U.S.B. HOLDING CO., INC.
Financial Highlights
<TABLE>
<CAPTION>
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(000's, Except Share Data and Percentages)
1996 1995 Change
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<S> <C> <C> <C>
For the Year
Net interest income $ 29,615 $ 25,374 17%
Provision for loan losses 2,275 1,200 90
Income before income taxes 14,188 13,638 4
Income taxes 4,774 4,311 11
Net income 9,414 9,327 1
Net income before net gains after tax on sale
of Royal Oak Savings Bank, F.S.B.("Royal")
and related assets, and net income of Royal 9,114 7,015 30
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Per Common and Common Equivalent Share
Net income $ 1.40 $ 1.43* (2)%
Net income before net gains after tax on
sale of Royal and related assets, and
net income of Royal 1.35 1.06* 27
Book value at December 31 8.67 7.74* 12
Cash dividends declared .30 .27* 11
Weighted average shares outstanding 6,512,997 6,304,758 3
- --------------------------------------------------------------------------------------
At Year End
Total loans $ 503,511 $ 391,341 29%
Allowance for loan losses 5,742 3,904 47
Total assets 803,451 678,783 18
Total deposits 682,280 610,635 12
Borrowings 59,692 10,000 497
Common stockholders' equity 53,616 47,583 13
Stockholders' equity 56,866 51,333 11
Tier I capital 57,205 49,942 15
Risk weighted assets 547,645 439,076 25
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Selected Financial Ratios
Return on average assets 1.25% 1.42% (12)%
Return on average assets before net gains after
tax on sale of Royal and related assets, and
net income of Royal 1.21 1.07 13
Return on average common
stockholders' equity 18.60 22.17 (16)
Return on average common stockholders'
equity before net gains after tax on
sale of Royal and related assets, and
net income of Royal 17.99 16.48 9
Leverage capital ratio 7.06 7.43 (5)
Tier I risk-based capital ratio 10.45 11.37 (8)
Total risk-based capital ratio 11.50 12.26 (6)
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</TABLE>
* Adjusted to reflect 10% stock dividend issued on June 14, 1996 and two-for-one
stock split issued on December 30, 1996.
Form 10-K is included in this Annual Report. Additional copies are available on
request from Steven T. Sabatini, Executive Vice President & Chief Financial
Officer
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3
<PAGE>
Consolidated Statements of Condition
December 31, 1996 and 1995
U.S.B. Holding Co., Inc.
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<TABLE>
<CAPTION>
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(000's, Except Share Data)
1996 1995
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<S> <C> <C>
ASSETS
Cash and due from banks $ 18,821 $ 23,469
Federal funds sold 10,800 13,800
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Cash and cash equivalents 29,621 37,269
Interest bearing deposits in other banks 99 2,069
Securities:
Available for sale (at fair value) 168,756 170,889
Held to maturity (fair value $83,123 in 1996
and $62,684 in 1995) 81,019 60,266
Loans held for sale 274 394
Loans, net of allowance for loan losses
of $5,742 in 1996 and $3,904 in 1995 497,495 387,043
Premises and equipment, net 10,104 10,088
Accrued interest receivable 5,820 5,288
Other real estate owned 651 939
Other assets 9,612 4,538
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TOTAL ASSETS $ 803,451 $ 678,783
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits $ 97,251 $ 82,363
Interest bearing deposits 585,029 528,272
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Total deposits 682,280 610,635
Accrued interest payable 1,895 1,769
Dividend payable 528 794
Accrued expenses and other liabilities 2,190 4,252
Securities sold under agreements to repurchase 29,425 --
Federal Home Loan Bank advances 30,267 10,000
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Total liabilities 746,585 627,450
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Commitments and contingencies (Notes 6 and 14)
Stockholders' equity:
Preferred stock, no par value
Authorized shares: 100,000
Outstanding shares: 32,500 in 1996 and 37,500 in 1995 3,250 3,750
Common stock, $5 par value
Authorized shares: 7,000,000
Issued shares: 6,326,808 in 1996 and 2,880,397 in 1995 31,634 14,402
Additional paid-in capital 10,783 19,046
Retained earnings 12,664 14,072
Treasury stock at cost, 143,772 shares in 1996 and
86,316 shares in 1995 (895) (1,075)
Unrealized gain (loss) on available for sale securities, net of tax (570) 1,138
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Total stockholders' equity 56,866 51,333
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 803,451 $ 678,783
===================================================================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
Consolidated Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
U.S.B. Holding Co., Inc. USB
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<TABLE>
<CAPTION>
(000's, Except Share Data)
1996 1995 1994
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<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 40,652 $ 33,216 $ 26,924
Interest on federal funds sold 693 1,013 167
Interest and dividends on securities:
Mortgage-backed securities 6,873 7,741 6,032
U.S. Treasury and government 5,110 2,851 1,140
Obligations of states and political subdivisions 3,170 3,381 3,532
Corporate and other 517 1,193 1,605
Interest on deposits in other banks 39 137 54
Dividends on Federal Home Loan Bank stock 162 160 147
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Total interest income 57,216 49,692 39,601
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INTEREST EXPENSE:
Interest on deposits 25,774 23,438 15,345
Interest on borrowings 1,827 880 588
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Total interest expense 27,601 24,318 15,933
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NET INTEREST INCOME 29,615 25,374 23,668
Provision for loan losses 2,275 1,200 993
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Net interest income after provision for loan losses 27,340 24,174 22,675
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NON-INTEREST INCOME:
Gain on securities transactions - net 819 167 69
(Loss) gain on loans held for sale - net (54) 57 (381)
Net gain on sale of Royal Oak Savings Bank, F.S.B -- 3,520 --
Net gain on sale of branch facility 600 -- --
Mortgage servicing 244 340 362
Service charges and fees 2,419 2,599 2,620
Other income 999 632 485
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Total non-interest income 5,027 7,315 3,155
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NON-INTEREST EXPENSES:
Salaries and employee benefits 10,322 8,993 8,194
Occupancy and equipment expense 3,419 3,288 2,841
Advertising and business development 867 905 815
Professional fees 1,033 929 656
Communications 625 577 542
Stationery and printing 387 380 261
FDIC insurance 2 688 1,105
OREO expense - net 156 186 102
Other expenses 1,368 1,905 1,188
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Total non-interest expenses 18,179 17,851 15,704
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Income before income taxes 14,188 13,638 10,126
Provision for income taxes 4,774 4,311 3,126
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NET INCOME $ 9,414 $ 9,327 $ 7,000
===============================================================================================
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 1.40 $ 1.43* $ 1.10*
===============================================================================================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 6,512,997 6,304,758* 6,080,892*
===============================================================================================
</TABLE>
*Adjusted for 10% stock dividend and two-for-one stock split issued in 1996.
See notes to consolidated financial statements.
21
<PAGE>
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996 , 1995 and 1994
U.S.B. Holding Co., Inc. USB
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<TABLE>
<CAPTION>
(000's)
1996 1995 1994
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<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9,414 $ 9,327 $ 7,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 2,275 1,200 993
Depreciation and amortization 1,324 1,496 1,324
Amortization/accretion of premiums/discounts on securities - net 301 129 925
Gain on securities transactions - net (819) (167) (69)
Loss (gain) on loans held for sale - net 54 (57) 381
Net gain on sale of Royal Oak Savings Bank, F.S.B -- (3,520) --
Net gain on sale of branch facility (600) -- --
Origination of loans held for sale (2,415) (2,222) (17,018)
Proceeds from sales of loans held for sale 573 4,140 13,093
Increase in accrued interest receivable (532) (903) (536)
Increase in accrued interest payable 126 661 406
Payment of income taxes related to sale of Royal Oak Savings Bank, F.S.B (1,530) -- --
Other - net (2,105) 1,357 227
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Net cash provided by operating activities 6,066 11,441 6,726
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INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 75,297 56,942 33,481
Proceeds from principal paydowns and maturities of
securities available for sale 31,762 20,463 44,598
Proceeds from maturities of securities held to maturity 6,418 24,796 46,076
Purchases of securities available for sale (107,118) (99,031) (79,331)
Purchases of securities held to maturity (27,417) (2,691) (54,389)
(Purchases) redemptions of Federal Home Loan Bank stock (2,582) 314 (1,518)
Cash and cash equivalents used in sale of Royal Oak
Savings Bank, F.S.B. (Note 3) -- (37,388) --
Net decrease (increase) in interest bearing deposits in other banks 1,970 (883) 201
Loans originated, net of principal collections (112,045) (61,898) (71,812)
Loans purchased -- (398) (4,381)
Purchases of premises and equipment - net (1,618) (1,211) (1,187)
Proceeds from sale of branch facility 900 -- --
Proceeds from sales of OREO 1,555 1,062 1,267
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Net cash used for investing activities (132,878) (99,923) (86,995)
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FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits, NOW,
money market and savings accounts 56,511 70,967 18,142
Increase in time deposits, net of withdrawals and maturities 15,134 38,135 56,704
Increase (decrease) in federal funds purchased -- (3,400) 3,400
Net proceeds from securities sold under agreements to repurchase 29,425 -- --
Net increase (decrease) in Federal Home Loan
Bank advances - short-term 5,000 (7,500) 7,500
Proceeds from Federal Home Loan Bank advances - long-term 20,267 5,000 5,000
Repayment of Federal Home Loan Bank Advances - long term (5,000) -- --
Repayment of long-term debt -- (1,800) --
Cash dividends paid (2,132) (1,974) (1,621)
Redemption of preferred stock (500) -- --
Proceeds from issuance of common stock 19 1,858 1,170
Proceeds from issuance of treasury stock 440 -- --
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Net cash provided by financing activities 119,164 101,286 90,295
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (7,648) 12,804 10,026
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CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 37,269 24,465 14,439
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CASH AND CASH EQUIVALENTS, END OF YEAR $ 29,621 $ 37,269 $ 24,465
=============================================================================================================
Supplemental Disclosures:
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Interest paid $ 27,475 $ 23,657 $ 15,527
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Income tax payments $ 7,412 $ 3,522 $ 3,793
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Transfer of assets to OREO - net $ 1,226 $ 1,599 $ 694
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Transfer of securities held to maturity
to securities available for sale $ -- $ 68,145 $ (42,181)
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Transfer of loans held for sale to loans held to maturity at
lower of cost or fair value $ 1,962 $ -- $ --
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Loans securitized into mortgage-backed securities $ -- $ -- $ 20,910
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Change in unrealized gain (loss) on
securities available for sale - net of tax $ (1,708) $ 3,803 $ (2,665)
=============================================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1996 , 1995 and 1994
U.S.B. Holding Co., Inc. USB
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<TABLE>
<CAPTION>
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(000's, Except Share Data)
Unrealized
Common Stock Gain (Loss ) on
Preferred ------------------------ Additional Available
Stock, Shares $5 Par Paid-in Retained Treasury For Sale
No Par Value Outstanding Value Capital Earnings Stock Securities
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 3,750 2,398,558 $ 12,424 $ 11,535 $ 7,801 $ (1,075) --
Adoption of SFAS No. 115 -- -- -- -- -- -- $ 919
Net income -- -- -- -- 7,000 -- --
Cash dividends:
Common ($.22* per share) -- -- -- -- (1,306) -- --
Preferred -- -- -- -- (315) -- --
Common stock issued:
Incentive stock options
exercised ($10.45* per share) -- 400 2 7 -- -- --
Directors' stock options
exercised ($5.37* per share) -- 2,310 12 16 -- -- --
Dividend reinvestment plan -- 47,816 239 894 -- -- --
Change in unrealized gain (loss) on
available for sale securities,
net of tax -- -- -- -- -- -- (3,584)
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Balance at December 31, 1994 3,750 2,449,084 12,677 12,452 13,180 (1,075) (2,665)
Net income -- -- -- -- 9,327 -- --
Cash dividends:
Common ($.27* per share) -- -- -- -- (1,659) -- --
Preferred -- -- -- -- (315) -- --
Common stock issued:
Incentive stock options
exercised ($3.15* to $10.45*
per share) -- 38,610 193 299 -- -- --
Directors' stock options
exercised ($4.50* to $4.52*
per share) -- 5,658 28 28 -- -- --
10% stock dividend -- 250,525 1,253 5,198 (6,461) -- --
Dividend reinvestment plan -- 50,204 251 1,069 -- -- --
Change in unrealized gain (loss)
on available for sale
securities, net of tax -- -- -- -- -- -- 3,803
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Balance at December 31, 1995 3,750 2,794,081 14,402 19,046 14,072 (1,075) 1,138
Net income -- -- -- -- 9,414 -- --
Redemption of preferred stock (500) -- -- -- -- -- --
Cash dividends:
Common ($.30* per share) -- -- -- -- (1,838) -- --
Preferred -- -- -- -- (294) -- --
Issuance of treasury stock -- 20,108 -- 260 -- 180 --
Common stock issued:
Incentive stock options
exercised ($4.23* to
$9.50* per share) -- 3,095 15 16 -- -- --
10% stock dividend -- 279,912 1,400 7,278 (8,690) -- --
Two-for-one stock split -- 3,085,840 15,817 (15,817) -- -- --
Change in unrealized gain (loss)
on available for sale
securities, net of tax -- -- -- -- -- -- (1,708)
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Balance at December 31, 1996 $ 3,250 6,183,036 $ 31,634 $ 10,783 $ 12,664 $ (895) $ (570)
====================================================================================================================================
</TABLE>
*Adjusted for 10 percent stock dividend and two-for-one stock split issued in
1996.
See notes to consolidated financial statements.
23
<PAGE>
Notes to Consolidated Financial Statements
U.S.B. Holding Co., Inc.
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Balance sheet information as of December 31, 1994, 1993 and 1992 and income
statement information for the years ended December 31, 1993 and 1992, is not
covered by the independent auditors' report.
1. NATURE OF OPERATIONS
U.S.B. Holding Co., Inc. (the "Company"), a Delaware corporation
incorporated on July 6, 1982, is a bank holding company which provides financial
services through its wholly-owned subsidiaries. The Company and its subsidiaries
derive substantially all of their revenue and income from the furnishing of
banking and related services primarily to customers in Rockland and Westchester
Counties, New York. The Company is a separate and distinct legal entity from its
subsidiaries.
Union State Bank (the "Bank"), the Company's banking subsidiary, is a New
York State chartered full-service commercial bank which was established in 1969.
The Bank offers a complete range of retail banking services to individuals,
municipalities, corporations, and small and medium-size businesses. These
services include checking accounts, NOW accounts, money market deposit accounts,
savings accounts (passbook and statement), certificates of deposit, retirement
accounts, business loans, personal loans, residential, construction, home equity
(second mortgage) and condominium mortgage loans, consumer loans, credit cards,
other consumer oriented financial services and safe deposit facilities.
U.S.B. Realty Corp. ("USBRC"), a wholly-owned subsidiary of the Bank, was
formed on November 13, 1996. USBRC was formed primarily for the purpose of
acquiring and managing a portfolio of loans secured by real estate and other
investment securities previously owned by the Bank. On December 31, 1996, USBRC
had approximately $250 million in assets, consisting primarily of commercial
real estate loans ($214 million, net of allowance for loan losses), government
agency securities ($27 million) and cash ($7 million).
Royal Oak Savings Bank, F.S.B. ("Royal"), a federal thrift subsidiary
located in Randallstown, Maryland, also offered a complete range of services to
individuals and businesses. On December 31, 1995, Royal was sold to Monocacy
Bancshares, Inc. (see Note 3). Prior to the sale to Monocacy, Royal sold
substantially all its investment and loan assets, and certain other assets and
liabilities to the Bank and the Company.
The Company's business is concentrated primarily in Westchester and
Rockland Counties, New York (see Note 5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly-owned banking subsidiaries, Union
State Bank (including its wholly-owned subsidiary, USBRC) and, through December
31, 1995, Royal Oak Savings Bank, F.S.B., which was sold to Monocacy Bancshares,
Inc. (see Note 3), and its non-bank subsidiary, Ad Con, Inc. The Bank (including
USBRC) and Royal are herein referred to as the "Banks." All significant
intercompany accounts and transactions are eliminated in consolidation.
Basis of Financial Statement Presentation: The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and predominant practices used within the banking industry. In
preparing such financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the dates of the consolidated statements of condition and the revenues and
expenses for the periods reported. Actual results could differ significantly
from those estimates.
Estimates that are particularly susceptible to significant change relate to
the determination of the allowance for loan losses and the valuation of other
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan losses and
other real estate owned, management obtains independent appraisals for
significant properties.
Securities: As of January 1, 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which had an after-tax effect of an
increase to stockholders' equity of $919,000, and revised its securities
accounting policy. Securities that may be sold as part of the Company's
asset/liability or liquidity management, or in response to or in anticipation of
changes in interest rates and resulting prepayment risk, or for other similar
factors, are classified as available for sale and carried at fair value.
Securities that the Company has the ability and positive intent to hold to
maturity are classified as held to maturity and carried at amortized cost.
Realized gains and losses on the sales of all securities, determined by using
the specific identification method, are reported in earnings. Securities
available for sale are shown in the Consolidated Statements of Condition at fair
value and the resulting unrealized gains and losses, net of tax
24
<PAGE>
USB
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are shown as a separate component of stockholders' equity. Prior to adopting
SFAS No. 115, the Company accounted for securities using the amortized cost
method.
The decision whether to sell securities available for sale is based on
management's assessment of changes in economic or financial market conditions,
interest rate risk, and the Company's financial position and liquidity. Fair
values for securities are based on quoted market prices, where available. If
quoted market prices are not available, fair values are based on quoted market
prices of comparable instruments.
The Company does not acquire securities for the purpose of engaging in
trading activities.
Interest Rate Contracts: The Company uses various interest rate contracts
such as forward rate agreements, interest rate swaps and caps, primarily as
hedges against specific assets, liabilities or anticipated transactions.
Contracts accounted for as hedges must meet certain criteria including the
following: the hedged item must expose the Company to interest rate risk; the
interest rate contract must reduce that exposure; and must have a high
correlation of change in fair value of the interest rate contract and change in
fair value of the item hedged. For contracts designated as hedges, gains or
losses are deferred and recognized as adjustments to interest income or expense
of the underlying assets or liabilities over the life of the contract. Net
payments on interest rate swaps designated as hedges are accounted for on the
accrual basis. Gains or losses resulting from early terminations of contracts
are deferred and amortized over the remaining term of the underlying assets or
liabilities. If the contracts do not meet the criteria for hedge accounting, the
contract is valued at its fair value and any gain or loss is recorded in the
Consolidated Statements of Income. Any fees received or disbursed which
represent adjustments to the yield on interest rate contracts are capitalized
and amortized over the term of the interest rate contracts.
Loans: Loans are reported at the principal amount outstanding, net of
unearned income and the allowance for loan losses. Interest income on loans is
recorded on an accrual basis until an interest or principal payment is more than
90 days past due and/or, in the opinion of management, there is a question as to
the ability of the debtor to continue to make payments. At the time a loan is
placed on nonaccrual status, interest accrued but not collected is reversed.
Interest payments received while a loan is in nonaccrual status are either
applied to reduce principal or, based on management's estimate of
collectibility, recognized as income. Loans are returned to accrual status when
factors indicating doubtful collectibility no longer exist.
Loan origination and commitment fees and certain direct loan origination
costs are deferred and the net amount amortized as an adjustment of the related
loan's yield over the contractual life of the related loan, using a method that
approximates the interest method of amortization. Unamortized net fees for loans
sold are recognized in income at the time the loan is sold.
Certain residential mortgage loans held for sale are carried at the lower
of aggregate cost or estimated market value, and are reported separately in the
Consolidated Statements of Condition as "Loans held for sale." Gains and losses
on sales of mortgage loans held for sale are shown as a separate component of
"Non-Interest Income" in the Consolidated Statements of Income.
Allowance for Loan Losses: The allowance for loan losses is available to
absorb charge-offs from any loan category, while additions are made through
charges to income and recoveries of loans previously charged off. An evaluation
of the quality of the loan portfolio is performed by management on a quarterly
basis as an integral part of the loan review function which includes the
identification of past due loans, non-performing loans, impaired loans,
assessment of the expected effects of the current economic environment and
review of historical loss experience. Based upon management's assessment of the
degree of risk associated with the various elements of the loan portfolio, it is
estimated that at December 31, 1996 and 1995, 6 percent and 9 percent,
respectively, of the allowance for loan losses is applicable to time and demand
loans, 66 percent and 77 percent, respectively, relate to loans secured by real
estate, including commercial and construction loans, and 28 percent and 14
percent, respectively, is applicable to installment, credit card and other
loans.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize possible loan losses, future
additions to the allowance may be necessary based on changes in economic
conditions, particularly in the Company's primary service areas, Rockland and
Westchester Counties in New York. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the allowance
for loan losses. Such agencies may require additions to the allowance based on
their judgments of information available to them at the time of their
examination.
As of January 1, 1995, the Company adopted SFAS No. 114, "Accounting for
Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures," which requires
recognition of an impairment of a loan when it is probable that either principal
and/or interest are not collectible in accordance with
25
<PAGE>
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the terms of the loan agreement. Measurement of the impairment is based on the
present value of expected cash flows discounted at the loan's effective rate or,
as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral-dependent. If the fair value
of the impaired loan is less than the related recorded amount, a specific
valuation allowance is established or the write down is charged against the
allowance for loan losses if the impairment is considered to be permanent. Small
homogenous loans such as residential mortgage, home equity, and installment
loans are not separately reviewed for impaired status. Such loans are typically
collateralized by residential or other personal property and require monthly
payments. Separate allocations to the allowance for loan losses are made based
on payment trends and prior loss experience and the composition of credit risk
inherent in these loan types. The adoption of these Statements did not have a
material effect on the Consolidated Financial Statements of the Company.
Mortgage Servicing Rights: SFAS No. 122, "Accounting for Mortgage Servicing
Rights," modifies the treatment of the capitalization of servicing rights by
mortgage banking enterprises. The change eliminates the separate treatment of
servicing rights acquired through loans originated and those acquired through
purchase transactions, as previously required under SFAS No. 65, "Accounting for
Certain Mortgage Banking Activities." SFAS No. 122 requires mortgage servicing
rights, whether acquired or originated, to be recorded as assets distinct from
the loans to which they relate. SFAS No. 122 also requires periodic evaluation
of capitalized servicing rights for deterioration of value, due to increases in
prepayments and other factors. The Company's adoption of SFAS No. 122 as of
January 1, 1996 did not have a material effect on the Consolidated Financial
Statements of the Company.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated useful lives (20 to 50 years for
buildings and 3 to 10 years for furniture, fixtures and equipment) of the
related assets. Amortization of leasehold improvements is computed on a
straight-line basis over the terms of the leases or, if shorter, the estimated
useful lives of the assets.
Other Real Estate Owned (OREO): OREO includes properties acquired in
satisfaction of loans. OREO properties are recorded at the lower of cost or fair
value, less estimated costs to sell. Losses arising at the time of acquisition
of such properties are charged against the allowance for loan losses. Net costs
of maintaining and operating foreclosed properties and any subsequent provisions
for and changes in valuation are charged or credited to operations when
incurred. Gains and losses realized from the sale of OREO are included in OREO
expenses. Sales of OREO financed by the Bank are required to meet the Bank's
underwriting standards.
Accounting for Impairment of Long-Lived Assets: In 1995, the Company
adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." This Statement requires that
long-lived assets and certain identifiable intangibles, and goodwill related to
those assets, to be held and used by an entity, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In performing the review for recoverability,
the entity should estimate the future cash flows expected to result from the use
of the asset and its eventual disposition. If the sum of the expected future
cash flows (undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment loss is recognized. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use should be based on the fair value of the asset.
Adoption of this Statement was not material to the Consolidated Financial
Statements of the Company.
Income Taxes: The Company accounts for income taxes under the provisions of
SFAS No. 109, "Accounting for Income Taxes." This Statement establishes
financial accounting and reporting standards for the effects of income taxes
that result from an enterprise's activities during the current and preceding
years. It requires an asset and liability approach for financial accounting and
reporting for deferred income taxes based on prevailing statutory tax rates. The
Company and its subsidiaries, except USBRC, file a consolidated Federal tax
return, and the Company and the Bank (excluding USBRC) file a consolidated New
York State tax return. Royal filed a separate Maryland State return and USBRC
files a separate New York State return.
Accounting for Stock-Based Compensation: In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation plans and encourages, but does not require,
entities to adopt that method in place of the provisions of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees," for all arrangements under which employees receive shares of stock
or other equity instruments of the employer or the employer
26
<PAGE>
USB
- --------------------------------------------------------------------------------
incurs liabilities to employees in amounts based on the price of the Company's
stock. SFAS No. 123 requires significantly expanded disclosure in complete
financial statements, including disclosure of pro forma net income and earnings
per share as if the fair value based method were used to account for stock-based
compensation, if the intrinsic value method of APB No. 25 is retained. SFAS No.
123 also establishes fair value as the measurement basis for transactions in
which an entity acquires goods or services from non-employees in exchange for
equity instruments. Effective January 1, 1996, the Corporation adopted SFAS No.
123 and has elected to continue to measure compensation cost for employee stock
compensation plans in accordance with the provisions of APB No. 25 (see Note
15).
Earnings per Common and Common Equivalent Share: Net income per common
share is based on net income after preferred stock dividend requirements and the
weighted average number of common shares outstanding adjusted for common stock
splits and dividends and common equivalent shares. Shares granted but not yet
issued under the Company's stock option plans are considered common stock
equivalents for earnings per share calculations.
Pending Accounting Pronouncements: In June 1996, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards for sales, securitizations, and
servicing of receivables and other financial assets, secured borrowing and
collateral transactions, and the extinguishment of liabilities. The Statement is
to be applied to transactions occurring after December 31, 1996 (regardless of
an entity's fiscal year), including transfers of assets pursuant to
securitization structures that previously were entered into. However, the FASB
has issued a proposed amendment that would delay until 1998 the effective date
of certain of the Statement's provisions that deal with securities lending,
repurchase and dollar repurchase agreements and the recognition of collateral.
The Statement establishes new rules for determining whether a transfer of
financial assets constitutes a sale and, if so, the determination of any
resulting gain or loss. It applies to transfers of trade receivables by
commercial and industrial companies, transfers of credit card balances by
retailers or financial institutions, and any other transfers of financial
instruments by any type of entity.
SFAS No. 125 is based on a financial-components approach that focuses on
control. Under this approach, following a transfer of financial assets
(including portions of financial assets), an entity recognizes the assets it
controls and liabilities it has incurred, and derecognizes financial assets for
which control has been surrendered and financial liabilities that have been
extinguished.
The Statement also significantly changes the accounting for retained
interests in assets sold and supercedes SFAS No. 122 which relates to mortgage
servicing rights as described above.
Application of the requirements of SFAS No. 125 will not have a significant
impact on the Company's consolidated financial statements.
Consolidated Statements of Cash Flows: For purposes of presenting the
Consolidated Statements of Cash Flows, cash equivalents include amounts due from
banks and Federal funds sold.
Reclassifications: Certain reclassifications have been made to prior year
accounts to conform to the current year's presentation.
3. DISPOSITION OF ROYAL OAK SAVINGS BANK, F.S.B.
On December 31, 1995, the Company completed the sale of its wholly-owned
subsidiary, Royal Oak Savings Bank, F.S.B., to Monocacy Bancshares, Inc., parent
company of Taneytown Bank & Trust Company, Taneytown, Maryland. Certain assets
and liabilities of Royal, principally the investment and loan portfolios
aggregating approximately $22 million and $24 million, respectively, were
purchased by the Bank and the Company, immediately prior to the sale.
Substantially all deposits, approximating $42 million at December 31, 1995,
certain loan servicing rights and certain other assets and liabilities were
retained by Royal, as well as cash deposited by the Company and the Bank to fund
the purchase of the assets discussed above, and other net assets acquired.
The proceeds to the Company on the sale of $7.8 million, were based upon
8.5 percent of the deposits of Royal at December 31, 1995, and an agreed upon
value for other assets, liabilities and loan servicing rights, and an amount
equal to Royal's stockholder's equity at December 31, 1995. This transaction
resulted in a gain of $3.9 million, which was reduced by expenses of
approximately $400,000 incurred as a result of the sale, including legal and
accounting fees and the management bonus on such gain. The gain after tax
approximated $2.1 million.
Under the agreement of sale, Royal will continue to service certain loans.
Also, as part of the agreement of sale, Royal leased a bank branch from the
Company, which it subse-
27
<PAGE>
- --------------------------------------------------------------------------------
quently purchased in 1996, under an option to purchase included in the lease
agreement.
Also as part of this transaction, the Company has agreed not to compete in
a five county region of Maryland, with certain exceptions, for a period of three
years from the date of closing of the transaction.
The principal components of deposits and other assets and liabilities
assumed by the acquiror as a result of its acquisition of Royal are summarized
in the following table.
- --------------------------------------------------------------------------------
(000's)
- --------------------------------------------------------------------------------
Deposits and other liabilities assumed
by acquiror $ 42,841
Assets sold, other than cash and
cash equivalents (1,530)
Excess of net liabilities assumed by
acquiror over net cash and cash
equivalents transferred (3,923)
- --------------------------------------------------------------------------------
Net cash and cash equivalents transferred
to acquiror $ 37,388
================================================================================
4. SECURITIES
A summary of the amortized cost, fair value of securities and related gross
unrealized gains and losses at December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for Sale:
U.S. Treasury and government agencies $ 77,037 $ 20 $ 1,022 $ 76,035
Obligations of states and political subdivisions 1,166 29 -- 1,195
Mortgage-backed securities 90,543 725 741 90,527
Corporate bonds 897 2 -- 899
Other 100 -- -- 100
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $169,743 $ 776 $ 1,763 $168,756
====================================================================================================================================
Held to Maturity:
U.S. Treasury and government agencies $ 10,000 $ 3 $ -- $ 10,003
Obligations of states and political subdivisions 61,222 2,178 23 63,377
Mortgage-backed securities 9,797 10 64 9,743
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $ 81,019 $ 2,191 $ 87 $ 83,123
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1995 Cost Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
Available for Sale:
U.S. Treasury and government agencies $ 46,011 $ 654 $ 95 $ 46,570
Obligations of states and political subdivisions 3,067 40 -- 3,107
Mortgage-backed securities 109,375 1,169 181 110,363
Corporate bonds 10,406 384 -- 10,790
Other 59 -- -- 59
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities available for sale $168,918 $ 2,247 $ 276 $170,889
====================================================================================================================================
Held to Maturity:
Obligations of states and political subdivisions $ 60,266 $ 2,456 $ 38 $ 62,684
- ------------------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity $ 60,266 $ 2,456 $ 38 $ 62,684
====================================================================================================================================
</TABLE>
28
<PAGE>
USB
- --------------------------------------------------------------------------------
In December 1995, the Company transferred, at fair value, securities having
a fair value of $68.8 million (amortized cost of $68.1 million) from its "held
to maturity" security portfolio to its portfolio of securities "available for
sale." This was done to enhance the Company's ability to respond to changes in
interest rates.
The securities transferred represented all of the readily marketable
securities that were previously classified as "held to maturity" at the date of
transfer, except for obligations of states and political subdivisions
securities. This transfer was made in accordance with the FASB's "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities," issued in November 1995. Concurrent with the adoption of
this guidance, corporations were permitted, through December 31, 1995, to
reclassify their "available for sale" and "held to maturity" securities without
calling into question the past intent of an entity to hold securities to
maturity. The effect of this transfer, after tax, was a $.4 million increase in
shareholders' equity.
During 1996, 1995 and 1994, proceeds from sales of securities were
$75,297,000, $56,942,000, and $33,481,000, respectively. Gross gains of
$866,000, $335,000, and $411,000 were realized in 1996, 1995 and 1994,
respectively. Losses of $47,000, $168,000 and $342,000 were realized in 1996,
1995 and 1994, respectively.
The following tables present the carrying value of securities at December
31, 1996, distributed based on contractual maturity or earlier call date for
securities expected to be called, and unaudited weighted average yields computed
on a tax equivalent basis. Mortgage-backed securities which may have principal
prepayments are distributed to a maturity category based on estimated average
lives. Actual maturities will differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Maturities of Securities Available for Sale
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(000's, except percentages)
After 1 After 5
Within But Within But Within
1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------------------------
Amt. Yield Amt. Yield Amt. Yield
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
government agencies $ 2,000 4.82% $ 30,037 6.46% $ 45,000 7.27%
Obligations of states and
political subdivisions -- -- -- -- 916 7.90
Mortgage-backed securities 719 7.74 44,871 6.12 15,422 7.51
Corporate bonds 897 7.40 -- -- -- --
Other -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Securities Available
for Sale $ 3,616 6.04% $ 74,908 6.26% $ 61,338 7.34%
- -------------------------------------------------------------------------------------------------
Fair Value $ 3,616 $ 74,038 $ 61,033
=================================================================================================
</TABLE>
After
10 Years Total
- --------------------------------------------------------------------------------
Amt. Yield Amt. Yield
- --------------------------------------------------------------------------------
U.S. Treasury and
government agencies -- -- $ 77,037 6.89%
Obligations of states and
political subdivisions $ 250 8.29% 1,166 7.98
Mortgage-backed securities 29,531 6.82 90,543 6.60
Corporate bonds -- -- 897 7.40
Other 100 1.79 100 1.79
- --------------------------------------------------------------------------------
Total Securities Available
for Sale $ 29,881 6.82% $ 169,743 6.74%
- --------------------------------------------------------------------------------
Fair Value $ 30,069 $ 168,756
================================================================================
Maturities of Securities Held to Maturity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except percentages)
After 1 After 5
Within But Within But Within After
1 Year 5 Years 10 Years 10 Years Total
- ------------------------------------------------------------------------------------------------------------------------------------
Amt. Yield Amt. Yield Amt. Yield Amt. Yield Amt. Yield
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and
government agencies -- -- -- -- $10,000 8.00% -- -- $10,000 8.00%
Obligations of states and
political subdivisions $6,273 6.10% $23,515 7.91% 31,434 8.67 -- -- 61,222 8.11
Mortgage-backed securities -- -- -- -- -- -- $ 9,797 6.77% 9,797 6.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total Securities Held to
Maturity $6,273 6.10% $23,515 7.91% $41,434 8.51% $ 9,797 6.77% $81,019 7.93%
- ------------------------------------------------------------------------------------------------------------------------------------
Fair Value $6,283 $24,135 $42,962 $ 9,743 $83,123
====================================================================================================================================
</TABLE>
Securities having a carrying value of approximately $171.2 million at
December 31, 1996, were pledged to secure public deposits as required or
permitted by law and securities sold under repurchase agreement transactions.
29
<PAGE>
- --------------------------------------------------------------------------------
5. LOANS
Major classifications of loans at December 31, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Time and demand loans $ 28,736 $ 22,597 $ 11,065 $ 9,249 $ 9,908
Installment loans 14,685 14,887 20,757 18,698 21,203
Credit card 8,264 2,592 -- -- --
Real estate loans
- Commercial 267,811 212,515 192,541 145,746 89,246
- Residential 79,490 66,380 59,441 58,875 49,784
- Construction and land
development 71,289 41,889 26,950 22,748 36,344
- Home equity 28,844 25,221 21,734 19,556 24,451
Other 5,184 5,902 1,808 1,768 1,836
- ------------------------------------------------------------------------------------------------------------------------------------
504,303 391,983 334,296 276,640 232,772
Deferred net commitment fees (792) (642) (659) (664) (252)
Unearned discount -- -- (67) (153) (271)
Allowance for loan losses (5,742) (3,904) (3,320) (2,852) (2,496)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $497,769 $387,437 $330,250 $272,971 $229,753
====================================================================================================================================
</TABLE>
Loans held for sale of $274,000 and $394,000 at December 31, 1996 and 1995,
respectively, which are included in the above table, and commitments of $142,000
at December 31, 1996 (none at December 31, 1995) which have not yet closed, are
fixed rate residential real estate loans with an aggregate cost of $416,000 and
market value of $415,000 at December 31, 1996, and a cost of $394,000 and market
value of $393,000 at December 31, 1995.
Substantially all of the Company's commercial and residential lending
activities are with customers located in Westchester and Rockland Counties, New
York. Although lending activities are diversified, a substantial portion of many
of the Company's customers' net worth is dependent on these counties' real
estate values.
Credit policies, applicable to each type of lending activity, have been
established, to evaluate the creditworthiness of each customer and, in most
cases, require collateral to be pledged. Generally, credit extension does not
exceed 60 to 80 percent of fair value of the collateral at the date of extension
(with occasional exceptions), depending on the evaluation of the borrowers'
creditworthiness. The market value of collateral is monitored on an ongoing
basis. Real estate is the primary form of collateral. While collateral provides
assurance as a secondary source of repayment, the primary source of repayment is
ordinarily based on the borrower's ability to generate continuing cash flow,
which is a principal underwriting criteria for approving a loan.
30
<PAGE>
USB
- --------------------------------------------------------------------------------
A summary of the allowance for loan losses for the years ended December 31, is
as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except percentages)
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net loans outstanding at end of the year $497,769 $387,437 $330,250 $272,971 $229,753
- ------------------------------------------------------------------------------------------------------------------------------------
Average net loans outstanding during the year $444,980 $352,244 $305,411 $244,813 $235,921
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses:
Balance at beginning of the year $ 3,904 $ 3,320 $ 2,852 $ 2,496 $ 1,889
Provision charged to expense 2,275 1,200 993 763 745
- ------------------------------------------------------------------------------------------------------------------------------------
6,179 4,520 3,845 3,259 2,634
- ------------------------------------------------------------------------------------------------------------------------------------
Recoveries (charge-offs) during the year:
Charge-offs:
Real estate (344) (379) (469) (179) (30)
Time and demand (37) (200) (45) (139) (66)
Installment (154) (108) (94) (212) (252)
- ------------------------------------------------------------------------------------------------------------------------------------
Recoveries:
Time and demand 83 20 37 98 154
Installment 15 51 46 25 56
- ------------------------------------------------------------------------------------------------------------------------------------
Net charge-offs during the year (437) (616) (525) (407) (138)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of the year $ 5,742 $ 3,904 $ 3,320 $ 2,852 $ 2,496
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net charge-offs to average net loans
outstanding during the year .10% .17% .17% .17% .06%
Ratio of allowance for loan losses to net loans
outstanding at end of the year 1.15% 1.01% 1.01% 1.04% 1.09%
Ratio of provision to net charge-offs (times) 5.2 1.9 1.9 1.9 5.4
====================================================================================================================================
</TABLE>
The following table summarizes the Company's nonaccrual and restructured
loans and related interest income not recorded on nonaccrual loans for the year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except percentages)
As of December 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans at year end $8,090 $4,036 $5,904 $3,966 $3,854
Restructured loans at year end 2,101 4,074 5,787 4,656 4,083
Additional interest income that would have been
recorded if these borrowers had complied
with contractual loan terms 840 226 500 339 308
Nonperforming assets to total assets 1.09% .73% 1.07% .96% 1.27%
====================================================================================================================================
</TABLE>
Substantially all of the nonaccruing loans are collateralized by real
estate, except for certain loans made by the Bank to Bennett Funding Group (see
below), which are collateralized by cash and lease receivables. At December 31,
1996, the Company has no commitments to lend additional funds to any customers
with nonaccrual or restructured loan balances.
At December 31, 1996, there are loans aggregating approximately $650,000,
which are not on nonaccrual status, that were potential problem loans that may
result in their being placed on nonaccrual status in the future.
At December 31, 1996 and 1995, the recorded investment in loans that are
considered to be impaired under SFAS No. 114 approximated $7.8 million
(including those loans to Bennett Funding Group described below) and $4.1
million, respectively, ($7.2 million and $3.3 million, respectively, of which
were in nonaccrual status). Each impaired loan has a related allowance for loan
losses determined in accordance with SFAS No. 114.
31
<PAGE>
- --------------------------------------------------------------------------------
The following table summarizes impaired loans by loan type and measurement
method pursuant to SFAS 114:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
As of December 31,
1996 1995
Present Value Fair Value Present Value Fair Value
of expected of of expected of
cash flows Collateral cash flows Collateral
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Time and demand $ 62 $ 29 $ 62 --
Installment -- 100 32 $ 83
Real estate
Commercial 1,455 2,287 1,307 2,188
Construction & land development 420 210 420 --
Other 3,276 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $ 5,213 $ 2,626 $ 1,821 $ 2,271
====================================================================================================================================
</TABLE>
Restructured loans in the amounts of $.6 million and $.8 million at
December 31, 1996 and 1995, respectively, that are considered to be impaired due
to a reduction in the contractual interest rate are on accrual status since the
collateral securing the loan is sufficient to protect the contractual principal
and interest of the restructured loans. These loans have been performing for a
reasonable period of time. Interest accrued on these loans not yet collected as
of December 31, 1996 and 1995 is immaterial. The total allowance for loan losses
related to impaired loans was $1.3 million and $.7 million as of December 31,
1996 and 1995, respectively. The average recorded investment in impaired loans
for the years ended December 31, 1996 and 1995 was approximately $7.4 million
and $4.0 million, respectively. For the years ended December 31, 1996 and 1995,
interest income recognized by the Company on impaired loans was not material.
The Bank has approximately $3.3 million of outstanding loans,
collateralized by cash and lease receivables, to Bennett Funding Group
("Bennett"), a lease finance company, which filed for bankruptcy protection
during the first quarter of 1996. Collection of the Bank's loans continues to be
delayed by the bankruptcy proceedings. The Bank has not yet determined the
extent of losses, if any, that will be sustained on these loans. However, based
upon Bennett's filing, the loans have been placed on nonaccrual status and a
specific reserve included in the allowance for loan losses of $.9 million has
been established in accordance with SFAS No. 114.
6. PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, follows:
- --------------------------------------------------------------------------------
(000's)
1996 1995
- --------------------------------------------------------------------------------
Land $ 2,588 $ 2,473
Buildings 6,314 6,324
Leasehold improvements 353 824
Furniture, fixtures and equipment 5,094 4,400
- --------------------------------------------------------------------------------
14,349 14,021
Less accumulated depreciation and amortization 4,245 3,933
- --------------------------------------------------------------------------------
Premises and equipment, net $10,104 $10,088
================================================================================
The Bank leases certain premises and equipment under noncancellable
operating leases. Certain of these lease agreements provide for periodic
increases in annual rental payments based on published price indices, renewal
options for varying periods and purchase options at amounts which are expected
to approximate the fair values of the related assets at the dates the options
become exercisable.
Rent expense for premises and equipment was $575,000 in 1996, $530,000 in
1995 and $452,000 in 1994.
The Bank leases a portion of its corporate headquarters and the Company
leased a bank branch facility to tenants under operating leases and recorded
rental income of approximately $525,000 in 1996, $495,000 in 1995 and $505,000
in 1994. The tenant of the bank branch facility purchased the facility for the
fair value of the property in December, 1996.
