the Trust shall
have funds available therefor, (ii) the redemption price, including all accrued
and unpaid Distributions to the date of redemption (the "Redemption Price"), to
the extent the Trust has funds available therefor, with respect to any Preferred
Securities called for redemption by the Trust, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of the Debentures to the Holders in exchange
for the Preferred Securities as provided in the Trust Agreement), the lesser of
(A) the aggregate of the Liquidation Amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment, to the extent
the Trust shall have funds available therefor (the "Liquidation Distribution"),
and (B) the amount of assets of the Trust remaining available for distribution
to Holders in liquidation of the Trust.
"Holder" means a Person in whose name a Preferred Security is or
Preferred Securities are registered in the Securities Register; provided,
however, that, in determining whether the holders of the requisite percentage of
the Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of January 21, 1998, among the
Debenture Issuer and State Street Bank and Trust Company, as trustee, and any
indenture supplemental thereto pursuant to which the Debentures are to be issued
to the Property Trustee of the Trust.
"Liquidation Distribution" has the meaning provided therefor in the
definition of Guarantee Payments.
"List of Holders" has the meaning set forth in Section 2.2 of this
Preferred Securities Guarantee.
"Majority in Liquidation Amount of the Preferred Securities" means the
holders of more than 50% of the Liquidation Amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a)......a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;
(b)......a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate;
(c)......a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d)......a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"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 Guarantee Trustee" means State Street Bank and Trust
Company, until a Successor Preferred Guarantee Trustee has been appointed and
has accepted such appointment pursuant to the terms of this Preferred Securities
Guarantee and thereafter means each such Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the definition
of Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of 1939, as
amended, is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939, as so amended.
ARTICLE II.
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a)......This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions.
(b)......If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
Section 2.2. The List of Holders of the Securities.
(a)......In the event the Preferred Guarantee Trustee is not also the
Securities Registrar, the Guarantor shall provide the Preferred Guarantee
Trustee with a list, in such form as the Preferred Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the Preferred
Securities (the "List of Holders") as of such date, (i) within 1 Business Day
after January 1 and June 30 of each year, and (ii) at any other time within 30
days of receipt by the Guarantor of a written request for a List of Holders as
of a date no more than 15 days before such List of Holders is given to the
Preferred Guarantee Trustee; provided, that the Guarantor shall not be obligated
to provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Preferred Guarantee Trustee by
the Guarantor. The Preferred Guarantee Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b)......The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
Section 2.3. Reports by the Preferred Guarantee Trustee. On or before
July 15 of each year, the Preferred Guarantee Trustee shall provide to the
Holders of the Preferred Securities such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
Section 2.4. Periodic Reports to the Preferred Guarantee Trustee. The
Guarantor shall provide to the Preferred Guarantee Trustee such documents,
reports and information as required by Section 314 (if any) 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 Preferred Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Preferred
Securities Guarantee 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 of all of the Preferred Securities, 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 Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 2.7. Event of Default; Notice.
(a)......The Preferred Guarantee Trustee shall, within 90 days after
the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice;
provided, that the Preferred Guarantee Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Preferred Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b)......The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Trust Agreement shall
have obtained actual knowledge of such Event of Default.
Section 2.8. Conflicting Interests. The Trust Agreement shall be deemed
to be specifically described in this Preferred Securities Guarantee 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 PREFERRED GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Preferred Guarantee Trustee.
(a)......This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of Preferred
Securities exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Preferred Guarantee
Trustee. The right, title and interest of the Preferred Guarantee Trustee shall
automatically vest in any Successor Preferred Guarantee Trustee, 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 Preferred Guarantee Trustee.
(b)......If an Event of Default actually known to a Responsible Officer
of the Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c)......The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Preferred Securities Guarantee, and no implied covenants shall be
read into this Preferred Securities Guarantee against the Preferred Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.6) and is actually known to a Responsible Officer
of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Preferred Securities
Guarantee, 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 Preferred Securities Guarantee shall be
construed to relieve the Preferred 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 Preferred
Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the
Preferred Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically
set forth in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into this
Preferred Securities Guarantee against the Preferred Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred 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 Preferred Guarantee
Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates
or opinions that by any provision hereof are specifically
required to be furnished to the Preferred Guarantee Trustee,
the Preferred Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the Preferred 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 Preferred Guarantee Trustee, or exercising any trust
or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred 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 Preferred Guarantee 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 Preferred Securities
Guarantee or indemnity, reasonably satisfactory to the Preferred
Guarantee Trustee, against such risk or liability is not reasonably
assured to it.
Section 3.2. Certain Rights of the Preferred Guarantee Trustee.