32
<PAGE>
USB
- --------------------------------------------------------------------------------
As of December 31, 1996, future minimum lease payments are as follows:
- --------------------------------------------------------------------------------
Year Ending December 31, (000's)
- --------------------------------------------------------------------------------
1997 $ 651
1998 634
1999 617
2000 485
2001 379
After 2001 2,161
- --------------------------------------------------------------------------------
Total minimum lease payments $4,927
================================================================================
As of December 31, 1996, future minimum lease receipts are as follows:
- --------------------------------------------------------------------------------
Year Ending December 31, (000's)
- --------------------------------------------------------------------------------
1997 $ 367
1998 326
1999 252
2000 214
2001 40
After 2001 --
- --------------------------------------------------------------------------------
Total minimum lease receipts $1,199
================================================================================
7. DEPOSITS
A summary of deosits at December 31, follows:
- --------------------------------------------------------------------------------
(000's)
1996 1995
- --------------------------------------------------------------------------------
Non-interest bearing:
Deposits of:
Individuals, partnerships and corporations $ 88,202 $ 70,358
Certified and official checks 8,092 10,824
States and political subdivisions 957 1,181
- --------------------------------------------------------------------------------
Total non-interest bearing $ 97,251 $ 82,363
================================================================================
Interest bearing:
Time deposits of individuals, partnerships and corporations $156,289 $149,755
States and political subdivisions 78,351 77,298
Money market accounts 42,039 45,982
Savings deposits 216,413 181,998
NOW deposits 43,193 36,755
IRA's and Keogh's 48,744 36,484
- --------------------------------------------------------------------------------
Total interest bearing $585,029 $528,272
================================================================================
At December 31, 1996 and 1995, certificates of deposits and other time
deposits of $100,000 or more totalled $101,468,000 and $110,272,000,
respectively. At December 31, 1996, such deposits classified by time remaining
to maturity were as follows:
--------------------------------------------------------
(000's)
--------------------------------------------------------
3 months or less $ 62,957
Over 3 and through 6 months 22,152
Over 6 and through 12 months 12,409
Over 12 months 3,950
--------------------------------------------------------
Total $101,468
=======================================================
33
<PAGE>
- --------------------------------------------------------------------------------
8. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31, are as follows:
- --------------------------------------------------------------------------------
(000's)
1996 1995 1994
Federal:
- --------------------------------------------------------------------------------
Current $ 4,396 $ 3,550 $ 2,375
Deferred (909) (350) (406)
State:
Current 1,544 1,187 1,228
Deferred (257) (76) (71)
- --------------------------------------------------------------------------------
Total $ 4,774 $ 4,311 $ 3,126
================================================================================
The income tax provision includes income taxes related to net gains on
securities transactions of approximately $343,000, $71,000, and $29,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
Net deferred tax assets of $2,143,000 and $903,000 are included in the
Consolidated Statements of Condition at December 31, 1996 and 1995,
respectively. Management believes it is more likely than not that the net
deferred tax assets will be realized.
The tax effects of temporary differences that give rise to the significant
portions of deferred tax assets at December 31, 1996 and 1995, are as follows:
- --------------------------------------------------------------------------------
(000's)
1996 1995
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for loan losses $1,686 $749
Deferred loan fees, net,
depreciation and other 457 154
- --------------------------------------------------------------------------------
Total deferred tax assets $2,143 $903
================================================================================
In addition to amounts in the above table, the Company recorded a deferred
tax asset of $417,000 in 1996 and a deferred tax liability of $833,000 in 1995
relating to available for sale securities valued at fair value in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
The following is a reconciliation of the statutory Federal and effective
tax rates as a percentage of income before taxes for the years ended December
31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal income tax rate 35.0% 35.0% 34.0%
Interest on obligations of states and political subdivisions (6.7) (7.3) (10.5)
State income taxes, net of Federal tax benefit 5.9 5.3 7.5
Other (0.6) (1.4) (0.1)
- ------------------------------------------------------------------------------------------------------------------------------------
Effective tax rate 33.6% 31.6% 30.9%
====================================================================================================================================
</TABLE>
9. BORROWINGS AND LONG-TERM DEBT
The Company utilizes borrowings primarily to meet the funding requirements
for its asset growth and to manage its interest rate risk. Short-term borrowings
include securities sold under agreements to repurchase, federal funds purchased,
and short-term Federal Home Loan Bank of New York ("FHLB") advances. Securities
sold under agreements to repurchase generally mature between one and 365 days.
The Bank may borrow up to $50.0 million from two primary investment firms under
master security sale and repurchase agreements. At December 31, 1996, the Bank
had $29.4 million of such borrowings outstanding, with terms of between 30 and
90 days at interest rates of between 5.62 and 5.76 percent. The borrowings are
collateralized by securities with an aggregate amortized cost and market value
of $30.2 million and $29.8 million, respectively. Federal funds purchased
represent
34
<PAGE>
USB
- --------------------------------------------------------------------------------
overnight funds. The Bank has federal funds purchase lines available
with two financial institutions for a total of $8.0 million. At December 31,
1996 and 1995, the Bank had no federal funds purchased balances outstanding.
Short-term FHLB advances are borrowings with original maturities of between one
and 365 days. At December 31, 1996, the Bank had short-term FHLB advances of
$5.0 million outstanding with a term of six months at an interest rate of 5.63%.
Additional information with respect to short-term borrowings for the three
years ended December 31, 1996, 1995 and 1994 is presented in the table below.
The increase in short-term borrowings was used primarily to fund asset growth.
- --------------------------------------------------------------------------------
(000's, except percentages)
1996 1995 1994
- --------------------------------------------------------------------------------
Balance at December 31 $ 34,425 $ -- $ 10,900
Average balance outstanding 12,611 5,321 9,489
Weighted-average interest rate*
As of December 31 5.85% -- 5.57%
Paid during year 5.67% 6.26% 4.35%
================================================================================
*The weighted-average interest rates for 1996 have been adjusted to reflect the
effect of an interest rate swap used to convert a variable rate borrowing to a
fixed rate (see Note 14).
As of December 31, 1996, long-term FHLB advances totalled $25.3 million,
compared with $10.0 million as of December 31, 1995. Long-term FHLB advances
aggregating $19.0 million are single principal payments and are not repayable
prior to maturity without penalty. Long-term FHLB advances aggregating $6.3
million are amortizing advances having scheduled payments, but may not be repaid
in full prior to maturity without penalty.
The Bank has purchased stock in the FHLB which is required in order to draw
advances from the FHLB. At December 31, 1996, the Bank had the ability to borrow
an additional $5.0 million from the FHLB without having to purchase additional
FHLB stock. The Bank may borrow up to an aggregate of 30% of total assets or
$240.7 million, at December 31, 1996, upon the purchase of additional shares of
FHLB stock. Advances made from the FHLB are collateralized with the FHLB stock
purchased and certain other assets of the Bank.
In May 1995, the Company repaid the $1.8 million of Series "A" subordinated
notes outstanding that qualified as Tier II capital under risk-based capital
guidelines. Interest under the notes was at the prime rate plus one-half
percent, payable quarterly. The weighted-average interest rates for the years
ended December 31, 1995 and 1994 were 9.39 and 7.64 percent, respectively.
The following table is a summary of long-term debt distributed based upon
remaining contractual maturity at December 31, 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except percentages)
After 1
But Within After 1996 1995
5 Years 5 Years Total Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed rate advances $22,467 $2,800 $25,267 $ 5,000
Variable rate advances -- -- -- 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term debt $22,467 $2,800 $25,267 $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted-average interest rate 6.14% 6.72% 6.20% 6.17%
====================================================================================================================================
</TABLE>
10. STOCKHOLDERS' EQUITY
The Company declared 10 percent stock dividends to shareholders of record
at May 31, 1996 and June 15, 1995, which were distributed on June 14, 1996 and
July 1, 1995, respectively. In addition, the Company declared a two-for-one
stock split in the form of a 100% stock dividend to stockholders of record on
December 13, 1996, which was distributed on December 30, 1996. The weighted
average shares outstanding and per share amounts have been adjusted to reflect
the stock dividends and split.
The Company and the Bank's ability to pay cash dividends in the future are
restricted by various regulatory requirements. The Company's ability to pay cash
dividends to its shareholders is primarily dependent upon the receipt of
dividends from the Bank. The Bank's dividends to the Company may not exceed the
sum of the Bank's net income for that year and its undistributed net income for
the preceding two years, less any required transfers to additional paid-in
capital. At December 31, 1996, the Bank could pay dividends to the Company of
$18.0 million without having to obtain prior regulatory approval.
The Company may not pay dividends on its common stock if it is in default
of the terms of its preferred stock (see below). In addition, the Company may
not pay dividends on its common stock or preferred stock if it is in default
with respect to the junior subordinated debt or trust capital securities issued
in February 1997, or if the Company elects to defer payment for up to five years
as permitted under the terms of such junior subordinated debt and trust capital
securities.
In December 1993, the Company implemented a Dividend Reinvestment Plan
("DRIP"). The DRIP allows stockholders to invest cash dividends in shares of the
Company's common stock
35
<PAGE>
- --------------------------------------------------------------------------------
at fair value and, in the third quarter of 1994, a stock purchase feature was
added to allow stockholders to purchase additional common stock at fair value of
up to $2,500 per quarter. The DRIP was temporarily suspended for dividends paid
after January 1, 1996. As of December 31, 1996, 200,000 shares of common stock
are authorized for issuance in connection with the Plan, of which 98,020 shares
have been issued.
The dividend rate on the Company's Series "A" non-voting preferred stock
issued to a single investor is determined quarterly and is subject to certain
minimum and maximum per annum dividend rates as specified in the agreement. The
weighted average dividend was at the minimum rate of 8.4 percent for 1996, 1995
and 1994. The agreement also provides for adjustments to the dividend rate in
the event of changes in the maximum Federal corporate tax rate or the dividend
exclusion rate. Dividends payable on account of the preferred shares are
cumulative. In the event of a liquidation of the Company, preferred stockholders
will be entitled to receive the stated value of their shares before any payments
are made to holders of any other class or series of capital stock of the
Company. In 1996, $500,000 of the preferred stock was redeemed by the Company at
stated value. Note 17 provides information on the subsequent redemption of this
preferred stock.
11. REGULATORY MATTERS
The Company and Bank 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 effect on the Company's financial statements. Under capital adequacy
guidelines, and, with respect to the Bank, the regulatory framework for prompt
corrective action, the Company and Bank must meet specific capital guidelines
that involve quantitative measures of the Company's and the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Company's and Bank's 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 the Company and Bank to maintain minimum amounts and ratios (set forth
in the tables below) of Total and Tier I capital (as defined in the regulations)
to risk-
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except percentages)
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
Company Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets) $62,947 11.50% $43,812 >=8.0% N/A N/A
Tier I Capital (to Risk Weighted Assets) 57,205 10.45% 21,906 >=4.0% N/A N/A
Tier I Capital (to Average Assets) 57,205 7.06% 32,392 >=4.0% N/A N/A
As of December 31, 1995
Total Capital (to Risk Weighted Assets) 53,846 12.26% 35,126 >=8.0% N/A N/A
Tier I Capital (to Risk Weighted Assets) 49,942 11.37% 17,563 >=4.0% N/A N/A
Tier I Capital (to Average Assets) 49,942 7.43% 26,034 >=4.0% N/A N/A
====================================================================================================================================
N/A - Not Applicable
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(000's, except percentages)
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
Bank Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets) $62,389 11.41% $43,728 >=8.0% $54,660 >=10.0%
Tier I Capital (to Risk Weighted Assets) 56,647 10.36% 21,864 >=4.0% 32,796 >= 6.0%
Tier I Capital (to Average Assets) 56,647 7.01% 32,346 >=4.0% 40,432 >= 5.0%
As of December 31, 1995
Total Capital (to Risk Weighted Assets) 52,960 12.08% 35,073 >=8.0% 43,841 >=10.0%
Tier I Capital (to Risk Weighted Assets) 49,056 11.19% 17,536 >=4.0% 26,304 >= 6.0%
Tier I Capital (to Average Assets) 49,056 7.63% 25,709 >=4.0% 32,136 >= 5.0%
====================================================================================================================================
</TABLE>
Capital ratios are computed excluding unrealized gains or losses on
available for sale securities, net of tax effect, which is included as a
component of stockholders' equity for financial reporting purposes.
36
<PAGE>
USB
- --------------------------------------------------------------------------------
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the
Company and Bank meet all capital adequacy requirements to which it is subject,
and is considered well capitalized under regulatory guidelines.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the tables above. There are no
conditions or events since that notification that management believes have
changed the Bank's category.
The Company's and Bank's actual capital amounts and ratios are presented in
the tables above.
12. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," as
amended by SFAS No. 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments," requires disclosure of the estimated fair
values for certain financial instruments. The estimated fair values disclosed
below are as of December 31, 1996 and 1995, and have been determined using
available market information and various valuation estimation methodologies.
Considerable judgment is required to interpret the effects on fair value of such
items as future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. The
estimates presented herein are not necessarily indicative of the amounts that
the Company would realize in a current market exchange. Also, the use of
different market assumptions and/or estimation methodologies may have a material
effect on the determination of the estimated fair values.
The fair value estimates presented below are based on pertinent information
available to management as of December 31, 1996 and 1995. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued since
December 31, 1996 and 1995 and, therefore, current estimates of fair value may
differ significantly from the amounts presented below.
Fair value methods and assumptions are as follows:
Cash, Cash Equivalents and Other Short-Term Investments - The carrying
amount is a reasonable estimate of fair value.
Securities - The fair value of securities is estimated based on quoted
market prices or dealer quotes, if available. If a quote is not available, fair
value is estimated using quoted market prices for similar securities.
Loans - For certain homogeneous fixed rate categories of loans, such as
residential mortgages, fair value is estimated using quoted market prices for
securities backed by similar loans. The fair value of other fixed rate loans has
been estimated by discounting projected cash flows using current rates for
similar loans reduced by specific and general loan loss allowances. For loans
which reprice frequently to market rates, the carrying amount is a reasonable
estimate of fair value. The fair value of nonaccrual loans was estimated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31,
1996 1995
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents and other
short-term investments $ 30.6 $ 30.6 $ 39.3 $ 39.3
Securities and accrued interest receivable 252.3 254.4 233.6 236.0
Loans and accrued interest receivable 500.8 501.0 389.9 390.5
Loans held for sale and accrued interest receivable .3 .3 .4 .4
Liabilities:
Deposits without stated maturities 415.5 415.5 358.9 358.9
Time deposits and accrued interest payable 268.5 268.7 253.5 254.3
Securities sold under agreements to repurchase
and accrued interest payable 29.6 29.6 -- --
Federal Home Loan Bank advances
and accrued interest payable 30.4 30.3 10.0 10.0
====================================================================================================================================
</TABLE>
37
<PAGE>
- --------------------------------------------------------------------------------
Deposits Without Stated Maturities - Under the provisions of SFAS No. 107,
the estimated fair value of deposits with no stated maturity, such as
non-interest bearing demand deposits, savings accounts, NOW accounts, money
market and checking accounts, is equal to the amount payable on demand.
Time Deposits - The fair value of certificates of deposits is based on the
discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered at the reporting date for deposits of similar
remaining maturities.
Securities Sold Under Agreements to Repurchase and Federal Home Loan Bank
Advances - The carrying amount is a reasonable estimate of fair value for
borrowings which are either short-term or for which applicable interest rates
reprice based upon changes in market rates. For medium and long-term borrowings,
fair value is based on the discounted cash flow of advances at rates currently
offered at the balance sheet date for similar terms.
Financial Instruments with Off-Balance Sheet Risk - As described in Note
14, the Company is a party to financial instruments with off-balance sheet risk
at December 31, 1996 and 1995. Such financial instruments include commitments to
extend permanent financing and letters of credit. If the commitments are
exercised by the prospective borrowers, these financial instruments will become
interest-earning assets of the Company. If the commitments expire, the Company
retains any fees paid by the counterparty in order to obtain the commitment or
guarantee. The fair value of commitments is estimated based upon fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the counterparties.
For fixed rate commitments, the fair value estimation takes into consideration
an interest rate risk factor. The fair value of guarantees and letters of credit
is based on fees currently charged for similar agreements. The fair value of
these off-balance sheet items at December 31, 1996 and 1995, respectively,
approximates the recorded amounts of the related fees, which are not material to
the consolidated financial position of the Company. The Company also has off
balance sheet interest rate contracts which are further described in Note 14.
The fair value of these contracts is not material at December 31, 1996 and 1995.
13. RELATED PARTY TRANSACTIONS
A summary of the transactions for the year ended December 31, 1996, with
respect to loans (in excess of $60,000 with respect to each party) to directors,
executive officers, stockholders or companies in which they had a 10 percent or
more beneficial interest is as follows:
- --------------------------------------------------------------------------------
(000's)
- --------------------------------------------------------------------------------
Balance, December 31, 1995 $813
New loans 64
Repayments 34
- --------------------------------------------------------------------------------
Balance, December 31, 1996 $843
================================================================================
The Company has made payments to organizations in which certain directors
have a beneficial interest for services rendered by such organizations. Such
payments are not considered to be material in the aggregate.
14. COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company was committed under an employment
agreement with a key officer, director and shareholder requiring annual salary
and other payments of $400,000, increasing annually by $30,000 during the term
of the contract, annual bonus payments equal to 6 percent of net income of the
Company under the executive compensation plan, annual stock option grants of
48,400 shares, issued at fair value (110 percent of fair value if the key
officer's ownership of the Company equals or exceeds 10 percent at the date of
grant) and other benefits for the term of the contract expiring July 1, 1999.
In the normal course of business, various commitments to extend credit are
made which are not reflected in the accompanying Consolidated Financial
Statements. At December 31, 1996 and 1995, formal credit line and loan
commitments which are primarily loans collateralized by real estate and credit
card lines approximated $111.6 million and $101.8 million, and outstanding
letters of credit totalled $15.9 million and $8.3 million, respectively. Such
amounts represent the maximum risk of loss on these commitments.
During 1996, 1995 and 1994, the Banks, which are approved Federal Home Loan
Mortgage Corporation ("FHLMC") seller/servicers, sold mortgage loans to FHLMC,
with net proceeds totalling $.6 million, $4.1 million and $13.1 million,
respectively. In addition, in 1994, $20.9 million of mortgages was exchanged by
the Banks with FHLMC for guaranteed participation certificates in residential
mortgage pools. At December 31, 1996, the principal balance of the loans sold
and exchanged which remain uncollected totalled $83.4 million. The Bank is
committed to service these loans.
In connection with its asset and liability management program, during 1994
the Bank entered into a protected rate agreement ("cap") which has a remaining
aggregate notional amount of $3.0 million at December 31, 1996 ($3.5 million at
December 31, 1995). The premium paid in the amount of $85,000 is deferred and is
being amortized over the five year life of the cap. Under the terms of the cap,
the Bank will be
38
<PAGE>
USB
- --------------------------------------------------------------------------------
reimbursed for increases in one-month LIBOR for any month during the term of the
agreement in which such rate exceeds the "strike level" of 8.1875%. Interest
rate cap agreements allow the Bank to limit its exposure to unfavorable interest
rate fluctuations over and above the "capped" rate. The purchased cap hedges
income payments from a mortgage-backed security with an interest rate adjusted
annually to the one year Constant Maturity Treasury rate. The Bank has also
entered into an interest rate swap contract, which effectively adjusts the
short-term interest rate on a security sold under agreement to repurchase
borrowing to a long-term fixed interest rate. Under the terms of the contract,
the Bank is required to pay a fixed interest rate payment equal to 6.16% of a
notional amount of $10.0 million, and receive a payment equal to three-month
LIBOR. The agreement expires on October 2, 1998. These agreements are subject to
the counter-party's ability to perform in accordance with the terms of the
agreement. The Bank's risk of loss on the interest rate cap is equal to the
original premium paid to enter into this agreement, while the risk of loss on
the interest rate swap is the fair value amount to be paid to terminate the
contract, which was $61,000 (liability) at December 31, 1996.
The Bank enters into forward commitments to sell residential first mortgage
loans to reduce market risk associated with originating and holding loans for
sale. A risk associated with these commitments arises from the Bank's potential
inability to generate loans to fulfill the contracts. To control the risk
associated with changes in interest rates, the Bank may also use options to
hedge loans closed and expected to close. No such contracts were outstanding at
December 31, 1996 and 1995.
In the ordinary course of business, the Company is party to various legal
proceedings, none of which, in the opinion of management, will have a material
effect on the Company's consolidated financial position or results of
operations.
The Bank is required to report deposits directly to the Federal Reserve and
to maintain reserves on a portion of these deposits. At December 31, 1996, the
reserve requirement for the Bank totalled $9.4 million.
15. EMPLOYEE BENEFIT PLANS
Executive Compensation Plan
The Company provides an executive compensation plan whereby certain key
officers (two of whom are directors and shareholders at December 31, 1996) are
entitled to compensation in addition to their salaries at varying percentages of
the Company's net income. The total amount of such additional compensation
cannot exceed 15 percent of the Company's net income in any year. During 1996,
1995 and 1994, such additional compensation aggregated $989,000, $963,000 and
$900,000, respectively.
Employee Stock Ownership Plan (With Code Section 401(k) Provisions) (KSOP)
At January 1, 1994, the Company merged its two existing defined
contribution plans, an Employee Stock Ownership Plan ("ESOP") and a Profit
Sharing and Thrift Plan 401(k), into a newly formed Employee Stock Ownership
Plan (with Code Section 401(k) Provisions) ("KSOP").
Under the ESOP feature, covering substantially all of the Bank's full-time
employees, the annual contribution determined by the Board of Directors,
intended to be invested primarily in the Company's common stock, was $180,000,
$120,000, and $123,000 during 1996, 1995 and 1994, respectively.
The 401(k) feature of the KSOP allows eligible employees of the Bank and
its affiliates to elect either to invest their voluntary contributions in a fund
which purchases common stock of the Company or in an investment fund. Employees
may elect to defer, through voluntary contributions, up to fifteen percent of
compensation and the Company can elect to match fifty percent of the employee's
voluntary contributions up to a maximum of four percent of compensation.
Employer matching contributions for 1996, 1995 and 1994 aggregated $200,000,
$165,000, and $144,000, respectively.
Supplemental Employees' Investment Plan
During 1994, the Bank adopted a Supplemental Employees' Investment Plan
("SEIP") for certain salaried employees. The SEIP was established solely for the
purpose of providing, to certain management personnel who participate in the
KSOP, benefits attributable to contribution allocations which would otherwise be
made under the KSOP but for Internal Revenue limitations. Under the SEIP, salary
reduction contributions may be made in excess of the limitations on annual
contributions imposed by the Internal Revenue Code Section 415, and the Bank may
elect to match fifty percent of the employee's voluntary contribution under the
SEIP up to a maximum of 4 percent of compensation (less the amount of the
employer contribution under the KSOP). The Bank's matching contribution in 1996,
1995 and 1994 was $41,000, $31,000 and $24,000, respectively.
STOCK OPTION PLANS
The Company provides fixed stock option plans to the
39
<PAGE>
- --------------------------------------------------------------------------------
Company's Board of Directors and certain employees, which are described below,
for the purchase of Company common stock at prices at least equal to the fair
market value of the Company's common stock on the date of grant. In October
1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation," which is effective for stock options granted in
fiscal years beginning after December 15, 1995. This standard defines a fair
value based method of measuring stock options or similar equity instruments.
However, SFAS No. 123 allows a corporation to continue to measure compensation
expense for such plans under APB No. 25, "Accounting for Stock Issued to
Employees." Under APB No. 25, no compensation expense is recorded if, at the
grant date, the exercise price of the options is at least equal to the fair
market value of a corporation's common stock. In lieu of recording the fair
value of such options as compensation expense, companies may provide pro forma
disclosures of the difference between compensation expense included in net
income as prescribed by APB No. 25 and the related expense measured by the fair
value based method as defined by SFAS No. 123. The Company adopted SFAS No. 123
on January 1, 1996 and elected to continue to follow APB No. 25 and related
interpretations in accounting for its stock option plans. Accordingly, no
compensation expense has been recognized by the Company in its Consolidated
Statements of Income for its fixed stock option plans. The disclosure required
by SFAS No. 123 is presented below.
Pro forma information on the Company's net income and net income per common
and common equivalent share as required by SFAS No. 123 has been determined as
if the Company had accounted for its stock options under the fair value method
of that standard. The fair value for these options was estimated at the date of
grant using a Black-Scholes option-pricing model and is recognized over the
options' vesting period. The following table compares the Company's net income
and net income per common and common equivalent share, as reported, to the pro
forma results as if the fair value method of accounting for options prescribed
by SFAS No. 123 had been applied for the years ended December 31, 1996 and 1995.
During the phase-in period of applying SFAS No. 123, the effect on pro forma net
income may not be representative of compensation expense for future years when
the impact of the amortization of multiple option grants would be reflected in
the pro forma disclosures.
- --------------------------------------------------------------------------------
(000's, except share data)
Year Ended
December 31,
1996 1995
- --------------------------------------------------------------------------------
Net income As reported $ 9,414 $ 9,327
Pro forma 8,925 8,988
Net income per
common and
common
equivalent share As reported $ 1.40 $ 1.43
Pro forma 1.34 1.38
================================================================================
Director Stock Option Plan
In 1989, the stockholders of the Company approved a Director Stock Option
Plan (the "Plan") for an aggregate of 315,497 shares (after adjustment for stock
splits and dividends) of the Company's common stock to be issued to all
non-employee members of the Company's Board of Directors. Under the terms of the
Plan, each eligible Director will automatically receive annually, effective as
of the close of each annual meeting of stockholders of the Company, a
nonqualified option (after adjustment for stock splits and dividends) to
purchase 8,470 shares of common stock at an exercise price equal to the fair
market value of such shares on the date of the grant. The Plan has a term of ten
years. Options may not be exercised prior to the first anniversary of the date
of grant and expire ten years after the date of grant. There were 86,562 shares
remaining to be granted at December 31, 1996 under the Plan.
A summary of the Director Stock Option Plan activity and related
information for the years ended December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1996 1995
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at January 1 123,581 $ 7.76 94,482 $ 6.02
Granted 42,350 14.09 42,350 10.54
Exercised -- -- (13,251) 4.24
- ---------------------------------------------------------------------------------------------------------
Outstanding at December 31 165,931 $ 9.38 123,581 $ 7.76
- ---------------------------------------------------------------------------------------------------------
Exercisable at December 31 123,581 $ 7.76 81,231 $ 6.31
Weighted-average fair value of
options granted during the year $4.47 $3.32
=========================================================================================================
</TABLE>
40
<PAGE>
USB
- --------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using
a Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996, respectively: dividend yield of
2.0% in both years; volatility factor of the expected market price of the
Company's common stock of 27.62 percent in both years; risk-free interest rates
of 6.34 and 6.45 percent; and expected life of 5.73 years in both years.
The following table summarizes the range of exercise prices on stock
options outstanding and exercisable for the Director Stock Option Plan at
December 31, 1996:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.11 to 4.89 53,280 5.01 years $ 4.65 53,280 $ 4.65
9.50 to 14.09 112,651 8.54 11.62 70,301 10.13
- ------------------------------------------------------------------------------------------------------------------------------------
$4.11 to 14.09 165,931 7.41 $ 9.38 123,581 $ 7.76
====================================================================================================================================
</TABLE>
Employee Stock Option Plans
Under the 1984 and 1993 Employee Stock Option Plans for key employees of
the Company and its subsidiaries, options for the issuance of both incentive and
nonqualified stock options up to an aggregate of 393,551 and 532,400 shares
(after adjustment for stocks splits and stock dividends), respectively, may be
granted at prices at least equal to the fair market value of the Company's
common stock at the time the options are granted. Each option holder may
exercise up to 50 percent of their options after a three month period subsequent
to the grant date and may exercise the remaining 50 percent six months after the
grant date. The options granted have a maximum exercisable term of ten years
from the date of grant, (not more than five years in the case of options granted
to an employee who, at the time of grant, owns stock aggregating more than 10
percent of the total combined voting power of all classes of stock of the
Company). The option shares and related prices are adjusted for stock splits and
stock dividends. All shares available for grant under the 1984 plan were fully
granted as of December 31, 1993. Shares totalling 469,824 have been granted
under the 1993 plan at December 31, 1996.
The fair value of each option grant is estimated on the date of grant using
a Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996, respectively: dividend yields of
2.0 percent in both years; volatility factor of the expected market price of the
Company's common stock of 27.62 percent in both years; risk-free interest rates
of 5.99 and 6.48 percent for the incentive options and 5.79 and 6.36 percent for
the nonqualified options; and expected lives of 6.06 years for the qualified
options and 4.82 years for the nonqualified options in both years.
41
<PAGE>
- --------------------------------------------------------------------------------
A summary of the Employee Stock Option Plans' activity and related
information for the years ended December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at January 1 505,318 $ 7.12 476,547 $ 5.75
Granted 126,940 14.16 122,210 11.06
Exercised (6,432) 4.88 (93,439) 5.28
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31 625,826 $ 8.57 505,318 $ 7.12
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31 625,826 $ 8.57 505,318 $ 7.12
Weighted-average fair value of options
granted during the year for:
Incentive shares $4.38 $3.30
Nonqualified shares 3.68 2.76
====================================================================================================================================
</TABLE>
The following table summarizes the range of exercise prices on stock
options outstanding and exercisable for the Employee Stock Option Plans at
December 31, 1996:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.86 to 4.88 278,886 4.44 years $ 4.44 278,886 $ 4.44
9.50 to 15.00 346,940 6.45 11.89 346,940 11.89
- ------------------------------------------------------------------------------------------------------------------------------------
$2.86 to 15.00 625,826 5.56 $ 8.57 625,826 $ 8.57
====================================================================================================================================
</TABLE>
16. CONDENSED FINANCIAL INFORMATION OF U.S.B. HOLDING CO., INC. (PARENT COMPANY
ONLY)
Condensed statements of condition are as follows:
- --------------------------------------------------------------------------------
(000's)
December 31,
1996 1995
- --------------------------------------------------------------------------------
ASSETS
Cash $ 832 $ 2,949
Securities (at fair value) 63 22
Investment in common stock of subsidiaries 56,308 50,447
Real estate 258 569
Other assets 726 78
- --------------------------------------------------------------------------------
TOTAL ASSETS $58,187 $54,065
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 1,321 $ 2,732
Stockholders' equity 56,866 51,333
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $58,187 $54,065
================================================================================
42
<PAGE>
USB
- --------------------------------------------------------------------------------
Condensed statements of income are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
Year Ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends from Bank subsidiaries $1,750 $3,150 $ 900
Gain on sale of available for sale securities 41 26 --
Net gain on sale of Royal Oak Savings Bank, F.S.B -- 3,520 --
Net gain on sale of branch facility 600 -- --
Other income 142 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 2,533 6,696 900
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Interest on long-term debt -- 64 137
Other expenses 428 355 255
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 428 419 392
- ------------------------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed income of subsidiaries
and provision for income taxes 2,105 6,277 508
Equity in undistributed income of subsidiaries 7,568 4,465 6,534
Provision for income taxes 259 1,415 42
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $9,414 $9,327 $7,000
====================================================================================================================================
</TABLE>
Condensed statements of cash flow are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
Year Ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash flows from operating activities:
Net income $9,414 $ 9,327 $ 7,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of available for sale securities (41) (26) --
Net gain on sale of Royal Oak Savings Bank, F.S.B. -- (3,520) --
Net gain on sale of branch facility (600) -- --
Equity in undistributed income of subsidiaries (7,568) (4,465) (6,534)
Other - net (2,061) 1,895 179
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities (856) 3,211 645
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of available for sale securities 59 41 --
Purchase of available for sale securities (59) -- --
Proceeds from sale of Royal Oak Savings
Bank, F.S.B., net of expenses of sale -- 7,420 --
Proceeds from sale of branch facility 900 -- --
Net increase in investment in subsidiary -- (5,889) --
Other - net 12 (311) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities 912 1,261 --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt qualifying as
regulatory capital -- (1,800) --
Dividends paid - Common (1,838) (1,659) (1,306)
- Preferred (294) (315) (315)
Redemption of preferred stock (500) -- --
Net proceeds from issuances of common stock 19 1,858 1,170
Issuance of treasury stock 440 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,173) (1,916) (451)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (2,117) 2,556 194
Cash, beginning of year 2,949 393 199
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 832 $ 2,949 $ 393
====================================================================================================================================
</TABLE>
43
<PAGE>
- --------------------------------------------------------------------------------
17. SUBSEQUENT EVENT
On February 5, 1997, the Company completed its issuance of trust capital
securities (the "Capital Securities") that raised $20 million of capital ($19
million net proceeds after issuance expenses). The 9.58% Capital Securities, due
February 1, 2027, were issued by Union State Capital Trust I (the "Trust"), a
Delaware business trust that was formed by the Company solely to issue the
Capital Securities and related common stock and advance the proceeds to the
Company by purchasing junior subordinated debt of the Company. The Capital
Securities may not be redeemed except under limited circumstances until February
1, 2007, and thereafter at a premium which reduces over a ten year period.
Dividends will be paid semi-annually, beginning August 1, 1997.
The Capital Securities qualify as Tier I or core capital for the Company
under the Federal Reserve Board's risk-based capital guidelines. The proceeds of
the sale of the Capital Securities is available for general corporate purposes,
and a portion thereof has been used to retire the Company's existing outstanding
preferred stock in the amount of $3,250,000 on February 14, 1997. Payments on
the junior subordinated debt, which are in turn passed through the Trust to the
Capital Securities holders, will be serviced through existing liquidity and cash
flow sources of the Company. The Company will be permitted to deduct payments on
the Capital Securities under current federal tax law.
So long as no default has occurred and is continuing, the Company has the
right under the junior subordinated indenture to defer the payment of interest
at any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods for any one extension (each such period an "Extension
Period"); provided, however, that no Extension Period may extend beyond the
stated maturity of the junior subordinated debt securities. During any Extension
Period, the Company may not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the junior subordinated debt securities or (iii)
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 junior subordinated debt securities, in
each case subject to certain exceptions.
Pursuant to the terms of the documents governing the Company's junior
subordinated debt and the Capital Securities of the Trust affiliated with the
Company, if the Company or its affiliate is in default under such securities,
the Company is prohibited from repurchasing or making distributions, including
dividends, on or with respect to its common or preferred stock and from making
payments on any debt or guarantees which rank pari passu or junior to such
securities.
In addition, under the terms of the indenture governing its junior
subordinated debt, the Company may not merge or consolidate with, or sell
substantially all of its assets to, any other corporation, person or entity
unless (a) the surviving corporation is a domestic corporation which expressly
assumes the Company's obligations with respect to the junior subordinated debt
and the Capital Securities and related documents, (b) there is no, and the
merger or other transaction would not cause, a default under the junior
subordinated debt, and (c) certain other conditions are met.
44
<PAGE>
Independent Auditors' Report
USB
- --------------------------------------------------------------------------------
Deloitte &
Touche LLP
- ------------
[LOGO]
Board of Directors and Stockholders
U.S.B. Holding Co., Inc.
We have audited the accompanying consolidated statements of condition of U.S.B.
Holding Co., Inc. and its subsidiaries (the "Company") as of December 31, 1996
and 1995 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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 auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of U.S.B. Holding Co.,
Inc. and its subsidiaries as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
As described in Note 2, the Company changed its method of accounting for
securities in 1994.
/s/ Deloitte & Touche LLP
January 24, 1997 (February 5, 1997 as to Note 17)
Stamford, Connecticut
45
<PAGE>
USB
- --------------------------------------------------------------------------------
January 24, 1997
To the Stockholders of
U.S.B. Holding Co., Inc.
Re: 1996 Management Report
U.S.B. Holding Co., Inc. (the "Company") is responsible for the preparation,
integrity, and fair presentation of its published financial statements as of
December 31, 1996 and for the year then ended. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and, as such, include amounts based on informed judgments and
estimates made by management.
The consolidated financial statements have been audited by an independent
accounting firm, Deloitte & Touche LLP, which was given unrestricted access to
management and personnel, and to all financial records and related data,
including minutes of all meetings of stockholders, the Board of Directors, and
committees of the Board. Management believes that all representations made to
the independent auditors during their audit were valid and appropriate. The
independent auditors' report is presented on page 45.
Internal Control
Management is responsible for establishing and maintaining internal controls
over the preparation of its published financial statements. The Company's
internal controls are intended to provide reasonable assurance to the Company's
Board of Directors and management regarding the preparation of financial
statements in conformity with both generally accepted accounting principles and
for the Company's bank subsidiary, Union State Bank, in conformity with the
Federal Financial Institutions Examination Council instructions for Consolidated
Reports of Condition and Income ("Call Report" instructions).
There are inherent limitations in the effectiveness of any structure of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control
structure can provide only reasonable assurance with respect to financial
statement preparation. Further, because of changes in conditions, the
effectiveness of an internal control structure may vary over time. Accordingly,
even an effective internal control structure can provide only reasonable
assurance with respect to financial statement preparation.
Management assessed the institution's internal control structure over financial
reporting, as of December 31, 1996, based on criteria for effective internal
control over financial reporting, including safeguarding of assets, described in
"Internal Control-Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management
believes that the Company maintained an effective internal control structure
over financial reporting as of December 31, 1996.
46
<PAGE>
- --------------------------------------------------------------------------------
Compliance with Laws and Regulations
Management is also responsible for ensuring compliance with the federal laws and
regulations concerning loans to insiders and the federal and state laws and
regulations concerning dividend restrictions, both of which are designated by
the FDIC as safety and soundness laws and regulations.
Management assessed its compliance with designated safety and soundness laws and
regulations and has maintained records of its determinations and assessments as
required by the FDIC. Based on this assessment, management believes that the
Company's insured depository subsidiary, Union State Bank, has complied, in all
material respects, with the designated safety and soundness laws and regulations
for the year ended December 31, 1996.
/s/ Thomas E. Hales /s/ Steven T. Sabatini
Thomas E. Hales Steven T. Sabatini
Chief Executive Officer Chief Financial Officer
47
<PAGE>
Independent Accountants' Report
- --------------------------------------------------------------------------------
Deloitte &
Touche LLP
- ------------
[LOGO]
To the Board of Directors
U.S.B. Holding Co., Inc.
Orangeburg, New York
We have examined management's assertion that, as of December 31, 1996, U.S.B.
Holding Co., Inc. and subsidiaries (the "Company") maintained an effective
internal control structure over financial reporting, including safeguarding of
assets, presented in conformity with both generally accepted accounting
principles and, for the Company's bank subsidiary, Union State Bank, in
conformity with Federal Financial Institutions Examination Council instructions
for Consolidated Reports of Condition and Income ("Call Report" instructions)
included in the accompanying 1996 Management Report to the stockholders.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the internal control structure over financial
reporting, testing and evaluating the design and operating effectiveness of the
internal control structure over financial reporting, including safeguarding of
assets, and such other procedures as we considered necessary in the
circumstances. We believe that our examination provides a reasonable basis for
our opinion.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projections of any
evaluation of the internal control structure over financial reporting to future
periods are subject to the risk that the internal control structure may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies may deteriorate.
In our opinion, management's assertion that, as of December 31, 1996, the
Company maintained an effective internal control structure over financial
reporting, including safeguarding of assets, presented in conformity with
generally accepted accounting principles and, for its bank subsidiary, the Call
Report instructions is fairly stated, in all material respects, based on the
criteria established in "Internal Control-Integrated Framework" issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
/s/ Deloitte & Touche LLP
January 24, 1997
Stamford, Connecticut
48
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
USB
- --------------------------------------------------------------------------------
This section presents discussion and analysis of the financial condition
and results of operations of U.S.B. Holding Co., Inc. (the "Company") and its
subsidiaries, including its banking subsidiaries (the "Banks"), Union State Bank
(the "Bank") and its wholly-owned subsidiary U.S.B. Realty Corp. ("USBRC"), and
Royal Oak Savings Bank, F.S.B. ("Royal"). Royal was sold as of December 31,
1995, as further discussed below and in Note 3 to the Consolidated Financial
Statements. This discussion and analysis should be read in conjunction with the
financial statements and supplemental financial data contained elsewhere in this
report.
Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except share data)
Year Ended December 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results:
Total interest income $57,216 $ 49,692 $ 39,601 $ 34,544 $ 34,007
Total interest expense 27,601 24,318 15,933 13,138 15,293
- ------------------------------------------------------------------------------------------------------------------------------------
Net interest income 29,615 25,374 23,668 21,406 18,714
Provision for loan losses 2,275 1,200 993 763 745
Income before income taxes 14,188 13,638 10,126 9,805 7,449
Net income 9,414 9,327 7,000 6,200 4,750
Net income per common and
common equivalent share 1.40 1.43* 1.10* 1.03* 0.81*
Weighted average common and common
equivalent shares outstanding 6,512,997 6,304,758* 6,080,892* 5,687,112* 5,459,509*
Cash dividends per common share .30 .27* .22* .16* .12*
====================================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
Year Ended December 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Position:
Total loans, net $497,769 $ 387,437 $ 330,250 $ 272,971 $ 229,753
Total assets 803,451 678,783 602,603 508,638 462,634
Total deposits 682,280 610,635 543,862 469,016 429,272
Borrowings 59,692 10,000 5,000 -- --
Long-term debt qualifying
as regulatory capital -- -- 1,800 1,800 2,000
Stockholders' equity 56,866 51,333 38,319 34,435 28,525
====================================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Quarterly Results of Operations
(000's, except share data)
1996 Quarters 1995 Quarters
Fourth Third Second First Fourth Third Second First
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $15,573 $14,751 $13,812 $13,080 $13,247 $12,739 $12,126 $11,580
Net interest income 7,888 7,646 7,246 6,835 6,808 6,481 6,142 5,943
Provision for loan losses 600 600 600 475 500 275 225 200
Income before
income taxes 4,201 3,331 3,313 3,343 5,889 3,109 2,231 2,409
Net income 2,864 2,175 2,125 2,250 4,052 2,075 1,500 1,700
Net income per common and
common equivalent share .43 .32** .31** .34* .63* .31* .23* .26*
====================================================================================================================================
</TABLE>
*Adjusted to reflect a 10% stock dividend and two-for-one stock split in 1996.
** Adjusted to reflect two-for-one stock split in 1996.
49
<PAGE>
- --------------------------------------------------------------------------------
Daily Average Balances and Interest Rates
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except percentages)
Year Ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Interest bearing deposits $ 388 $ 39 10.1% $ 2,132 $ 137 6.4% $ 1,169 $ 54 4.6%
Federal funds sold 12,925 693 5.4 16,917 1,013 6.0 4,325 167 3.9
Securities:
U.S. Treasury and
government agencies 75,678 5,123 6.8 42,013 2,907 6.9 24,563 1,140 4.6
Mortgage-backed securities 104,865 6,873 6.6 115,504 7,741 6.7 93,056 6,032 6.5
Obligations of states and
political subdivisions 63,396 4,960 7.8 69,427 5,295 7.6 74,402 5,352 7.2
Corporate bonds, FHLB
stock, and other securities 8,777 745 8.5 16,311 1,417 8.7 26,996 1,802 6.7
Loans, net 444,980 40,660 9.1 352,244 33,222 9.4 305,411 26,937 8.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 711,009 59,093 8.3% 614,548 51,732 8.4% 529,922 41,484 7.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest earning assets:
Cash and due from banks 22,756 22,359 21,106
Other assets 17,611 18,240 16,982
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $751,376 $655,147 $568,010
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Money market $ 53,794 $ 1,445 2.7% $ 65,080 $ 1,945 3.0% $ 78,746 $ 1,889 2.4%
Savings 206,932 8,085 3.9 143,931 4,705 3.3 119,995 2,775 2.3
Time 281,178 15,590 5.5 268,611 16,144 6.0 211,398 10,077 4.8
NOW 41,055 654 1.6 40,667 644 1.6 39,610 604 1.5
Federal funds purchased,
securities sold under
agreements to repurchase
and Federal Home Loan
Bank advances 30,857 1,827 5.9 13,243 816 6.2 10,147 451 4.4
Long-term debt qualifying as
regulatory capital -- -- -- 710 64 9.0 1,800 137 7.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 613,816 27,601 4.5 532,242 24,318 4.6 461,696 15,933 3.5
- ------------------------------------------------------------------------------------------------------------------------------------
Non-interest bearing liabilities
and stockholders' equity:
Demand deposits 82,491 75,564 65,120
Other liabilities 2,535 2,933 3,438
Stockholders' equity 52,534 44,408 37,756
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $751,376 $655,147 $568,010
====================================================================================================================================
NET INTEREST EARNINGS $31,492 $27,414 $25,551
====================================================================================================================================
NET YIELD ON INTEREST
EARNING ASSETS 4.4% 4.5% 4.8%
====================================================================================================================================
</TABLE>
The statistical data contained herein has been adjusted to a tax equivalent
basis, based on the federal statutory tax rates of 35% in 1996 and 1995 and 34%
in 1994, and applicable state tax rates.
50
<PAGE>
USB
- --------------------------------------------------------------------------------
Summary of Results
The Company (including results for the Bank prior to the Company's
formation as of holding company) recorded its eighteenth consecutive year of
increased net income in 1996. Net income was $9.4 million for the year ended
December 31, 1996, a 1 percent increase over 1995 net income of $9.3 million.
Net income for 1995 reflected an increase of 33.2 percent over that recorded in
1994. Net income for 1995 includes a gain of $2.1 million, net of tax, from the
sale of the Company's subsidiary, Royal Oak Savings Bank, F.S.B. ("Royal"),
headquartered in Randallstown, Maryland, while 1996 net income includes
approximately $.3 million attributable to the sale of a branch facility which
was previously part of Royal's branch system. Excluding the net gain on sale of
Royal in 1995 and net income from the sale of the Royal branch in 1996, as well
as net income of Royal in 1995 ($.2 million), the increase in 1996 net income
was $2.1 million or an increase of 29.9 percent. Before the net gain on the
Royal transaction and net income of Royal, the Company recorded 1995 net income
of $7.0 million, or a 6.1 percent increase over 1994 net income, excluding Royal
net income of $.4 million. The 1996 results reflect higher net interest income
and other operating income (excluding the Royal transactions discussed above),
and a significant reduction in FDIC insurance and other non-interest expenses,
offset by a higher provision for loan losses and higher operating expenses, as
the Company made additional investments in people, new branches, products and
technology to ensure its competitive position and increase its future revenue
base.
Net income per common and common equivalent share of $1.40 in 1996
decreased slightly compared to $1.43 per common and common equivalent share in
1995, due to a higher amount of average common stock and common stock
equivalents outstanding for 1996. Excluding the effects of the Royal
transactions described above and Royal net income in 1995, net income per common
and common equivalent share increased $.29 or 27.4 percent over the 1995 amount.
Per share amounts reflect the 10 percent stock dividend distributed by the
Company on June 14, 1996 and the two-for-one stock split in the form of a 100
percent stock dividend distributed December 30, 1996. Net income per common and
common equivalent share for 1995 was 30.0 percent higher than the $1.10 recorded
in 1994. Excluding the net gain from the sale of Royal and net income of Royal
in 1995 and 1994, net income per common and common equivalent share was $1.06
and $1.03, respectively, which represents a 2.9 percent increase in 1995 over
1994. Return on average common stockholders' equity was 18.60 percent in 1996,
compared to 22.17 percent in 1995 and 19.66 percent in 1994. Return on average
total assets in 1996 was 1.25 percent, compared to 1.42 percent in 1995, and
1.23 percent in 1994.
Record net interest income for 1996 rose to $29,615,000 or a 16.7 percent
increase over the $25,374,000 recorded in 1995, compared to a 7.2 percent
increase in 1995 over 1994. These increases resulted principally from continuing
growth in interest earning assets, primarily loans, partially offset by a
narrowing interest rate spread in 1995. The interest rate spread on a tax
equivalent basis remained flat at 3.8 percent in both 1996 and 1995, as a result
of the flat yield curve in both years and the effects of additional leveraging
of the balance sheet, while 1995 decreased significantly as compared to 1994 due
generally to increasing interest rates, increased leverage of the balance sheet,
and the flat yield curve. Non-interest income for 1996 increased by $1,232,000
as compared to 1995, excluding the 1995 gain on sale of Royal, primarily as a
result of higher securities gains, the gain from sale of the Royal branch
facility, and other income, offset by lower service fee income and mortgage
servicing fees and a loss on sale of loans. Non-interest income increased by
$4,160,000 in 1995 as compared to 1994, primarily due to the net gain before
taxes of $3,520,000 from the sale of Royal, higher net gains on sale of
securities and loans of $536,000 and higher other income of $147,000, while
mortgage servicing income and service charges and fees were slightly lower than
the prior year. The overall increase in revenues was partially offset by 1.8 and
13.7 percent increases in non-interest expense in 1996 and 1995, respectively,
reflecting increases in such costs as salaries and employee benefits, occupancy
and equipment expense and other costs, as a result of the continuing growth of
the Company and its investment in people and technology, partially offset in
both 1996 and 1995 by a reduction in FDIC insurance expense and by lower other
non-interest expenses in 1996. Other non-interest expense was higher in 1995 as
compared to 1996 and 1994, due to an employee settlement, a contribution to the
U.S.B. Foundation, and higher branch charge-offs. A higher effective tax rate in
1996 and 1995 also reduced net income in these years.
The Company's total capital ratio under the risk-based capital guidelines
exceeds regulatory guidelines of 8 percent, as the total ratio equaled 11.50
percent and 12.26 percent at December 31, 1996 and 1995, respectively. The
leverage capital ratio decreased to 7.06 percent at December 31, 1996 from 7.43
percent in 1995, reflecting a higher level of assets at December 31, 1996.
51
<PAGE>
- --------------------------------------------------------------------------------
Interest Differential
The following table sets forth the dollar amount of changes in interest
income, interest expense and net interest income between the years ended
December 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, on a
tax equivalent basis.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's)
1996 Compared to 1995 1995 Compared to 1994
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
- ------------------------------------------------------------------------------------------------------------------------------------
Total Total
Average Average Increase Average Average Increase
Volume Rate (Decrease) Volume Rate (Decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Interest bearing deposits $ (149.5) $ 51.5 $ (98.0) $ 56.3 $ 26.7 $ 83.0
Federal funds sold (221.7) (98.3) (320.0) 711.4 134.6 846.0
Securities:
U.S. Treasury and government agencies 2,280.3 (64.3) 2,216.0 1,045.0 722.0 1,767.0
Mortgage-backed securities (700.3) (167.7) (868.0) 1,498.4 210.6 1,709.0
Obligations of states and
political subdivisions (469.1) 134.1 (335.0) (369.2) 312.2 (57.0)
Corporate bonds, FHLB stock,
and other securities (640.2) (31.8) (672.0) (835.3) 450.3 (385.0)
Loans, net 8,502.6 (1,064.6) 7,438.0 4,327.9 1,957.1 6,285.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets 8,602.1 (1,241.1) 7,361.0 6,434.5 3,813.5 10,248.0
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Expense:
Deposits:
Money market (315.7) (184.3) (500.0) (361.2) 417.2 56.0
Savings 2,337.5 1,042.5 3,380.0 628.0 1,302.0 1,930.0
Time 733.3 (1,287.3) (554.0) 3,089.5 2,977.5 6,067.0
NOW 6.2 3.8 10.0 16.4 23.6 40.0
Federal funds purchased, securities sold under
agreements to repurchase and
Federal Home Loan Bank advances 1,043.9 (32.9) 1,011.0 161.1 203.9 365.0
Long-term debt qualifying as regulatory capital (64.0) -- (64.0) (94.7) 21.7 (73.0)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 3,741.2 (458.2) 3,283.0 3,439.1 4,945.9 8,385.0
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in interest differential $4,860.9 $ (782.9) $ 4,078.0 $2,995.4 $(1,132.4) $1,863.0
====================================================================================================================================
</TABLE>
The variance not solely due to rate or volume is allocated between the rate and
volume variances based upon their absolute relative weights to the total change.
Net Interest Income
Net interest income, the difference between interest income and interest
expense, is the most significant component of the Company's consolidated
earnings. Net interest income of $31.5 million on a tax equivalent basis for
1996 reflects a 14.9 percent increase over the $27.4 million in 1995. Net
interest income on a tax equivalent basis for 1995 rose to $27.4 million, or a
7.3 percent increase over the $25.6 million for 1994. Net interest income
benefited by the increase in the excess of average interest earning assets over
average interest bearing liabilities to $97.2 million in 1996 from $82.3 million
and $68.2 million for 1995 and 1994, respectively.
Interest income is determined by the volume of, and related rates earned
on, interest earning assets. Volume increases in U.S. Treasury and government
agencies securities and loans contributed to higher interest income in 1996, as
compared to 1995. These increases were offset by lower volume for all other
categories, partially offset by lower average interest rates in all asset
categories, except interest bearing deposits and obligations of states and
political subdivisions. Volume increases also contributed to higher net interest
income in 1995 in all components of interest earning assets, except obligations
of states and political subdivisions and corporate and other securities.
Interest income was also higher in 1995 due to generally higher interest rates
earned on interest earning assets. Average interest earning assets increased in
1996 to $711.0 million over the $614.5 million in 1995, compared to $529.9
million in 1994, reflecting a 15.7 percent and 16.0 percent increase in 1996 and
1995, respectively. The Company's ability to make changes in the asset mix
allows management to capitalize on more desirable yields, as available, on
various interest earning assets.
52
<PAGE>
USB
- --------------------------------------------------------------------------------
Loans are the largest component of interest earning assets and due to their
significance are carefully reviewed with respect to the Company's overall
interest sensitivity position. In 1996, average net loan balances increased
$92.7 million to $445.0 million compared to 1995, while average net loans
increased $46.8 million in 1995. Net loans outstanding increased $110.3 million
to $497.8 million at December 31, 1996 from $387.4 million at December 31, 1995,
or a 28.5 percent increase, compared to an increase of $57.2 million in 1995
over 1994, or 17.3 percent. Interest income on loans in 1996, increased due to
higher volume, partially offset by lower interest rates. In 1995, the increase
in interest income on loans was attributable to increased volume, and also due
to higher rates, continuing the increase which began in the latter part of 1994
through the first quarter of 1995, while medium to long-term rates began to
decline in the second through fourth quarters of that year. Loan interest income
was also affected by interest income not recorded on nonaccrual loans of
$840,000 in 1996, $226,000 in 1995 and $500,000 in 1994.
The average balances of total securities increased in both 1996 and 1995,
due principally to efforts to effectively leverage capital and, in 1995, as a
result of deposit growth exceeding loan demand, as well as management's efforts
to balance the risk and liquidity of the entire portfolio. Overall, the net
volume increase in securities resulted in increased interest income on
securities in both years. Interest income on securities was also affected by
higher short to medium-term yields for most of 1995, while interest rates on
securities were generally lower in 1996.
Interest expense is a function of the volume of, and rates paid for,
interest bearing liabilities. Interest expense in 1996 increased $3,283,000, or
13.5 percent to $27.6 million, following the 1995 increase of $8,385,000, or
52.6 percent, compared to 1994. Average balances in substantially all categories
(except for money market accounts, and long-term debt) increased in both 1996
and 1995, due principally to the opening of the Stony Point branch in 1996 and
the Ossining branch in 1995, as well as continuing growth of deposits in
existing branches. In addition, management decided to maximize leveraging of the
Bank's capital by increasing time deposits of municipalities, Federal Home Loan
Bank advances and borrowings under securities sold with agreements to
repurchase, and investing these funds in short and medium-term investments and
loan originations. The level of non-interest bearing average demand deposits
which increased in 1996 to $82.5 million from $75.6 million in 1995, compared to
$65.1 million in 1994, is an integral aspect of liability management and has a
direct impact on the determination of net interest income. In May, 1995, the
Company repaid its long-term debt. In 1996 interest rates on average interest
bearing deposits declined due to the lower rate environment, except for savings
account interest rates which increased due to a higher level of deposits in high
rate savings products. In 1995, interest rates on average interest bearing
deposits increased overall, principally due to the increases in rates on savings
accounts, money market and time deposits and other borrowings during periods of
higher short-term interest rates. The interest rate spread on a tax equivalent
basis for each of the three years in the period ended December 31, 1996 is as
follows:
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Average interest rate on:
Total average interest-
earning assets 8.3% 8.4% 7.8%
Total average interest-
bearing liabilities 4.5 4.6 3.5
- --------------------------------------------------------------------------------
Total interest rate spread 3.8% 3.8% 4.3%
================================================================================
During 1996, the Bank maintained its interest rate spread at 3.8 percent
consistent with that of 1995. The net interest spread decrease of 50 basis
points between 1995 and 1994 is attributable to a shift in the Banks' funding
mix from lower cost savings and interest bearing transaction accounts to higher
cost savings and time deposit accounts, and higher average short-term rates in
1995, which significantly affect deposit rates, as well as a lag in the
repricing of assets in a rising rate environment in early 1995 and the effect of
leverage transactions. Management cannot predict what impact market conditions
will have on its interest rate spread, and, therefore, further compression in
the net interest margin may occur.
Non-Interest Income
Excluding the gain on sale of Royal in 1995, non-interest income for 1996
increased by $1,232,000 over 1995. Non-interest income for 1995 increased by
131.9 percent to $7.3 million from the $3.2 million recorded in 1994, primarily,
as a result of the net gain before income taxes of $3.5 million from the sale of
Royal. Non-interest income is also higher in 1995 compared to 1994, due to
higher net gains from security and loan sales of $536,000, and higher other
income, partially offset by slightly lower mortgage servicing income and service
charges and fees. Non-interest income in 1996 is higher than that recorded in
1995 before the gain on sale of Royal, due to higher gains on security and loan
sales of $541,000, and the gain on sale of the Royal branch facility of $600,000
and higher other income, partially offset by lower mortgage servicing income and
service charges and fees.
53
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The net gain on the sale of Royal reflects the sale of this thrift
subsidiary on December 31, 1995, to Monocacy Bancshares, Inc., parent company of
Taneytown Bank & Trust Company, Taneytown, Maryland. The sales price of $7.8
million was determined based on an 8.5% premium on deposits of Royal at the date
of sale, plus an agreed upon premium for certain loan servicing and other assets
of Royal, and an amount equal to common stock, paid-in capital and retained
earnings at the date of sale. The sales price was reduced by the Company's
investment in Royal of $3.9 million, and expenses of sale and management bonus
of approximately $400,000.
Net gains on securities transactions principally result from the sales of
securities to restructure the portfolio, manage cash flow and reduce long-term
market value volatility of the portfolio in response to changes in interest
rates.
Gains (losses) on loans held for sale are primarily realized from sales of
residential mortgage loans held for sale and originated principally from fixed
rate mortgage promotions. Net losses on loans held for sale of $54,000 and
$381,000 in 1996 and 1994, respectively, were due to write-downs of fixed rate
mortgage loans held for sale during periods of increasing interest rates, and in
1994, also due to losses on cash sales to FHLMC. The decision to sell loans in
any period is influenced by the amount and type of loans originated in relation
to the total portfolio, the secondary market environment and the interest rate
environment.
Mortgage servicing fees decreased to $244,000 in 1996, a 28.2 percent
decrease from $340,000 in 1995, a 6.1 percent decrease from $362,000 in 1994.
Mortgage servicing fees decreased due to a decrease in volume of primarily fixed
rate loans sold to FHLMC with servicing retained, as the Bank decided to retain
approximately $21.0 million and $5.5 million of residential loan originations in
portfolio in 1996 and 1995, respectively. In addition, originations were lower
in the first half of 1995 due to higher interest rates. The Company expects to
continue to originate and sell/swap residential mortgages in the secondary
market as opportunities exist.
Service charges and fees on deposit accounts decreased 6.9% in 1996, while
remaining relatively flat in 1995. Although deposit accounts increased in both
years, lower insufficient funds charges and higher competition impacted
increases in fees.
Other income increased $367,000 and $147,000 in 1996 and 1995,
respectively, compared to the prior year. Increases in both years reflect higher
income from merchant credit card transactions and other fees, and, a loan
prepayment fee of $101,000 in 1996.
Non-Interest Expense
Non-interest expense rose to $18.2 million for 1996, or 1.8 percent over
the $17.9 million for 1995, compared to a 13.7 percent increase in 1995 over the
$15.7 million for 1994. The Company's overhead ratio which compares non-interest
expense to total adjusted revenue (taxable equivalent net interest income, plus
non-interest income excluding gains or losses on securities and loan sales and
the gain on sale of Royal) decreased to 50.84 percent in 1996 compared to 57.61
percent in 1995 and 54.12 percent in 1994.
Salaries and employee benefits, the largest component of non-interest
expense, rose 14.8 percent in 1996 to $10.3 million, compared to a 9.8 percent
increase in 1995 to $9.0 million from the $8.2 million in 1994. During 1996 and
1995, the Bank opened one branch in each year, resulting in increased staff. The
increases in both years also reflect the costs of additional personnel necessary
for the Bank to accommodate the increases in both deposits and loans resulting
from the expansion of services and products available to customers, as well as
annual merit increases. Increases in salaries and employee benefits in both 1996
and 1995 were also attributable to incentive compensation programs and other
benefit plans necessary to be competitive in attracting and retaining high
quality and experienced personnel and health care costs, and costs associated
with related payroll taxes. The percentages of salaries and employee benefits to
total average assets remained flat in 1996 and 1995 compared to the prior year,
and as a percentage of total non-interest expense, increased in 1996 compared to
1995, and decreased in 1995 as compared to 1994.
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Employees at December 31,
Full-time employees 206 183 177
Part-time employees 23 28 30
Salaries and employee benefits (000's except percentages)
Salaries $ 6,766 $ 6,168 $ 5,404
Payroll taxes 670 623 556
KSOP 422 315 299
Medical plans 682 618 534
Incentive compensation plans 1,539 1,094 1,239
Other 243 175 162
- --------------------------------------------------------------------------------
Total $10,322 $ 8,993 $ 8,194
================================================================================
Percentage of total average assets 1.4% 1.4% 1.4%
Percentage of total non-interest
expense 56.8% 50.4% 52.2%
================================================================================
54
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Occupancy and equipment expenses rose to $3.4 million in 1996, a 4.0
percent increase over 1995, compared to $3.3 million in 1995, a 15.7 percent
increase over 1994. The 1996 and 1995 increases were due to a full year of
expenses for the branch opened in the prior year, current year branch openings
and increased utilization of the Corporate Headquarters by the Bank, offset in
1996 by the elimination of occupancy expense of Royal. Equipment expense
continued to increase as a result of higher depreciation and maintenance costs
associated with the in-house IBM AS-400 computer and capital investments over
the last several years in systems designed to enhance bank-wide operating and
processing capabilities. All years also reflect the rising costs of such items
as fuel, electricity, real estate taxes and other costs of operating the
Company's facilities.
Advertising and business development expense decreased to $867,000, or a
4.2 percent decrease compared to the $905,000 recorded in 1995. Advertising and
business development expense increased 11.0 percent in 1995 over the 1994 level.
The decrease in 1996 reflects management of advertising costs, while the
increase in 1995 is due principally to increased deposit (savings and time
deposit) promotions in connection with new branch openings, mortgage/home equity
loan promotional campaigns, and the expansion of the Chairman's Council business
development campaign programs.
Professional fees increased 11.2 percent to $1,033,000 in 1996 from
$929,000 in 1995, which was a 41.6 percent increase from the $656,000 recorded
in 1994. The increases in 1996 and 1995 were due to professional fees associated
with loan collections and foreclosures, higher external audit fees due to
implementation of certain reporting requirements required by the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), and other litigation
costs.
Communications expense increased 8.3 percent in 1996 to $625,000 from
$577,000 in 1995, a 6.5 percent increase from $542,000 in 1994. The increases
were due principally to the additional telephone lines required for computer
hookups and telephones for the new branches and increases in business volume.
FDIC insurance decreased by $686,000 to $2,000 in 1996 and $417,000 to
$688,000 in 1995, as the Bank Insurance Fund reached its required level of 1.25
percent of insured deposits. This resulted in a reduction of premiums from $.23
to $.04 per $100 of insured deposits during the second quarter and throughout
the second half of 1995, while premiums were virtually eliminated in 1996.
- --------------------------------------------------------------------------------
(000's, except percentages)
1996 1995 1994
- --------------------------------------------------------------------------------
FDIC insurance expense $ 2 $ 688 $ 1,105
Percentage of average
deposits NM .12% .21%
FDIC fee per $100 NM $.04-$.23 $ .23
Percentage of total non-
interest expense NM 3.9% 7.0%
NM - Not Meaningful
================================================================================
The Company incurred $156,000, $186,000 and $102,000 in 1996, 1995 and
1994, respectively, in expenditures related to maintaining foreclosed properties
and additional write-downs of carrying values on such properties. Costs
increased in 1995 due to a higher level of OREO, while 1996 costs declined,
primarily from higher gains realized on sales of OREO and a declining level of
assets classified as other real estate. Expenditures associated with expenses in
this category are comprised of real estate taxes, insurance, utilities,
maintenance and other charges required to protect the Company's interest in the
properties. In general, the longer the foreclosed properties are held, the total
cost to maintain such properties will increase; however, to the extent time
between acquisition of a property and its sale is reduced, the holding cost per
property should decline. In general, the Company seeks to dispose of other real
estate owned as expeditiously as possible. However, the ability to dispose of
other real estate owned is highly dependent on market conditions in the area in
which a property is located.
Other non-interest expenses, as reflected in the following table, decreased
28.2 percent in 1996, compared to an increase of 60.4 percent in 1995 from 1994.
The 1996 decrease was primarily due to an employee settlement and a contribution
to the U.S.B. Foundation in 1995, partially offset by higher credit card
expenses. The 1995 increase compared to 1994 is primarily due to a $250,000
contribution to the U.S.B. Foundation, a not-for-profit entity that makes
contributions to worthwhile organizations serving the community, an employee
settlement of $236,000, an increase in teller and branch charge-offs (primarily
resulting from check fraud), and an increase in credit card expense, as the
introduction of this product was expanded in 1995.
55
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(000's, except for percentages)
1996 1995 1994
- --------------------------------------------------------------------------------
Other non-interest expenses
Other insurance $ 216 $ 206 $ 221
Courier fees 196 202 164
Dues, meetings and seminars 221 253 254
Amortization of intangibles 22 89 96
Outside services 288 361 319
Employee settlement -- 236 --
U.S.B. Foundation -- 250 --
Credit card related expense 210 103 41
Other 215 205 93
- --------------------------------------------------------------------------------
Total $1,368 $1,905 $1,188
- --------------------------------------------------------------------------------
Percentage of total average
assets .18% .29% .21%
- --------------------------------------------------------------------------------
Percentage of total non-interest
expense 7.5% 10.7% 7.6%
================================================================================
To monitor and control the level of non-interest expenses, as well as
non-interest income, the Company continually monitors the system of internal
budgeting, including analysis and follow-up of budget variances.
Income Taxes
Income tax provisions of $4,774,000, $4,311,000, and $3,126,000 were
recorded in 1996, 1995 and 1994, respectively. The Company is currently subject
to both a statutory incremental Federal tax rate of 35 percent (34 percent in
1994), and a New York State tax rate of 9 percent, plus a surcharge of 19-1/2
percent in 1996, 24-1/2 percent in 1995 and 29-1/2 percent in 1994. Royal's
operation was subject to a Maryland state tax rate of 7 percent. The Company's
overall effective tax rate was 33.6 percent, 31.6 percent, and 30.9 percent in
1996, 1995 and 1994, respectively.
The increase in the overall effective tax rate in 1996 and 1995 reflects a
higher Federal statutory rate and a lower percent of non-taxable security
income. Other pertinent tax information is set forth in the Notes to
Consolidated Financial Statements included elsewhere herein.
Securities Portfolio
Securities are selected to provide safety of principal, liquidity, and
produce income on excess funds during structural changes in the composition of
deposits, as well as during cyclical and seasonal changes in loan demand. In
order to manage liquidity and control interest rate risk, the Company's
investment strategy may focus on securities which have short maturities,
adjustable rate securities, or those whose cash flow patterns result in a lower
degree of interest rate risk.
The securities portfolio of $249.8 million and $231.2 million at December
31, 1996 and 1995, respectively, consists of securities held to maturity
totalling $81.0 million and $60.3 million, and securities available for sale
totalling $168.8 million and $170.9 million, respectively.
In accordance with SFAS No. 115, the Bank's investment policy includes a
determination of the appropriate classification of securities at the time of
purchase. If management has the intent and ability to hold securities until
maturity, they are classified as held to maturity and carried at amortized
historical cost. Securities held for indefinite periods of time and not intended
to be held to maturity include securities that management intends to use as part
of its asset/liability strategy and that may be sold in response to changes in
interest rates, resultant prepayment risk and other factors. Such securities are
classified as available for sale and carried at fair value.
Upon implementation of SFAS No. 115 in 1994, the Company, acting upon
further regulatory clarification, transferred certain of its collateralized
mortgage obligations which met the new regulatory parameters to its held to
maturity portfolio. In 1995, the Company further reclassified all securities,
except for substantially all municipal securities, to available for sale, as
permitted by the Financial Accounting Standards Board (also see Note 4 to the
Notes to Consolidated Financial Statements included elsewhere herein).
Securities represent approximately 35.5 percent, 39.6 percent and 41.3
percent of average interest-earning assets in 1996, 1995 and 1994, respectively.
Emphasis on the securities portfolio will continue to be an important part of
the Company's investment strategy. The size of the securities portfolio will
depend on deposit and loan growth, and the ability of the Bank to take advantage
of leverage opportunities. The carrying value, fair value, weighted average
yields and maturity distributions of securities, are included in the Notes to
the Consolidated Financial Statements appearing elsewhere herein.
Obligations of U.S. Treasury and government agencies principally consist of
U.S. Treasury obligations and Federal Home Loan Bank, Federal National Mortgage
Association ("FNMA") and FHLMC debentures and notes. In 1996 and 1995, average
balances outstanding of such securities increased $33.7
56
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million and $17.5 million, respectively, primarily due to the purchase of bonds,
principally callable within one to three years and which are expected by
management to be called prior to maturity based upon its evaluation of interest
rates at the time of purchase.
The decrease of $10.6 million in 1996 and the increase of $22.4 million in
1995 in average balances of mortgage-backed securities were principally due to
transactions in U.S. government agency mortgage-backed securities consisting of
FNMA and FHLMC securities. FNMA and FHLMC guarantee the payment of interest at
the applicable certificate rate and the full collection on the mortgages backing
the securities which they issue; however, such securities are not backed by the
full faith and credit of the United States.
The following table sets forth additional information concerning
mortgage-backed securities at amortized cost for the periods indicated.
- --------------------------------------------------------------------------------
(000's)
December 31,
1996 1995 1994
- --------------------------------------------------------------------------------
U.S. government agency:
Mortgage-backed securities
Fixed rate $ 8,239 $ 13,266 $ 33,882
Adjustable rate 12,648 16,884 12,885
Collateralized mortgage
obligations
Fixed rate 37,200 50,596 57,823
Adjustable rate 41,783 27,639 4,685
Other 470 990 1,179
- --------------------------------------------------------------------------------
Total $100,340 $109,375 $110,454
================================================================================
The decrease in fixed rate U.S. government agency mortgage-backed
securities in 1996 and 1995 reflects, in addition to principal amortizations and
prepayments, sales of $4.3 million and $18.2 million, respectively, of these
securities whose market values would decrease and the weighted average lives
would extend, as prepayments slow in a rising interest rate environment. The
decrease of U.S. government agency adjustable rate mortgage-backed securities in
1996 reflects increased prepayments of these securities. The increase in
adjustable rate U.S. government agency mortgage-backed securities in 1995 is due
primarily to the purchases of $6.6 million of adjustable rate mortgage-backed
securities, partially offset by principal amortizations and prepayments. The
decrease in fixed rate collateralized mortgage obligations ("CMOs") in 1996 and
1995 is primarily due to principal amortizations and prepayments, and in 1996,
sales of $9.5 million of low rate CMOs to restructure the portfolio. Adjustable
rate CMOs reflect the purchases of $14.3 million in 1996 and $23.0 million in
1995 of floating rate collateralized mortgage obligations, respectively. The
interest rates on these floating rate securities periodically adjust at certain
spreads to market indices and typically contain maximum lifetime caps. These
transactions generally resulted in a shortening of the portfolio's average rate
repricing period.
Obligations of states and political subdivision securities decreased by
$6.0 million and $5.0 million in average balances in 1996 and 1995 ,
respectively, as the Bank invested in other securities with higher yields and
shorter maturities, and due to the limited availablity of state and political
subdivision securities. At December 31, 1996, such obligations, principally of
New York State and political subdivisions, have diversified final maturities.
The Company considers such securities a core investment, with favorable tax
equivalent yields and have classified substantially all such securities as held
to maturity.
The Company invests in FHLB stock and medium-term corporate debt securities
and other securities which are rated investment grade by nationally recognized
credit rating organizations. The Bank is a member of the Federal Home Loan Bank
of New York, which required ownership of $4.2 million of its stock at December
31, 1996 ($1.7 million in 1995) . The Bank utilizes the Federal Home Loan Bank
of New York to sell federal funds and obtain advances for funding needs. Average
balances of corporate securities, FHLB stock and other securities, decreased
$7.5 million in 1996 and $10.7 million in 1995, primarily due to narrowing
spreads on corporate and other securities. The Company, as a matter of policy,
does not invest in non-rated securities or securities rated less than investment
grade at the time of purchase.
The Company has continued to exercise its conservative approach to
investing by purchasing high credit quality investments and controlling interest
rate risk by averaging investments in medium-term maturities or with securities
having interest rates that reprice periodically. Generally, most securities may
be used to collateralize borrowings and public deposits, and therefore the
securities portfolio is an integral part of the Company's funding strategy.
Except for securities of the U. S. Treasury and government agencies
(principally callable and mortgage-backed securities), there were no obligations
of any single issuer which exceeded ten percent of stockholders' equity at
December 31, 1996.
57
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Loan Portfolio
During 1996, the average balances of loans of the Company increased $92.7
million to $ 445.0 million, and balances in 1995 increased $46.8 million to
$352.2 million, as compared to the 1994 balance of $305.4 million. At December
31, 1996, loans outstanding increased $112.1 million to $503.5 million, or a
28.7 percent increase compared to 1995. Loans outstanding at December 31, 1995
increased $57.8 million, or 17.3 percent over 1994. This growth resulted
primarily from: an increase of $55.3 million and $20.0 million in 1996 and 1995,
respectively, in commercial mortgages which primarily reprice after three to
five years to an index based on the three year or five year Treasury bill;
increases in construction and land development loans, principally variable rate
loans which are based on the prime rate as published in the Wall Street Journal,
of $29.4 million and $14.9 million, respectively, as both the real estate market
and business activity increased during each year; increases in time and demand
loans of $6.1 million in 1996 ($11.5 million increase in 1995); as well as a
$16.7 million increase in 1996 ($10.4 million in 1995) in residential real
estate loans and home equity loans; and increases in credit card loans of $5.7
million in 1996 and $2.6 million in 1995; while installment and other loans
declined $.9 million and $1.8 million in 1996 and 1995, respectively.
Real estate collateralized loans consisting of construction mortgages,
interim and permanent commercial mortgages, home equity and residential
mortgages, represent approximately 89 and 88 percent of total gross loans in
1996 and 1995, respectively. The Bank is approved by FHLMC and FNMA as a
preferred seller of residential mortgages, which allows more active
participation in the home mortgage market, enabling the Bank to meet the
community's needs for housing. This also allows the Bank the flexibility to
determine if profit margins are best achieved by retention or sale of earning
assets and also generates loan origination fees and loan servicing income from
the collection and processing of monthly loan payments.
As part of its secondary marketing activities, 15 and 30 year residential
real estate loans with fixed rates are generally originated with an intent of
selling qualifying loans. During 1996, 1995 and 1994, the Company took advantage
of the secondary market by selling for cash $.6 million, $4.1 million and $13.1
million to FHLMC, and exchanged $20.9 million with FHLMC for guaranteed
participation certificates in residential mortgage pools in 1994. Commercial
mortgages and construction and land development loans, which increased
significantly in both 1996 and 1995, and generally involve more risk than
residential loans, will continue to be emphasized as such loans represent
quality real estate secured loans. At December 31, 1996, the Bank has
approximately $54.0 million and $34.2 million of committed but unissued
(including lines of credit) commercial mortgage, construction and land
development loans, and residential mortgages, respectively. At December 31, 1996
and 1995, approximately $.4 million, of fixed rate residential loans (including
commitments) were held for sale in each year.
Installment loans to individuals and businesses represented 2.9 percent,
3.8 percent and 6.2 percent of total gross loans in 1996, 1995 and 1994,
respectively. The declining trend of installment loans to gross loans was due to
normal principal repayments by borrowers, a slowdown in automobile loans as
automobile manufacturers offer special financial incentives, including lower
interest rates, and the inability of borrowers to deduct interest under the
existing tax laws.
In 1994, Royal established a Visa credit card business, which was sold to
the Bank in 1995. Affinity cards with the Masons of Maryland and New Hampshire,
and a Union State Bank Visa card and MasterCard are currently offered. In 1996,
the Bank purchased a portfolio of credit cards aggregating $4.3 million in
outstanding lines and $1.7 million in balances. At December 31, 1996, the Bank
had credit card lines of $23.5 million, and outstanding balances of $8.3
million. The credit card business allows the Bank to increase its consumer
lending business and also diversify the loan portfolio.
It is the Company's policy to discontinue the accrual of interest on loans
when, in the opinion of management, a reasonable doubt exists as to the timely
collectibility of the amounts due. Regulatory requirements generally prohibit
the accrual of interest on certain loans when principal or interest is due and
remains unpaid for 90 days or more, unless the loan is both well secured and in
the process of collection. Nonaccrual loans, which are primarily secured by real
estate and lease receivables, increased in each of the years ended December 31,
1996 and 1994, to $8.1 million and $5.9 million, respectively, and decreased in
1995 to $4.0 million. The increase in 1996 is principally due to the addition of
the Bennett Funding Group loans of $3.3 million, which are collateralized by
cash and lease receivables. The Bennett Funding Group filed for Bankruptcy
during 1996, and collection of these loans has been delayed by the bankruptcy
proceedings. Net income is adversely impacted by the level of non-performing
assets caused by the deterioration of borrowers' ability to meet scheduled
interest and principal payments. In addition to foregone revenue, the Company
must increase the level of
58
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provisions for loan losses, incur higher collection costs, and other costs
associated with the management and disposition of foreclosed properties.
The most significant non-performing loans have been in construction loans
and real estate related commercial loans, and in 1996, the Bennett Funding Group
loans discussed above. Although the Bank has an aggressive foreclosure policy,
the process is slow and is hampered by market factors. The level of
non-performing assets has negatively impacted the Company's net interest income
and operating results. Management believes that the level of non-performing
assets will continue to impact net interest income. Net loan charge-offs against
the allowance for loan losses decreased in 1996 to $437,000 compared to 1995 and
increased in 1995 to $616,000 from $525,000 in 1994. At December 31, 1996,
restructured loans decreased to $2.1 million from $4.1 million in 1995, compared
to $5.8 million in 1994. Loans considered to be impaired under SFAS 114
approximated $7.8 million (including the Bennett Funding Group Loans) and $4.1
million at December 31, 1996 and 1995, respectively.
Provision for Loan Losses
The allowance for loan losses is available to absorb charge-offs from any
loan category, while additions are made through charges to income and recoveries
of loans previously charged-off. An evaluation of the quality of the loan
portfolio is performed by management on a quarterly basis as an integral part of
the loan review function, which includes the identification of past due loans,
non-performing loans and impaired loans, assessments of the expected effects of
the current economic environment and a review of the historical loss experience.
Based upon management's assessment of the degree of risk associated with the
various elements of the loan portfolio, it is estimated that at December 31,
1996 and 1995, 6 percent and 9 percent of the allowance for loan losses,
respectively, is applicable to time and demand loans, 66 percent and 77 percent,
respectively, relate to loans secured by real estate, including commercial and
construction loans, and 28 percent and 14 percent, respectively, is applicable
to installment, credit card and other loans.
As with any financial institution, poor economic conditions, high
inflation, high interest rates, or high unemployment may lead to increased
losses in the loan portfolio. Conversely, improvements in economic conditions
tend to reduce the amounts charged against the allowance. Management has
established various controls in order to limit future losses, such as (1) a
"watchlist" of possible problem loans, (2) various loan policies concerning loan
administration (loan file documentation, disclosures, approvals, etc.), and (3)
a loan review staff employed by the Company to audit for adherence to
established controls and to review the quality and anticipated collectibility of
the portfolio. Management determines which loans are possibly uncollectible and
makes additional provisions, if necessary, to state the allowance at a
satisfactory level.
Management takes a prudent and cautious position in evaluating various
business and economic uncertainties in relation to the Company's loan portfolio.
In management's judgment, the allowance is considered adequate to absorb
potential losses inherent in the credit portfolio. A substantial portion (89
percent at December 31, 1996) of the loans of the
Loan Maturities and Sensitivity to Change in Interest Rates
The following table presents the maturities of loans outstanding at December 31,
1996 (excluding installment loans to individuals and real estate loans other
than construction loans) and the amount of such loans by maturity date that have
predetermined interest rates and the amounts that have floating rates.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1996
After
1 But
Within Within After
(000's, except for percentages) 1 Year 5 Years 5 Years Total Percent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans:
Time and demand loans $23,602 $ 4,434 $ 700 $ 28,736 26%
Commercial installment loans 762 10,146 892 11,800 10
Mortgage construction loans 40,741 30,548 -- 71,289 64
- ------------------------------------------------------------------------------------------------------------------------------------
Total 65,105 45,128 1,592 $111,825 100%
- ------------------------------------------------------------------------------------------------------------------------------------
Rate Sensitivity:
Fixed or predetermined interest rate $ 2,035 $11,048 $ 69 $ 13,152 12%
Floating or adjustable interest rates 63,070 34,080 1,523 98,673 88
- ------------------------------------------------------------------------------------------------------------------------------------
Total $65,105 $45,128 $1,592 $111,825 100%
====================================================================================================================================
Percent 58% 40% 2% 100%
====================================================================================================================================
</TABLE>
59
<PAGE>
- --------------------------------------------------------------------------------
Company are secured by real estate, primarily located in the New York
Metropolitan area. The collectibility of the loan port-folio of the Company is
subject to changes in the real estate market in which the Company operates. The
provisions for loan losses established in 1996, 1995 and 1994, and the related
allowance for loan losses as set forth in the Notes to Consolidated Financial
Statements reflect net charge-offs and losses incurred with respect to real
estate foreclosures, and the effect of the real estate market in the New York
metropolitan area on the loan portfolio.
Management believes the allowance for loan losses at December 31, 1996,
appropriately reflects the risk elements inherent in the total loan portfolio at
that time. There is no assurance that the Company will not be required to make
future adjustments to the allowance in response to changing economic conditions
or regulatory examinations. During 1996, the New York State Banking Department
completed an examination of the Bank and during 1995, the Federal Reserve Bank
and FDIC completed an examination of the Company and the Bank, respectively. The
Office of Thrift Supervision examined Royal in 1995. The regulatory agencies
concluded that the process of internal asset review and the allowance for loan
losses were adequate.
Deposits
The Company's fundamental source of funds supporting interest earning
assets continues to be deposits, consisting of demand deposits (non-interest
bearing), money market, savings, NOW and various forms of time deposits. The
maintenance of a strong deposit base is key to the development of lending
opportunities and creates long-term customer relationships, which enhance the
ability to cross-sell services. Depositors include individuals, small and large
businesses and governmental units. To meet the requirements of a diverse
customer base, a full range of deposit instruments are offered, which has
allowed the Company to maintain and expand the deposit base despite intense
competition from other banking institutions and non-bank financial service
providers.
Total deposits at the end of 1996 increased 11.7 percent to $682.3 million,
from $610.6 million at December 31, 1995, an increase of 12.3 percent from
$543.9 million in 1994. Average deposits outstanding increased 12.1 percent in
1996 and 15.3 percent in 1995. Average non-interest bearing deposits increased
9.2 percent or $6.9 million at December 31, 1996 compared to 1995, and 16.0
percent in 1995 compared to 1994 due to business development efforts. Average
interest bearing deposits in 1996 increased $64.7 million and in 1995 increased
approximately $68.5 million, reflecting increases in all deposit categories,
except for money market accounts. Savings deposits average balances increased
$63.0 million in 1996 and $23.9 million in 1995, due to the introduction of
higher interest rate savings accounts in 1996 and 1995. Average balances in NOW
deposits increased $.4 million in 1996 and $1.1 million in 1995, due principally
to increased account activity by customers. The decrease of $11.3 million in
1996 and 1995 of $13.7 million in average money market deposit balances
principally resulted from decreased deposits of local municipalities and
customers, as the rate on the money market account was maintained at a lower
competitive rate, and customers switched to time deposits, and the new savings
account products discussed above. In 1996 and 1995, average time deposits
outstanding increased $12.6 million and $57.2 million, respectively, due to
promotion of attractive rate products. In general, the lower interest rate
environment in 1996 compared to 1995 caused interest rates to decrease in all
products, except for savings accounts due to the increase of deposits in higher
rate savings products. The change in mix of deposits, as well as higher
sustained short-term rates in 1995, caused average rates on interest bearing
liabilities to increase. In 1996, time deposits over $100,000 decreased $8.8
million as funding from retail deposits and borrowings decreased the need for
deposits of municipalities. In 1995, time deposits over $100,000 increased $25.8
million compared to 1994, primarily because of aggressive bidding on deposits of
large depositors and local municipalities. Deposits of over $100,000 are
generally for maturities of 30 to 180 days and are acquired to fund loans and
The following table summarizes the average amounts and rates of various
classifications of deposits for the periods indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(000's, except for percentages)
Year Ended December 31,
1996 1995 1994
Average Average Average Average Average Average
Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 82,491 -- $ 75,564 -- $ 65,120 --
Money market deposits 53,794 2.7% 65,080 3.0% 78,746 2.4%
Savings deposits 206,932 3.9 143,931 3.3 119,995 2.3
Time deposits 281,178 5.5 268,611 6.0 211,398 4.8
NOW deposits 41,055 1.6 40,667 1.6 39,610 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total $665,450 3.9% $593,853 3.9% $514,869 3.0%
====================================================================================================================================
</TABLE>
60
<PAGE>
USB
- --------------------------------------------------------------------------------
securities temporarily, under the Company's asset liability policy and to
leverage excess capital by matching such funds with investments and loan
production in excess of deposit growth.