(a)......Subject to the provisions of Section 3.1:
(i) the Preferred 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 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 Preferred Securities Guarantee shall be sufficiently evidenced by
an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred 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,
shall be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with respect to legal
matters 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 accordance with such advice or opinion. Such counsel
may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any court of
competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Preferred Guarantee Trustee's agents, nominees or custodians) 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 Preferred Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Preferred Securities Guarantee;
(vii) the Preferred 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
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) no third party shall be required to inquire as to the
authority of the Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Preferred
Securities Guarantee, both of which shall be conclusively evidenced by
the Preferred Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (A) may request instructions from the Holders of a Majority in
Liquidation Amount of the Preferred Securities, (B) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (C) shall be protected in conclusively
relying on or acting in accordance with such instructions.
(b)......No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred 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 Preferred 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 Preferred Guarantee Trustee shall be construed to be a duty.
Section 3.3. Not Responsible for Recitals or Issuance of Guarantee. The
Recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Preferred Guarantee Trustee does not assume any
responsibility for their correctness. The Preferred Guarantee Trustee makes no
representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV.
THE PREFERRED GUARANTEE TRUSTEE
Section 4.1. The Preferred Guarantee Trustee; Eligibility.
(a)......There shall at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States or any state or territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by
federal, state, territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section 4.1(a)(ii),
the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b)......If at any time the Preferred Guarantee Trustee shall cease to
be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c)......If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and the 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 Preferred
Guarantee Trustee.
(a)......Subject to Section 4.2(b), the Preferred Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor.
(b)......The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c)......The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d)......If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
(e)......No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f)......Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all fees
and expenses accrued to the date of such termination, removal or resignation.
ARTICLE V.
GUARANTEE
Section 5.1. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of this Preferred Securities Guarantee and of any liability
to which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the 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.
Section 5.3. Obligations not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Preferred Securities Guarantee
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 Trust of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Trust;
(b)......the extension of time for the payment by the Trust of all or
any portion of the Distributions, 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 (other than an extension of
time for payment of Distributions, Redemption Price, Liquidation Distribution or
other sum payable that results from the extension of any interest payment period
on the Debentures or any extension of the maturity date of the Debentures
permitted by the Indenture);
(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 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 Trust or any of the assets of
the Trust;
(e)......any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f)......any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the common
equity securities issued by the Trust), including the failure to receive any
approval of the Board of Governors of the Federal Reserve System required for
the redemption of the Preferred Securities;
(g)......the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(h)......any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 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 consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 5.4. Rights of the Holders.
(a)......The Holders of a Majority in Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b)......Any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting a legal proceeding
against the Trust, the Preferred Guarantee Trustee or any other Person.
Section 5.5. Guarantee of Payment. This Preferred Securities Guarantee
creates a guarantee of payment and not of collection.
Section 5.6. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders of the Preferred Securities against the Trust in
respect of any amounts paid to such Holders by the Guarantor under this
Preferred Securities Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Preferred Securities Guarantee, if, at the time of any such payment,
any amounts are due and unpaid under this Preferred Securities Guarantee. 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 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 Preferred Securities Guarantee notwithstanding the occurrence of
any event referred to in subsections (a) through (h), inclusive, of Section 5.3
hereof.
Section 5.8. Right to Elect Directors. If at any time or from time to
time any Distributions payable on the Preferred Securities are in arrears for
six quarterly periods, then the Holders of Preferred Securities, voting
separately as a class, will be entitled to elect two directors, as a special
class of directors (the "Preferred Directors"), to the Guarantor's Board of
Directors at the next special or annual meeting of the shareholders of the
Guarantor.
The Preferred Directors shall serve one-year terms on the Guarantor's
Board of Directors, commencing on the date of their election and shall be
eligible for re-election for an unlimited number of one year terms; provided,
however, that such terms shall immediately terminate upon the Guarantor curing
the arrearage described in this Section 5.8 by paying or depositing with the
Trustee a sum sufficient to pay all such arrearages.
The Guarantor and the Trust agree that the election of the Preferred
Directors and any related proxy solicitation shall be governed by, to the extent
applicable, the laws of the State of Kansas, federal laws and the Securities
Exchange Commission's Rules and Regulations as in effect at the time of any such
election and solicitation.
ARTICLE VI.
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1. Limitation on Transactions. So long as any of the
Preferred Securities remain outstanding, if any of the circumstances described
in Section 5.6 of the Indenture shall have occurred, then (a) the Guarantor
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock (other than (i) dividends or distributions in common
stock of the Guarantor or any declaration of a non-cash dividend in connection
with the implementation of a shareholder rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, and (ii) purchases of common stock of the Guarantor
related to the rights under any of the Guarantor's benefit plans for its
directors, officers or employees of), (b) the Guarantor shall not make any
payment of principal or interest on or repay, repurchase or redeem any debt
securities issued by the Guarantor which rank pari passu with or junior to the
Debentures other than payments under this Preferred Securities Guarantee and (c)
the Guarantor shall not redeem, purchase or acquire less than all of the
Outstanding Debentures or any of the Preferred Securities.
Section 6.2 Ranking. This Preferred Securities Guarantee will
constitute an unsecured obligation of the Guarantor and will rank (a)
subordinate and junior in right of payment to all Senior Debt, Subordinated Debt
and Additional Senior Obligations (as defined in the Indenture) of the
Guarantor, (b) pari passu with the most senior preferred securities or
preference stock now or hereafter issued by the Guarantor and with any guarantee
now or hereafter entered into by the Guarantor in respect of any preferred
securities or preference stock of any Affiliate of the Guarantor, and (c) senior
to the Guarantor's common stock.
ARTICLE VII.
TERMINATION
Section 7.1. Termination. This Preferred Securities Guarantee shall
terminate upon (a) full payment of the Redemption Price of all the Preferred
Securities, (b) full payment of the amounts payable in accordance with the Trust
Agreement upon liquidation of the Trust, or (c) distribution of the Debentures
to the Holders of the Preferred Securities. Notwithstanding the foregoing, this
Preferred Securities Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1. Exculpation.
(a)......No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b)......An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to the Holders of the Preferred
Securities might properly be paid.
Section 8.2. Indemnification. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Preferred Securities Guarantee.
ARTICLE IX.
MISCELLANEOUS
Section 9.1. Successors and Assigns. All guarantees and agreements
contained in this Preferred Securities Guarantee 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.
Section 9.2. Amendments. Except with respect to any changes that do not
adversely affect the rights of the Holders (in which case no consent of the
Holders will be required), this Preferred Securities Guarantee may only be
amended with the prior approval of the Holders of at least 66-2/3% in
Liquidation Amount of the Preferred Securities. The provisions of Article VI of
the Trust Agreement with respect to meetings of the Holders of the Preferred
Securities apply to the giving of such approval.
Section 9.3. Notices. All notices provided for in this Preferred
Securities Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a)......If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Department
(b)......If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may give notice of to
the Holders of the Preferred Securities):
INTRUST Financial Corporation
105 North Main Street
Box One
Wichita, Kansas 67202
Attention: Chief Executive Officer
(c)......If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Trust.
All such notices 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 9.4. Benefit. This Preferred Securities Guarantee is solely for
the benefit of the Holders of the Preferred Securities and, subject to Section
3.1(a), is not separately transferable from the Preferred Securities.
Section 9.5. Governing Law. THIS PREFERRED SECURITIES GUARANTEE SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF KANSAS.
<PAGE>
This Preferred Securities Guarantee is executed as of the day and year
first above written.
INTRUST FINANCIAL CORPORATION,
as Guarantor
By: _________________________________________
Name: C.Q. Chandler
Title: Chairman of the Board and
Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY,
as Preferred Guarantee Trustee
By: _________________________________________
Name:
Title:
EXHIBIT 4(e)
------------
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") dated as of
January 21, 1998, between INTRUST FINANCIAL CORPORATION, a Kansas corporation
(the "Company"), and INTRUST CAPITAL TRUST, a Delaware business trust (the
"Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the "Common
Securities") to, and receive the Debentures from, the Company and to issue and
sell up to 2,300,000 8.24% Cumulative Trust Preferred Securities (the "Preferred
Securities") with such powers, preferences and special rights and restrictions
as are set forth in the Amended and Restated Trust Agreement of the Trust dated
as of January 21, 1998, as the same may be amended from time to time (the "Trust
Agreement");
WHEREAS, the Company shall directly or indirectly own all of the Common
Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each holder of the
Preferred Securities, which purchase the Company hereby agrees shall benefit the
Company and which purchase the Company acknowledges shall be made in reliance
upon the execution and delivery of this Agreement, the Company, including in its
capacity as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
Section 1.1. Guarantee by the Company.
Subject to the terms and conditions hereof, the Company, including in
its capacity as holder of the Common Securities, hereby irrevocably and
unconditionally guarantees to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment when
and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs, expenses or
liabilities of the Trust other than obligations of the Trust to pay to the
holders of any Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Preferred Securities or
such other similar interests, as the case may be. This Agreement is intended to
be for the benefit of, and to be enforceable by, all such Beneficiaries, whether
or not such Beneficiaries have received notice hereof.