The Federal Reserve continues to maintain higher short-term rates to
control inflation. Accordingly, it is expected that depositors will continue to
favor short-term deposit products, which result in higher volatility of interest
margins due to the quick repricing of deposits during periods of both rising and
declining interest rates.
Capital Resources
Strong capitalization is fundamental to the successful operation of a
banking organization. Stockholders' equity increased to $56.9 million in 1996,
or 10.8 percent over $51.3 million in 1995. There was a 34.0 percent increase in
1995, over the $38.3 million in 1994. The increases in all years were due to the
Company's record net income and common stock issuances under the Company's
various stock plans, offset by cash dividends and repayments of $500,000 of
preferred stock in 1996. Stockholders' equity was also decreased $1.7 million at
December 31, 1996 and was increased by $3.8 million at December 31, 1995,
resulting from the implementation of SFAS No. 115, which reflects the effect of
unrealized gains and losses on available for sale securities, net of deferred
taxes. Cash dividends on the Company's common stock have been paid since 1986,
the first dividend paid in the Company's history. In the first quarter of 1988,
the Board of Directors authorized a quarterly cash dividend policy. Cash
dividends on the Company's preferred stock commenced in 1989. Capital was
further increased in February 1997 with the issuance of $20 million, 9.58% trust
preferred capital securities which qualify for Tier I capital treatment by the
Federal Reserve Bank.
The various components and changes in stockholders' equity are reflected in
the Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994, appearing elsewhere herein.
Management believes that the recently issued trust capital securities,
future retained earnings, and purchases under the employee benefit plans, will
provide the necessary capital for current operations and the planned growth in
total assets. In addition, capital growth can be acquired through the
reinstatement of the Company's Dividend Reinvestment and Optional Stock Purchase
Plan, which has been temporarily suspended.
All banks are subject to risk-based capital guidelines. These guidelines
define capital as Tier I and Tier II capital. Tier I capital consists of common
stockholders' equity and qualifying preferred stock, less intangibles; and Tier
II capital consists of Tier I capital plus the allowance for possible loan
losses up to certain limits, preferred stock and certain subordinated and
term-debt securities. The guidelines require a minimum total (Tier I plus Tier
II) risk-based capital ratio of 8.0 percent, and a minimum Tier I risk-based
capital ratio of 4.0 percent.
The risk-based capital ratios at December 31 follows:
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Tier I Capital
Company 10.45% 11.37% 10.58%
Bank 10.36% 11.19% 10.77%
Royal -- -- 15.82%
Total Capital
Company 11.50% 12.26% 11.82%
Bank 11.41% 12.08% 11.60%
Royal -- -- 17.21%
================================================================================
Banks must also maintain minimum leverage ratio of at least 3 percent,
which consists of Tier I capital based on risk-based capital guidelines, divided
by average tangible assets (excluding intangible assets that were deducted to
arrive at Tier I capital).
The leverage ratios were as follows at December 31:
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
Company 7.06% 7.43% 6.86%
Bank 7.01% 7.63% 7.19%
Royal -- -- 7.33%
================================================================================
The issuance of the trust preferred capital securities discussed above
increased the Company's leverage capital ratio to 9.13% on a pro forma basis at
December 31, 1996.
To be considered "well-capitalized" under FDICIA, an institution must
generally at least have a leverage ratio of 5 percent, Tier I ratio of 6 percent
and Tier II ratio of 10 percent. The Bank exceeds all current regulatory capital
requirements and was in the "well-capitalized" category at December 31, 1996.
Management fully expects that the Bank will maintain a strong capital position
in the future.
Pursuant to the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") and further expanded by the FDICIA, Royal was required to
meet minimum regulatory
61
<PAGE>
- --------------------------------------------------------------------------------
tangible (1.50 percent), core leverage (3 percent), and risk-based capital
ratios. At all times while it was owned by the Company, Royal exceeded all
current and fully-phased-in capital requirements as stipulated by each of these
acts.
Liquidity
The Asset/Liability Committee ("ALCO") establishes specific policies and
operating procedures governing the Company's liquidity levels and develops plans
to address future liquidity needs. The primary functions of asset/liability
management are to provide safety of depositor and investor funds, assure
adequate liquidity and maintain an appropriate balance between interest earning
assets and interest bearing liabilities. Liquidity management involves the
ability to meet the cash flow requirements of customers who may be either
depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Interest rate
sensitivity management seeks to avoid fluctuating net interest margins and to
enhance consistent growth of net interest income through periods of changing
interest rates.
The purpose of asset/liability management is to determine and maintain an
appropriate level of liquid, interest earning assets. Aside from Cash on Hand
and Due from Banks, the Bank's liquid assets are federal funds sold, which are
available daily, and interest bearing deposits with banks. The Bank invests
excess liquid funds by selling federal funds, which mature daily, to other
financial institutions in need of funds. At December 31, 1996, the Bank sold
overnight federal funds in the amount of $10.8 million at a weighted-average
interest rate of 6.31 percent.
Other sources of asset liquidity include maturity and principal and
interest payments on securities and loans. The securities and loan portfolios
are of high credit quality and of mixed maturity, providing a constant stream of
maturing and reinvestable assets, which can be converted into cash should the
need arise. The ability to redeploy these funds is an important source of medium
to long-term liquidity. The amortized cost of securities available for sale
having contractual maturities or expected call dates or average lives of one
year or less amounted to $3.6 million, while held to maturity securities
maturing in one year or less amounted to $6.3 million, for a total of $9.9
million at December 31, 1996. This represented 3.9 percent of the amortized cost
of the securities portfolio, compared to 16.1 percent of the securities
portfolio maturing within one year at December 31, 1995. Excluding installment
loans to individuals and real estate loans other than construction loans, $65.1
million, or 12.9 percent of loans (including loans held for sale) at December
31, 1996, mature in one year or less. The approval of the Bank as a preferred
seller of mortgages to both FHLMC and FNMA, has improved liquidity as
residential mortgages may be sold or swapped in the secondary market. The Bank
is a member of the Federal Home Loan Bank of New York ("FHLB"). The Bank may
take advances of up to $240.7 million at December 31, 1996 at various terms on
the security of the FHLB capital stock owned and to be puchased by the Bank and
certain other assets of the Bank. In addition, the Bank has arrangements with
two primary investment firms to borrow up to $50.0 million under master
securities sale and repurchase agreements. The Bank had advances aggregating
$30.3 million from the Federal Home Loan Bank of New York and $29.4 million
borrowed under securities sold under agreements to repurchase at December 31,
1996. The Bank may also borrow up to $8.0 million overnight under federal fund
purchase agreements with two correspondent banks. Additional liquidity is
provided by the ability to borrow from the Federal Reserve Bank's discount
window, which borrowings must be collateralized with U.S. Treasury and
government agency securities. (See Note 9 to the Consolidated Financial
Statements).
Demand deposits from individuals, businesses and institutions, as well as
retail time deposits ("core deposits") are a relatively stable, low-cost source
of funds. The deposits of the Bank generally have shown a steady growth trend.
However, the trend of the deposit mix has generally been toward deposits of
shorter average maturity, with a larger percentage of funds in savings deposits
and shorter term certificates of deposit, while money market accounts as a
percentage of total deposits declined as depositors favored higher rates offered
by high balance savings accounts and time deposit products.
The Bank has pledged certain of its assets as collateral for deposits of
municipalities, FHLB borrowings and repurchase agreements. By utilizing
collateralized funding sources, the Bank is able to access a variety of cost
effective sources of funds. The assets pledged consist of mortgage-backed and
other securities. Management monitors its liquidity requirements by assessing
assets pledged, the level of assets available for sale, additional borrowing
capacity and other factors. Management does not anticipate any negative impact
to its liquidity from its pledging activities.
Another source of stable funding for the Company is capital market funds,
which includes preferred stock, convertible debentures, the capital securities
discussed above, common stock, retained earnings and long-term debt qualifying
as regulatory capital.
62
<PAGE>
USB
- --------------------------------------------------------------------------------
Each of the Company's sources of liquidity is vulnerable to various
uncertainties beyond the control of the Company. Scheduled loan payments are a
relatively stable source of funds, while loan prepayments and deposit flows vary
widely in reaction to market conditions, primarily prevailing interest rates.
Asset sales are influenced by general market interest rates and other unforeseen
market conditions. The Company's ability to borrow at attractive rates is
affected by its financial condition and other market conditions.
Management considers the Company's sources of liquidity to be adequate to
meet any expected funding needs and also to be responsive to changing interest
rate markets.
Interest Rate Sensitivity Management
Closely related to the concept of liquidity is the degree of rate
sensitivity, which varies greatly among different classes of assets and
liabilities. Federal funds, both purchases and sales, on which rates change
daily, and loans and deposits tied to certain indices, such as the prime rate
and Federal Discount rate, are the most sensitive. The least sensitive vehicles
include long-term fixed rate loans and securities and fixed rate retail savings
deposits. On those types falling between these extremes, the management of
maturity distributions is as important as the balances maintained. The
management techniques for maturity distributions involve the matching of
interest rate maturities as well as principal maturities and is a key element to
net interest income. In periods of rapidly changing interest rates, an imbalance
("gap") between the rate sensitive assets and liabilities can cause major
fluctuations in net interest income and in earnings. The Company's management of
liquidity and the interest rate sensitivity gap has been successful in the past,
as evidenced by the net interest income growth performance during very difficult
economic cycles. Continuing to establish patterns of sensitivity which will
enhance future growth regardless of frequent shifts in market conditions is one
of the objectives of the Company's asset/liability management strategy.
In the following table, balance sheet items are appropriately categorized
by contractual maturity, expected average lives for mortgage-backed securities,
or repricing dates with prime rate indexed loans and certificates of deposit,
including IRAs, NOW accounts, savings accounts tied to the Federal Discount
rate, and retail money market deposits constituting the bulk of the floating
rate category. The determination of the interest rate sensitivity of
noncontractual items is arrived at in a subjective fashion. Passbook and
statement savings accounts are viewed as a relatively stable source of funds and
are therefore classified as intermediate funds.
On December 31, 1996, the table shows a cumulative gap of $107.6 million in
the one day to one year repricing period, due principally to fixed rate
securities and loans in the over one year to five years and over five year
categories to maximize yield on assets. A significant portion of the loans in
the over one year to five year category represents three year adjustable
commercial mortgages. Origination of such loans has allowed the Company to
generate an adjustable rate asset repriceable within three years to reduce
long-term interest rate risk.
The previous discussion of net interest income stated that as market
interest rates began increasing in 1995, the cost of funds rose from 3.5 percent
in 1994 to 4.6 percent in 1995 and declined slightly to 4.5 percent in 1996 on
interest-bearing liabilities, while the yield on earning assets increased to 8.4
percent in 1995, and declined slightly to 8.3 percent in 1996, compared to 7.8
percent in 1994. The Company's liabilities at December 31, 1996, as reflected in
the following table, are more "sensitive" than its assets to short-term interest
rate movements. Interest rate sensitivity is the relationship between market
interest rates and net interest income due to the repricing characteristics of
assets and liabilities. If more liabilities than assets reprice in a given
period (a liability-sensitive position), market interest rate changes will be
reflected more quickly in liability rates. If interest rates decline, such
positions will generally benefit net interest income. Alternatively, where
assets reprice more quickly than liabilities in a given period (an
asset-sensitive position), a decline in market rates could have an adverse
effect on net interest income.
One way to minimize interest rate risk is to maintain a balanced or matched
interest rate sensitivity position. However, profits are not always maximized by
matched funding. To increase net interest earnings, the Company selectively
mismatches asset and liability repricing to take advantage of short-term
interest rate movements and the shape of the U.S. Treasury yield curve. The
magnitude of the mismatch depends on a careful assessment of the risks presented
by forecasted interest rate movements. The risk inherent in such a mismatch, or
gap, is that interest rates may not move as anticipated. For this reason, the
Company assumes the larger portion of its interest rate mismatch in the early
periods of the repricing schedule from one day to one year.
Short-term interest rate risk exposure is reviewed in weekly meetings in
which guidelines are established for the following
63
<PAGE>
- --------------------------------------------------------------------------------
week and the longer term exposure. The structural interest rate mismatch is
reviewed periodically by the Company's Asset and Liability Policy Committee.
The Company also manages its interest rate risk exposure by simulating the
effects on the balance sheet in increasing and decreasing interest rate
environments. Risk is mitigated by matching maturities or repricing more
closely, and by reducing interest rate risk by the use of interest rate
contracts. The Company does not use derivative financial instruments
extensively. However, as circumstances warrant, the Company will purchase
derivatives such as interest rate contracts to manage its interest rate
exposure. Any derivative financial instruments are carefully evaluated to
determine the impact on the Company's interest rate risk in rising and declining
interest rate environments, as well as the fair value of the derivative
instruments. Use of derivative financial instruments is included in the Bank's
investment policy, which has been approved by the Board of Directors.
At December 31, 1996, the Company is party to an interest rate cap with a
notional amount of $3 million and an interest rate swap with a notional amount
of $10 million. Under the terms of the interest rate cap, the Bank will be
reimbursed for increases in one-month LIBOR for any month during the term of the
agreement in which such rate exceeds the "strike level" of 8.1875%. The purpose
of this contract is to limit the interest rate risk on an investment with a
variable interest rate and an interest rate cap. The terms of the interest rate
swap require the payment by the Company of interest at a fixed rate of 6.16% on
the notional amount, while the Company receives interest on a floating rate
basis of three-month LIBOR. The effect of the interest rate swap is to convert a
short-term borrowing to a long-term interest rate, which was a lower rate than
comparable rates on conventional borrowings with similar terms. The interest
rate swap expires in October 1998.
INTEREST RATE SENSITIVITY ANALYSIS
BY REPRICING DATE
<TABLE>
<CAPTION>
December 31, 1996 (000's, except percentages)
- ------------------------------------------------------------------------------------------------------------------------------------
One Over Over Over
Day and One Day Three One Year Over Non-
Floating to Three Months to to Five Five Interest
Rate Months One Year Years Years Bearing Total
- ------------------------------------------------------------------------------------------------------------------------------------
Assets:
<S> <C> <C> <C> <C> <C> <C> <C>
Loans $ 196,196 $ 22,074 $ 73,279 $ 139,340 $ 66,880 -- $ 497,769
Mortgage-backed securities 55,083 900 11,357 6,509 26,475 -- 100,324
Other securities 1,446 4,058 5,111 29,937 108,899 -- 149,451
Other earning assets 10,800 99 -- -- -- -- 10,899
Other assets -- 4,238 -- -- -- $ 40,770 45,008
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 263,525 31,369 89,747 175,786 202,254 40,770 803,451
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Equity:
Interest bearing deposits 184,879 142,387 130,569 127,194 -- -- 585,029
Other borrowed funds 29,425 -- 5,000 22,467 2,800 -- 59,692
Demand deposits -- -- -- -- -- 97,251 97,251
Other liabilities -- -- -- -- -- 4,613 4,613
Stockholders' equity -- -- -- -- -- 56,866 56,866
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity 214,304 142,387 135,569 149,661 2,800 158,730 803,451
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Rate Sensitivity Gap $ 49,221 $(111,018) $ (45,822) $ 26,125 $ 199,454 $(117,960) $ --
====================================================================================================================================
Cumulative Gap $ 49,221 $ (61,797) $(107,619) $ (81,494) $117,960 $ -- $ --
====================================================================================================================================
Cumulative Gap to
Interest-Earning Assets 6.49% (8.45)% (14.19)% (10.74)% 15.55% -- --
====================================================================================================================================
</TABLE>
64
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USB
- --------------------------------------------------------------------------------
Financial Ratios
Significant ratios of the Company for the periods indicated are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings Ratio Net Income as a percentage of:
Average earning assets 1.32% 1.52% 1.32%
Average total assets 1.25% 1.42% 1.23%
Average common stockholders' equity 18.60% 22.17% 19.66%
Average total stockholders' equity 17.92% 21.00% 18.54%
Capital Ratios
Average common stockholders' equity to average total assets 6.52% 6.21% 5.99%
Average total stockholders' equity to average total assets 6.99% 6.78% 6.65%
Average total stockholders' equity and long-term debt qualifying as
regulatory capital to average total assets 6.99% 6.89% 6.96%
Average net loans as a multiple of average total stockholders' equity 8.47 7.93 8.09
Leverage capital 7.06% 7.43% 6.86%
Tier I capital 10.45% 11.37% 10.58%
Total risk-based capital 11.50% 12.26% 11.82%
Other
Allowance for loan losses as a percentage of year-end net loans 1.15% 1.01% 1.01%
Loans (net) as a percentage of year-end total assets 62.0% 57.1% 54.8%
Loans (net) as a percentage of year-end total deposits 73.0% 63.4% 60.7%
Securities as a percentage of year-end total assets 31.1% 34.1% 37.4%
Dividends per share as a percentage of net income per common and
common equivalent share 21.4% 19.1% 20.2%
====================================================================================================================================
</TABLE>
65
<PAGE>
Consolidated Statements of Condition (Unaudited)
December 31, 1996 and 1995
Union State Bank
- --------------------------------------------------------------------------------
(000's)
1996 1995
- --------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 18,821 $ 23,469
Federal funds sold 10,800 13,800
- --------------------------------------------------------------------------------
Cash and cash equivalents 29,621 37,269
Interest bearing deposits in other banks 99 2,069
Securities:
Available for sale (at fair value) 168,693 170,867
Held to maturity (fair value $83,123 in
1996 and $62,684 in 1995) 81,019 60,266
Loans held for sale 274 394
Loans, net of allowance for loan losses
of $5,742 in 1996 and $3,904 in 1995 497,495 387,043
Premises and equipment, net 9,846 9,519
Accrued interest receivable 5,820 5,288
Other real estate owned 651 939
Other assets 8,884 4,460
- --------------------------------------------------------------------------------
TOTAL ASSETS $ 802,402 $ 678,114
================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Non-interest bearing deposits $ 98,083 $ 85,312
Interest bearing deposits 585,029 528,272
- --------------------------------------------------------------------------------
Total deposits 683,112 613,584
Accrued interest payable 1,895 1,769
Accrued expenses and other liabilities 1,395 2,314
Securities sold under agreements to repurchase 29,425 --
Federal Home Loan Bank advances 30,267 10,000
- --------------------------------------------------------------------------------
Total liabilities 746,094 627,667
- --------------------------------------------------------------------------------
Commitments and contingencies (Notes 6 and 14)
Stockholder's equity:
Common stock 2,203 2,203
Additional paid-in capital 13,953 13,953
Retained earnings 40,722 33,153
Unrealized gain (loss) on available for
sale securities, net of tax (570) 1,138
- --------------------------------------------------------------------------------
Total stockholder's equity 56,308 50,447
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 802,402 $ 678,114
================================================================================
66
<PAGE>
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PART I
ITEM 1. BUSINESS
U.S.B. Holding Co., Inc. (the "Company"), a Delaware corporation
incorporated in 1982, is a bank holding company registered under the Bank
Holding Company Act of 1956, as amended, which provides financial services
through its wholly-owned subsidiaries. The Company and its subsidiaries derive
substantially all of their revenue and income from the furnishing of banking and
related financial services, primarily to customers in Rockland and Westchester
Counties, New York.
Union State Bank (the "Bank"), the Corporation's sole banking subsidiary,
is a New York state chartered commercial bank established in 1969. The Bank
offers a wide range of banking services to individuals, municipalities,
corporations and small and medium-size businesses through its 18 retail banking
facilities and two limited branch offices in Rockland and Westchester Counties.
The Bank's corporate offices are located in Rockland County. The Bank's products
and services include checking accounts, NOW accounts, money market accounts,
savings accounts (passbook and statement), certificates of deposit, retirement
accounts, business, personal, residential, construction, home equity (second
mortgage) and condominium mortgage loans, consumer loans, credit cards, other
consumer oriented financial services and safe deposit facilities. The Bank also
makes available to its customers automated teller machines (ATMs) and has a
remote banking service for business customers. The deposits of the Bank are
insured to the extent permitted by law pursuant to the Federal Deposit Insurance
Act of 1950, as amended.
On November 13, 1996, the Bank formed a wholly-owned subsidiary, U.S.B.
Realty Corp. ("USBRC"). USBRC was formed primarily for the purpose of acquiring
and managing a portfolio of loans secured by real estate and other investment
securities previously owned by the Bank.
The Company currently has no banking subsidiaries other than the Bank.
Prior to December 31, 1995, the Company owned Royal Oak Savings Bank, F.S.B.
("Royal"), a federal thrift subsidiary located in Maryland. The Company acquired
Royal in January 1991 from the Resolution Trust Company. Prior to its sale by
the Company, Royal offered a wide range of services to individuals and
businesses in Baltimore and Carroll Counties, Maryland. Royal had assets of
approximately $47,000,000 as of December 31, 1995. On December 31, 1995, all of
the common stock of Royal was sold by the Corporation to Monocacy Bancshares,
Inc. Immediately prior to such sale, substantially all of Royal's loans and
investment securities were purchased from Royal, for book value, by the Bank and
the Company, in effect transferring Royal's branch system, loan servicing
function, cash and certain immaterial assets to Monocacy Bancshares, Inc. The
Bank and the Company intend to maintain the loan portfolio purchased from Royal,
as the Company believes such portfolio represents an attractive asset, and
intend to continue to expand a credit card business acquired from Royal. The
Company does not intend, however, to expand its lending or other business in the
Maryland market, except for its credit card business.
The Company's nonbank subsidiary, Ad Con, Inc., provides advertising
services for the Bank. Ad Con, Inc. does not expect to provide services to other
banks in the near future.
Employees
As of December 31, 1996, the Bank employed a total of 206 full-time and 23
part-time employees. The Company and its subsidiaries provide a variety of
benefit plans, including group life, health, and stock ownership plans.
Management considers its employee relations to be satisfactory.
Competition
The Bank's main office and twelve of its branch offices are located in
Rockland County, New York. Five of the Bank's branch offices are located in
Westchester County, New York. The Bank also has limited branch offices which
only close loans and disburse funds in Tarrytown and White Plains (opening in
1997), New York.
The Bank's current market shares are approximately 9% and .5% of Rockland
and Westchester deposits, respectively. The Bank is the largest independent bank
headquartered in Rockland County and believes it is able to attract and retain
customers because of its knowledge of its local markets, and the ability of its
professional staff to provide a high degree of service to its customers. Within
its market area, the Bank encounters competition in its banking business from
many other financial institutions offering comparable products. These
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competitors include other commercial banks (both locally based independent banks
and local offices of major New York City commercial banks), as well as mutual
savings banks, mortgage bankers, savings and loan associations and credit
unions. In addition, the Bank experiences competition in marketing some of its
services from the local operations of insurance companies and brokerage firms.
The Bank expects to continue to expand by opening new retail branches,
enhancing computerized and telephonic delivery channels, and expanding loan
originations in the Bank's market area. Acquisitions of other smaller financial
institutions and branches will be considered to supplement growth in the Bank's
present markets and in contiguous markets. The Company has not made any
acquisitions of other banking institutions to date, other than its acquisition
of Royal.
Supervision and Regulation
The references under this heading to various aspects of supervision and
regulation are brief summaries which do not purport to be complete and which are
qualified in their entirety by reference to applicable laws, rules and
regulations.
The Company, as a "bank holding company" under the Bank Holding Company Act
of 1956 (the "BHC Act"), is regulated and examined by the Board of Governors of
the Federal Reserve System (the "FRB") and is required to file with the FRB an
annual report and such other information as may be required. The BHC Act
restricts the business activities and acquisitions that may be engaged in or
made by the Company. The FRB may make examinations of the Company and has the
authority (which it has not exercised) to regulate provisions of certain bank
holding company debt. The BHC Act requires every bank holding company to obtain
the prior approval of the FRB before acquiring substantially all the assets of,
or direct or indirect ownership or control of more than five percent of the
voting shares of, any bank which is not already majority-owned. The BHC Act also
prohibits a bank holding company, with certain exceptions, from engaging in or
acquiring direct or indirect control of more than five percent of the voting
shares of any company engaged in non-banking activities. One of the principal
exceptions to these prohibitions is engaging in, or acquiring shares of a
company engaged in, activities found by the FRB, by order or regulations, to be
so closely related to banking or the management of banks as to be a proper
incident thereto. Subject to certain limitations and restrictions, a bank
holding company, with the prior approval of the FRB, may acquire an out-of-state
bank. Banks in states that do not prohibit out-of-state mergers may merge,
effective June 1997 or sooner if both states expressly permit such mergers, with
the approval of the appropriate federal bank regulatory agency. A national or
state bank may establish a de novo branch out of state if such branching is
expressly permitted by the other state. The BHC Act and regulations of the FRB
also currently prohibit a bank holding company and its subsidiaries from
engaging in certain tying arrangements in connection with any extension of
credit or the provision of any property or services.
The FRB recently finalized a major revision of its regulations affecting
bank holding companies and their non-bank subsidiaries. These revisions, which
will take effect on April 21, 1997, will expand the list of non-bank activities
permitted and significantly liberalize the FRB's approval process of non-bank
activities. In addition, the new rules remove tying restrictions on bank holding
companies and their non-bank subsidiaries and create exceptions from statutory
restrictions on bank tying arrangements to allow banks greater flexibility in
packaging their products with affiliates. The new rules also streamline the bank
acquisition application process for "well managed," "well capitalized"
institutions, with satisfactory or better Community Reinvestment Act records.
The Company is a legal entity separate and distinct from its subsidiaries.
The ability of holders of debt and equity securities of the Company to benefit
from the distribution of assets to any subsidiary upon the liquidation or
reorganization of such subsidiary is subordinate to prior claims of creditors of
the subsidiary (including depositors in the case of banking subsidiaries) except
to the extent that a claim of the Company as a creditor may be recognized.
There are various statutory and regulatory limitations on the extent to
which present and future banking subsidiaries of the Company can finance or
otherwise transfer funds to the Company or its nonbanking subsidiaries, whether
in the form of loans, extensions or credit, investments or asset purchases,
including regulatory limitations on the payment of dividends directly or
indirectly to the Company from the Bank. Federal and state bank regulatory
agencies also have the authority to limit further the Bank's payment of
dividends based on such factors as the maintenance of adequate capital for such
subsidiary bank, which could reduce the amount of dividends otherwise payable.
Under applicable banking statues, at December 31, 1996, the Bank could have
declared additional
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dividends of approximately $18.0 million to the Company without prior regulatory
approval.
Under the policy of the FRB, the Company is expected to act as a source of
financial strength to the Bank and any other subsidiary bank which the Company
might own and to commit resources to support each subsidiary bank in
circumstances where the Company might not do so absent such policy. In addition,
any subordinated loans by the Company to the Bank or any other subsidiary bank
which the Company might own would also be subordinate in right of payment to
deposits and obligations to general creditors of such subsidiary banks.
Until December 31, 1995, the Company was also a savings and loan holding
company within the meaning of the Home Owners' Loan Act and was registered as
such with the Office of Thrift Supervision ("OTS"). Upon the sale of Royal, the
Company deregistered as a savings and loan holding company.
The FRB requires bank holding companies to comply with risk-based capital
and leverage standards. These guidelines are discussed in Management's
Discussion and Analysis of Financial Condition and Results of Operations under
Capital Resources and in Note 11 to the Consolidated Financial Statements.
The Bank is organized under the Banking Law of the State of New York. Its
operations are subject to Federal and State laws applicable to commercial banks
and to regulation by the Superintendent of Banks and the Banking Board of the
State of New York as well as by the FRB. The Superintendent of Banks examines
the affairs of the Bank for the purpose of determining its financial condition.
Acquisitions of stock of other banks generally require prior approval of the
Superintendent of Banks and/or the Banking Board.
The Federal Deposit Insurance Company ("FDIC") insures deposits of the Bank
and, in that capacity, also regulates and examines the Bank. As a result, the
Bank is subject to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA").
FDICIA classifies banks in one of five categories according to capital
levels. With respect to banks not meeting their minimum capital levels, federal
bank regulators may be required to take corrective actions against
undercapitalized banks, including requiring an acceptable capital restoration
plan or placing a bank into conservatorship or receivership. In addition,
undercapitalized banks may be subject to certain restrictions on their
activities and operations, including restrictions on asset growth, rates of
interest paid on deposits, transactions with affiliates, engaging in material
transactions not in the ordinary course of business, and other activities. In
general, a bank is categorized as "critically undercapitalized" if its leverage
capital ratio is below two percent or such higher percentage that may be set by
the appropriate federal bank regulatory agency. As of December 31, 1996, the
Bank was "well-capitalized." See Management's Discussion and Analysis of
Financial Condition and Results of Operations under Capital Resources and Note
11 to the Consolidated Financial Statements.
FDICIA makes it more difficult for undercapitalized banks to borrow funds
from the Federal Reserve's "discount window," thus possibly limiting or
eliminating a source of liquidity for such banks. FDICIA also limits, with
certain exceptions, the ability of banks to engage in activities or make equity
investments that are not permissible for national banks. The Company does not
expect such provisions to have a material adverse effect on the Bank or the
Company.
Government Monetary Policies and Economic Controls
The earnings and growth of the banking industry, the Company, and the Bank
are affected by general economic conditions, as well as by the credit policies
of monetary authorities, including the Federal Reserve System. An important
function of the Federal Reserve System is to regulate the national supply of
bank credit in order to combat recession and curb inflationary pressures. Its
policies are used in varying combinations to influence overall growth of bank
loans, investments and deposits and may also affect interest rates charged on
loans or paid for deposits.
In view of changing conditions in the national economy and the money
markets, as well as the effect of actions by monetary and fiscal authorities,
including the Federal Reserve System, no prediction can be made by the Company
as to possible future changes in interest rates, deposit levels, loan demand or
their effect on the business and earnings of the Company and the Bank.
ITEM 2. PROPERTIES
The main office of the Company and the Bank, including the executive
offices, Finance, Mortgage, Commercial Loan, Loan Support, Human Resources,
Internal Audit, Operations Center, Transit and Data Processing Departments, and
Marketing Departments, is located at its Corporate Headquarters which is owned
by the Bank at 100 Dutch Hill Road, Orangeburg, New York. The Bank's main branch
is located at
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46 College Avenue, Nanuet, New York in premises which are leased by the Bank.
The Bank also has limited purpose branches in Tarrytown and White Plains, New
York which may originate loans and disburse funds. The Company also owns other
real property in Orange County, where it may open a future branch of the Bank.
Real property in Carroll County, Maryland, which included a bank branch
facility, was sold in 1996.
In addition to the main office in Nanuet, the Bank operates twelve branches
in Rockland County, New York: 270 South Little Tor Road, New City; 87 Route 59,
Monsey; 115 South Main Street, New City; 45 Kennedy Drive, Spring Valley; 35
South Liberty Drive, Stony Point; One Broadway, Haverstraw; Route 9W and
Railroad Avenue, West Haverstraw; 338 Route 59, Central Nyack; 230 North
Middletown Road, Pearl River; 747 Chestnut Ridge Road, Chestnut Ridge; 7 College
Avenue, Nanuet; and 65 Dutch Hill Road, Orangeburg. The premises of the Chestnut
Ridge, Nanuet, Central Nyack, Little Tor Road, Orangeburg and Spring Valley
branch offices are leased, while the other Rockland branch offices are owned by
the Bank. The Bank also operates five branches in Westchester County, New York:
131 Central Avenue, Tarrytown; 299 Bedford Road, Bedford Hills; and 3000 East
Main Street, Peekskill, which are owned, and leased locations at 76 Virginia
Road, North White Plains; and 88 Croton Avenue, Ossining. The limited purpose
branch located at 660 White Plains Road in Tarrytown is a leased location. The
limited purpose branch located at 60 Mitchell Place, White Plains, was leased in
1996 and approved by the New York State Banking Department in 1997.
In the opinion of management, the premises, fixtures, and equipment used by
the Company and the Bank are adequate and suitable for the conduct of their
businesses. All the facilities are well maintained and provide adequate parking.
ITEM 3. LEGAL PROCEEDINGS
Various actions and proceedings are presently pending to which the Company
is a party. Management is of the opinion that the aggregate liabilities, if any,
arising from such actions would not have a material adverse effect on the
consolidated financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED SECURITY HOLDER MATTERS
Market Information and Holders
The Company's common stock was held of record as of February 28, 1997 by
approximately 1,191 shareholders and is traded sporadically in the
over-the-counter market and in private transactions. To date there has been no
established public trading market for the Company's common stock and bid and
asked quotations by broker-dealers have been intermittent and infrequent. The
Company has recently applied to the American Stock Exchange for listing of the
Company's common stock.
National Quotation Bureau, Inc., a service which accumulates security price
quotations from broker-dealers, reports high and low bid prices for the
Company's common stock. Prices quoted by National Quotation Bureau, Inc. or
actual sale prices (adjusted for the 10 percent stock dividend on June 14, 1996
and the two-for-one stock split on December 30, 1996) where no such quote is
available are as follows:
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1996 1995
High Low High Low
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First Quarter $13.07 $10.68 $10.02 $ 9.61
Second Quarter 14.50 12.27 10.54 9.71
Third Quarter 15.00 14.00 13.07 10.68
Fourth Quarter 16.81 15.00 13.18 10.68
February 28, 1997 24.00 21.00
================================================================================
The foregoing prices represent inter-dealer quotations without adjustment
for retail markup, markdown or commission.
Due to the limited number of reported bid and asked quotations for the
Company's stock, they are not, in the management's opinion, sufficient to
establish a representative market value for the stock.
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Under the Company's Dividend Reinvestment and Stock Purchase Plan, which
has been temporarily suspended, participants are permitted to reinvest cash
dividends in common stock at 100 percent of the current market price (as
determined under the Plan). In the third quarter of 1994, a stock purchase
feature of the Plan was added to allow stockholders to purchase at fair market
value up to $2,500 of common stock per quarter.
Under the Plan, shareholders reinvested cash dividends to purchase and made
optional purchases of common stock in 1995 (adjusted for the 10 percent stock
dividend on June 14, 1996 and the two-for-one stock split on December 30, 1996)
as follows:
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1995
Shares
------
Purchase Dividend Optional Price per
Date Reinvestment Purchases Share
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January 16 20,658 10,164 $10.12
April 14 19,954 14,993 10.54
July 14 16,529 18,124 11.70
October 13 16,872 17,917 12.73
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Dividends
In 1988, the Board of Directors of the Company adopted a policy of paying
quarterly cash dividends to holders of its common stock. After adjustment for
the 10 percent stock dividend on June 14, 1996 and the two-for-one stock split
on December 30, 1996, quarterly cash dividends of $.068 per share were paid to
shareholders of record on March 31, $.075 on June 30 and September 30, and $.08
on December 31, 1996. In 1995, a $.045 and $.05 quarterly dividend was paid to
shareholders of record on March 31, and June 30, respectively, and $.055
quarterly dividends were paid to shareholders of record on September 30 and
December 31. A special dividend of $.068 per share was declared on December 29,
1995 and paid to shareholders of record on January 26, 1996. In 1994, quarterly
cash dividends of $.045 were paid to shareholders of record on March 31, June 30
and September 30, and December 31, 1994, in addition to a special dividend of
$.041 paid to shareholders of record on May 25, 1994.
Stock dividends of 10 percent were declared by the Company for shareholders
of record on June 14, 1996, June 15, 1995 and June 30, 1993, respectively, and a
five percent stock dividend was declared for shareholders of record on June 30,
1992. In addition, a two-for-one stock split in the form of a 100% stock
dividend was declared for stockholders of record on December 13, 1996 and
distributed on December 30, 1996.
Any funds which the Company may require in the future to pay cash
dividends, as well as various Company expenses, are expected to be obtained by
the Company chiefly in the form of cash dividends from the Bank and secondarily
from stock issuances under the Company's Dividend Reinvestment and Stock Option
Plans. The ability of the Company to declare and pay dividends in the future
will depend not only upon its future earnings and financial condition, but also
upon the future earnings and financial condition of the Bank and upon the
ability of the Bank to transfer funds to the Company in the form of cash
dividends and otherwise. The Company is a separate and distinct legal entity
from its subsidiaries. The Company's right to participate in any distribution of
the assets or earnings of its subsidiaries is subject to prior claims of
creditors of the subsidiaries.
Under New York Banking Law, a New York bank may declare and pay dividends
not more often than quarterly and no dividends may be declared, credited, or
paid so long as there is any impairment of capital stock. In addition, except
with the approval of the New York State Superintendent of Banks, the total of
all dividends declared in any year may not exceed the sum of a bank's net
profits for that year and its undistributed net profits for the preceding two
years, less any required transfers to surplus. A bank may be required to
transfer to surplus up to 10 percent of its net profits in any accounting period
if its combined capital stock, surplus and undivided profit accounts do not
equal 10 percent of its net deposit liabilities.
The Company may not pay dividends on its common stock if it is in default
of the terms of its preferred stock (see below). In addition, the Company may
not pay dividends on its common stock or preferred stock if it is in default
with respect to the junior subordinated debt or trust capital securities issued
in February 1997, or if the Company elects to defer payment for up to five years
as permitted under the terms of such junior subordinated debt and trust capital
securities.
The payment of dividends by the Company may also be limited by the Federal
Reserve Board's capital adequacy and dividend payment guidelines applicable to
bank holding companies (see Item 1 - Business-Supervision and Regula-
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tion). Under these guidelines, the Company is not expected to pay any dividends
on shares of the Company's common stock until such time as its debt to equity
ratio (as defined, including long-term debt qualifying as capital) is below 30
percent.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference from the
table entitled "Selected Financial Data" of the Company's 1996 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required by this Item is incorporated by reference from the
Company's 1996 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The information required by this Item is incorporated by reference from the
Company's 1996 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
The information required by Items 10, 11, 12 and 13 is incorporated by
reference from the Company's definitive Proxy Statement for its Annual Meeting
of Shareholders which will be filed with the Commission not later than 120 days
after December 31, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(A) Documents Filed as a Part of this Report:
1. and 2. Financial Statements and Schedules
The following financial statements and schedules of the Company and its
subsidiaries are incorporated in Item 8 by reference from the Company's 1996
Annual Report to Shareholders:
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED STATEMENTS OF CONDITION, DECEMBER 31, 1996 AND 1995
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995
AND 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996,
1995 AND 1994
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Schedules are omitted because of the absence of the conditions
under which they are required or because the required information is included in
the Consolidated Financial Statements and the Notes thereto.
3. EXHIBITS
Exhibit No. Exhibit
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(3) (a) Restated Certificate of Incorporation of Registrant*
(3) (b) Bylaws of Registrant (incorporated herein by reference from
Registrant's Registration Statement on Form S-14 (file no. 2-79734),
Exhibit 3(b)).
(4) (a) Junior Subordinated Indenture, dated February 5, 1997, between
Registrant and The Chase Manhattan Bank, as trustee.*
(4) (b) Guarantee Agreement, dated February 5, 1997, by and between
Registrant and The Chase Manhattan Bank, as trustee for the holders
of 9.58% Capital Securities of Union State Capital Trust I.*
(4) (c) Amended and Restated Declaration of Trust of Union State Capital
Trust I.*
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(10) (a) Agreement of Employment dated as of July 1, 1994 between the Bank
and Thomas E. Hales (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994 ("1994 10-K"), Exhibit (10)(a)).
(10) (b) Registrant's 1984 Incentive Stock Option Plan (incorporated herein
by reference from Form S-8 Registration Statement, file No. 2-90674,
Exhibit 28 (b)).
(10) (c) Registrant's 1993 Incentive Stock Option Plan (incorporated herein
by reference from Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 ("1993 10-K"), Exhibit (10)(c)).
(10) (d) Registrant's Employee Stock Ownership Plan (With Code Section 401(k)
Provisions) (incor- porated herein by reference from 1993 10-K,
Exhibit (10)(d)).
(10) (e) Registrant's Dividend Reinvestment and Stock Purchase Plan
(incorporated herein by reference from Registrant's Form S-3
Registration State- ment, file No. 33-72788).
(10) (f) Registrant's Director Stock Option Plan*
(10) (g) Registrant's Supplemental Employees' Investment Plan for Salaried
Employees (incorporated herein by reference from 1994 10-K, Exhibit
(10)(o)).
(10) (h) Stock Purchase Agreement dated August 25, 1995 between Registrant,
Monocacy Bancshares, Inc. and Royal Oak Savings Bank, F.S.B. (incor-
porated herein by reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995)
(10) (i) Purchase Agreement, dated January 31, 1997, by and among Registrant,
Union State Capital Trust I and Keefe, Bruyette & Woods, Inc.*
(10) (j) Registration Rights Agreement, dated February 5, 1997, by and among
Registrant, Union State Capital Trust I and Keefe, Bruyette & Woods,
Inc.*
(11) Computation of earnings per share.*
(13) Registrant's Annual Report to Shareholders for the year ended
December 31, 1996* (portions incorporated by reference in Form
10-K).
(21) Subsidiaries of the Registrant*
(23) Consent of Deloitte & Touche LLP*
(27) Financial Data Schedule
* Filed Herewith
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(B) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1996.
74
RESTATED CERTIFICATE OF INCORPORATION
OF
U.S.B. HOLDING CO., INC.
Under Section 245 of the
Delaware General Corporation Law
U.S.B. Holding Co., Inc., a corporation duly organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. The present name of the Corporation is U.S.B. Holding Co., Inc.,
which is the name under which the Corporation was originally incorporated; and
the date of filing the original certificate of incorporation of the Corporation
with the Secretary of State of Delaware is July 6, 1982.
2. The provisions of the certificate of incorporation as heretofore
amended and/or supplemented are hereby restated and integrated into the single
instrument which is hereinafter set forth, and which is entitled Restated
Certificate of Incorporation of U.S.B. Holding Co., Inc., without further
amendment and without any discrepancy between the provisions of the certificate
of incorporation as heretofore amended and supplemented and the provisions of
the said single instrument hereinafter set forth.
3. The Board of Directors of the Corporation has duly adopted this
Restated Certificate of Incorporation pursuant to the provisions of Section 245
of the General Corporation Law of the State of Delaware in the form set forth as
follows:
<PAGE>
"RESTATED CERTIFICATE OF INCORPORATION
OF
U.S.B. HOLDING CO., INC.
----------------------------
1. Name. The name of the corporation is U.S.B. Holding Co., Inc.
(hereinafter called the "Corporation").
2. Address Registered Agent. The address, including street, number, city
and county, of the Corporation's registered office in this State is 1209 Orange
Street, Wilmington, County of New Castle, Delaware; and its registered agent at
such address is The Corporation Trust Company.
3. Purpose. The nature of the business and purposes to be conducted or
promoted by the Corporation are to engage in, carry on and conduct any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
4. Number of Shares. The total number of shares of stock which the
Corporation shall have authority to issue is 7,100,000 shares, consisting of
7,000,000 shares of Common Stock having a par value of $5.00 per share and
100,000 shares of Preferred Stock without par value.
The Board of Directors is authorized, by resolution or resolutions,
subject to limitations prescribed by law and the provisions of this Article 4,
to provide for the issuance of the Preferred Stock in one or more series, to
establish the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, of the shares of each such series. The
authority of the Board with respect to each series shall include, but not be
limited to, determination of the following:
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(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate of the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares
of that series;
(c) Whether that series shall have voting rights, and, if so, the
terms of such voting rights;
(d) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(e) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and if so, the terms and amount of
such sinking fund;
(f) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(g) Any other powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of that series.
Dividends on outstanding Preferred Stock shall be declared and paid, or
set apart for payment, before any dividends shall be declared and paid, or
set apart for payment, on the Common Stock with respect to the same
dividend period. No shares of Preferred Stock
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shall be convertible into shares of Common Stock or other securities of
the Corporation.
5. Board of Directors
Section 1. Number, election and terms. The Board of Directors of the
Corporation shall consist of that number of directors, to be fixed by, or
in the manner provided in, the Bylaws, and such number of directors so
fixed in such Bylaws may be changed only by receiving the affirmative vote
of (i) the holders of at least 75% of all the shares of the Corporation
then entitled to vote on such change or (ii) a majority of the directors
in office at the time of vote. In the election of directors at the 1985
Annual Meeting of Shareholders, the directors shall be divided into three
classes, as nearly equal in number as possible, with the term of office of
the first class to expire at the 1986 Annual meeting of Shareholders, the
term of office of the second class to expire at the 1987 Annual Meeting of
Shareholders, and the term of office of the third class to expire at the
1988 Annual Meeting of Shareholders. At each Annual Meeting of
Shareholders following such initial classification and election, the
number of directors equal to the number of the class whose term expires at
the time of such meeting shall be elected to hold office until the third
succeeding Annual Meeting of Shareholders. Each director shall hold office
until his successor is elected and qualified, or until his earlier
resignation or removal.
Section 2. Newly created directorships and vacancies. Newly created
directorships resulting from any increase in the authorized number of
directors and any vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from office or
other cause may be filled by a majority vote of the directors then in
office, and directors so chosen shall hold office for a term expiring at
the
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Annual Meeting of Shareholders at which the term of the class to which
they have been elected expires.
Section 3. Removal. At a meeting of shareholders called expressly
for that purpose, any director, or the entire Board of Directors, may be
removed from office at any time, without cause, but only by the
affirmative vote of the holders of at least 80% of the shares of the
Corporation then entitled to vote in an election of directors. At a
meeting of stockholders called expressly for that purpose, a director may
be removed by the stockholders for cause by the affirmative vote of the
holders of a majority of the shares then entitled to vote in an election
of directors.
Section 4. Amendment, repeal etc. Notwithstanding anything contained
in Delaware corporate law or these Articles of Incorporation to the
contrary, the affirmative vote of the holders of at least 80% of the
shares of the Corporation then entitled to vote in an election of
directors shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article 5.
6. Adoption, Amendment and/or Repeal of By-Laws. The Board of Directors
may from time to time (after adoption by the undersigned of the original by-laws
of the Corporation) adopt, amend or appeal the by-laws of the Corporation;
provided, that any by-laws adopted, amended or repealed by the Board of
Directors may be amended repealed, and any by-laws may be adopted, amended, or
repealed by the stockholders of the Corporation.
7. Compromise and Arrangements. Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within
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<PAGE>
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
8. Approval of Certain Business Combinations. The approval of any Business
Combination shall, in addition to any affirmative vote required by law, require
the affirmative vote of the holders of not less than eighty percent (80%) of the
common shares of the Corporation then entitled to vote generally in the election
of directors of the Corporation; provided, however, that any such Business
Combination may be approved on the affirmative vote required by law if such
Business Combination is approved by not less than sixty-six and two-thirds
percent (66-2/3%) of the entire Board of Directors of the Corporation. As used
herein the term "Business Combination" shall mean:
-6-
<PAGE>
(i) any merger or consolidation of the Corporation or any subsidiary
of the Corporation with (a) any Substantial Shareholder or (b) any other
corporation which, after such merger or consolidation, would be a
Substantial Shareholder regardless of which entity survives;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Substantial Shareholder of all or substantially all of the assets of
the Corporation or any subsidiary of the Corporation, or both;
(iii) the adoption of any plan or proposal for the liquidation of
the Corporation proposed by or on behalf of a Substantial Shareholder; or
(iv) any transaction involving the Corporation or any of its
subsidiaries, including the issuance or transfer of any securities of, any
reclassification of securities of, or any recapitalization of, the
Corporation or any of its subsidiaries, or any merger or consolidation of
the Corporation with any of its subsidiaries (whether or not involving a
Substantial Shareholder), if the transaction would have the effect,
directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Corporation or any subsidiary, of which a Substantial Shareholder is the
Beneficial Owner.
As used herein, the term "Substantial Shareholder" shall mean and include
any individual, corporation, partnership or other person or entity which,
together with its "Affiliates" and "Associates" (as such terms were defined as
of May 22, 1984, in Rule 12b-2 under the Securities Exchange Act of 1934), is
the "Beneficial Owner" (as determined in accordance with the criteria set forth
as of May 22, 1984 under Rule 13d-3 under the Securities Exchange Act of 1934)
in the
-7-
<PAGE>
aggregate of more than five percent (5%) of the outstanding shares of the
Corporation entitled to vote generally in an election of directors; and any
Affiliate or Associate of any such individual, corporation, partnership or other
person or entity. Notwithstanding anything contained in Delaware corporate law
or these Articles of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the shares of the Corporation then entitled to vote
in an election of directors shall be required to amend or repeal, or to adopt
any provision inconsistent with, this Article 8.
9. Limitation of Director's Personal Liability. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, as the same exists or
hereafter may be amended, or (iv) for any transaction from which the director
derived an improper personal benefit. This Article shall not eliminate or limit
the liability of a director for or with respect to any act or omission occurring
prior to the effective date of the Amendment adding this Article to the
Certificate of Incorporation. If the Delaware General Corporation Law hereafter
is amended to authorize the further elimination or limitation of the liability
of directors, then the liability of a director of the Corporation, in addition
to the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this paragraph by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification."
-8-
<PAGE>
IN WITNESS WHEREOF, this Restated Certificate has been signed on this 26th
day of March, 1997, and the signature of the undersigned shall constitute the
affirmation and acknowledgment of the undersigned, under penalties of perjury,
that the Restated Certificate is the act and deed of the Corporation and that
the facts stated herein are true.
_________________________
Michael H. Fury
Secretary
-9-
<PAGE>
EXHIBIT A
DIRECTOR STOCK OPTION PLAN
1. Purpose. The purpose of this Director Stock Option Plan (the "Plan") of
U.S.B. Holding Co., Inc. (the "Company") is to encourage ownership in the
Company by outside directors of the Company whose continued services are
considered essential to the Company's future progress and to provide them with a
further incentive to remain as directors of the Company.
2. Administration. The Board of Directors shall supervise and administer
the Plan. Grants of stock options granted shall be automatic in accordance with
Section 5. However, all questions of interpretation of the Plan or of any
options issued under it shall be determined by the Board of Directors and such
determination shall be final and binding upon all persons having an interest in
the Plan.
3. Participation in the Plan. Directors of the Company who are not
employees of the Company or any subsidiary of the Company shall be eligible to
participate in the Plan.
4. Stock Subject to the Plan. (a) The maximum number of shares which may
be issued under the Plan shall be Fifty Thousand (50,000) shares of the
Company's Common Stock, par value $l0.00 per share ("Common Stock"), subject to
adjustment as provided in Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised price of such option shall again become available for grant pursuant
to the Plan.
(c) All options granted under the Plan shall be non-statutory options
entitled to special tax treatment under section 422A of the Internal Revenue
Code of 1986, as amended to date and as may be amended from time to time.
5. Terms, Conditions and Form of Options. Each option granted under the
Plan shall be evidenced by a written agreement in such form as the Board of
Directors shall from time to time approve, which agreements shall comply with
and be subject to the following terms and conditions:
(a) Option Grant Dates. An option shall be granted automatically to
each eligible director at the close of business on the date the Plan is
approved by the stockholders of the Company. Thereafter, an option shall
be granted automatically to each eligible director effective as of the
close of each annual meeting of stockholders of the Company (i) at which
such individual is elected a director or (ii) following which such
individual will continue to serve as a director as a member of a
continuing class of directors.
(b) Shares Subject to Option. Each option granted under the Plan
shall be exercisable, in whole or in part, for Seven Hundred (700) shares
of Common Stock, subject to adjustment as provided in Section 9 of the
Plan.
12
<PAGE>
(c) Option Exercise Price. The option exercise price per share for
each option granted under the Plan shall equal not less than l00% of the
fair market value of the Common Stock on the date an option is granted nor
less than the par value of the Common Stock, whichever is greater. The
fair market value of the Common Stock on any day shall be (a) if the
principal market for the Common Stock is a national securities exchange,
the mean between the highest and lowest quoted selling prices of the
Common Stock on such day (or last day of trade prior to such day if not
traded on such day) as reported by such exchange or on a consolidated tape
reflecting transactions on such exchange, or (b) if the principal market
for the Common Stock is not a national securities exchange and the Common
Stock is subject to quotation on the National Association of Securities
Dealers Automated Quotations System, the mean between the highest
independent bid and the lowest independent asked prices for the Common
Stock on such day (or the last day quoted prior to such day if not quoted
on such day) on such system, or (c) if the principal market for the Common
Stock is not a national securities exchange and the Common Stock is not
subject to quotation on the National Association of Securities Dealers
Automated Quotations System, the mean between the highest bid and lowest
asked prices for the Common Stock on such day (or the last day quoted
prior to such day if not quoted on such day) as reported by National
Quotation Bureau Incorporated or a similar organization, or (d) if none of
the above is applicable, fair market value will be determined by the Board
of Directors.
(d) Options Non-Transferable. Each option granted under the Plan by
its terms shall not be transferable by the optionee otherwise than by
will, or by the laws of descent and distribution, and shall be exercised
during the lifetime of the optionee only by him. No option or interest
therein maybe transferred, assigned, pledged, or hypothecated by the
optionee during his lifetime, whether by operation of law or otherwise, or
be made subject to execution, attachment or similar process.
(e) Exercise Period. Except as otherwise provided in this Plan, no
option may be exercised prior to the first anniversary of the date of
grant of such option. provided that, subject to the provisions of Section
5 (f), no option may be exercised more than 90 days after the optionee
ceases to serve as a director of the Company. No option shall be
exercisable after the expiration of ten (10) years and one day from the
date of grant.
(f) Exercise Period Upon Death or Disability. Notwithstanding the
provisions of Section 5 (e), any option granted under the Plan may be
exercised in full by an optionee who becomes disabled while acting as a
full director of the Company, or may be exercised in full upon the death
of such optionee while a director of the Company or within three months
after he ceases to serve as a director of the Company, by the person to
whom it is transferred by will, by the laws of descent and distribution,
or by written notice filed pursuant to Section 5 (h), in each case within
the period of one year after the date of the optionee ceases to be such a
director by reason of such death or disability: provided, that no option
shall be exercisable after the expiration of ten (10) years and one day
from the date of grant.
(g) Exercise Procedure. Options may be exercised only by written
notice to the Company at its principal office specifying the number of
shares as to which the Option is being exercised, accompanied by payment
in cash of the full consideration for the shares as to which they are
exercised.
13
<PAGE>
(h) Exercise by Representative Following Death of Director. A
director, by written notice to the Company, may designate one or more
persons (and from time to time change such designation), including his
legal representative, who, by reason of the director's death, shall
acquire the right to exercise all or a portion of the option. If the
person or persons so designated wish to exercise any portion of the
option, they must do so within the term of the option as provided herein.
Any exercise by a representative shall be subject to the provisions of the
Plan.
6. Assignments. The rights and benefits under the Plan may not be assigned
except for the designation of a beneficiary as provided in Section 5.
7. Time for Granting Options. All options for shares subject to the Plan
shall be granted, if at all, not later than ten (10) years after the approval of
the Plan by the Company's stockholders.
8. Limitation of Rights.
(a) No Right to Continue as a Director. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
as a stockholder with respect to the shares covered by his options until the
date of the issuance to him of a stock certificate therefor, and no adjustment
will be made for dividends or other rights (except as provided in Section 9) for
which the record date is prior to the date such certification is issued.
9. Changes in Common Stock. (a) If the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities, or if additional shares or new or different shares or other
securities are distributed with respect to such of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment may be made in (i) the maximum number and kind of
shares reserved for issuance under the Plan, (ii) the number and kind of shares
or other securities subject to then outstanding options under the Plan and (iii)
the price for each share subject to any then outstanding options under the Plan,
without changing the aggregate purchase price as to which such options remain
exercisable. No fractional shares will be issued under the Plan on account of
any such adjustments.
14
<PAGE>
(b) In the event that the Company is merged or consolidated into or with
another corporation (in which consolidation or merger the stockholders of the
Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company are acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, as to outstanding options, either (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or successor corporation (or an affiliate thereof), or (ii) upon
written notice to the optionees, provided that all unexercised options will
terminate immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization or liquidation unless exercised by the optionee
within a specified number of days following the date of such notice.
10. Amendment of the Plan. The Board of Directors may suspend or
discontinue the Plan or review or amend it in any respect whatsoever; provided,
however, that without approval of the stockholders of the Company no revision or
amendment shall change the number of shares subject to the Plan (except as
provided in Section 9), change the designation of the class of directors
eligible to receive options, or materially increase the benefits accruing to
participants under the Plan; and provided further, however, that in no case may
the Plan be amended more than once every six months regarding which directors
may receive grants of options, the timing of the grants for all participants,
and the amount of options to be granted to individual participants.
12. Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of New York.
15
================================================================================
U.S.B. HOLDING CO., INC.
to
THE CHASE MANHATTAN BANK
Trustee
--------------------------------
JUNIOR SUBORDINATED INDENTURE
Dated as of February 5, 1997
================================================================================
<PAGE>
U.S.B. HOLDING CO., INC.
Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Sections 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of February 5, 1997.
Indenture
Trust Indenture Act Section Section
- --------------------------- -------
ss.310(a)(1), (2) and (5)..................................... 6.09
ss.310(a)(3).................................................. Not Applicable
ss.310(a)(4).................................................. Not Applicable
ss.310(b)..................................................... 6.08, 6.10
ss.310(c)..................................................... Not Applicable
ss.311(a)..................................................... 6.13
ss.311(b)..................................................... 6.13
ss.312(a)..................................................... 7.01, 7.02 (a)
ss.312(b)..................................................... 7.02(b)
ss.312(c)..................................................... 7.02(c)
ss.313(a)..................................................... 7.03(a)
ss.313(b)..................................................... 7.03 (b)
ss.313(c)..................................................... 7.03 (a),
7.03 (b)
ss.313(d)..................................................... 7.03(c)
ss.314(a)(1), (2) and (3)..................................... 7.04
ss.314(a)(4).................................................. 10.04
ss.314(b)..................................................... Not Applicable
ss.314(c)(1).................................................. 1.02
ss.314(c)(2).................................................. 1.02
ss.314(c)(3).................................................. Not Applicable
ss.314(d)..................................................... Not Applicable
ss.314(e)..................................................... 1.02
ss.314(f)..................................................... Not Applicable
ss.315(a)..................................................... 6.01(a)
ss.315(b)..................................................... 6.02, 7.03(a)
ss.315(c)..................................................... 6.01(b)
ss.315(d)..................................................... 6.01(c)
ss.315(d)(1).................................................. 6.01(c)(1)
ss.315(d)(2).................................................. 6.01(c)(2)
ss.315(d)(3).................................................. 6.01(c)(3)
ss.315(e)..................................................... 5.14
ss.316(a)..................................................... 1.01
ss.316(a)(1)(A)............................................... 5.12
ss.316(a)(1)(B)............................................... 5.13
ss.316(a)(2).................................................. Not Applicable
ss.316(b)..................................................... 5.08
ss.316(c)..................................................... 1.04(f)
ss.317(a)(1).................................................. 5.03
ss.317(a)(2).................................................. 5.04
ss.317(b)..................................................... 10.03
ss.318(a)..................................................... 1.07
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.
<PAGE>
-3-
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions and Other Provisions of
General Application
SECTION 1.01. Definitions.............................................1
SECTION 1.02. Compliance Certificate and Opinions.....................11
SECTION 1.03. Forms of Documents Delivered to Trustee.................12
SECTION 1.04. Acts of Holders.........................................12
SECTION 1.05. Notices, Etc. to Trustee and Company....................13
SECTION 1.06. Notice to Holders; Waiver...............................14
SECTION 1.07. Conflict with Trust Indenture Act.......................14
SECTION 1.08. Effect of Headings and Table of Contents................14
SECTION 1.09. Successors and Assigns..................................14
SECTION 1.10. Separability Clause.....................................14
SECTION 1.11. Benefits of Indenture...................................14
SECTION 1.12. Governing Law...........................................15
SECTION 1.13. Non-Business Days.......................................15
ARTICLE II Security Forms
SECTION 2.01. Forms Generally.........................................15
SECTION 2.02. Form of Face of Security................................16
SECTION 2.03. Form of Reverse of Security.............................20
SECTION 2.04. Additional Provisions Required in Global Security.......24
SECTION 2.05. Form of Trustee's Certificate of Authentication.........24
ARTICLE III The Securities
SECTION 3.01. Title and Terms.........................................25
SECTION 3.02. Denominations...........................................27
SECTION 3.03. Execution, Authentication, Delivery and Dating..........27
SECTION 3.04. Temporary Securities....................................29
SECTION 3.05. Global Securities.......................................29
SECTION 3.06. Registration, Transfer and Exchange Generally;
Certain Transfers and Exchanges; Restricted
Securities Legends...................................30
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities........34
SECTION 3.08. Payment of Interest; Interest Rights Preserved..........35
SECTION 3.09. Persons Deemed Owners...................................36
SECTION 3.10. Cancellation............................................37
SECTION 3.11. Computation of Interest.................................37
SECTION 3.12. Deferrals of Interest Payment Dates.....................37
<PAGE>
-4-
SECTION 3.13. Agreed Tax Treatment....................................38
SECTION 3.14. CUSIP Numbers...........................................38
ARTICLE IV Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.................39
SECTION 4.02. Application of Trust Money..............................40
ARTICLE V Remedies
SECTION 5.01. Events of Default.......................................40
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment......41
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee..............................................43
SECTION 5.04. Trustee May File Proofs of Claim........................44
SECTION 5.05. Trustee May Enforce Claim Without Possession of
Securities...........................................45
SECTION 5.06. Application of Money Collected..........................45
SECTION 5.07. Limitation on Suits.....................................45
SECTION 5.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest.................................46
SECTION 5.09. Restoration of Rights and Remedies......................46
SECTION 5.10. Rights and Remedies Cumulative..........................47
SECTION 5.11. Delay or Omission Not Waiver............................47
SECTION 5.12. Control by Holders......................................47
SECTION 5.13. Waiver of Past Defaults.................................48
SECTION 5.14. Undertaking for Costs...................................48
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.................48
SECTION 5.16. Option to Waive Certain Rights..........................49
SECTION 5.17. Tax Treatment of the Junior Subordinated Debt
Securities...........................................49
ARTICLE VI The Trustee
SECTION 6.01. Certain Duties and Responsibilities.....................49
SECTION 6.02. Notice of Defaults......................................50
SECTION 6.03. Certain Rights of Trustee...............................50
SECTION 6.04. Not Responsible for Recitals or Issuance of
Securities...........................................51
SECTION 6.05. May Hold Securities.....................................52
SECTION 6.06. Money Held in Trust.....................................52
SECTION 6.07. Compensation and Reimbursement..........................52
SECTION 6.08. Disqualification; Conflicting Interests.................53
SECTION 6.09. Corporate Trustee Required, Eligibility.................53
SECTION 6.10. Resignation and Removal; Appointment of Successor.......53
SECTION 6.11. Acceptance of Appointment by Successor..................55
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business.............................................56
<PAGE>
-5-
SECTION 6.13. Preferential Collection of Claims Against Company.......56
SECTION 6.14. Appointment of Authenticating Agent.....................56
SECTION 6.15. Trustee's Rights and Obligations After Qualification
of Indenture........................................58
ARTICLE VII Holder's Lists and Reports by Trustee
and Company
SECTION 7.01. Company to Furnish Trustee Names and Addresses of
Holders..............................................58
SECTION 7.02. Preservation of Information, Communications to
Holders..............................................58
SECTION 7.03. Reports by Trustee......................................59
SECTION 7.04. Reports by Company......................................59
ARTICLE VIII Consolidation, Merger, Conveyance,
Transfer or Lease
SECTION 8.01. Company May Consolidate, etc., Only on Certain Terms....60
SECTION 8.02. Successor Corporation Substituted.......................60
ARTICLE IX Supplemental Indentures
SECTION 9.01. Supplemental Indentures without Consent of Holders......61
SECTION 9.02. Supplemental Indentures with Consent of Holders.........62
SECTION 9.03. Execution of Supplemental Indentures....................64
SECTION 9.04. Effect of Supplemental Indentures.......................64
SECTION 9.05. Conformity with Trust Indenture Act.....................64
SECTION 9.06. Reference in Securities to Supplemental Indentures......64
ARTICLE X Covenants
SECTION 10.01. Payment of Principal, Premium and Interest.............64
SECTION 10.02. Maintenance of Office or Agency........................64
SECTION 10.03. Money for Security Payments to be Held in Trust........65
SECTION 10.04. Statement as to Compliance.............................66
SECTION 10.05. Waiver of Certain Covenants............................67
SECTION 10.06. Payment of the Trust's Costs and Expenses..............67
SECTION 10.07. Additional Covenants...................................67
SECTION 10.08. Information Returns....................................68
ARTICLE XI Redemption or Prepayment of Securities
SECTION 11.01. Applicability of this Article..........................68
SECTION 11.02. Election to Redeem; Notice to Trustee..................69
SECTION 11.03. Selection of Securities to be Redeemed.................69
<PAGE>
-6-
SECTION 11.04. Notice of Redemption...................................69
SECTION 11.05. Deposit of Redemption Price............................70
SECTION 11.06. Payment of Securities Called for Redemption............70
SECTION 11.07. Company's Right of Redemption..........................71
ARTICLE XII Exchange and Registration Rights
SECTION 12.01. Exchange...............................................71
SECTION 12.02. Registration...........................................72
SECTION 12.03. Liquidated Damages.....................................72
SECTION 12.04. Compliance with Law....................................72
ARTICLE XIII Sinking Funds
SECTION 13.01. Applicability of Article...............................73
SECTION 13.02. Satisfaction of Sinking Fund Payments with
Securities...........................................73
SECTION 13.03. Redemption of Securities for Sinking Fund..............73
ARTICLE XIV Subordination of Securities
SECTION 14.01. Securities Subordinate to Senior Debt..................75
SECTION 14.02. Payment Over of Proceeds Upon Dissolution, Etc.........75
SECTION 14.03. Prior Payment to Senior Debt Upon Acceleration of
Securities...........................................76
SECTION 14.04. No Payment When Senior Debt in Default.................77
SECTION 14.05. Payment Permitted If No Default........................78
SECTION 14.06. Subrogation to Rights of Holders of Senior Debt........78
SECTION 14.07. Provisions Solely to Define Relative Rights............78
SECTION 14.08. Trustee to Effectuate Subordination....................79
SECTION 14.09. No Waiver of Subordination Provisions..................79
SECTION 14.10. Notice to Trustee......................................79
SECTION 14.11. Reliance on Judicial Order or Certificate of
Liquidating Agent....................................79
SECTION 14.12. Trustee Not Fiduciary for Holders of Senior Debt.......80
SECTION 14.13. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights.....................80
SECTION 14.14. Article Applicable to Paying Agents....................80
SECTION 14.15. Certain Conversions or Exchanges Deemed Payment........80
<PAGE>
-7-
Exhibit A - Form of Restricted Securities Certificate
<PAGE>
JUNIOR SUBORDINATED INDENTURE, dated as of February 5,
1997 between U.S.B. HOLDING CO., INC., a bank holding company
established under the laws of Delaware (hereinafter called the
"Company") having its principal office at 100 Dutch Hill Road,
Orangeburg, New York 10962, and THE CHASE MANHATTAN BANK, a
New York banking corporation, as Trustee (hereinafter called
the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company of the proceeds from the
issuance from time to time by one or more business trusts (each a "U.S.B.H.
Capital Trust" and, collectively, the "U.S.B.H. Capital Trusts") of preferred
trust interests in such U.S.B.H. Capital Trusts (the "Capital Securities") and
common interests in such U.S.B.H. Capital Trusts (the "Common Securities" and,
collectively with the Capital Securities, the "Trust Securities"), and to
provide the terms and conditions upon which the Securities are to be
authenticated, issued and delivered.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration
of the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:
ARTICLE I
Definitions and Other Provisions of General Application
SECTION 1.01. Definitions. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular.
(2) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein.
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" with respect
to any computation required or permitted hereunder shall mean such accounting
principles which are generally accepted at the
<PAGE>
-2-
date or time of such computation; provided, that when two or more principles are
so generally accepted, it shall mean that set of principles consistent with
those in use by the Company.
(4) The words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 1.04.
"Additional Interest" means the interest, if any, that shall accrue
on any interest on the Securities of any series the payment of which has not
been made on the applicable Interest Payment Date and which shall accrue at the
rate per annum specified or determined as specified in any Officers' Certificate
delivered pursuant to Section 3.01 of the Indenture.
"Additional Sums" has the meaning specified in Section 10.06.
"Adjusted Treasury Rate" means, with respect to any prepayment date,
the rate per annum equal to (i) the yield, under the heading which represents
the average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Adjusted Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, calculated using a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such prepayment date, in each case calculated on the third Business Day
preceding the prepayment date, plus in each case (a) if such prepayment is in
connection with a Tax Event, (1) 2.25% if such prepayment occurs on or prior to
February 1, 1998 and (2) 1.50% in all other cases, and (b) if such prepayment is
in connection with a Regulatory Capital Event, (1) 2.25% if such prepayment
occurs on or prior to February 1, 1998 and (2) 1.50% in all other cases.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Company shall not be deemed to include any U.S.B.H. Capital Trust to which
Securities have been issued. For the purposes of this definition, "control" when
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
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"Agent Member" means any member of, or participant in, the
Depositary.
"Amended and Restated Declaration of Trust" for each series of
Securities has the meaning specified in the Officers' Certificate for such
series delivered pursuant to Section 3.01 of this Indenture.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any committee of that board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday,
(ii) a day on which banking institutions in The City of New York are authorized
or required by law or executive order to remain closed, or (iii) a day on which
the Corporate Trust Office of the Trustee, or, with respect to the Securities of
a series issued to a U.S.B.H. Capital Trust, the principal office of the
Property Trustee under the related Trust Agreement, is closed for business.
"Capital Securities" has the meaning specified in the first recital
of this Indenture, and shall include, where appropriate, Exchange Capital
Securities as defined in Article XII.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or if at any time under the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties on such date.
"Common Securities" has the meaning specified in the first
recital of this Indenture.
"Common Stock" means the common stock, $5.00 par value, of the
Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" and "Company Order" mean, respectively, the
written request or order signed in the name of the Company by the Chairman,
Chief Executive
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Officer, President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Controller, the Secretary or an Assistant Secretary of the
Company, and delivered to the Trustee.
"Comparable Treasury Issue" means the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
Remaining Life of the Security to be prepaid that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity with the Remaining
Life of the Securities. If no United States Treasury Security has a maturity
which is within a period from three months before to three months after,
February 1, 2007, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Adjusted
Treasury Rate shall be interpolated or extrapolated on a straight-line basis,
rounding to the nearest month using such securities.
"Comparable Treasury Price" means, with respect to any prepayment
date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (a) the average
of five Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest of such Reference Treasury Dealer Quotations,
or (b) if the Trustee obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Corporate Trust Office", means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office as of the date of this Indenture is located at 450
West 33rd Street, 15th Floor, New York, New York 10001, Attention: Corporate
Trustee Administration Department.
"Corporation" includes a corporation, association, company,
joint-stock company or business trust.
"Declaration of Trust" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01 of this Indenture.
"Debt" means (i) the principal of and premium, if any, and unpaid
interest on indebtedness for money borrowed, (ii) purchase money and similar
obligations, (iii) obligations under capital leases, (iv) guarantees,
assumptions or purchase commitments relating to, or other transactions as a
result of which the Company is responsible for the payment of, such indebtedness
of others, (v) renewals, extensions and refunding of any such indebtedness, (vi)
interest or obligations in respect of any such indebtedness accruing after the
commencement of any insolvency or bankruptcy proceedings and (vii) obligations
associated with derivative products such as interest rate and currency exchange
contracts, foreign exchange contracts, commodity contracts and similar
arrangements; provided, however, that
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Debt shall not include trade accounts payable or accrued liabilities in the
ordinary course of business.
"Defaulted Interest" has the meaning specified in Section 3.08.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.01 with respect to such series (or any successor thereto (a "Successor
Depositary")).
"Discount Security" means any security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 5.02.
"Dollar" means the currency of the United States of America that, as
at the time of payment, is legal tender for the payment of public and private
debts.
"DTC" means The Depository Trust Company.
"Event of Default", unless otherwise specified in the supplemental
indenture creating a series of Securities, has the meaning specified in Article
V.
"Extension Period" has the meaning specified in Section 3.12.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Foreign Currency" means any currency issued by the government of
one or more countries other than the United States of America or by any
recognized confederation or association of such governments.
"Global Security" means a Security in the form prescribed in Section
2.04 evidencing all or part of a series of Securities, issued to the Depositary
of its nominee for such series, and registered in the name of such Depositary or
its nominee.
"Guarantee Agreement" for each series of Securities has the meaning
specified in the Officers' Certificate for such series delivered pursuant to
Section 3.01 of this Indenture.
"Holder" means a Person in whose name a Security is registered in
the Securities Register.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of each particular series of Securities established
as contemplated by Section 3.01.
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"Institutional Accredited Investor" means an accredited investor
within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act.
"Interest Payment Date" means as to each series of Securities the
Stated Maturity of an installment of interest on such Securities.
"Interest Rate" means the rate of interest specified or determined
as specified in each Security as being the rate of interest payable on such
Security.
"Junior Subordinated Payment" has the meaning specified in Section
14.02.
"Lien" means any mortgage, pledge, lien, security interest or other
encumbrance.
"Liquidation Amount" has the meaning specified in Section 1.01 of
the Trust Agreement.
"Maturity", when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether as the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman
and Chief Executive Officer, President, or Vice President, and by the Treasurer,
the Controller, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and delivered to the Trustee, which certificate shall
comply with the provisions of Section 1.03 hereof.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, which opinion shall comply with the provisions of
Section 1.03 hereof.
"Original Issue Date" means the date of issuance specified as such
in each Security.
"Other Debentures" means, with respect to any series of Securities,
all junior subordinated debt securities to be issued by the Company pursuant to
this Indenture, other than such series of Securities, with substantially similar
subordination terms, and which will be issued and sold (if at all) to any
U.S.B.H. Capital Trust established by the Company (if any), and will be
unsecured and subordinate and junior in right of payment to the extent and to
the manner set forth in this Indenture to all Senior Debt of the Company.
"Other Guarantees" means, with respect to any series of Securities,
all guarantees (if any) to be issued by the Company with respect to Capital
Securities (if any) to be issued by any U.S.B.H. Capital Trust to be established
by the Company (if any), other than the guarantee related to such series of
Securities.
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"Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount has
been theretofore deposited with the Trustee or any Paying Agent in trust
for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or which have been paid
pursuant to Section 3.07, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands such
Securities are valid, binding and legal obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible officer actually knows to
be so owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor. Upon the
written request of the Trustee, the Company shall furnish the Trustee promptly
an Officers' Certificate listing and identifying all Securities, if any, known
by the Company to be owned or held by or for the account of the Company, or any
other obligor on the Securities or any Affiliate of the Company or such obligor,
and, subject to the provisions of Section 6.01, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Securities not listed therein are Outstanding
for the purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of (or premium, if any) or interest on any
Securities on behalf of the Company.
"Person" means any individual, Corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment" means, with respect to the Securities of any
series, the place or places where the principal of (and premium, if any) and
interest on the Securities of such series are payable pursuant to Sections 3.01
and 3.11.
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"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
security authenticated and delivered under Section 3.07 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Proceeding" has the meaning specified in Section 14.02.
"Property Trustee" means, in respect of any U.S.B.H. Capital Trust,
the commercial bank or trust company identified as the "Property Trustee" in the
related Trust Agreement, solely in its capacity as Property Trustee of such
U.S.B.H. Capital Trust under each Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as therein provided.
"Quotation Agent" means the Reference Treasury Dealer selected by
the Trustee to act as such after consultation with the Company.
"Redemption Date", when used with respect to any Security of a
series to be redeemed, means the date fixed for such redemption by or pursuant
to this Indenture.
"Reference Treasury Dealer" means a nationally-recognized U.S.
Government Securities dealer selected by the Trustee after consultation with the
Company and its respective successors.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Trustee, of the bid and asked prices at 5:00 p.m., New York City time, on
the third Business Day preceding such prepayment date for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by such Reference Treasury Dealer.
"Regular Record Date" for the interest payable on any Interest
Payment Date with respect to the Securities of a series means, unless otherwise
provided pursuant to Section 3.01 with respect to Securities of a series, the
date which is the Business Day next preceding such Interest Payment Date.
"Regulatory Capital Event" means the Company shall have received an
opinion of independent bank regulatory counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in the laws (or any regulations thereunder) of the
United States or any rules, guidelines or policies of the Federal Reserve Board
or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such pronouncement or decision is announced on or after the date of
original issuance of the Capital Securities, the Capital Securities do not
constitute, or within 90 days of the date thereof, will not constitute, Tier 1
capital (or its then equivalent); provided, however, that the distribution of
the Securities in connection with the liquidation of the Trust by the
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Company and the treatment thereafter of the Securities as other than Tier 1
capital shall not in and of itself constitute a Regulatory Capital Event unless
such liquidation shall have occurred in connection with a Tax Event.
"Remaining Life" has the meaning specified in Section 2.03.
"Responsible Officer", when used with respect to the Trustee means
any officer of the Trustee having direct responsibility for the administration
of this Indenture, and also means, with respect to a particular matter, any
other officer of the Trustee to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"Restricted Security" means each Security required pursuant to
Section 3.06(c) hereof to bear a Restricted Securities Legend.
"Restricted Securities Certificate" means a certificate
substantially in the form set forth in Exhibit A to this Indenture.
"Restricted Securities Legend" means a legend substantially in the
form of the legend required in the form of Security set forth in Section 2.02 to
be placed on a Restricted Security.
"Securities" or "Security" means any debt securities or debt
security, as the case may be, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Certificate" means a certificate evidencing ownership of
Securities.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.06.
"Senior Debt" with respect to any series of Securities 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 of the Company,
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 Securities or the Other 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 U.S. 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 to the extent such debt is 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 as a result of the subordination
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provisions of this Indenture would be greater than such payments otherwise would
have been as a result of any obligation of such holders of such Debt 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 the
subordination provisions to which such Debt is subject; and (e) any other debt
securities issued pursuant to this Indenture.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 3.08.
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case of
such principal, as such date may be shortened or extended as provided pursuant
to the terms of such Security and this Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.07 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Event" means the receipt by the Company of an opinion of
independent counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced proposed 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 proposed change, pronouncement or decision is announced on or after the
Original Issue Date of the applicable series of Securities or of the applicable
Capital Securities issued by the affected U.S.B.H. Capital Trust, there is more
than an insubstantial risk that (i) such U.S.B.H. Capital Trust is, or will be
within 90 days of the date of such opinion of independent counsel, subject to
United States Federal income tax with respect to income received or accrued on
such Securities, (ii) interest payable by the Company on such series of
Securities is not, or within 90 days of the date of such opinion of independent
counsel, will not be, deductible by the Company, in whole or in part, for United
States Federal income tax purposes, or (iii) such U.S.B.H. Capital Trust is, or
will be within 90 days of the date of such opinion of independent counsel,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
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"Trust Agreement" with respect to each series of Securities means
the Declaration of Trust with respect to such series, as amended by the Amended
and Restated Declaration of Trust with respect to such series.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a Successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder and,
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. ss.ss. 77aaa-77bbbb), as amended and as in effect on the date of this
Indenture, except as provided in Sections 1.07 and 9.05 hereof, provided that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
"Trust Securities" has the meaning specified in the first recital
of this Indenture.
"U.S.B.H. Capital Trust" has the meaning specified in the first
recital of this Indenture.
"U.S.B. Holding Co., Inc. Guarantee" means the guarantee by the
Company of the distributions on the Trust Securities of a U.S.B.H. Capital
Trust to the extent of the Guarantee Agreement.
"Vice President", when used with respect to the Company, means any
duly appointed vice president, whether or not designated by a number or a word
or words added before or after the title "vice president".
SECTION 1.02. Compliance Certificate and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent (including covenants
compliance with which constitutes a condition precedent), if any, provided for
in this Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel that all such
conditions precedent (including covenants compliance with which constitute a
condition precedent), if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided regarding conditions or covenants waived by the Holders
pursuant to Section 10.05) shall include:
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(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. Forms of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or given an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given to or taken by Holders, may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments is or are delivered to the Trustee, and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a
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writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the
Securities Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(f) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to take any action
under this Indenture by vote or consent. Except as otherwise provided herein,
such record date shall be the later of 30 days prior to the first solicitation
of such consent or vote or the date of the most recent list of Securityholders
furnished to the Trustee pursuant to Section 7.01 prior to such solicitation. If
a record date is fixed, those persons who were Securityholders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to take such action by vote or consent or to revoke any vote or consent
previously given, whether or not such persons continue to be Holders after such
record date, provided, however, that unless such vote or consent is obtained
from the Holders (or their duly designated proxies) of the requisite principal
amount of Outstanding Securities prior to the date which is the 120th day after
such record date, any such vote or consent previously given shall automatically
and without further action by any Holder be canceled and of no further effect.
SECTION 1.05. Notices, Etc. to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with:
(1) the Trustee by any holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
<PAGE>
-14-
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise provided in Section 5.01 hereof)
hereunder if in writing and mailed, first class, postage prepaid, to the
Company addressed to it at the address of its principal office specified
in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 1.06. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first class postage prepaid, to each Holder affected by such event, at the
address of such Holder as it appears in the Securities Register, not later than
the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 1.07. Conflict with Trust Indenture Act. This Indenture will
not be qualified under the Trust Indenture Act except upon the effectiveness of
a registration statement as contemplated in Article XII hereof. If any provision
of this Indenture limits, qualifies or conflicts with the duties imposed by any
of Section 310 to 317, inclusive, of the Trust Indenture Act through operation
of Section 318(c) thereof, such imposed duties shall control.
SECTION 1.08. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and agreements
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 1.10. Separability Clause. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto, any Paying Agent and their successors and assigns, the holders
of Senior Debt and the Holders of the Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
<PAGE>
-15-
SECTION 1.12. Governing Law. This Indenture and the Securities shall
be governed by and construed in accordance with the laws of the State of New
York without regard to the conflicts of laws principles thereof.
SECTION 1.13. Non-Business Days. In any case where any Interest
Payment Date, Redemption Date or Stated Maturity of any Security shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or the
Securities) payment of interest or principal need not be made on such date, but
may be made on the next succeeding Business Day (and no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, until such next succeeding Business Day)
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity, as the case may be, such payment was
originally payable.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities of each series and the
Trustee's certificate of authentication shall be in substantially the forms set
forth in this Article, or in such other form or forms as shall be established by
or pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with applicable tax
laws or the rules of any securities exchange or as may, consistently herewith,
be determined by the officers executing such securities, as evidenced by their
execution of the Securities. If the form of Securities of any series is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 3.03 with respect to
the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules or any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Securities distributed to holders of book-entry Capital Securities
shall be distributed in the form of one or more Global Securities registered in
the name of a Depositary or its nominee, and deposited with the Securities
Registrar, as custodian for such Depositary, or held by such Depositary for
credit by the Depositary to the respective accounts of the
<PAGE>
-16-
beneficial owners of the Securities represented thereby (or such other accounts
they may direct). Securities distributed to holders of Capital Securities other
than book-entry Capital Securities shall not be issued in the form of a Global
Security or any other form intended to facilitate book-entry trading in
beneficial interests in such Securities.
SECTION 2.02. Form of Face of Security.
[If this Security is a Restricted Security, insert -- THIS SECURITY
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH U.S.B. HOLDING CO., INC. (THE
"CORPORATION") OR ANY AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTIONS
TERMINATION DATE") ONLY (A) TO THE CORPORATION, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE CORPORATION'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED
DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION OR
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTIONS TERMINATION DATE.]
<PAGE>
-17-
U.S.B. HOLDING CO., INC.
(Title of Security)
No. $
U.S.B. HOLDING CO., INC., a corporation organized and existing under
the laws of Delaware (hereinafter called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ___________, or its registered assigns, the
principal sum of __________ Dollars on __________. The Company further promises
to pay interest on said principal sum from or from the most recent interest
payment date (each such date, an "Interest Payment Date") on which interest has
been paid or duly provided for, [monthly] (quarterly] [semi-annually] [if
applicable, insert--(subject to deferral as set forth herein)], in arrears on
[insert applicable Interest Payment Dates] of each year, commencing , at the
rate of % per annum, until the principal hereof shall have become due and
payable, [if applicable, insert--plus Additional Interest, if any,] until the
principal hereof is paid or duly provided for or made available for payment [if
applicable, insert--and on any overdue principal and (without duplication and to
the extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the rate of % per annum, compounded
[monthly] [quarterly] [semi-annually] [annually] as Additional Interest]. The
amount of interest payable for any period shall be computed on the basis of
twelve 30-day months and a 360-day year. The amount of interest payable 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 Security is not a Business Day, then a payment of
the interest payable on such date will 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), (except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case] with the same force and effect as if made on the date the
payment was originally payable. A "Business Day" shall mean any day other than
(i) a Saturday or Sunday, (ii) a day on which banking institutions in The City
of New York are authorized or required by law or executive order to remain
closed or (iii) a day on which the Corporate Trust Office of the Trustee or the
Corporate Trust Office of the Property Trustee under the Trust Agreement
hereinafter referred to for U.S.B.H. Capital Trust is closed for business. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities, as
defined in the Indenture) is registered at the close of business on the Regular
Record Date for such interest installment, which shall be the [insert definition
of Regular Record Dates]. Any such interest installment not so punctually paid
or duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this
<PAGE>
-18-
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
[If applicable, insert -- So long as no Event of Default has
occurred and is continuing, the Company shall have the right at any time during
the term of this Security, from time to time, to defer payment of interest on
such Security for up to _____ consecutive [monthly] [quarterly] [semi-annual]
interest payment periods with respect to each deferral period (each an
"Extension Period"), during which Extension Periods the Company shall have the
right to make partial payments of interest on any Interest Payment Date, and at
the end of which the Company shall pay all interest then accrued and unpaid
(together with Additional Interest thereon to the extent permitted by applicable
law); provided, however, that no Extension Period may extend beyond the Maturity
of this Security. During any such Extension Period, the Company will not (i)
declare or pay any dividends or distributions on or redeem, purchase, acquire or
make a liquidation payment with respect to, any of the Company's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal of, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company (including Other Debentures) that ranks pari
passu with or junior in interest to this Security or (iii) make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any Subsidiary of the Company (including Other Guarantees) if such guarantee
ranks pari passu with or junior in interest to this Security (other than (a)
dividends or distributions in Common Stock of the Company, (b) any declaration
of a dividend in connection with the implementation of a stockholders' 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, (c) payments under
the applicable U.S.B. Holding Co., Inc. Guarantee, (d) purchases or acquisitions
of shares of the Company's Common Stock in connection with the satisfaction by
the Company of its obligations under any employee benefit plan or other
contractual obligation of the Company (other than a contractual obligation
ranking pari passu with or junior to these Securities), (e) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, or (f) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged).