Section 1.2. Term of Agreement.
This Agreement shall terminate and be of no further force and effect
upon the later of (a) the date on which full payment has been made of all
amounts payable to all holders of all the Preferred Securities (whether upon
redemption, liquidation, exchange or otherwise); and (b) the date on which there
are no Beneficiaries remaining; provided, however, that this Agreement shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any holder of the Preferred Securities or any Beneficiary must restore
payment of any sums paid under the Preferred Securities, under any obligation
under the Preferred Securities Guarantee Agreement dated the date hereof by the
Company and State Street Bank and Trust Company as guarantee trustee, or under
this Agreement for any reason whatsoever. This Agreement is continuing,
irrevocable, unconditional and absolute.
Section 1.3. Waiver of Notice.
The Company hereby waives notice of acceptance of this Agreement and of
any obligation to which it applies or may apply, and the Company hereby waives
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 1.4. No Impairment.
The obligations, covenants, agreements and duties of the Company under
this 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 extension of time for the payment by the Trust of all or
any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part
of the Beneficiaries to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) 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 Trust or any of the assets of
the Trust.
There shall be no obligation of the Beneficiaries to give notice to, or
obtain the consent of, the Company with respect to the happening of any of the
foregoing.
Section 1.5. Enforcement.
A Beneficiary may enforce this Agreement directly against the Company,
and the Company waives any right or remedy to require that any action be brought
against the Trust or any other person or entity before proceeding against the
Company.
ARTICLE II
Section 2.1. Binding Effect.
All guarantees and agreements contained in this Agreement shall bind
the successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the Beneficiaries.
Section 2.2. Amendment.
So long as there remains any Beneficiary or any Preferred Securities of
any series are outstanding, this Agreement shall not be modified or amended in
any manner adverse to such Beneficiary or to the holders of the Preferred
Securities.
Section 2.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same by facsimile
transmission (confirmed by mail), telex, or by registered or certified mail,
addressed as follows (and if so given, shall be deemed given when mailed or upon
receipt of an answer back, if sent by telex):
INTRUST Capital Trust c/o INTRUST Financial Corporation, 105 North Main
Street, Box One, Wichita, Kansas 67202. Facsimile No.: (316) 383-1828.
Attention: Chief Executive Officer.
INTRUST Financial Corporation, 105 North Main Street, Box One, Wichita,
Kansas 67202. Facsimile No.: (316) 383-1828. Attention: Chief Executive Officer.
Section 2.4. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Kansas (without regard to conflict of
laws principles).
[The remainder of this page has been left blank intentionally]
<PAGE>
THIS AGREEMENT is executed as of the day and year first above written.
INTRUST FINANCIAL CORPORATION
By: __________________________________
Name: C. Q. Chandler
Title: Chairman of the Board and
Chief Executive Officer
INTRUST CAPITAL TRUST
By: __________________________________
Name: Jay L. Smith
Title: Administrative Trustee
EXHIBIT 11
----------
INTRUST FINANCIAL CORPORATION
Computation of Earnings Per Share
Years Ended December 31, 1998, 1997 and 1996
(Dollars in thousands except per share data)
1998 1997 1996
- --------------------------------------------------------------------------------
Basic Earnings Per Share:
Net income $19,534 $16,664 $1,680
- ---------------------------------------------===================================
Weighted average common shares outstanding 2,147,118 2,193,268 2,285,337
Basic earnings per share $9.10 $7.60 $0.74
- ---------------------------------------------===================================
Diluted Earnings per Share:
Net Income $19,534 $16,664 $1,680
Net reduction in interest expense
assuming conversion of capital notes 652 656 *
- --------------------------------------------------------------------------------
Net income $20,186 $17,320 $1,680
- ---------------------------------------------===================================
Weighted average common shares outstanding
assuming conversion of capital notes
and exercise of stock options 2,554,230 2,569,497 2,285,337*
Diluted earnings per share $7.90 $6.74 $0.74
- ---------------------------------------------===================================
* For 1996, diluted earnings per share is considered to be the same as basic
earnings per share, since the effect of exercise of stock options (285 shares)
and the conversion of subordinated capital notes (387,178 shares) would be
antidilutive.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
AS OF DECEMBER 31, 1998
PERCENTAGE
OF VOTING
JURISDICTION SECURITIES
NAME OF ORGANIZATION OWNED
- ---- --------------- ----------
INTRUST Bank, National Association National Bank 100%
Will Rogers Bank Oklahoma 100%
NestEgg Consulting Inc. Kansas 100%
INTRUST Community Development Corporation Kansas 100%
INTRUST Capital Trust Delaware 100%
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