Prior to the termination of any such Extension Period, the Company may further
extend such Extension Period, provided, however, that such extension does not
cause such Extension Period to exceed consecutive [monthly] [quarterly]
[semi-annual] interest payment periods or extend beyond the Maturity of this
Security. Upon the termination of any such Extension Period and the payment of
all accrued and unpaid interest and any Additional Interest then due, the
Company may elect to begin a new Extension Period, subject to the above
requirements. No interest shall be due and payable during an Extension Period
except at the end thereof. The Company shall give the Holder of this Security
and the Trustee notice of its election to begin any Extension Period at least
five Business Days prior to the Interest Payment Date, [if applicable,
insert--or, with respect to the Securities issued to a U.S.B.H. Capital Trust,
prior to the earlier of (i) the date the Distributions on the Capital Securities
would have been payable except for the election to begin or extend such
Extension Period or (ii) the date the Administrative Trustees are required to
give notice to any automated quotation
<PAGE>
-19-
system or to holders of such Capital Securities of the record date or the date
such Distributions are payable, but in any event not less than five Business
Days prior to such record date]. There is no limitation on the number of times
the Company may elect to begin an Extension Period.
Payment of the principal of (and premium, if any) and interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in the United States, in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts [if applicable, insert--; provided, however, that at the option of
the Company payment of any interest may be made (except Securities in Global
form) (i) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Securities Register or (ii) by wire transfer in
immediately available funds at such place and to such account as may be
designated by the Person entitled thereto as specified in the Securities
Register].
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Debt, and this Security is issued subject to
the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
actions as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Debt, whether now outstanding or hereinafter incurred,
and waives reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
<PAGE>
-20-
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Date: U.S.B. HOLDING CO., INC.,
[Seal]
By_________________________________
[Chairman and Chief
Executive Officer,
President or
Vice President]
Attest:
__________________________________
[Secretary or Assistant Secretary]
SECTION 2.03. Form of Reverse of Security. This Security is one of a
duly authorized issue of securities of the Company (herein called the
"Securities"), issued and to be issued in one or more series under a Junior
Subordinated Indenture, dated as of February 5, 1997, [as supplemented by an
Officers' Certificate dated as of ____________, (herein called the "Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof [, limited in aggregate principal amount to $ ].
All terms used in this Security that are defined in the Indenture
[if applicable, insert--and in the Amended and Restated Declaration of Trust of
[insert the applicable U.S.B.H. Capital Trust ], dated as of [ ] (the
"Amended and Restated Declaration of Trust") among U.S.B. Holding Co., Inc., as
Depositor, and the Trustees named therein,] shall have the meanings assigned to
them in the Indenture or, to the extent not defined in the Indenture, the
Amended and Restated Declaration of Trust, as the case may be.
[If applicable, insert -- On or after the Company may at any time,
at its option, subject to the terms and conditions of Article XI of the
Indenture and subject to the Company having received prior approval of the
Federal Reserve if then required under applicable capital guidelines of the
Federal Reserve, redeem this Security in whole or in part at any time or from
time to time prior to maturity, at a redemption price (the "Optional Prepayment
Price") equal
<PAGE>
-21-
to the following prices, expressed in percentages of the principal amount of the
Securities together with accrued but unpaid interest to but excluding the date
fixed for redemption. If redeemed during the 12-month period beginning
____________:
Year Redemption
Price
---- ----------
[Insert year and redemption prices]
and at 100% on or after _____________.]
[If applicable, insert -- If a Tax Event or a Regulatory Capital
Event (each a "Special Event") shall occur and be continuing prior to __________
__, ______, the Company may, at its option and subject to receipt of prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve, prepay the Securities within 90
days after the occurrence of such Special Event, in whole (but not in part), at
a prepayment price (the "Special Event Prepayment Price") equal to the greater
of (i) 100% of the principal amount of such Securities and (ii) the sum, as
determined by a Quotation Agent, of the present values of the principal amount
and premium payable as part of the Optional Prepayment Price with respect to an
optional redemption of such Securities on to __________ __, ______, together
with scheduled payments of interest accruing from the prepayment date to
__________ __, ______, (the "Remaining Life"), in each case discounted to the
prepayment date on a semiannual basis (assuming a 360-day year consisting of
30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
interest thereon to the date of prepayment. In the case of redemption on or
after to __________ __, ______, following a Special Event, the Special Event
Prepayment Price shall equal the Optional Prepayment Price then applicable to a
redemption as described above.]
In the event of redemption of this Security in part only, a new
Security or Securities of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
[If the Security is not a Discount Security, -- If an Event of
Default with respect to Securities of this series shall occur and be continuing,
the principal of this Security may be declared due and payable in the manner,
with the effect and subject to the conditions provided in the Indenture].
[If the Security is a Discount Security, -- If an Event of Default
with respect to Securities of this series shall occur and be continuing, an
amount of principal of this Security may be declared due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.
Such amount shall be equal to [ -- insert formula for determining the amount].
Upon payment (i) of the amount of principal so declared due and payable and (ii)
<PAGE>
-22-
of interest on any overdue principal and overdue interest (in each case to the
extent that the payment of such interest shall be legally enforceable), all of
the Company's obligations in respect of the payment of the principal of and
interest, if any, on this Security shall terminate.]
The Indenture permits, with certain exceptions as therein provided,
the Company and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Company and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
[If the Security is not a Discount Security, -- As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in principal amount of the Outstanding Securities of this series may
declare the principal amount of all the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided, however, that, in the case of the Securities of
this series issued to a U.S.B.H. Capital Trust, if upon an Event of Default, the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of this series fails to declare the principal of all the
Securities of this series to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount of the corresponding series of Capital
Securities then outstanding shall have such right by a notice in writing to the
Company and the Trustee. The Holders of a majority in aggregate principal amount
of the Outstanding Securities of these Securities may annul such declaration and
waive the default if the default (other than the non-payment of the principal of
these Securities which has become due solely by such acceleration) has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Trustee. Should the Holders of these Securities fail to annul such declaration
and waive such default, the holders of a majority in aggregate Liquidation
Amount of the Capital Securities shall have such right. Upon any such
declaration such specified amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIV of the Indenture.]
[If the Security is a Discount Security, -- As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or
<PAGE>
-23-
the Holders of not less than such portion of the principal amount as may be
specified in the terms of this series of all the Securities of this series to be
due and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), provided that, in the case of the Securities of
this series issued to a U.S.B.H. Capital Trust, if upon an Event of Default, the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of this series fails to declare the principal of all the
Securities of this series to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount of the corresponding series of Capital
Securities then outstanding shall have such right by a notice in writing to the
Company and the Trustee. The Holders of a majority in aggregate principal amount
of the Outstanding Securities of these Securities may annul such declaration and
waive the default if the default (other than the nonpayment of the principal of
these Securities which has become due solely by such acceleration) has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Trustee. Should the Holders of these Securities fail to annul such declaration
and waive such default, the holders of a majority in aggregate Liquidation
Amount of the Capital Securities shall have such right. Upon any such
declaration such specified amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIII of the Indenture.]
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate, and
in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained pursuant to Section
10.02 of the Indenture duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Securities Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing
and thereupon one or more new Securities of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees. No service charge shall be made for any
such registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
shall treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
<PAGE>
-24-
The Securities of this series are issuable only in registered form
without coupons in denominations of $____________ and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of such series of a different authorized
denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security intend that such Security constitute indebtedness and
agree to treat such Security as indebtedness for all United States Federal,
state and local tax purposes.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES THEREOF.
SECTION 2.04. Additional Provisions Required in Global Security. Any
Global Security issued hereunder shall, in additional to the provisions
contained in Sections 2.02 and 2.03, bear a legend in substantially the
following form:
"This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of The Depository
Trust Company (the "Depositary") or a nominee of the Depositary. This
Security is exchangeable for Securities registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Indenture and no transfer of this Security (other than a
transfer of this Security as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited
circumstances.
Unless this Security is presented by an authorized representative of The
Depositary Trust Company (55 Water Street, New York) to U.S.B. Holding
Co., Inc. or its agent for registration of transfer, exchange or payment,
and any Security issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of The Depository
Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein."
SECTION 2.05. Form of Trustee's Certificate of Authentication. This
is one of the Securities referred to in the within mentioned Indenture:
THE CHASE MANHATTAN BANK
as Trustee
By:__________________________________
Authorized Officer
<PAGE>
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ARTICLE III
The Securities
SECTION 3.01. Title and Terms. The aggregate principal amount of
Securities which may be authenticated and delivered under this Indenture is
unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of a series:
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 3.04, 3.06, 3.07, 9.06 or
11.06); provided, however, that the authorized aggregate principal amount
of such series may be increased above such amount by a Board Resolution to
such effect;
(c) the Stated Maturity or Maturities on which the principal of the
Securities of such series is payable or the method of determination
thereof;
(d) the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates and extent to which
Additional Interest, if any, shall be payable in respect of any Securities
of such series, the Interest Payment Dates on which such interest shall be
payable, the right, pursuant to Section 3.12 or as otherwise set forth
therein, of the Company to defer or extend an Interest Payment Date, and
the Regular Record Date for the interest payable on any Interest Payment
Date or the method by which any of the foregoing shall be determined;
(e) the place or places where the principal of (and premium, if any)
and interest on the Securities of such series shall be payable, the place
or places where the Securities of such series may be presented for
registration of transfer or exchange, and the place or places where
notices and demands to or upon the Company in respect of the Securities of
such series may be made;
(f) the period or periods within or the date or date on which, if
any, the price or prices at which and the terms and conditions upon which
the Securities of such series may be redeemed, in whole or in part, at the
option of the Company;
(g) the obligation or the right, if any, of the Company to redeem,
repay or purchase the Securities of such series pursuant to any sinking
fund, amortization or analogous provisions, or at the option of a Holder
thereof, and the period or periods within which, the prices or prices at
which, the currency or currencies (including
<PAGE>
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currency unit or units) in which and the other terms and conditions upon
which Securities of the series shall be redeemed, repaid or purchased, in
whole or in part, pursuant to such obligations;
(h) the denominations in which any Securities of such series shall
be issuable, if other than denominations of $1,000 and any integral
multiple thereof;
(i) if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any)
and interest, if any, on the Securities of the series shall be payable, or
in which the Securities of the series shall be denominated and the manner
of determining the equivalent thereof in Dollars for purposes of the
definition of the term "Outstanding";
(j) the additions, modifications or deletions, if any, in the Events
of Default or covenants of the Company set forth herein with respect to
the Securities of such series;
(k) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;
(l) the additions or changes, if any, to this Indenture with respect
to the Securities of such series as shall be necessary to permit or
facilitate the issuance of the Securities of such series in bearer form,
registrable or not registrable as to principal, and with or without
interest coupons;
(m) any index or indices used to determine the amount of payments of
principal of and premium, if any, on the Securities of such series or the
manner in which such amounts will be determined;
(n) the issuance of a temporary Global Security representing all of
the Securities of such series and exchange of such temporary Global
Security for definitive Securities of such series;
(o) whether the Securities of the series shall be issued in whole or
in part in the form of one or more Global Securities and, in such case,
the Depositary for such Global Securities, which Depositary shall be a
clearing agency registered under the Securities Exchange Act of 1934, as
amended;
(p) the appointment of any Paying Agent or Agents for the Securities
of such series;
(q) the terms of any right to convert or exchange Securities of such
series into any other securities or property of the Company, and the
additions or changes, if any, to this Indenture with respect to the
Securities of such series to permit or facilitate such conversion or
exchange;
<PAGE>
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(r) the transfer restrictions and legends required to be on the
Securities;
(s) the definitions of Amended and Restated Declaration of Trust,
Declaration of Trust and Guarantee Agreement for each series;
(t) the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of Securities
in right of payment, whether such other series of Securities are
Outstanding or not; and
(u) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officers' Certificate
or in any such indenture supplemental hereto.
Unless otherwise provided with respect to the Securities of any
series, at the option of the Company, interest on the Securities of any series
that bears interest may be paid by (i) by mailing a check to the address of the
person entitled thereto as such address shall appear in the Securities Register
or (ii) by wire transfer in immediately available funds at such place and to
such account as may be designated by the person entitled thereto as specified in
the Securities Register.
SECTION 3.02. Denominations. The Securities of each series shall be
in registered form without coupons and shall be issuable in denominations of
$1,000 and any integral multiple thereof, unless otherwise specified as
contemplated by Section 3.01.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents under its corporate seal
reproduced or impressed thereon and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. At any time and from time to
time after the execution and delivery of this Indenture, the Company may deliver
Securities executed by the Company to the Trustee for authentication. Securities
may be authenticated on original issuance from time to time and delivered
pursuant to such procedures acceptable to the Trustee ("Procedures") as may be
specified from time to time by Company Order. Procedures may authorize
authentication and delivery pursuant to oral instructions of the Company or a
duly authorized agent, which instructions shall be promptly confirmed in
writing.
<PAGE>
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Prior to the delivery of a Security in any such form to the Trustee
for authentication, the Company shall deliver to the Trustee the following:
(a) a Company Order requesting the Trustee's authentication and
delivery of all or a portion of the Securities of such series, and if less
than all, setting forth procedures for such authentication;
(b) the Board Resolution by or pursuant to which such form of
Security has been approved, and the Board Resolution, if any, by or
pursuant to which the terms of the Securities of such series have been
approved, and, if pursuant to a Board Resolution, an Officers' Certificate
describing the action taken;
(c) an Officers' Certificate dated the date such certificate is
delivered to the Trustee, stating that all conditions precedent provided
for in this Indenture relating to the authentication and delivery of
Securities in such form and with such terms have been complied with; and
(d) an Opinion of Counsel substantially to the effect that (i) the
form of such Securities has been duly authorized and approved in
conformity with the provisions of this Indenture; (ii) the terms of such
Securities have been duly authorized and determined in conformity with the
provisions of this Indenture, or, if such terms are to be determined
pursuant to Procedures, as defined above, when so determined such terms
shall have been duly authorized and determined in conformity with the
provisions of this Indenture; and (iii) Securities in such form when
completed by appropriate insertions and executed and delivered by the
Company to the Trustee for authentication in accordance with this
Indenture, authenticated and delivered by the Trustee in accordance with
this Indenture within the authorization as to aggregate principal amount
established from time to time by the Board of Directors and sold in the
manner specified in such Opinion of Counsel, will be the legal, valid and
binding obligations of the Company entitled to the benefits of this
Indenture, subject to applicable bankruptcy, reorganization, insolvency
and similar laws generally affecting creditors, rights, to general
equitable principles and except as enforcement thereof may be limited by
(A) requirements that a claim with respect to any Securities denominated
other than in Dollars (or a Foreign Currency or currency unit judgment in
respect of such claim) be converted into Dollars at a rate of exchange
prevailing on a date determined pursuant to applicable law or (B)
governmental authority to limit, delay or prohibit the making of payments
in Foreign Currencies or currency units or payments outside the United
States, and subject to such other qualifications as such counsel shall
conclude do not materially affect the rights of Holders of such
Securities.
The Trustee shall be entitled to receive the documents referred to
in clauses (b) and (d) above only at or prior to the first request of the
Company to the Trustee to authenticate Securities of such series.
Each Security shall be dated the date of its authentication.
<PAGE>
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No Security shall be entitled to any benefit under this Indenture,
or be valid or obligatory for any purpose, unless there appears on such Security
a certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.
SECTION 3.04. Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
denomination, substantially of the tenor of the definitive Securities of such
series in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations having the
same Original Issue Date and Stated Maturity and having the same terms as such
temporary Securities. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 3.05. Global Securities. (a) Each Global Security issued
under this Indenture shall be registered in the name of the Depositary
designated by the Company for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or custodian therefor, and
each such Global Security shall constitute a single Security for all purposes of
this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (a) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security, and the
Company is unable to locate a qualified successor, (b) the Company executes and
delivers to the Trustee a Company Order stating that the Company elects to
terminate the book-entry system through the Depositary, (c) there shall have
occurred and be continuing an Event of Default or (d) pursuant to the following
sentence. All or any portion of a Global Security may be exchanged for a
Security that has a like aggregate principal amount and is not a Global
<PAGE>
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Security upon 20 days' prior request made by the Depositary or its Agent Member
to the Securities Registrar.
(c) If any Global Security is to be exchanged for other Securities
or canceled in whole, it shall be surrendered by or on behalf of the Depositary
or its nominee to the Securities Registrar for exchange or cancellation as
provided in this Article III. If any Global Security is to be exchanged for
other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article III or (ii) the principal amount
thereof shall be reduced, subject to Section 3.06(b)(iv), or increased by an
amount equal to the portion thereof to be so exchanged or canceled, or equal to
the principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment made
on the records of the Securities Registrar, whereupon the Trustee shall instruct
the Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global
Security by the Depositary, accompanied by registration instructions and, to the
extent required by Section 3.06, a Restricted Securities Certificate, the
Trustee shall, subject to Section 3.05(b) and as otherwise provided in this
Article III, authenticate and deliver any Securities issuable in exchange for
such Global Security (or any portion thereof) in accordance with the
instructions of the Depositary. The Trustee shall not be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.
(d) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interest pursuant to the rules and procedures of
the Depositary. Accordingly, any such owner's beneficial interests in a Global
Security shall be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members. Neither the Trustee nor the Securities Registrar shall have
any liability in respect of any transfers effected by the Depositary.
(e) The rights of the beneficial interests in a Global Security
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.
SECTION 3.06. Registration, Transfer and Exchange Generally; Certain
Transfers and Exchanges; Restricted Securities Legends. (a) The Company shall
cause to be kept at the Corporate Trust Office of the Trustee a register in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of the Securities and of transfers of
Securities. Such register is herein sometimes referred to as the "Securities
Register". The Trustee is hereby appointed "Securities Registrar" for the
purpose of registering the Securities and transfers of Securities as herein
provided.
<PAGE>
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Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of a like aggregate principal amount, of
the same Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or exchange shall (if so required by the Company or the Securities Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities.
Neither the Company nor the Trustee shall be required, pursuant to
the provisions of this Section, (a) to issue, register any transfer or exchange
any Security of any series during a period beginning at the opening of business
15 days before the day of selection for redemption of Securities pursuant to
Article XI and ending at the close of business on the day of mailing of notice
of redemption or (b) to transfer or exchange any Security so selected for
redemption in whole or in part, except, in the case of any Security to be
redeemed in part, any portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Notwithstanding any other
provision of the Indenture, the registration of transfers and exchanges of
Securities and beneficial interests in a Global Capital Security of the kinds
specified in this Section 3.06(b) shall be made only in accordance with this
Section 3.06(b).
(i) Non-Global Security to Global Security. if the Holder of a
Security (other than a Global Security) wishes at any time to transfer all or
any portion of such Security to a Person who wishes to take delivery thereof in
the form of a beneficial interest in a Global
<PAGE>
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Security, the registration of such transfer may be effected only in accordance
with the provisions of this clause (b)(i) and subject to the rules and
procedures of the Depositary. Upon receipt by the Securities Registrar of (A)
such Security as provided in Section 3.06(a) and instructions satisfactory to
the Securities Registrar directing that a beneficial interest in the Global
Security in a specified principal amount not greater than the principal amount
of such Security be credited to a specified Agent Member's account and (B) a
Securities Certificate duly executed by such Holder or such Holder's attorney
duly authorized in writing, then the Securities Registrar shall cancel such
Security (and issue a new Security in respect of the untransferred portion
thereof) as provided in Section 3.06(a) and increase the aggregate principal
amount of the Global Security by the specified principal amount as provided in
Section 3.05(c).
(ii) Non-Global Security to Non-Global Security. A Security that is
not a Global Security may be transferred, in whole or in part, to a Person who
takes delivery in the form of another Security that is not a Global Security as
provided in Section 3.06(a); provided, that in connection with the registration
of transfer of such Security that is a Restricted Security, the Securities
Registrar shall have received a Restricted Securities Certificate duly executed
by the transferor Holder or such Holder's attorney duly authorized in writing.
(iii) Exchanges between Global Security and Non-Global Security.
A beneficial interest in a Global Security may be exchanged for a Security
that is not a Global Security as provided in Section 3.05.
(iv) Limitations Relating to Principal Amount. Notwithstanding any
other provision of this Indenture and unless otherwise specified as permitted by
Section 3.01, Securities or portions thereof may be registered for transfer or
exchanged only in blocks having an aggregate principal amount of not less than
$100,000 and integral multiples of $1,000 in excess thereof. Any transfer,
exchange or other disposition of Securities in contravention of this Section
3.06(b)(iv) shall be deemed to be void and of no legal effect whatsoever, any
such transferee shall be deemed not to be the Holder or owner of any beneficial
interest in such Securities for any purpose, including but not limited to the
receipt of interest payable on such Securities, and such transferee shall be
deemed to have no interest whatsoever in such Securities.
(c) Restricted Securities Legend. (i) Except as set forth
below, all Securities shall bear a Restricted Securities Legend, as follows:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS
<PAGE>
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SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH U.S.B.
HOLDING CO., INC. (THE "CORPORATION") OR ANY AFFILIATE OF THE CORPORATION
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTIONS TERMINATION DATE") ONLY (A) TO THE CORPORATION, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE CORPORATION'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN
ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A COPY OF
WHICH MAY BE OBTAINED FROM THE CORPORATION OR THE TRUSTEE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTIONS
TERMINATION DATE.
(ii) Subject to Section 3.06(d) and to the following clauses of this
Section 3.06(c), a Security (other than a Global Security) that does not
bear a Restricted Securities Legend may be issued in exchange for or in
lieu of a Restricted Security or any portion thereof that bears such
legend if, in the Company's judgment, placing such a legend upon such new
Security is not necessary to ensure compliance with the registration
requirements of the Securities Act, and the Trustee, at the written
direction of the Company in the form of an Officers' Certificate, shall
countersign and deliver such a new Security as provided in this Article
III.
(iii) Notwithstanding the foregoing provisions of this Section
3.06(c), a successor Security of a Security that does not bear a
Restricted Securities Legend shall not bear such form of legend unless the
Company has reasonable cause to believe that
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such successor Security is a "restricted security" within the meaning of
Rule 144 under the Securities Act, in which case the Trustee, at the
written direction of the Company in the form of an Officers' Certificate,
shall countersign and deliver a new Security bearing a Restricted
Securities Legend in exchange for such successor Security as provided in
this Article III.
(iv) Upon any sale or transfer of a Restricted Security (including
any Restricted Security represented by a Global Security) pursuant to an
effective registration statement under the Securities Act or pursuant to
Rule 144 under the Securities Act after such registration ceases to be
effective: (A) in the case of any Restricted Security that is a definitive
Security, the Securities Registrar shall permit the Holder thereof to
exchange such Restricted Security for a definitive Security that does not
bear the Restricted Securities Legend and rescind the restriction on
transfer of such Restricted Security; and (B) in the case of any
Restricted Security that is represented by a Global Security, the
Securities Registrar shall permit the Holder of such Global Security to
exchange such Global Security for another Global Security that does not
bear the Restricted Securities Legend.
(v) If Restricted Securities are being presented or surrendered for
transfer or exchange then there shall be (if so required by the Trustee),
(A) if such Restricted Securities are being delivered to the Securities
Registrar by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect; or (B) if such
Restricted Securities are being transferred, (i) a certification from the
transferor in a form substantially similar to that attached hereto as
Exhibit A, and (ii) if the Company or Securities Registrar so requests,
evidence reasonably satisfactory to them as to the compliance with the
restrictions set forth in the Restricted Securities Legend.
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities. If
any mutilated Security is surrendered to the Trustee together with such security
or indemnity as may be required by the Company or the Trustee to save each of
them harmless, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same issue and series of like
tenor and principal amount, having the same Original Issue Date and Stated
Maturity and bearing the same Interest Rate as such mutilated Security, and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
issuing Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same issue and series of like tenor and
principal amount, having the same Original Issue Date and Stated Maturity and
bearing the same Interest Rate as such destroyed, lost or stolen Security, and
bearing a number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.08. Payment of Interest; Interest Rights Preserved.
Interest on any Security of any series which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date, shall be paid to the Person
in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
in respect of Securities of such series, except that, unless otherwise provided
in the Securities of such series, interest payable on the Stated Maturity of a
Security shall be paid to the Person to whom principal is paid. The initial
payment of interest on any Security of any series which is issued between a
Regular Record Date and the related Interest Payment Date shall be payable as
provided in such Security or in the Board Resolution pursuant to Section 3.01
with respect to the related series of Securities.
Any interest on any Security which is payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities of such
series (herein called "Defaulted Interest"), shall forthwith cease to be payable
to the registered Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series in respect of which
interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed
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payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall not be more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be mailed, first
class, postage prepaid, to each Holder of a Security of such series at the
address of such Holder as it appears in the Securities Register not less than 10
days prior to such Special Record Date. The Trustee may, in its discretion, in
the name and at the expense of the Company, cause a similar notice to be
published at least once in a newspaper, customarily published in the English
language on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, but such publication shall not be a condition
precedent to the establishment of such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered on such Special Date and shall no longer
be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
Clause, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
SECTION 3.09. Persons Deemed Owners. The Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.08) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary. No holder of any
beneficial interest in any Global Security held on its behalf by a Depositary
shall have any rights under this Indenture with respect to such Global Security,
and such Depositary may be treated by the Company, the Trustee and any agent of
the Company or the Trustee as the owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company or the Trustee from giving effect to any written certification, proxy,
or other authorization furnished by a Depositary or impair, as between the
Depositary and such holders of beneficial interests, the operation of customary
practices
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governing the exercise of the rights of the Depositary (or its nominee) as
Holder of any Security.
SECTION 3.10. Cancellation. All Securities surrendered for payment,
redemption, transfer or exchange shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee, and any such Securities and Securities
surrendered directly to the Trustee for any such purpose shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities shall be destroyed by the Trustee and the Trustee shall deliver to
the Company a certificate of such destruction.
SECTION 3.11. Computation of Interest. Except as otherwise specified
as contemplated by Section 3.01 for Securities of any series, interest on the
Securities of each series for any period shall be computed on the basis of a
360-day year of twelve 30-day months and interest on the Securities of each
series 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.
SECTION 3.12. Deferrals of Interest Payment Dates. If specified as
contemplated by Section 3.01 with respect to the Securities of a particular
series, provided that no Event of Default has occurred and is continuing with
respect to the Securities, the Company shall have the right, at any time or from
time to time during the term of such series, to defer the payment of interest on
such Securities for such period or periods as may be specified as contemplated
by Section 3.01 (each, an "Extension Period") during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date. No Extension Period shall end on a date other than an
Interest Payment Date. At the end of any such Extension Period the Company shall
pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law), provided, however, that
no Extension Period may extend beyond the Maturity of these Securities. During
any such Extension Period, the Company shall not (i) declare or pay dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), or (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
(including Other Debentures) that rank pari passu with or junior in interest to
the Securities of such series or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any Subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with or
junior in interest to the Securities of such series (other than (a) dividends or
distributions in common stock of the Company, (b) any declaration of a dividend
in connection with the implementation of a stockholders' 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, (c) payments under the
applicable U.S.B. Holding Co., Inc. Guarantee, (d) purchases or acquisitions of
shares of the
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Company's Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plan or other contractual obligation of
the Company (other than a contractual obligation ranking pari passu with or
junior to these Securities, (e) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's capital
stock, or (f) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged). Prior to the termination of
any such Extension Period, the Company may further extend such Extension Period;
provided, however, that no Extension Period shall exceed the period or periods
specified in such Securities or extend beyond the Maturity of such Securities.
Upon termination of any Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Holders of the
Securities of such series and the Trustee and the Property Trustee notice of its
election to begin any such Extension Period (or an extension thereof) at least
five Business Days prior to the Interest Payment Date or, with respect to the
Securities of a series issued to a U.S.B.H. Capital Trust, prior to the earlier
of (i) the date the Distributions on the Trust Securities of such U.S.B.H.
Capital Trust would have been payable except for the election to begin or extend
such Extension Period or (ii) the date the Administrative Trustees of such
U.S.B.H. Capital Trust are required to give notice to any automated quotation
system or to holders of Trust Securities of the record date or the date such
Distributions are payable, but in any event not less than five Business Days
prior to such record date. There is no limitation on the number of times that
the Company may elect to begin an Extension Period.
SECTION 3.13. Agreed Tax Treatment. Each Security issued hereunder
shall provide that the Company and, by its acceptance of a Security or a
beneficial interest therein, the Holder of, and any Person that acquires a
beneficial interest in, such Security intend that such Security constitute
indebtedness and agree to treat such Security as indebtedness for all United
States federal, state and local tax purposes.
SECTION 3.14. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption or other related material as
a convenience to Holders; provided, however, that any such notice or other
related material may state that no representation is made as to the correctness
of such numbers either as printed on the Securities or as contained in any
notice of a redemption or other related material and that reliance may be placed
only on the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Trustee of any change in the CUSIP numbers.
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ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to (i) any surviving
rights of transfer, substitution and exchange of Securities, (ii) rights
hereunder of Holders to receive payments of principal of (and premium, if any)
and interest on the Securities and other rights, duties and obligations of the
Holders as beneficiaries hereof with respect to the amounts, if any, deposited
with the Trustee pursuant to this Article IV and (iii) the rights and
obligations of the Trustee hereunder), and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 3.07 and
(ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such trust,
as provided in Section 10.03) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year of the date of deposit,
and the Company, in the case of Clause (B)(i) or (B)(ii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which
the Securities of such series are payable sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any) and
interest (including any Additional Interest) to the date of such deposit
(in the case of Securities which have become due and payable) or to the
Stated Maturity;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.
SECTION 4.02. Application of Trust Money. Subject to the provisions
of the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01, shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for the
payment of which such money or obligations have been deposited with or received
by the Trustee; provided, however, that such moneys need not be segregated from
other funds except to the extent required by law.
ARTICLE V
Remedies
SECTION 5.01. Events of Default. "Event of Default", wherever used
herein with respect to the Securities of any series, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it
becomes due and payable, and continuance of such default for a period of
30 days (subject to the deferral of any due date in the case of an
Extension Period); or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series when due, whether at its Maturity, upon
redemption, by declaration of acceleration or otherwise; or
(3) default in the performance or breach of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in the performance of which or the breach of which is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 90 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate outstanding principal
amount of the Securities of that series a written notice specifying such
default or breach and requiring it to be remedied; or
(4) the entry or a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving
as properly
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filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or of any substantial part of its
property or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(5) the institution by the Company of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law, or the consent by it to the filing of any such petition
or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit for creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate
action by the Company in furtherance of any such action; or
(6) in respect of a series issued to a U.S.B.H. Capital Trust, the
voluntary or involuntary dissolution, winding-up or termination of a
U.S.B.H. Capital Trust, except in connection with the distribution of the
Securities to the holders of Trust Securities in liquidation of such
U.S.B.H. Capital Trust, the redemption of all the Trust Securities of a
U.S.B.H. Capital Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the applicable Trust Agreement; or
(7) any other Event of Default with respect to Securities of that
series as may be specified pursuant to Section 3.01 hereof.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), provided, however, that, in
the case of the Securities of a series issued to a U.S.B.H. Capital Trust, if,
upon an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of that series fail to declare
the principal of all the Securities of that series to be immediately due and
payable, the holders of at least 25% in aggregate Liquidation Amount of the
corresponding series of Capital Securities then outstanding shall have such
right by a notice in writing to the Company and the Trustee. The Holders of a
majority in aggregate principal amount of the Outstanding Securities of these
Securities may annul such declaration and waive the default if the default
(other than the
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nonpayment of the principal of these Securities which has become due solely by
such acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Trustee. Should the Holders of these Securities fail to
annul such declaration and waive such default, the holders of a majority in
aggregate Liquidation Amount of the Capital Securities shall have such right.
Upon any such declaration such principal amount (or specified amount) of and the
accrued interest (including any Additional Interest) on all the Securities of
such series shall become immediately due and payable, provided, however, that
the payment of principal and interest (including any Additional Interest) on
such Securities shall remain subordinated to the extent provided in Article
XIII.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest (including any
Additional Interest) on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne
by the Securities, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
(2) all Events of Default with respect to Securities of that series,
other than the nonpayment of the principal of Securities of that series
which has become due solely by such acceleration, have been cured or
waived as provided in Section 5.13.
The Holders of a majority in aggregate outstanding principal amount
of the Securities of a series affected thereby may, on behalf of the Holders of
all the Securities of such series, waive any past default, except a default in
the payment of principal of (or premium, if any) or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been deposited
with the Trustee) or a default in respect of a covenant or provision which under
this Indenture cannot be modified or amended without the consent of the Holder
of each outstanding Security of such series and, in the case of Securities of a
series issued to a U.S.B.H. Capital Trust, should the holders of such Securities
fail to annul such declaration and waive such default, the holders of a majority
in aggregate Liquidation Amount of the related series of Capital Securities
shall have such right. The Company is required to file
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annually with the Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under this
Indenture.
No such recession shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities of
a series all or part of which is represented by a Global Security, a record date
shall be established for determining Holders of Outstanding Securities of such
series entitled to join in such notice, which record date shall be at the close
of business on the day the Trustee receives such notice. The Holders on such
record date, or their duly designated proxies, and only such Persons, shall be
entitled to join in such notice, whether or not such Holders remain Holders
after such record date; provided, however, that, unless such declaration of
acceleration, or rescission and annulment, as the case may be, shall have become
effective by virtue of the requisite percentage having joined in such notice
prior to the day which is 90 days after such record date, such notice of
declaration of acceleration, or rescission and annulment, as the case may be,
shall automatically and without further action by any Holder be canceled and of
no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy
of a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice which has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 5.02.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee. The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security when such interest
becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (and premium,
if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest); and, in addition thereto, all amounts owing to the Trustee
under Section 6.07 and Section 10.06.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner
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provided by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of
overdue principal (and premium, if any) or interest (including any
Additional Interest)) shall be entitled and empowered, by intervention in
such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (including any
Additional Interest) owing and unpaid in respect to the Securities
and to file such other papers or documents as may be necessary or
advisable and to take any and all actions as are authorized under
the Trust Indenture Act in order to have the claims of the Holders
and any predecessor to the Trustee under Section 6.07 and of the
Holders allowed in any such judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to collect
and receive any moneys or other property payable or deliverable on
any such claims and to distribute the same in accordance with
Section 5.06; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee
for distribution in accordance with Section 5.06, and in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor
Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any
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proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and be a
member of a creditors' or other similar committee.
SECTION 5.05. Trustee May Enforce Claim Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.07, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.06. Application of Money Collected. Any money or property
collected or to be applied by the Trustee with respect to a series of Securities
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money or
property on account of principal (or premium, if any) or interest (including any
Additional Interest), upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
First: to the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.07;
Second: to the payment of the amounts then due and unpaid upon such
series of Securities for principal (and premium, if any) and interest
(including any Additional Interest), in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such series of Securities for principal (and premium, if any)
and interest (including any Additional Interest), respectively; and
Third: the balance, if any, to the Person or Persons entitled
thereto.
SECTION 5.07. Limitation on Suits. No Holder of any Securities of
any series shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture or for the appointment of a receiver,
assignee, trustee, liquidator, sequestrator (or other similar official) or for
any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
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(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
SECTION 5.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right which is absolute and unconditional
to receive payment of the principal of (and premium, if any) and (subject to
Section 3.08) interest (including any Additional Interest) on such Security on
the respective Stated Maturities expressed in such Security and to institute
suit for the enforcement of any such payment, and such right shall not be
impaired without the consent of such Holder. In the case of Securities of a
series issued to a U.S.B.H. Capital Trust, any holder of the corresponding
series of Capital Securities shall have the right, upon the occurrence of an
Event of Default described in Section 5.01(l) or 5.01(2) hereof, to institute a
suit directly against the Company for enforcement of payment to such Holder of
principal of (and premium, if any) and (subject to Section 3.08) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount of the Capital Securities of the
corresponding series held by such Holder. Notwithstanding any payments made to a
holder of Capital Securities by the Company in connection with a suit directly
against the Company, the Company shall remain obligated to pay the principal of
or interest on the Securities, and the Company shall be subrogated to the rights
of the holder of such Capital Securities with respect to payments on the Capital
Securities to the extent of any payments made by the Company to such holder in
any suit directly against the Company.
The holders of the Capital Securities will not be able to exercise
directly any remedies, other than those set forth in this Section 5.08,
available to the holders of the Securities unless there shall have been an Event
of Default under the Trust Agreement.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every case the Company,
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the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. Except as otherwise
provided in the last paragraph of Section 3.07, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. Except as otherwise
provided in the last paragraph of Section 3.07, no delay or omission of the
Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders as the case may be.
SECTION 5.12. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee, with respect to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or unduly prejudicial to the rights of other Holders
and would not subject the Trustee to personal liability; and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Upon receipt by the Trustee of any written notice directing the
time, method or place of conducting any such proceeding or exercising any such
trust or power, with respect to Securities of a series all or part of which is
represented by a Global Security, a record date shall be established for
determining Holders of Outstanding Securities of such series entitled to join in
such notice, which record date shall be at the close of business on the day the
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, however, that, unless the Holders of a majority in principal amount of
the Outstanding Securities of such series shall have joined in such notice
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prior to the day which is 90 days after such record date, such notice shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period, a new notice
identical to a notice which has been canceled pursuant to the proviso to the
preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.12.
SECTION 5.13. Waiver of Past Defaults. The Holders of not less than
a majority in principal amount of the Outstanding Securities of any series may
on behalf of the Holders of all the Securities of such series waive any past
default hereunder and its consequences with respect to such series except a
default:
(1) in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such
series; or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder or each
Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Holder, or group
of Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities of any series, or to any suit instituted by any Holder
for the enforcement of the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security on or after the
respective Stated Maturities expressed in such Security.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to
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the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 5.16. Option to Waive Certain Rights. Any beneficiary of any
right granted under this Indenture shall have the option to waive such right,
unless expressly prohibited under this Indenture.
SECTION 5.17. Tax Treatment of the Junior Subordinated Debt
Securities. Each beneficial owner of a Trust Security by acceptance of a
beneficial interest in the Trust Security agrees to treat the Junior
Subordinated Debt Securities as indebtedness for all U.S. federal, state and
local tax purposes.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture; but
in the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that:
(i) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(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 Holders pursuant to Section 5.12 hereof.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be grounds for believing that repayment of such
funds or indemnity satisfactory to its against such risk or liability is not
assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.02. Notice of Defaults. Within 90 days after actual
knowledge by a Responsible Officer of the Trustee of the occurrence of any
default hereunder with respect to the Securities of any series, the Trustee
shall transmit by mail to all Holders of Securities of such series, as their
names and addresses appear in the Securities Register, notice of such default
hereunder known to a Responsible Officer of the Trustee, unless such default
shall have been cured or waived; provided, however, that, except in the case of
a default in the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security of such series, the Trustee
shall be fully protected in withholding such notice if and so long as the board
of directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of Securities of
such series; and provided, further, however, that, in the case of any default of
the character specified in Section 5.01(3), no such notice to Holders of
Securities of such series shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series.
SECTION 6.03. Certain Rights of Trustee. Subject to the provisions
of Section 6.01:
(a) the Trustee may conclusively rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, Security or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties, and, except as provided in Section 6.01(a)
hereof, the Trustee need not investigate any fact or matter stated in the
document;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
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(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) shall be entitled to
receive and may, in the absence of bad faith on its part, conclusively
rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, indenture, Security or other paper or document, but the Trustee in
its discretion may make such inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make
such inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Indenture;
(i) the Trustee shall not be charged with knowledge of any Event of
Default unless either (1) a Responsible Officer of the Trustee shall have
actual knowledge or (2) the Trustee shall have received notice thereof in
accordance with Section 1.05(l) hereof from the Company or a Holder; and
(j) no permissive power or authority available to the Trustee shall
be construed as a duty.
SECTION 6.04. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities or any offering or disclosure materials
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prepared in connection therewith. The Trustee shall not be accountable for the
use or application by the Company of the Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, any Paying Agent,
Securities Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject to
Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Paying Agent, Securities Registrar or such
other agent.
SECTION 6.06. Money Held in Trust. Money held by the Trustee in
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Company.
SECTION 6.07. Compensation and Reimbursement. The Company, as
borrower on the Securities, agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder in such amounts as the Company
and the Trustee shall agree from time to time (which compensation shall
not be limited by any provision of law in regard to the compensation a
trustee of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee, its officers, agents, directors and
employees for, and to hold them harmless against, any loss, liability or
expense (including the reasonable compensation and the expenses and
disbursements of its agents and counsel) incurred without negligence or
bad faith, arising out of or in connection with the acceptance or
administration of this trust or the performance of its duties hereunder,
including the 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.
To secure the Company's payment obligations in this Section, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. The
obligations of the Company under this Section 6.07 shall survive the
satisfaction and discharge and the termination of this Indenture or the earlier
resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 5.01(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code of 1978, as amended, or any successor
statute.
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SECTION 6.08. Disqualification; Conflicting Interests. The Trustee
for the Securities of any series issued hereunder shall be subject to the
provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall
prevent the Trustee from filing with the Commission the application referred to
in the second-to-last paragraph of Section 301(b) of the Trust Indenture Act.
SECTION 6.09. Corporate Trustee Required, Eligibility. There shall
at all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under the laws of the
United States of America or of any state, territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers
and subject to supervision or examination by Federal, state, territorial
or District of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized
under such laws to exercise corporate trust powers, and subject to
supervision or examination by authority of such foreign government or a
political subdivision thereof substantially equivalent to the supervision
or examination applicable to United States institutional trustees,
in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision of examination by Federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examination authority, then,
for the purposes of this Section, 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. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article. Neither the Company nor any Person directly or indirectly
controlling, controlled by or under common control with the Company shall serve
as Trustee for the Securities of any series issued hereunder.
SECTION 6.10. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a Successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the Successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If an instrument of acceptance by a Successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a Successor Trustee with respect to the
Securities of such series.
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(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case, (i)
the Company, acting pursuant to the authority of a Board Resolution, may
remove the Trustee, or (ii) subject to Section 5.14, any Holder who has
been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a Successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a Successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a Successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the Successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment, become
the Successor Trustee with respect to the Securities of such series and
supersede the Successor Trustee appointed by the Company. If no Successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, subject to Section 5.14, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a Successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a Successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Securities of such series as their names and addresses appear in
the Securities Register. Each notice shall include the name of the
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Successor Trustee with respect to the Securities of such series and the address
of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. (a) In case of
the appointment hereunder of a Successor Trustee with respect to all Securities,
every such Successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such Successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers trusts and duties
of the retiring Trustee; but, on the request of the Company or the Successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such Successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such Successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) In case of the appointment hereunder of the Successor Trustee
with respect to the Securities of one or more (but not all) series, the Company,
the retiring Trustee and each Successor Trustee with respect to the Securities
of one or more series shall execute and deliver an instrument or an indenture
supplemental hereto wherein each Successor Trustee shall accept such appointment
and which (1) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each Successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such Successor
Trustee relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such instrument or supplemental indenture shall constitute
such Trustee co-trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Trustee and upon the execution
and delivery of such instrument or supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such Successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts, and duties
of the retiring Trustee with respect to the Securities of that or those series
to which the appointment of such Successor Trustee relates; but, on request of
the Company or any Successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such Successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such Successor Trustee relates.
(c) Upon request of any such Successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such
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Successor Trustee all rights, powers and trusts referred to in paragraph (a) or
(b) of this Section, as the case may be.
(d) No Successor Trustee shall accept its appointment unless at the
time of such acceptance such Successor Trustee shall be qualified and eligible
under this Article. In the event that the Trust Indenture Act applies to this
Indenture at the time that any Successor Trustee is appointed, such Successor
Trustee shall qualify under such Act.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article (including qualification under the Trustee Indenture Act, if
applicable), without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such Successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Company. If
and when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent. The Trustee may
appoint an authenticating agent or agents (each, an "Authenticating Agent") with
respect to one or more series of Securities which shall be authorized to act on
behalf of the Trustee to authenticate Securities of such series issued upon
original issue and upon exchange, registration of transfer or partial redemption
thereof, and Securities so authenticated shall be entitled to the benefits of
this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Where reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any state, Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually,
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pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.06 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provision of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of each series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
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This is one of the Securities referred to in the within mentioned
Indenture.
THE CHASE MANHATTAN BANK
Trustee
by ______________________________
As Authenticating Agent
by ______________________________
Authorized Signatory
SECTION 6.15. Trustee's Rights and Obligations After Qualification
of Indenture. Following the qualification of this Indenture under the Trust
Indenture Act, the Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Trustee is under no obligation to
exercise any of the powers vested in it by this Indenture at the request of any
holder of the Securities, unless offered indemnity to its satisfaction by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Trustee will not be required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
the Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it. Notwithstanding the foregoing, nothing in this Section
6.15 shall be deemed to abrogate any of the rights, indemnities or protections
otherwise provided to the Trustee under this Indenture.
ARTICLE VII
Holder's Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 15 days after January 15 and July
15, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such January 1 and July 1, 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 so long as the
Trustee is the Securities Registrar, no such list need be furnished.
SECTION 7.02. Preservation of Information, Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in
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Section 7.01 and the names and addresses of Holders received by the Trustee in
its capacity as Securities Registrar. The Trustee may destroy any list furnished
to it as provided in Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 7.03. Reports by Trustee. (a) The Trustee shall transmit to
Holders such reports concerning the Trustee and its actions under this Indenture
as may be required pursuant to the Trust Indenture Act, at the times and in the
manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted within 60 days of May 15 of each
calendar year, commencing with May 15, 1997.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each securities exchange
upon which the Securities are listed and also with the Commission. The Company
will notify the Trustee whenever the Securities are listed on any securities
exchange.
SECTION 7.04. Reports by Company. The Company shall file with the
Trustee and with the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided in
the Trust Indenture Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, shall be filed
with the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall continue to file with the
Commission and provide the Trustee with the annual reports and the information,
documents and other reports which are specified in Sections 13 and 15(d) of the
Securities Exchange Act of 1934, as amended. The Company also shall comply with
the other provisions of Trust Indenture Act Section 314(a).
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ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge with or into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge with or into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge with or into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a corporation,
partnership or trust organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest
(including any Additional Interest) on all the Securities and the
performance of every covenant and every obligation of this Indenture on
the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing;
(3) in the case of the Securities of a series issued to a U.S.B.H.
Capital Trust, such consolidation, merger, conveyance, transfer or lease
is permitted under the related Trust Agreement and U.S.B. Holding Co.,
Inc. Guarantee and does not give rise to any breach or violation of the
related Trust Agreement or U.S.B. Holding Co., Inc. Guarantee; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and any such
supplemental indenture complies with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and the Trustee, subject to Section 6.01, may rely upon
such Officers' Certificate and Opinion of Counsel as conclusive evidence
that such transaction complies with this Section 8.01.
SECTION 8.02. Successor Corporation Substituted. Upon any
consolidation or merger by the Company with or into any other Person, or any
conveyance, transfer or lease by the Company of its properties and assets
substantially as an entirety to any Person in accordance with Section 8.01, the
successor corporation formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or
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lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor Person had been named as the Company herein; and in the event of
any such conveyance, transfer or lease the Company shall be discharged from all
obligations and covenants under the Indenture and the Securities and may be
dissolved and liquidated.
Such successor Person may cause to be signed, and may issue either
in its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or
lease, such changes in phraseology and form may be made in the Securities
thereafter to be issued as may be appropriate.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory, to the
Trustee, for any of the following:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company
herein and in the Securities contained;
(2) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee or to surrender any right or power herein conferred
upon the Company;
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 or 3.01;
(4) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to
be for the benefit of less than all series of Securities, stating that
such covenants are expressly being included
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solely for the benefit of such series) or to surrender any right or power
herein conferred upon the Company;
(5) to add any additional Events of Default;
(6) to change or eliminate any of the provisions of this Indenture;
provided that any such change or elimination shall become effective only
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision;
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided that such action pursuant to this clause
(7) shall not materially adversely affect the interest of the Holders of
Securities of any series or, in the case of the Securities of a series
issued to a U.S.B.H. Capital Trust and for so long as any of the
corresponding series of Capital Securities shall remain outstanding, the
holders of such Capital Securities;
(8) to evidence and provide for the acceptance of appointment
hereunder by a Successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant
to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
SECTION 9.02. Supplemental Indentures with Consent of Holders. With
the consent of the Holders of not less than a majority in principal amount of
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) except to the extent permitted by Section 3.12 or as otherwise
specified as contemplated by Section 3.01 with respect to the extension of
the interest payment period of the Securities of any series, change the
Stated Maturity of the principal of, or any installment of interest
(including any Additional Interest) on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or reduce any
premium payable upon the redemption thereof, or reduce the amount of
principal of a Discount Security that would be due and payable upon a
declaration of acceleration of
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the Maturity thereof pursuant to Section 5.02, or change the place of
payment where, or the coin or currency in which, any Security or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the date fixed for redemption
thereof);
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture;
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.05, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Security affected thereby; or
(4) modify the provisions in Article XIII of this Indenture with
respect to the subordination of Outstanding Securities of any series in a
manner adverse to the Holders thereof;
provided that, in the case of the Securities of a series issued to a U.S.B.H.
Capital Trust, so long as any of the corresponding series of Capital Securities
remains outstanding, no such amendment shall be made that adversely affects the
holders of such Capital Securities, and no termination of this Indenture shall
occur, and no waiver of any Event of Default or compliance with any covenant
under this Indenture shall be effective, without the prior consent of the
holders of at least a majority of the aggregate Liquidation Amount of such
Capital Securities then outstanding unless and until the principal (and premium,
if any) of the Securities of such series and all accrued and, subject to Section
3.08, unpaid interest (including any Additional Interest) thereon have been paid
in full; and provided further, however, that in the case of the Securities of a
series issued to a U.S.B.H. Capital Trust, so long as any of the corresponding
series of Capital Securities remain outstanding, no amendment shall be made to
Section 5.08 of this Indenture without the prior consent of the holders of each
Capital Security then outstanding unless and until the principal (and premium,
if any) of the Securities of such series and all accrued and (subject to Section
3.08) unpaid interest (including any Additional interest) thereon have been paid
in full.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
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SECTION 9.03. Execution of Supplemental Indentures. In executing or
accepting the additional trusts created by any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in conclusively relying upon, an Officer's
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, or
which may subject it to liability or be contrary to applicable law.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.05. Conformity with Trust Indenture Act. No supplemental
indenture will be qualified or executed pursuant to the Trust Indenture Act
unless this Indenture is so qualified, or in connection with Capital Securities
which are registered under the Securities Exchange Act of 1934, as amended, upon
the effectiveness of a registration statement and the consummation of an
exchange offer pursuant to a Registration Rights Agreement as contemplated in
Article XII hereof. Every supplemental indenture so qualified or executed shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.06. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Company,
bear a notation in form approved by the Company as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such Series.
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal, Premium and Interest. The
Company covenants and agrees for the benefit of each series of securities that
it will duly and punctually pay the principal of (and premium, if any) and
interest on the Securities of that series in accordance with the terms of such
Securities and this Indenture.
SECTION 10.02. Maintenance of Office or Agency. The Company will
maintain in each Place of Payment for any series, an office or agency where
Securities of that
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series may be presented or surrendered for payment and an office or agency where
Securities may be surrendered for transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company initially appoints the Trustee, acting through its
Corporate Trust Office, as its agent for said purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain such office
or agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.
SECTION 10.03. Money for Security Payments to be Held in Trust. If
the Company shall at any time act as its own Paying Agent with respect to any
series of Securities, it will, on or before each due date of the principal of
(and premium, if any) or interest on any of the Securities of such series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and will promptly notify the Trustee of its failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to 10:00 a.m. New York City time on each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal and
premium (if any) or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Securities in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Company
(or any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest;
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(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and premium,
if any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall (unless otherwise required by mandatory provision of applicable escheat or
abandoned or unclaimed property law) be paid on Company Request to the Company,
or (if then held by the Company) shall (unless otherwise required by mandatory
provision of applicable escheat or abandoned or unclaimed property law) be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, the City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 10.04. Statement as to Compliance. The Company shall deliver
to the Trustee, within 120 days after the end of such calendar year of the
Company ending after the date hereof, an Officers' Certificate executed by
authorized officers at least one of whom shall be the principal executive,
financial or accounting officer of the Company covering the preceding calendar
year, stating whether or not to the best knowledge of the signers thereof the
Company is in default in the performance, observance or fulfillment of or
compliance with any of the terms, provisions, covenants and conditions of this
Indenture, and if the Company shall be in default, specifying all such defaults
and the nature and status thereof of which they may have knowledge. For the
purpose of this Section 10.04, compliance shall be determined without regard to
any grace period or requirement of notice provided pursuant to the terms of this
Indenture.
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SECTION 10.05. Waiver of Certain Covenants. The Company may omit in
any particular instance to comply with any covenant or condition as specified as
contemplated by Section 3.01 with respect to the Securities of any series, if
before or after the time for such compliance the Holders of at least a majority
in principal amount of the Outstanding Securities of such series shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company in respect of any such covenant or condition shall remain in full force
and effect.
SECTION 10.06. Payment of the Trust's Costs and Expenses. Since the
U.S.B.H. Capital Trusts are being formed solely to facilitate the investment in
the Securities, the Company, as borrower on the Securities, hereby covenants to
pay all debts and obligations (other than with respect to the payment of
principal, interest and premium, if any, on the Trust Securities) and all costs
and expenses of such Trusts (including, but not limited to, all costs and
expenses relating to the organization of such Trusts, the fees and expenses of
the Trustees and all costs and expenses relating to the operation of such
Trusts) and to pay any and all taxes, duties, assessments or other governmental
charges of whatever nature (other than United States withholding taxes) imposed
on such Trusts by the United States, or any other taxing authority (such
payments of amounts in connection with taxes being herein referred to as
"Additional Sums"), so that the net amounts received and retained by such Trusts
and their respective Property Trustees after paying such expenses or Additional
Sums will be equal to the amounts such Trusts and Property Trustees would have
received had no such costs, expenses or taxes, duties, assessments or other
governmental charges been incurred by or imposed on such Trusts. The foregoing
obligations of the Company are for the benefit of, and shall be enforceable by,
any person to whom such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of the Company hereunder directly
against the Company, and the Company hereby irrevocably waives any right or
remedy to require that any such Creditor take any action against any Trust or
any other person before proceeding against the Company. The Company also agrees
hereby to execute such additional agreements as may be necessary or desirable to
give full effect to the foregoing.
SECTION 10.07. Additional Covenants. The Company covenants and
agrees with each Holder of Securities of a series issued to a U.S.B.H. Capital
Trust that it will not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
shares of the Company's capital stock (which includes common and preferred
stock), or (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company (including
Other Debentures) that rank pari passu with or junior in interest to the
Securities of such series or (iii) make any guarantee payments with respect to
any guarantee by the Company of debt securities of any subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in interest to the Securities (other than (a) dividends or distributions in
Common Stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholders' rights plan, or the issuance of stock
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under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the U.S.B. Holding Co. Inc.
Guarantee, (d) purchases or acquisitions of shares of the Company's Common Stock
in connection with the satisfaction by the Company of its obligations under any
employee benefit plan or other contractual obligation of the Company (other than
a contractual obligation ranking pari passu with or junior in interest to these
Securities), (e) as a result of a reclassification of the Company's capital
stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock, or (f)
the purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged), if at such time (i) there shall have
occurred an Event of Default, (ii) the Company shall be in default with respect
to its payment of any obligations under the related U.S.B. Holding Co. Inc.
Guarantee or (iii) the Company shall have given notice of its election to begin
an Extension Period as provided herein and shall not have rescinded such notice,
or such Extension Period, or any extension thereof, shall be continuing.
The Company also covenants with each Holder of Securities of a
series issued to a U.S.B.H. Capital Trust (i) to maintain directly 100%
ownership of the Common Securities of such U.S.B.H. Capital Trust; provided,
however, that any permitted successor of the Company hereunder may succeed to
the Company's ownership of such Common Securities, (ii) not to voluntarily
terminate, windup or liquidate such U.S.B.H. Capital Trust, except (a) in
connection with a distribution of the Securities of such series to the holders
of Capital Securities in liquidation of such U.S.B.H. Capital Trust or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the related Trust Agreement and (iii) to use its reasonable efforts, consistent
with the terms and provisions of such Trust Agreement, to cause such U.S.B.H.
Capital Trust to remain classified as a grantor trust and not an association
taxable as a corporation for United States Federal income tax purposes.
SECTION 10.08. Information Returns. On or before December 15 of each
year during which any Securities are outstanding, the Company shall furnish to
each Paying Agent such information as may be reasonably requested by each Paying
Agent in order that such Paying Agent may prepare the information which it is
required to report for such year on Internal Revenue Service Forms 1096 and
1099. Such information shall include the amount of original issue discount, if
any, includible in income for each $1,000 of principal amount at Stated Maturity
of outstanding Securities during such year.
ARTICLE XI
Redemption or Prepayment of Securities
SECTION 11.01. Applicability of This Article. Redemption of
Securities (whether by operation of a sinking fund or otherwise) as permitted or
required by any form of Security issued pursuant to this Indenture shall be made
in accordance with such form of Security and this Article; provided, however,
that if any provision of any such form of Security shall conflict with any
provision of this Article, the provision of such form of
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Security shall govern. Except as otherwise set forth in the form of Security for
such series, each Security shall be subject to partial redemption only in the
amount of $1,000 or, in the case of the Securities of a series issued to a
U.S.B.H. Capital Trust, $1,000, or integral multiples thereof.
SECTION 11.02. Election To Redeem; Notice to Trustee. The election
of the Company to redeem any Securities shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company of
any Securities of any particular series and having the same terms, the Company
shall, not less than 45 nor more than 60 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee and the Property Trustee of such date and of the principal
amount of Securities of that series to be redeemed. In the case of any
redemption of Securities prior to the expiration of any restriction on such
redemption provided in the terms of such Securities, the Company shall furnish
the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing
compliance with such restriction. Any such notice given to the Trustee hereunder
shall include the information required by Section 11.04 hereof.
SECTION 11.03. Selection of Securities to be Redeemed. If less than
all the Securities of any series are to be redeemed (unless all the Securities
of such series and of a specified tenor are to be redeemed or unless such
redemption affects only a single Security all as designated to the Trustee by
the Company), the particular Securities to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and which may provide
for the selection for redemption of a portion of the principal amount of any
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security. If less than all the
Securities of such series and of a specified tenor are to be redeemed (unless
such redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series and specified tenor
not previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.
SECTION 11.04. Notice of Redemption. Notice of redemption shall be
given by the Company by first-class mail, postage prepaid, mailed not later than
the thirtieth day, and not earlier than the sixtieth day, prior to the date
fixed for redemption, to each
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Holder of Securities to be redeemed, at the address of such Holder as it appears
in the Securities Register.
With respect to Securities of each series to be redeemed, each
notice of redemption shall state:
(a) the date fixed for redemption for Securities of such series;
(b) the redemption price at which Securities of such series are to
be redeemed;
(c) if less than all Outstanding Securities of such particular
series and having the same terms are to be redeemed, the identification
(and, in the case of partial redemption, the respective principal amounts)
of the particular Securities to be redeemed;
(d) that on the date fixed for redemption, the redemption price at
which such Securities are to be redeemed will become due and payable upon
each such Security or portion thereof, and that interest thereon, if any,
shall cease to accrue on and after said date;
(e) the place or places where such Securities are to be surrendered
for payment of the redemption price at which such Securities are to be
redeemed;
(f) that the redemption is for a sinking fund, if such is the case;
and
(g) such other provisions as may be required in respect of the terms
of a particular series of Securities.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 11.05. Deposit of Redemption Price. Prior to 10:00 a.m. New
York City time on the redemption date specified in the notice of redemption
given as provided in Section 11.04, the Company will deposit with the Trustee or
with one or more paying agents an amount of money sufficient to redeem on the
redemption date all the Securities so called for redemption at the applicable
redemption price.
SECTION 11.06. Payment of Securities Called for Redemption. If any
notice of redemption has been given as provided in Section 11.04, the Securities
or portion of Securities with respect to which such notice has been given shall
become due and payable on
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the date and at the place or places stated in such notice at the applicable
redemption price. On presentation and surrender of such Securities at a place of
payment in said notice specified, the said securities or the specified portions
thereof shall be paid and redeemed by the Company at the applicable redemption
price.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of that
same series, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms. If the Global Security is so surrendered,
such new Security will (subject to Section 3.06) also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
SECTION 11.07. Company's Right of Redemption. Unless otherwise
specified as contemplated by Section 3.01 with respect to the Securities of a
particular series and notwithstanding any additional redemption rights that may
be so specified, the Company may, at its option, redeem the Securities of any
series after their date of issuance in whole at any time or in part from time to
time, subject to the provisions of this clause (a) and the other provisions of
this Article XI. Unless otherwise specified as contemplated by Section 3.01 with
respect to the Securities of a particular series, the redemption price for any
Security so redeemed pursuant to this clause (a) shall be equal to 100% of the
principal amount of such Securities plus any accrued and unpaid interest,
including any Additional Interest, to the date fixed for redemption. The Company
shall not redeem the Securities in part unless all accrued and unpaid interest
(including any Additional Interest) has been paid in full on all Securities
Outstanding for all interest periods terminating on or prior to the date fixed
for redemption.
ARTICLE XII
Exchange and Registration Rights
SECTION 12.01. Exchange. (a) If specified as contemplated by Section
3.01 for Securities for any series, the Company and a U.S.B.H. Capital Trust
holding such Securities shall enter into a registration rights agreement (a
"Registration Rights Agreement") for the benefit of the holders of any Capital
Securities of such U.S.B.H. Capital Trust which are not registered under the
Securities Act providing that such U.S.B.H. Capital Trust use its best efforts
to exchange such Capital Securities for registered securities, by means of an
exchange offer registration statement (an "Exchange Offer Registration
Statement"), issued by the Company and such U.S.B.H. Capital Trust with terms
identical in all material respects to the terms of the Capital Securities (the
"Exchange Capital Securities").
(b) In the event that U.S.B.H. Capital Trust is successful in
providing Exchange Capital Securities to the holders of Capital Securities as
described in clause (a) of
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this Section 12.01, the Company shall contemporaneously exchange the Securities
held by such U.S.B.H. Capital Trust for new securities issued by the Company
(the "Exchange Securities") with terms identical in all material respects to the
terms of the Securities to such Capital Securities, and shall further
contemporaneously exchange the U.S.B. Holding Co., Inc. Guarantee then held by
the Guarantee Trustee under the Guarantee Agreement for a new guarantee of the
Company (the "Exchange Guarantee") with terms identical in all material respects
to the terms of the U.S.B. Holding Co., Inc. Guarantee.
SECTION 12.02. Registration. If specified as contemplated by Section
3.01 for Securities for any series, the Administrative Trustee of any U.S.B.H.
Capital Trust on behalf of the Company and such U.S.B.H. Capital Trust shall (a)
file a registration statement under the Securities Act covering resales of the
Capital Securities (the "Registration Statement"), (b) use their best efforts to
cause such Registration Statement to be declared effective under the Securities
Act, and (c) use their best efforts to cause such Registration Statement to
remain effective for as long as specified as contemplated by Section 3.01 for
Securities of such series. The Administrative Trustees shall (x) promptly
deliver to the holders and to the Delaware Trustee and the Property Trustee
written notice of their intent to file such Registration Statement. All costs
incurred in connection with the filing and maintenance of such Registration
Statement shall be borne by the Company.
SECTION 12.03. Liquidated Damages. If specified as contemplated by
Section 3.01 for Securities of any series, the Company may enter into an
agreement providing that, in the event that (i) an Exchange Offer Registration
Statement or a Registration Statement is not filed, (ii) such Exchange Offer
Registration Statement or Registration Statement does not become effective, or
(iii) such Exchange Offer Registration Statement or Registration Statement does
not remain effective or useable within the time period or for as long as
contemplated by the applicable registration rights agreement, the Company shall
pay to the relevant U.S.B.H. Capital Trust, and such U.S.B.H. Capital Trust
shall pay to the holders of the Capital Securities, an amount of liquidated
damages, which may be either fixed or based on the duration and/or principal
amount of the Securities or the Liquidation Amount of the Capital Securities
affected thereby.
SECTION 12.04. Compliance with Law. Any registration rights
agreement entered into hereunder may provide that any Holder of Capital
Securities who is considered to be an affiliate of the Company or the U.S.B.H.
Capital Trust or any underwriter in connection with the issuance and sale of
Capital Securities be barred from participation in the Exchange Offer
Registration Statement or other Registration Statement, in accordance with
applicable law or regulation.
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ARTICLE XIII
Sinking Funds
SECTION 13.01. Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of any series except as otherwise specified as contemplated by Section 3.01 for
such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any sinking fund payment in excess of such minimum
amount which is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment". If provided
for by the terms of any Securities of any series, the case amount of any sinking
fund payment may be subject to reduction as provided in Section 13.02. Each
sinking fund payment shall be applied to the redemption (or purchase by tender
or otherwise) of Securities of any series as provided for by the terms of such
Securities.
SECTION 13.02. Satisfaction of Sinking Fund Payments with
Securities. In lieu of making all or any part of a mandatory sinking fund
payment with respect to any Securities of a series in cash, the Company may at
its option, at any time no more than 16 months and no less than 45 days prior to
the date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured Coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Company, except Securities of such series that have been redeemed through the
application of mandatory or optional sinking fund payments pursuant to the terms
of the Securities of such series, accompanied by a Company Order instructing the
Trustee to credit such obligations and stating that the Securities of such
series were originally issued by the Company by way of bona fide sale or other
negotiation for value; provided that the Securities to be so credited have not
been previously so credited. The Securities to be so credited shall be received
and credited for such purpose by the Trustee at the redemption price for such
Securities, as specified in the Securities so to be redeemed, for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.
SECTION 13.03. Redemption of Securities for Sinking Fund. Not less
than 45 days prior to each sinking fund payment date for any series of
securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.01) and the portion thereof, if any, which is to be satisfied by delivering
and crediting Securities pursuant to Section 13.02 and will also deliver to the
Trustee any Securities to be so delivered. Such Certificate shall be irrevocable
and upon its delivery the Company shall be obligated to make the cash payment or
payments therein referred to, if any, on or before the succeeding sinking fund
payment date. In the case of the failure of the Company to deliver such
Certificate (or, as required by this Indenture, the Securities and coupons, if
any, specified in such Certificate)
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by the due date therefor, the sinking fund payment due on the succeeding sinking
fund payment date for such series shall be paid entirely in cash and shall be
sufficient to redeem the principal amount of the Securities of such series
subject to a mandatory sinking fund payment without the right to deliver or
credit securities as provided in Section 13.02 and without the right to make the
optional sinking fund payment with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the redemption price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or by the Company if the Company is acting as its own Paying Agent,
segregated and held in trust as provided in Section 10.03) for such series and
together with such payment (or such amount so segregated) shall be applied in
accordance with the provisions of this Section 13.03. Any and all sinking fund
moneys with respect to the Securities of any particular series held by the
Trustee (or if the Company is acting as its own Paying Agent, segregated and
held in trust as provided in Section 10.03) on the last sinking fund payment
date with respect to Securities of such series and not held for the payment or
redemption of particular Securities of such series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent),
together with other moneys, if necessary, to be deposited (or segregated)
sufficient for the purpose, to the payment of the principal of the Securities of
such series at Maturity. The Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 11.03 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 11.04. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Section 11.06. On or before each sinking fund
payment date, the Company shall pay to the Trustee (or, if the Company is acting
as its own Paying Agent, the Company shall segregate and hold in trust as
provided in Section 10.03) in cash a sum in the currency in which Securities of
such series are payable (except as provided pursuant to Section 3.01) equal to
the principal, premium, if any, and any interest accrued to the redemption date
for Securities or portions thereof to be redeemed on such sinking fund payment
date pursuant to this Section 13.03.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Company if the
Company is then acting as its own Paying Agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with
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the terms of this Article XII. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default shall
occur and any moneys thereafter paid into such sinking fund shall, during the
continuance of such default or Event of Default, be held as security for the
payment of the Securities and coupons, if any, of such series; provided,
however, that in case such default or Event of Default shall have been cured or
waived herein, such moneys shall thereafter be applied on the next sinking fund
payment date for the Securities of such series on which such moneys may be
applied pursuant to the provisions of this Section 13.03.
ARTICLE XIV
Subordination of Securities
SECTION 14.01. Securities Subordinate to Senior Debt. The Company
covenants and agrees, and each Holder of a Security, by its acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article, the payment of the principal of (and premium, if any)
and interest (including any Additional Interest) on each and all of the
Securities are hereby expressly made subordinate and junior in right of payment
to the prior payment in full of all amounts then due and payable in respect of
all Senior Debt.
SECTION 14.02. Payment Over of Proceeds Upon Dissolution, etc. In
the event of (a) any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company, its creditors or its property, (b) any
proceeding for the liquidation, dissolution, or other winding up of the Company,
voluntary or involuntary, whether or not involving insolvency or bankruptcy
proceedings, (c) any assignment by the Company for the benefit of creditors or
(d) any other marshaling of the assets of the Company (each such event, if any,
herein sometimes referred to as a "Proceeding"), then the holders of Senior Debt
shall be entitled to receive payment in full of principal of (and premium, if
any) and interest, if any, on such Senior Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, before the Holders of the Securities are entitled
to receive or retain any payment or distribution of any kind or character,
whether in cash, property or securities (including any payment or distribution
which may be payable or deliverable by reason of the payment of any other Debt
of the Company (including any series of the Securities) subordinated to the
payment of the Securities, such payment or distribution being hereinafter
referred to as a "Junior Subordinated Payment"), on account of principal of (or
premium, if any) or interest (including any Additional Interest) on the
Securities or on account of the purchase or other acquisition of Securities by
the Company or any Subsidiary and to that end the holders of Senior Debt shall
be entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
including any Junior Subordinated Payment, which may be payable or deliverable
in respect of the Securities in any such Proceeding; provided, however, that
holders of Senior Debt shall not be entitled to receive payment of any such
amounts to the extent that such holders would be required by the subordination
provisions of such Senior Debt
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to pay such amounts over to the obligees on trade accounts payable or other
liabilities arising in the ordinary course of business.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Senior Debt is paid in full or payment thereof is provided
for in cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, and if such fact shall, at or prior to the time of such
payment or distribution, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Debt remaining unpaid, to the extent necessary to
pay all Senior Debt in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in 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 or reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person or the liquidation or dissolution of the Company following the sale of
all or substantially all of its properties and assets as an entirety to another
Person upon the terms and conditions set forth in Article VIII shall not be
deemed a Proceeding for the purposes of this Section if the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale such properties and assets as an entirety, as the case may be,
shall, as a part of such consolidation, merger, or sale comply with the
conditions set forth in Article VIII.
SECTION 14.03. Prior Payment to Senior Debt Upon Acceleration of
Securities. In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall first be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Debt (including any amounts due upon acceleration), or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the Holders of the Securities
will be entitled to receive or retain any payment or distribution of any kind or
character, whether in cash, property or securities (including any Junior
Subordinated Payment) by the Company on account of the principal of (or premium,
if any) or interest (including any Additional Interest) on the Securities or on
account of the purchase or other acquisition of Securities by the Company or any
Subsidiary; provided, however, that nothing in this Section
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shall prevent the satisfaction of any sinking fund payment in accordance with
this Indenture or as otherwise specified as contemplated by Section 3.01 for the
Securities of any series by delivering and crediting pursuant to Section 13.02
or as otherwise specified as contemplated by Section 3.01 for the Securities of
any series Securities which have been acquired (upon redemption or otherwise)
prior to such declaration of acceleration; provided further, however, that
holders of Senior Debt shall not be entitled to receive payment of any such
amounts to the extent that such holders would be required by the subordination
provisions of such Senior Debt to pay such amounts over to the obligees on trade
accounts payable or other liabilities arising in the ordinary course of
business.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of Trustee
or, as the case may be, such Holder, then and in such event such payment shall
be paid over and delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 14.02 would be applicable.
SECTION 14.04. No Payment When Senior Debt in Default. (a) In the
event and during the continuation of any default by the Company in the payment
of principal of (or premium, if any) or interest, if any, on any Senior Debt, or
in the event that any event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable, unless and until such event of default
shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled, or (b) in the event any
judicial proceeding shall be pending with respect to any such default in payment
or such event or default, then no direct or indirect payment or distribution of
any kind or character, whether in cash, property or securities (including any
Junior Subordinated Payment) shall be made or agreed to be made by the Company
on account of principal of (or premium, if any) or interest (including any
Additional Interest), if any, on the Securities or on account of any redemption,
repayment, retirement, purchase or other acquisition of any Securities by the
Company or any Subsidiary; provided, however, that nothing in this Section shall
prevent the satisfaction of any sinking fund payment in accordance with this
Indenture or as otherwise specified as contemplated by Section 3.01 for the
Securities of any series by delivering and crediting pursuant to Section 13.02
or as otherwise specified as contemplated by Section 3.01 for the Securities of
any series Securities which have been acquired (upon redemption or otherwise)
prior to such default in payment or event of default.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to a Responsible Officer of the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
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The provisions of this Section shall not apply to any payment with
respect to which Section 14.02 would be applicable.
SECTION 14.05. Payment Permitted If No Default. Nothing contained in
this Article or elsewhere in this Indenture or in any of the Securities shall
prevent (a) the Company, at any time except during the pendency of any
Proceeding referred to in Section 14.02 or under the conditions described in
Sections 14.03 and 14.04, from making payments at any time of principal of (and
premium, if any) or interest (including Additional Interest) on the Securities,
or (b) the application by the Trustee of any money deposited with it hereunder
to the payment of or on account of the principal of (and premium, if any) or
interest (including any Additional Interest) on the Securities or the retention
of such payment by the Holders, if, at the time of such payment by the Company
or application by the Trustee, as the case may be, it did not have knowledge
that such payment or application, as the case may be, would have been prohibited
by the provisions of this Article.
SECTION 14.06. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment of all Senior Debt to the extent required under Sections
14.02 and 14.03 of this Indenture, or the provision for such payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of Senior
Debt, the Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Debt pursuant to
the provisions of this Article (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to Senior
Debt of the Company to substantially the same extent as the Securities are
subordinated to the Senior Debt and is entitled to like rights of subrogation by
reason of any payments or distributions made to holders of such Senior Debt) to
the rights of the holders of such Senior Debt to receive payments and
distributions of cash, property and securities applicable to the Senior Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full. For purposes of such subrogation or assignment, no
payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt, and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 14.07. Provisions Solely to Define Relative Rights. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Debt on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall (a) impair, as between the Company and the Holders of the Securities, the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders of the Securities the principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Securities and
creditors of the Company other than their rights in relation to the
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holders of Senior Debt; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture including, without limitation, filing and voting claims in
any Proceeding, subject to the rights, if any, under this Article of the holders
of Senior Debt to receive cash, property and securities otherwise Payable or
deliverable to the Trustee or such Holder.
SECTION 14.08. Trustee to Effectuate Subordination. Each Holder of a
Security by his or her acceptance thereof authorizes and directs the Trustee on
his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination provided in this Article and
appoints the Trustee his or her attorney-in-fact for any and all such purposes.
SECTION 14.09. No Waiver of Subordination Provisions. No right of
any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof that any such holder may have or be otherwise charged with.
SECTION 14.10. Notice to Trustee. The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities. Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee in respect of the Securities, unless and until the Trustee shall
have received written notice thereof from the Company or a holder of Senior Debt
or from any trustee, agent or representative therefor (whether or not the facts
contained in such notice are true); provided, however, that if the Trustee shall
not have received the notice provided for in this Section at least two Business
Days prior to the date upon which by the terms hereof any monies may become
payable for any purpose (including, without limitation, the payment of the
principal of (and premium, if any) or interest (including any Additional
Interest) on any Security), then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
monies and to apply the same to the purpose for which they were received and
shall not be affected by any notice to the contrary which may be received by it
within two Business Days prior to such date.
SECTION 14.11. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the provisions of Article
VI, and the Holders of the Securities shall be entitled to conclusively rely
upon any order or decree entered by any court of competent jurisdiction in which
such Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of Securities, for the purpose of ascertaining the
Persons entitled to participate in such payment
<PAGE>
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or distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 14.12. Trustee Not Fiduciary for Holders of Senior Debt. The
Trustee, in its capacity as trustee under this Indenture, shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt and shall not be liable to
any such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Debt shall be entitled by virtue of
this Article or otherwise.
SECTION 14.13. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Debt which may at any time be held by it, to the same extent as any other
holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee
of any of its rights as such holder.
SECTION 14.14. Article Applicable to Paying Agents. In case at any
time any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee.
SECTION 14.15. Certain Conversions or Exchanges Deemed Payment. For
purposes of this Article only, (a) the issuance and delivery of junior
securities upon conversion or exchange of Securities shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest (including any Additional Interest) on Securities or on
account of the purchase or other acquisition of Securities, and (b) the payment,
issuance or delivery of cash, property or securities (other than junior
securities) upon conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such Security. For the
purposes of this Section, the term "junior securities" means (i) shares of any
stock of any class of the Company and (ii) securities of the Company which are
subordinated in right of payment to all Senior Debt which may be outstanding at
the time of issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article.
<PAGE>
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This instrument may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first written above.
U.S.B. HOLDING CO., INC.,
by /s/ [ILLEGIBLE]
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee,
by /s/ Sheik Wiltshire
----------------------------------
Name: Sheik Wiltshire
Title: (Second Vice President)
<PAGE>
1
EXHIBIT A
[Form of Restricted Securities Certificate]
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to ss. 3.05 and ss. 3.06
of the Junior Subordinated Indenture)
[_____________________________],
as Security Registrar
[address]
Re: ____% Junior Subordinated Securities of
U.S.B. Holding Co., Inc. (the "Company")
(the "Securities")
Reference is made to the Junior Subordinated Indenture, dated as of
________ ____, 1997 (the "Indenture"), between U.S.B. Holding Co., Inc. and The
Chase Manhattan Bank, as trustee (the "Trustee"). Terms used herein and defined
in the Indenture or in Regulation D, Rule 144A or Rule 144 under the U.S.
Securities Act of 1933, as amended (the "Securities Act") are used herein as so
defined.
This certificate relates to $____________ aggregate principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). __________________________________________________________
CERTIFICATE No(s). ____________________________________________________
CURRENTLY IN BOOK-ENTRY FORM: __Yes __No (check one)
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary in the name of the Undersigned, as or on behalf of the
Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with one of the following as indicated (check one):
<PAGE>
2
___ (1) transferred to the Company; or
___ (2) exchanged for the undersigned's own account without transfer; or
___ (3) transferred pursuant to and in compliance with Rule 144A under
the Securities Act; or
___ (4) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring the Securities for its own
account, or for the account of such an institutional "accredited
investor," for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation
of the Securities Act; or
___ (5) transferred pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless such transfer is being effected in accordance with one of the above, the
Securities Registrar will refuse to register any of the Securities evidenced by
this certificate in the name of any person other than the Holder thereof;
provided, however, that if (4) or (5) is applicable, the Securities Registrar
may require, prior to registering any such transfer of the Securities such legal
opinions, certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, such as the exemption provided by Rule 144 under such Act;
provided, further, that if box (3) is checked, the transferee must also certify
that it is a qualified institutional buyer as defined in Rule 144A.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated: _______________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By: ___________________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
================================================================================
GUARANTEE AGREEMENT
Between
U.S.B. HOLDING CO., INC.
(as Guarantor)
and
THE CHASE MANHATTAN BANK
(as Trustee)
Dated as of
February 5, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Definitions.................................................2
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application............................4
SECTION 2.02. List of Holders.............................................5
SECTION 2.03. Reports by the Guarantee Trustee............................5
SECTION 2.04. Periodic Reports to the Guarantee Trustee...................5
SECTION 2.05. Evidence of Compliance with Conditions Precedent............5
SECTION 2.06. Events of Default, Waiver...................................5
SECTION 2.07. Event of Default; Notice....................................6
SECTION 2.08. Conflicting Interests.......................................6
ARTICLE III
Powers, Duties and Rights of the Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee..................6
SECTION 3.02. Certain Rights of Guarantee Trustee.........................8
SECTION 3.03. Indemnity...................................................9
SECTION 3.04. Expenses....................................................9
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee; Eligibility.............................10
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee....................................................10
ARTICLE V
Guarantee
SECTION 5.01. Guarantee..................................................11
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 5.02. Waiver of Notice and Demand................................11
SECTION 5.03. Obligations Not Affected...................................11
SECTION 5.04. Rights of Holders..........................................12
SECTION 5.05. Guarantee of Payment.......................................12
SECTION 5.06. Subrogation................................................12
SECTION 5.07. Independent Obligations....................................13
ARTICLE VI
Covenants and Subordination
SECTION 6.01. Subordination..............................................13
SECTION 6.02. Pari Passu Guarantees......................................13
ARTICLE VII
Termination
SECTION 7.01. Termination................................................15
ARTICLE VIII
Miscellaneous
SECTION 8.01. Successors and Assigns.....................................15
SECTION 8.02. Amendments.................................................15
SECTION 8.03. Notices....................................................15
SECTION 8.04. Benefit....................................................16
SECTION 8.05. Interpretation.............................................17
SECTION 8.06. Governing Law..............................................17
<PAGE>
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
- ------------------- -------------------
310 (a) .................................................. 4.01 (a)
310 (b) .................................................. 4.01 (c), 2.08
310 (c) .................................................. Inapplicable
311 (a) .................................................. 2.02 (b)
311 (b) .................................................. 2.02 (b)
311 (c) .................................................. Inapplicable
312 (a) .................................................. 2.02 (a)
312 (b) .................................................. 2.02 (b)
313. .................................................. 2.03
314 (a) .................................................. 2.04
314 (b) .................................................. Inapplicable
314 (c) .................................................. 2.05
314 (d) .................................................. Inapplicable
314 (e) .................................................. 1.01, 2.05,
3.02
314 (f) .................................................. 2.01, 3.02
315 (a) .................................................. 3.01 (d)
315 (b) .................................................. 2.07
315 (c) .................................................. 3.01
315 (d) .................................................. 3.01 (d)
316 (a) .................................................. 1.01, 2.06,
5.04
316 (b) .................................................. 5.03
316 (c) .................................................. Inapplicable
317 (a) .................................................. Inapplicable
317 (b) .................................................. Inapplicable
318 (a) .................................................. 2.01 (b)
- ----------
* This Cross-Reference Table does not constitute part of the Guarantee Agreement
and shall not affect the interpretation of any of its terms or provisions.
<PAGE>
GUARANTEE AGREEMENT, dated as of February 5, 1997, executed and
delivered by U.S.B. HOLDING CO., INC., a Delaware corporation (the "Guarantor")
having its principal office at 100 Dutch Hill Road, Orangeburg, New York 10962,
and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Trust Securities (as defined herein) of UNION STATE CAPITAL
TRUST I, a Delaware statutory business trust (the "Issuer").
WHEREAS pursuant to an Amended and Restated Declaration of Trust
(the "Declaration of Trust"), dated as of February 5, 1997, among the Trustees
named therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial ownership interests in the assets of the Issuer, the Issuer
is issuing $20,000,000 aggregate liquidation amount of its 9.58% Capital
Securities, liquidation amount $1,000 per Security (the "Capital Securities")
and $619,000 of aggregate liquidation amount of 9.58% Common Securities,
liquidation amount $1,000 per security (the "Common Securities" and collectively
with the Capital Securities, the "Trust Securities") representing undivided
beneficial ownership interests in the assets of the Issuer and having the terms
set forth in the Declaration of Trust;
WHEREAS the Trust Securities will be issued by the Issuer and the
proceeds thereof will be used by the Issuer to purchase $20,619,000 aggregate
principal amount of the 9.58% Junior Subordinated Debt Securities due February
1, 2027 (the "Junior Subordinated Debt Securities") of the Guarantor, which will
be held by The Chase Manhattan Bank, as Property Trustee under the Declaration
of Trust, as trust assets; and
WHEREAS as incentive for the Holders to purchase Trust Securities
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth herein, to pay to the Holders 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,
which purchase the Guarantor hereby agrees shall benefit the Guarantor, the
Guarantor executes and delivers this Guarantee Agreement for the benefit of the
Holders from time to time of the Trust Securities.
<PAGE>
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Guarantee Agreement, the
terms set forth below shall, unless the context otherwise requires, have the
following meanings. Capitalized or otherwise defined terms used but not defined
herein shall have the meanings assigned to such terms in the Declaration of
Trust as in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Capital Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Common Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Debt" shall have the meaning specified in the Indenture.
"Declaration of Trust" shall have the meaning specified in the first
recital of this Guarantee Agreement.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice; proved, further, that no
Event of Default shall be deemed to have occured unless an Event of Default (as
defined in the Indenture or the Declaration) shall have occurred and be
continuing.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Trust Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions required to be paid on the Trust Securities, to the extent the
Issuer shall have funds on hand available therefor at such time, (ii) the
redemption price, including all accrued and unpaid Distributions to the date of
redemption (the "Redemption Price"), with respect to the Trust Securities called
for redemption by the Issuer to the extent the Issuer shall have funds on hand
available therefor at such time, and (iii) upon a voluntary or involuntary
termination, winding-up or liquidation of the Issuer, unless Junior Subordinated
Debt Securities are distributed to the Holders, the lesser
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<PAGE>
of (a) the aggregate of the liquidation amount of $1,000 per Trust Security plus
accrued and unpaid Distributions to the date of payment to the extent the Issuer
shall have funds on hand available to make such payment at such time and (b) the
amount of assets of the Issuer remaining available for distribution to Holders
in liquidation of the Issuer (in either case, the "Liquidation Distribution").
If an Event of Default under the Declaration has occurred and is continuing, no
Guarantee Payments with respect to the Common Securities or any guarantee
payment under any Other Guarantees (as defined in the Indenture) with respect to
Common Securities of any other U.S.B.H. Capital Trust (as defined in the
Indenture), if any, shall be made until the Holders of Capital Securities shall
be paid in full the Guarantee Payments to which they are entitled under this
Guarantee. Subordination of Guarantee Payments on the Common Securities
following such an Event of Default under the Declaration shall be analogous to
the subordination of the Common Securities provided for in Section 4.03 of the
Declaration.
"Guarantee Trustee" means The Chase Manhattan Bank, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
"Guarantor" shall have the meaning specified in the first recital of
this Guarantee Agreement.
"Holder" means any holder, as registered on the books and records of
the Issuer, of any Trust Securities; provided, however, that in determining
whether the holders of the requisite percentage of Trust Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Issuer, the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of
February 5, 1997, as supplemented and amended between the Guarantor and The
Chase Manhattan Bank, as trustee, relating to the issuance of the Junior
Subordinated Debt Securities.
"Issuer" shall have the meaning specified in the first recital of
this Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in Liquidation Amount of the Securities" means a vote by
the Holder(s), voting separately as a class, of more than 50% of the aggregate
Liquidation Amount of all then Outstanding Trust Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman, the Chief Executive Officer, the President
or a Vice President, and by the Chief Financial Officer, the Treasurer, an
Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary of
such Person, and delivered to the Guarantee Trustee. Any Officers'
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<PAGE>
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee 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) statement that each 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 officer, such
condition or covenant has been complied with.
"Other Debentures" shall have the meaning specified in the
Indenture.
"Other Guarantees" shall have the meaning specified in the
Indenture.
"Registration Rights Agreement" shall have the meaning specified in
Section 12.01 of the Indenture.
"Responsible Officer" when used with respect to the Guarantee
Trustee means any officer of the Trustee with direct responsibility for the
administration of this Guarantee Agreement, and also means, with respect to a
particular matter, any other officer of the Trustee to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Senior Debt" shall have the meaning specified in the Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Securities" shall have the meaning specified in the first
recital of this Guarantee Agreement.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee
Agreement will not be qualified under the Trust Indenture Act except upon the
effectiveness of a registration statement with respect to this Guarantee
Agreement pursuant to a registration rights agreement as contemplated in Article
XII of the Indenture.
-4-
<PAGE>
(b) Upon qualification under the Trust Indenture Act as contemplated
in clause (a) above, if and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.02. List of Holders. (a) The Guarantor shall furnish or
cause to be furnished to the Guarantee Trustee (i) semiannually, not more than
15 days after May 15 and November 15 or each year, a list, in such form as the
Guarantee Trustee may reasonably require, of the names and addresses of the
Holders ("List of Holder") as of a date not more than 15 days prior to the
delivery thereof, and (ii) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the Guarantor of any
such request, a List of Holders as of a date not more than 15 days prior to the
time such list is furnished, in each case to the extent such information is in
the possession or control of the Guarantor and is not identical to a previously
supplied list of Holders or has not otherwise been received by the Guarantee
Trustee in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311 (a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days of
May 15 of each calendar year, commencing with May 15, 1997, the Guarantee
Trustee shall provide to the Holders such reports, if any, as are required by
Section 313 of the Trust Indenture Act in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply
with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to the Guarantee Trustee. The
Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange
Commission and the Holders such documents, reports and information, if any, as
required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by any officer
pursuant to Section 314 (c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06. Events of Default, Waiver. The Holders of a Majority
in Liquidation Amount of the Securities may, by vote, on behalf of the Holders,
waive any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any such Event of Default shall be
deemed to have been cured, for every
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<PAGE>
purpose of this Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
therefrom.
SECTION 2.07. Event of Default; Notice. (a) The Guarantee Trustee
shall, within 90 days after the occurrence of an Event of Default known to a
Responsible Officer of the Trustee, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such Events of Default have been cured before the giving of such
notice; provided, that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the Board of Directors, the executive committee or a
trust committee of directors and/or a Responsible Officer in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless a Responsible Officer charged with the
administration of the Declaration of Trust shall have received written notice of
such Event of Default.
SECTION 2.08. Conflicting Interests. The Declaration of Trust shall
be deemed to be specifically described in this Guarantee Agreement for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.
ARTICLE III
Powers, Duties and Rights of the
Guarantee Trustee
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of
the Holders, and the Guarantee Trustee shall not transfer this Guarantee
Agreement to any Person except a Holder exercising his or her rights pursuant to
Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to
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<PAGE>
Section 2.06), the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee Agreement, and use the same degree of care
and skill in its exercise thereof as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee
Agreement, and the Guarantee Trustee shall not be liable except for
the performance of such duties and obligations as are specifically
set forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Guarantee Trustee and conforming to the requirements of this
Guarantee Agreement; but in the case of any such certificates or
opinions that by any provision hereof or of the Trust Indenture Act
are specifically required to be furnished to the Guarantee Trustee,
the Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in Liquidation
Amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon the Guarantee
Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers if the Guarantee Trustee shall
have reasonable grounds for believing that the repayment of such funds or
liability is not assured to it under the terms of this Guarantee Agreement
-7-
<PAGE>
or indemnity satisfactory to it against such risk or liability is not
reasonably assured to it.
SECTION 3.02. Certain Rights of Guarantee Trustee. (a) Subject to
the provisions of Section 3.01:
(i) The Guarantee Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document reasonably believed by it to be
genuine and to have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by all Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee Agreement,
the Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and the
advice or written opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates and
may be one of its employees. The Guarantee Trustee shall have the right at
any time to seek instructions concerning the administration of this
Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee Agreement at
the request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee such security and indemnity reasonably
satisfactory to it, against the costs, expenses (including attorneys' fees
and expenses) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as may
be requested by the Guarantee Trustee; provided, that nothing contained in
this Section 3.02(a)(v) shall be taken to relieve the Guarantee Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion,
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<PAGE>
report, notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent
or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee Agreement
the Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the
Holders, (B) may refrain from enforcing such remedy or right or taking
such other action until such instructions are received and (C) shall be
fully protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
Guarantee Trustee and its directors, officers, agents and employees for, and to
hold them harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this Guarantee 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. The Guarantee Trustee will not claim or exact any lien or
charge on any Guarantee Payments as a result of any amount due to it under this
Guarantee Agreement. This indemnity shall survive the termination of this
Guarantee Agreement or the resignation or removal of the Guarantee Trustee.
SECTION 3.04. Expenses. The Guarantor, as obligor on the Junior
Subordinated Debt Securities, shall from time to time reimburse the Guarantee
Trustee for its reasonable expenses and costs incurred in connection with the
performance of its duties hereunder. The provisions of this Section 3.04 shall
survive the termination of this Guarantee Agreement or the resignation or
removal of the Guarantee Trustee.
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<PAGE>
ARTICLE IV
Guarantee Trustee
SECTION 4.01. Guarantee Trustee; Eligibility. (a) There shall at all
times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of
Section 310(c) of the Trust Indenture Act. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority, then, for the
purposes of this Section and to the extent permitted by the Trust
Indenture Act, the combined capital and surplus of such corporation shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.01(a), the Guarantee Trustee shall immediately resign
in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee. (a) Subject to Section 4.02(b), in the absence of the existence of an
Event of Default, the Guarantee Trustee may be appointed or removed without
cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.
(c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
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<PAGE>
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Guarantee Trustee.
ARTICLE V
Guarantee
SECTION 5.01. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by or on behalf of the Issuer),
as and when due, regardless of any defense, right of set-off or counterclaim
which the Issuer 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 Issuer to pay such amounts to the
Holders. The Guarantor shall give prompt written notice to the Guarantee Trustee
in the event it makes any direct payment hereunder.
SECTION 5.02 Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of the Guarantee Agreement and of any liability to
which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Guarantee Trustee, Issuer 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 5.03. Obligations Not Affected. The obligations,
covenants, agreements and duties of the Guarantor under this Guarantee
Agreement shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Trust Securities to
be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions (other than any extension of time for
payment of Distributions that results from the extension of any interest
payment period on the Junior Subordinated Debt Securities as so provided
in the Indenture), Redemption Price, Liquidation Distribution or any other
sums payable under the terms of the Trust Securities or the extension of
time for the performance of any other obligation under, arising out of, or
in connection with, the Trust Securities;
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<PAGE>
(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 Trust
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Trust
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred;
(g) the consummation of the Exchange Offer; 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 5.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly
acknowledges that: (i) this Guarantee Agreement will be deposited with the
Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee
Trustee has the right to enforce this Guarantee Agreement on behalf of the
Holders; (iii) subject to Section 3.02(v), the Holders of a Majority in
Liquidation Amount of the Securities have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of this Guarantee Agreement or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv)
any Holder may institute a legal proceeding directly against the Guarantor to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Issuer or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates
a guarantee of payment and not of collection. This Guarantee Agreement will not
be discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer) or upon distribution of
Junior Subordinated Debt Securities to Holders as provided in the Declaration of
Trust.
SECTION 5.06 Subrogation. The Guarantor shall be subrogated to all
(if any ) rights of the Holders against the Issuer in respect of any amounts
paid to the Holders by the Guarantor under this Guarantee Agreement and shall
have the right to waive payment by
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<PAGE>
the Issuer pursuant to Section 5.01; provided, however, that the Guarantor shall
not (except to the extent required by mandatory provisions of law) be entitled
to enforce or exercise any rights which it may acquire by way of subrogation or
any indemnity, reimbursement or other agreement, in all cases as a result of
payment under this Guarantee Agreement, if at the time of any such payment, any
amounts are due and unpaid under this Guarantee Agreement. If any amount shall
be paid to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such amount
to the Holders.
SECTION 5.07 Independent Obligations. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the Issuer
with respect to the Trust Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI
Covenants and Ranking
SECTION 6.01. Ranking.. This Guarantee Agreement will constitute an
unsecured obligation of the Guarantor and will rank (a) subordinate and junior
in right of payment to all Senior Debt of the Guarantor, to the same extent and
in the same manner that the Junior Subordinated Debt Securities are subordinated
to Senior Debt pursuant to the Indenture, and (b) senior to all capital stock of
the Guarantor.
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement shall
rank pari passu with any similar guarantee agreements issued by the Guarantor on
behalf of the holders of trust securities issued by a trust created by the
Guarantor similar to the Issuer.
SECTION 6.03. Limitation on Transactions. The Guarantor covenants
and agrees with each Holder that it will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any shares of the Guarantor's capital stock (which includes
common and preferred stock), or (ii) make any payment of principal, interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Guarantor (including Other Debentures) that rank pari passu with or junior in
interest to the Securities or (iii) make any guarantee payments with respect to
any guarantee by the Guarantor of debt securities of any subsidiary of the
Guarantor (including Other Guarantees) if such guarantee ranks pari passu with
or junior in interest to the Securities (other than (a) dividends or
distributions in common stock of the Guarantor, (b) any declaration of a
dividend in connection with the implementation of a stockholders' 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, (c) payments under this
Guarantee, (d) purchases or acquisitions of shares of the Guarantor's common
stock in connection with the satisfaction by the Guarantor of its obligations
under any employee benefit plan or other contractual obligation of the Guarantor
-13-
<PAGE>
(other than a contractual obligation ranking pari passu with or junior in
interest to the Securities), (e) as a result of a reclassification of the
Guarantor's capital stock or the exchange or conversion of one class or series
of the Guarantor's capital stock for another class or series of the Guarantor's
capital stock, or (f) the purchase of fractional interests in shares of the
Guarantor's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged), if at such
time (i) there shall have occurred an Event of Default (as defined in the
Indenture), (ii) the Guarantor shall be in default with respect to its payment
of any obligations under this Guarantee or (iii) the Guarantor shall have given
notice of its election to begin an Extension Period (as defined in the
Indenture) and shall not have rescinded such notice, or such Extension Period,
or any extension thereof, shall be continuing.
The Guarantor also covenants with each Holder for so long as the
Securities remain outstanding (i) to maintain 100% direct or indirect ownership
of the Common Securities; provided, however, that any permitted successor of the
Guarantor under the Indenture may succeed to the Guarantor's ownership of such
Common Securities, (ii) not to cause or permit the dissolution, winding-up or
termination of the Issuer, except (a) in connection with a distribution of the
Junior Subordinated Debt Securities to the holders of Capital Securities or (b)
in connection with certain mergers, consolidations or amalgamations permitted by
the Declaration of Trust and (iii) to use its reasonable efforts, consistent
with the terms and provisions of such Declaration of Trust, to cause the Trust
to remain classified as a grantor trust and not an association taxable as a
corporation for United States Federal income tax purposes.
SECTION 6.04. Exchange Offer . In the event an Exchange Offer
Registration Statement (as defined in the Registration Rights Agreement) becomes
efective and the Issuer issues any Exchange Capital Securities (as defined in
the Registration Rights Agreement) in the Exchange Offer, the Guarantor will
enter into a new guarantee agreement, in substantially the same form as this
Guarantee, with respect to the Exchange Capital Securities.
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<PAGE>
ARTICLE VII
Termination
SECTION 7.01. Termination. This Guarantee Agreement shall terminate
and be of no further force and effect upon (i) full payment of the Redemption
Price of all Trust Securities, (ii) the distribution of Junior Subordinated Debt
Securities to the Holders in exchange for all of the Trust Securities, (iii)
full payment of the amounts payable in accordance with the Declaration of Trust
upon liquidation of the Issuer or (iv) the exchange of all the Capital
Securities for Exchange Capital Securities. Notwithstanding the foregoing, this
Guarantee Agreement will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must repay any sums paid with respect to
Trust Securities or this Guarantee Agreement. The provisions of Sections 3.03
and 3.04 shall survive termination of this Guarantee Agreement as provided
therein.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article VIII of the Indenture and pursuant to which the assignee agrees in
writing to perform the Guarantor's obligations hereunder, the Guarantor shall
not assign its obligations hereunder.
SECTION 8.02. Amendments. Except with respect to any changes which
do not adversely affect the rights of the Holders in any material respect (in
which case no consent of the Holders will be required), this Guarantee Agreement
may only be amended with the prior approval of the Holders of not less than a
Majority in Liquidation Amount of the Securities. The provisions of Article VI
of the Declaration of Trust concerning meetings of the Holders shall apply to
the giving of such approval.
SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied (confirmed by delivery
of the original) or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address set forth below or
such other address, facsimile number or to the attention of such other
Person as the Guarantor may give notice to the Holders:
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<PAGE>
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
Facsimile No.: 914-365-4695
Attention: Steven T. Sabatini
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such
other address as the Guarantee Trustee on behalf of the Issuer may give
notice to the Holders:
UNION STATE CAPITAL TRUST I
c/o U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
Facsimile No.: 914-365-4695
Attention: Steven T. Sabatini
with a copy to:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Facsimile No.:
Attention: Corporate Trustee Administration Department
(c) if given to the Guarantee Trustee:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Facsimile No.:
Attention: Corporate Trustee Administration Department
(d) if given to any Holder, at the address set forth on the books
and records of the Issuer.
All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from the Trust
Securities.
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<PAGE>
SECTION 8.05. Interpretation. In this Guarantee Agreement, unless
the context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not
defined in the preamble hereto have the respective meanings assigned to
them in Section 1.01;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(d) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
(g) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
U.S.B. HOLDING CO., INC.
By /s/ [ILLEGIBLE]
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By /s/ Sheik Wiltshire
----------------------------------
Name: Sheik Wiltshire
Title: (Second Vice President)
================================================================================
AMENDED AND RESTATED
DECLARATION OF TRUST
among
U.S.B. HOLDING CO., INC., as Depositor,
THE CHASE MANHATTAN BANK,
as Property Trustee,
CHASE MANHATTAN BANK DELAWARE,
as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of February 5, 1997
UNION STATE CAPITAL TRUST I
================================================================================
<PAGE>
UNION STATE CAPITAL TRUST I
Certain Sections of this Amended and Restated Declaration of Trust
relating to Sections 310 through 318 of the Trust Indenture Act of 1939:
Trust Indenture Declaration of
Act Section Trust Section
--------------- --------------
ss.310(a)(1)............................................. 8.07
(a)(2)............................................. 8.07
(a)(3)............................................. 8.09
(a)(4)............................................. 2.07(a)(ii)
(b)................................................ 8.08
ss.311(a)................................................ 8.13
(b)................................................ 8.13
ss.312(a)................................................ 5.08
(b)................................................ 5.08
(c)................................................ 5.08
ss.313(a)................................................ 8.14
(a)(4)............................................. 8.14
(b)................................................ 8.14
(c)................................................ 10.09
(d)................................................ 8.14
ss.314(a)................................................ 8.14, 8.15
(b)................................................ Not Applicable
(c)(1)............................................. 8.16
(c)(2)............................................. 8.16
(c)(3)............................................. Not Applicable
(d)................................................ Not Applicable
(e)................................................ 1.01, 8.16, 8.01(a)
ss.315(a)................................................ 8.03(a)
(b)................................................ 8.02, 10.09
(c)................................................ 8.01(a)
(d)................................................ 8.01, 8.03
(e)................................................ Not Applicable
ss.316(a)................................................ Not Applicable
(a)(1)(A).......................................... Not Applicable
(a)(1)(B).......................................... Not Applicable
(a)(2)............................................. Not Applicable
(b)................................................ 5.13
(c)................................................ 6.07
ss.317(a)(1)............................................. Not Applicable
(a)(2)............................................. Not Applicable
(b)................................................ 5.10
ss.318(a)................................................ 10.11
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of this Amended and Restated Declaration of Trust.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINED TERMS
SECTION 1.01. DEFINITIONS .................................................2
ARTICLE II
CONTINUATION OF THE TRUST
SECTION 2.01. NAME .......................................................11
SECTION 2.02. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS..11
SECTION 2.03. ORGANIZATIONAL EXPENSES ....................................12
SECTION 2.04. ISSUANCE OF THE CAPITAL SECURITIES .........................12
SECTION 2.05. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION AND PURCHASE
OF JUNIOR DEBT SECURITIES .................................12
SECTION 2.06. DECLARATION OF TRUST .......................................12
SECTION 2.07. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.............13
SECTION 2.08. ASSETS OF TRUST ............................................17
SECTION 2.09. TITLE TO TRUST PROPERTY ....................................17
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.01. PAYMENT ACCOUNT ............................................17
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 4.01. DISTRIBUTIONS ..............................................17
SECTION 4.02. REDEMPTION .................................................19
SECTION 4.03. SUBORDINATION OF COMMON SECURITIES .........................21
SECTION 4.04. PAYMENT PROCEDURES .........................................21
SECTION 4.05. TAX RETURNS AND REPORTS ....................................21
SECTION 4.06. PAYMENT OF TAXES; DUTIES, ETC. OF THE TRUST ................22
SECTION 4.07. PAYMENTS UNDER INDENTURE ...................................22
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.01. INITIAL OWNERSHIP ..........................................22
SECTION 5.02. TRUST SECURITIES CERTIFICATES ..............................22
SECTION 5.03. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES ....23
<PAGE>
SECTION 5.04. GLOBAL CAPITAL SECURITY ....................................23
SECTION 5.05. REGISTRATION OF TRANSFER AND EXCHANGE GENERALLY; CERTAIN
TRANSFERS AND EXCHANGES; CAPITAL SECURITIES CERTIFICATES;
SECURITIES ACT LEGENDS ....................................24
SECTION 5.06. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES ..............................................30
SECTION 5.07. PERSONS DEEMED SECURITYHOLDERS .............................30
SECTION 5.08. ACCESS TO LIST OF SECURITYHOLDERS, NAMES AND ADDRESSES .....30
SECTION 5.09. MAINTENANCE OF OFFICE OR AGENCY. ...........................30
SECTION 5.10. APPOINTMENT OF PAYING AGENT ................................31
SECTION 5.11. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR ................31
SECTION 5.12. NOTICES TO CLEARING AGENCY .................................32
SECTION 5.13. RIGHTS OF SECURITYHOLDERS ..................................32
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 6.01. LIMITATIONS ON CAPITAL SECURITYHOLDER'S VOTING RIGHTS ......34
SECTION 6.02. NOTICE OF MEETINGS .........................................35
SECTION 6.03. MEETINGS OF SECURITYHOLDERS ................................35
SECTION 6.04. VOTING RIGHTS ..............................................36
SECTION 6.05. PROXIES ....................................................36
SECTION 6.06. SECURITYHOLDER ACTION BY WRITTEN CONSENT ...................36
SECTION 6.07. RECORD DATE FOR VOTING AND OTHER PURPOSES ..................36
SECTION 6.08. ACTS OF SECURITYHOLDERS ....................................36
SECTION 6.09. INSPECTION OF RECORDS ......................................37
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.01. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE .....38
SECTION 7.02. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE .....38
SECTION 7.03. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR ................39
ARTICLE VIII
THE TRUSTEES
SECTION 8.01. CERTAIN DUTIES AND RESPONSIBILITIES ........................39
SECTION 8.02. EVENTS OF DEFAULT NOTICES; DEFERRAL OF INTEREST PAYMENT
NOTICES ...................................................41
SECTION 8.03. CERTAIN RIGHTS OF PROPERTY TRUSTEE .........................41
SECTION 8.04. NOT RESPONSIBLE FOR RECITALS ...............................44
SECTION 8.05. MAY HOLD SECURITIES ........................................44
SECTION 8.06. COMPENSATION, INDEMNITY, FEES ..............................44
SECTION 8.07. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES 45
SECTION 8.08. CONFLICTING INTERESTS ......................................46
SECTION 8.09. CO-TRUSTEES AND SEPARATE TRUSTEE ...........................46
SECTION 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR ..........48
(ii)
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SECTION 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR .....................49
SECTION 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS 50
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST 50
SECTION 8.14. REPORTS BY PROPERTY TRUSTEE ................................51
SECTION 8.15. REPORTS TO THE PROPERTY TRUSTEE ............................51
SECTION 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT ...........51
SECTION 8.17. NUMBER OF TRUSTEES .........................................51
SECTION 8.18. DELEGATION OF POWER ........................................52
ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
SECTION 9.01. TERMINATION UPON EXPIRATION DATE; TERMINATION UPON SPECIAL
EVENT .....................................................52
SECTION 9.02. EARLY TERMINATION ..........................................52
SECTION 9.03. TERMINATION ................................................53
SECTION 9.04. LIQUIDATION ................................................53
SECTION 9.05. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST .....................................................55
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. LIMITATION OF RIGHTS OF SECURITYHOLDERS ...................56
SECTION 10.02. LIABILITY OF THE DEPOSITOR ................................56
SECTION 10.03. AMENDMENT .................................................56
SECTION 10.04. SEPARABILITY ..............................................57
SECTION 10.05. GOVERNING LAW .............................................58
SECTION 10.06. PAYMENTS DUE ON NON-BUSINESS DAY ..........................58
SECTION 10.07. SUCCESSORS ................................................58
SECTION 10.08. HEADINGS ..................................................58
SECTION 10.09. REPORTS, NOTICES AND DEMANDS ..............................58
SECTION 10.10. AGREEMENT NOT TO PETITION .................................59
SECTION 10.11. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT ....59
SECTION 10.12. ACCEPTANCE OF TERMS OF DECLARATION OF TRUST, GUARANTEE AND
INDENTURE .................................................60
(iii)
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AMENDED AND RESTATED DECLARATION OF TRUST, dated as of
February 5, 1997, among (i) U.S.B. HOLDING CO., INC., a
Delaware corporation (including any successors or assigns, the
"Depositor"), (ii) THE CHASE MANHATTAN BANK, a New York
banking corporation, as property trustee (in such capacity,
the "Property Trustee" and, in its separate corporate capacity
and not in its capacity as Property Trustee, the "Bank"),
(iii) CHASE MANHATTAN BANK Delaware, a Delaware banking
corporation, as Delaware trustee (the "Delaware Trustee"),
(iv) Thomas E. Hales, an individual, (v) Michael H. Fury an
individual, (vi) Raymond J. Crotty, an individual, and (vii)
Steven T. Sabatini, an individual, each of whose address is
c/o U.S.B. Holding Co., Inc. (each an "Administrative Trustee"
and collectively, the "Administrative Trustees") (the Property
Trustee, the Delaware Trustee and the Administrative Trustees
are referred to collectively herein as the "Trustees") and
(viii) the several Holders, as hereinafter defined.
W I T N E S S E T H :
WHEREAS the Depositor, the Delaware Trustee and the Administrative
Trustees have heretofore duly declared and established a business trust pursuant
to the Business Trust Act of the State of Delaware by entering into a certain
Declaration of Trust, dated as of January 27, 1997 (the "Original Declaration of
Trust"), and by the execution and filing by the Delaware Trustee and the
Administrative Trustees with the Secretary of State of the State of Delaware of
a Certificate of Trust, filed on January 27, 1997 (the "Certificate of Trust"),
a copy of which is attached hereto as Exhibit A; and
WHEREAS the Depositor, the Delaware Trustee and the Administrative
Trustees desire to amend and restate the Original Declaration of Trust in its
entirety as set forth herein to provide for, among other things, (i) the
issuance and sale of the Common Securities, as hereinafter defined, by Union
State Capital Trust I (the "Trust") to the Depositor, (ii) the issuance and sale
of the 9.58% Capital Securities (the "Initial Capital Securities") by the Trust
pursuant to the Purchase Agreement, as hereinafter defined, (iii) the issuance
pursuant to a registered exchange for the Initial Capital Securities of 9.58%
Capital Securities (the "Exchange Capital Securities"), (iv) the acquisition by
the Trust from the Depositor of all of the right, title and interest in the
Junior Subordinated Debt Securities, and (v) the appointment of the Bank as the
Property Trustee.
NOW, THEREFORE, in consideration of the agreements and obligations
set forth herein and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, each party, for the benefit of the other
parties and for the benefit of the Securityholders, hereby amends and restates
the Original Declaration of Trust in its entirety and agrees as follows:
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ARTICLE I
Defined Terms
SECTION 1.01. Definitions. For all purposes of this Declaration of
Trust, 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 Declaration of Trust;
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Declaration of Trust as a whole and not to
any particular Article, Section or other subdivision; and
(e) all references to the date the Capital Securities were
originally issued shall refer to the date the Initial Capital Securities
were originally issued.
"Act" has the meaning specified in Section 6.08.
"Additional Distribution" has the meaning specified in Section
4.01(c).
"Administrative Trustee" means each of Thomas E. Hales, Michael H.
Fury, Raymond J. Crotty, and Steven T. Sabatini solely in such Person's capacity
as Administrative Trustee of the Trust continued hereunder and not in such
Person's individual capacity, or such Administrative Trustee's successor in
interest in such capacity, or any successor trustee appointed as herein
provided.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a beneficial interest in a Global Capital Security, the
rules and procedures of the Depositary for such Capital Security, in each case
to the extent applicable to such transaction and as in effect from time to time.
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"Bank" has the meaning specified in the preamble to this Declaration
of Trust.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjudication or composition of or in respect of such Person under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of such Person or of any
substantial part of its property or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law, or the consent by it to the filing of any such petition
or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or similar official) of such Person or of any substantial
part of its property or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due and its willingness to be
adjudicated a bankrupt, or the taking of corporate action by such Person
in furtherance of any such action.
"Board Resolution" means a copy of a resolution certified by the
Secretary of 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 Trustees.
"Business Day" means a day other than (a) a Saturday or Sunday, (b)
a day on which banking institutions in the City of New York are authorized or
required by law or executive order to remain closed or (c) a day on which the
Property Trustee's Corporate Trust Office or the Corporate Trust Office of the
Debenture Trustee is closed for business.
"Capital Securities" means, at any given time, the Initial Capital
Securities and the Exchange Capital Securities issued and outstanding at such
time, treated together as a single class hereunder.
"Capital Securities Certificate" means a certificate evidencing
ownership of Capital Securities, substantially in the form attached as Exhibit
B.
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"Capital Securityholder" means a Person in whose name a Capital
Security or Capital Securities is registered in the Securities Register; and any
such Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act.
"Certificate of Trust" has the meaning specified in the preamble
to this Declaration of Trust.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. The Depository Trust Company shall be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means February 5, 1997.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, 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 the 9.58% Common Securities, each
representing an undivided beneficial interest in the assets of the Trust, having
a Liquidation Amount of $1,000 and having the rights provided therefor in this
Declaration of Trust, 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 principal office of the
Property Trustee located in New York City which at the time of the execution
of this Declaration of Trust is located at 450 West 33rd Street, 15th Floor,
New York, NY 10001-2697, Attention: Corporate Trustee Administration
Department.
"Debenture Event of Default" means an "Event of Default" as
defined in the Indenture.
"Debenture Trustee" means The Chase Manhattan Bank, a New York
banking corporation, as trustee under the Indenture, and any successor trustee
under the Indenture.
"Declaration of Trust" means this Amended and Restated Declaration
of Trust, 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 Amended and Restated Declaration of Trust, the
provisions of the Trust Indenture Act that are deemed to
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be a part of and govern this Amended and Restated Declaration of Trust and any
modification, amendment or supplement of either, respectively.
"Definitive Capital Securities Certificate" means a Capital
Securities Certificate issued in certificated, fully registered form.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. ss.ss. 3801, et seq., as it may be amended from time
to time.
"Delaware Trustee" means the corporation identified as the "Delaware
Trustee" in the preamble to this Declaration of Trust solely in its capacity as
Delaware Trustee of the Trust continued hereunder and not in its individual
capacity, or its successor in interest in such capacity, or any successor
trustee appointed in such capacity as herein provided.
"Depositor" has the meaning specified in the preamble to this
Declaration of Trust.
"Distribution Date" has the meaning specified in Section 4.01(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"Early Termination Event" has the meaning specified in Section 9.02.
"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 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 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 of any covenant or
warranty of any Trustee in this Declaration of Trust (other than a
covenant or warranty, a default in the performance or breach of which is
addressed 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 Capital
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
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(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 and Exchange Act of 1934, as
amended.
"Exchange Capital Securities" means the 9.58% Capital Securities,
Series B, issued in exchange for the Initial Capital Securities in an Exchange
Offer in accordance with the Registration Rights Agreement, each representing an
undivided beneficial interest in the assets of the Trust, having a Liquidation
Amount of $1,000 per Exchange Capital Security and having the rights provided
therefor in this Declaration of Trust, including the right to receive
Distributions and a Liquidation Distribution.
"Exchange Offer" has the meaning set forth in Section 5.05(d).
"Expiration Date" has the meaning specified in Section 9.01.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Global Capital Securities" means a Capital Security registered in
the name of a Clearing Agency, beneficial ownership and transfers of which shall
be made through book entries by such Clearing Agency as described in Section
5.04.
"Global Capital Securities Certificate" means a certificate
evidencing ownership of Global Capital Securities, substantially in the form
attached as Exhibit B.
"Guarantee" means the Guarantee Agreement executed and delivered by
the Depositor and The Chase Manhattan Bank, as trustee, contemporaneously with
the execution and delivery of this Declaration of Trust, for the benefit of the
Holders of the Trust Securities, as amended from time to time, provided, that
following the consummation of the Exchange Offer, such term shall be deemed to
refer to the Exchange Guarantee (as defined in the Registration Rights
Agreement).
"Indenture" means the Indenture, dated as of February 5, 1997,
between the Depositor and the Debenture Trustee (as amended or supplemented from
time to time), relating to the issuance of the Junior Subordinated Debt
Securities.
"Initial Capital Securities" means the 9.58% Capital Securities,
Series A, of the Trust issued on the date hereof, each representing an undivided
beneficial interest in the assets of the Trust, having a Liquidation Amount of
$1,000 per Capital Security and having the rights provided therefor in this
Declaration of Trust, including the right to receive Distributions and a
Liquidation Distribution.
"Initial Purchaser" means Keefe, Bruyette & Woods, Inc.
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"Institutional Accredited Investor" means an institutional
accredited investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act.
"Junior Subordinated Debt Securities" means the aggregate principal
amount of the Depositor's 9.58% Junior Subordinated Debt Securities due February
1, 2027, issued pursuant to the Indenture.
"Junior Subordinated Debt Securities Redemption Date" means, with
respect to any Junior Subordinated Debt Securities to be redeemed under the
Indenture, the date fixed for redemption under the Indenture.
"Letter of Representations" means the agreement among the Trust, the
Property Trustee and The Depository Trust Company ("DTC"), as the initial
Clearing Agency, dated as of the Closing Date.
"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 an aggregate Liquidation Amount equal to the
principal amount of Junior Subordinated Debt Securities to be contemporaneously
redeemed in accordance with the Indenture, allocated to the Trust Securities
based upon their relative Liquidation Amounts and the proceeds of which will be
used to pay the Redemption Price of such Trust Securities, and (b) with respect
to a distribution of Junior Subordinated Debt Securities to Holders in
connection with a dissolution or liquidation of the Trust, Junior Subordinated
Debt Securities having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Trust Securities of the Holder to whom such Junior
Subordinated Debt Securities are distributed.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated Debt
Securities are to be distributed to Holders of Trust Securities in connection
with a termination and liquidation of the Trust pursuant to Section 9.04(a).
"Liquidation Distribution" has the meaning specified in Section
9.04(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman,
the Chief Executive Officer, President or a Vice President, and by the
Treasurer, an Associate Treasurer, an Assistant Treasurer, the Controller, 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 8.16 shall be the principal executive, financial or
accounting officer of the Depositor. Any Officers' Certificate delivered with
respect to
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compliance with a condition or covenant provided for in this Declaration of
Trust 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 officer's opinion is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust, the Property Trustee or the Depositor, but not an
employee of any thereof, and which opinion shall be reasonably acceptable to the
Property Trustee.
"Original Declaration of Trust" has the meaning specified in the
preamble to this Declaration of Trust.
"Other Capital Securities" means the Capital Securities sold by the
Initial Purchaser in the initial offering contemplated by the Purchase Agreement
to Institutional Accredited Investors in reliance on an exemption from the
registration requirements of the Securities Act other than Rule 144A.
"Outstanding", with respect to Capital Securities, means, as of the
date of determination, all Capital Securities theretofore executed and delivered
under this Declaration of Trust, except:
(a) Capital Securities theretofore canceled by the Property Trustee
or delivered to the Property Trustee for cancellation;
(b) Capital 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 benefit of the Holders of such Capital
Securities; provided that if such Capital Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Declaration
of Trust; and
(c) Capital Securities which have been paid or in exchange for or in
lieu of which other Capital Securities have been executed and delivered
pursuant to Sections 5.02, 5.04, 5.05, 5.11 or 5.13;
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provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Capital Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Capital
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 (a) in determining whether any Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Capital Securities that a Responsible Officer of such Trustee actually
knows to be so owned shall be so disregarded and (b) the foregoing shall not
apply at any time when all of the outstanding Capital Securities are owned by
the Depositor, one or more of the Trustees and/or any such Affiliate. Capital
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 Capital Securities
and that the pledgee is not the Depositor or any Affiliate of the Depositor.
"Owner" means each Person who is the beneficial owner of a Global
Capital Security as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the Owner, then as reflected in the records
of a Person maintaining an account with such Clearing Agency (directly or
indirectly), in accordance with the rules of such Clearing Agency.
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.09 and shall initially be the Property Trustee.
"Payment Account" means a segregated noninterest-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 Junior Subordinated Debt Securities will be held and from which
the Property Trustee shall make payments to the Securityholders in accordance
with Sections 4.01 and 4.02.
"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.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Declaration of
Trust solely in its capacity as Property Trustee of the Trust 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.
"Purchase Agreement" means the Purchase Agreement, dated as of
January 31, 1997, among the Trust, the Depositor and the Initial Purchaser.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Declaration
of Trust, provided, however, that each Junior Subordinated Debt Securities
Redemption Date and the Stated
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Maturity of the Junior Subordinated Debt Securities 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, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Junior Subordinated Debt Securities, allocated on a pro rata basis (based on
Liquidation Amounts) among the Trust Securities.
"Registration Agreement" means the Registration Rights Agreement
dated as of February 5, 1997, among the Trust, the Depositor and the Initial
Purchaser.
"Registration Statement" has the meaning specified in the
Registration Agreement.
"Regulation D" means Regulation D under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulatory Capital Event" has the meaning specified in Section 1.01
of the Indenture.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Responsible Officer" means, when used with respect to the Property
Trustee, any officer of the Property Trustee having direct responsibility for
the administration for this Declaration of Trust, and also means, with respect
to a particular matter, any other officer of the Property Trustee, to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Restricted Capital Securities" means all Capital Securities
required pursuant to Section 5.05(c) to bear a Restricted Capital Securities
Legend, including the Global Capital Securities.
"Restricted Capital Securities Certificate" means a certificate
substantially in the form set forth in Exhibit D.
"Restricted Capital Securities Legend" means a legend substantially
in the form of the legend required in Section 5.05(c).
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A Capital Securities" means the Capital Securities
purchased by the Initial Purchaser from the Trust pursuant to the Purchase
Agreement, other than the Other Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.05.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Trust Securities is registered in the Securities Register; any such
Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act.
"Special Event" means either a Tax Event or a Regulatory Capital
Event.
"Stated Maturity" has the meaning specified in Section 1.01 of the
Indenture.
"Tax Event" has the meaning specified in Section 1.01 of the
Indenture.
"Trust" means Union State Capital Trust I.
"Trust Indenture Act" has the meaning specified in Section 1.01 of
the Indenture.
"Trust Property" means (a) the Junior Subordinated Debt Securities,
(b) the rights of the Property Trustee under the Guarantee, (c) any cash or
deposit in, or owing to, the Payment Account and (d) all proceeds and rights in
respect of the foregoing.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Capital Securities Certificates.
"Trust Security" means any one of the Common Securities or the
Capital Securities.
"Trustees" means, collectively, the Property Trustee, the Delaware
Trustee and the Administrative Trustees.
ARTICLE II
Continuation of the Trust
SECTION 2.01. Name. The Trust continued hereby shall be known as
"Union State Capital Trust I," as such name may be modified from time to time by
the Administrative Trustees following written notice to the Holders and the
other Trustees, in which name the Trustees may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
SECTION 2.02. Office of the Delaware Trustee; Principal Place of
Business. The address of the Delaware Trustee in the State of Delaware is Chase
Manhattan Bank Delaware, 1201 Market Street, 9th Floor, Wilmington, DE 19801,
Attention: Corporate Trustee Administration Department, 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 in care of U.S.B. Holding Co., Inc., 100 Dutch
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Hill Road, Orangeburg, New York 10962, Attention: Steven T. Sabatini, Executive
Vice President and Chief Financial Officer.
SECTION 2.03. Organizational Expenses. The Depositor, as issuer of
the Junior Subordinated Debt Securities, shall pay all 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 2.04. Issuance of the Capital Securities. The Capital
Securities to be issued will be limited to $20 million aggregate Liquidation
Amount outstanding at any one time.
On January 31, 1997, the Depositor and an Administrative Trustee, on
behalf of the Trust, and pursuant to the Original Declaration of Trust, and the
Initial Purchaser executed and delivered the Purchase Agreement.
Contemporaneously with the execution and delivery of this Declaration of Trust,
an Administrative Trustee, on behalf of the Trust, shall execute or cause to be
executed in accordance with Section 5.02 and the Property Trustee shall upon the
written order of the Depositor, countersign and deliver to the initial Clearing
Agency or its custodian on behalf of the Initial Purchaser, a Global Capital
Securities Certificate registered in the name of the nominee of the initial
Clearing Agency, in an aggregate amount of Capital Securities having an
aggregate Liquidation Amount of $20 million against receipt by the
Administrative Trustees of the aggregate purchase price of such Capital
Securities equal to 100% of the Liquidation Amount multiplied by the number of
Capital Securities being purchased.
SECTION 2.05. Issuance of the Common Securities; Subscription and
Purchase of Junior Debt Securities. Contemporaneously with the execution and
delivery of this Declaration of Trust, an Administrative Trustee, on behalf of
the Trust, shall execute or cause to be executed in accordance with Section
5.02(a) and delivered to the Depositor Common Securities Certificates,
registered in the name of the Depositor, in an aggregate amount of 619 Common
Securities having an aggregate Liquidation Amount of $619,000 against payment by
the Depositor of $619,000, which amount the Administrative Trustees shall
promptly deliver to the Property Trustee. Contemporaneously therewith, an
Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase
from the Depositor Junior Subordinated Debt Securities, registered in the name
of the Trust and having an aggregate principal amount equal to $20,619,000, and,
in satisfaction of the purchase price for such Junior Subordinated Debt
Securities, the Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $20,619,000.
SECTION 2.06. Declaration of Trust. The exclusive purposes and
functions of the Trust are to (a) issue and sell Trust Securities, (b) use the
proceeds from the sale of Trust Securities to acquire the Junior Subordinated
Debt Securities, (c) receive payments to be made with respect to the Junior
Subordinated Debt Securities, and (d) engage in only those other activities
necessary, advisable or incidental thereto, such as registering the transfer of
the
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Capital Securities and complying with the terms of the Registration Agreement.
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 subject to the terms hereof. The Property Trustee
hereby declares that it will hold the Trust Property in trust upon and subject
to the conditions set forth herein for the benefit of the Trust and 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 2.07. Authorization to Enter into Certain Transactions. (a)
The Trustees shall conduct the affairs of the Trust in accordance with the terms
of this Declaration of Trust. Subject to the limitations set forth in paragraph
(b) of this Section and in accordance with the following provisions (i) and
(ii), the Trustees shall have the authority to enter into all transactions and
agreements necessary to exercise the authority granted to the Trustees under
this Declaration of Trust, including, without limitation, the following acts:
(i) As among the Trustees, each Administrative Trustee 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 Purchase Agreement, the
Registration Agreement, the Letter of Representations and such other
agreements as may be necessary or desirable in connection with the
purposes and function of the Trust;
(C) assisting the Depositor in the registration of the Capital
Securities under the Securities Act and under state securities or
blue sky laws, and the qualification of this Declaration of Trust as
a trust indenture under the Trust Indenture Act;
(D) assisting the Depositor in the listing, if any, of the
Capital Securities upon such securities exchange or exchanges as
shall be determined by the Depositor and the registration of the
Capital 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 Junior
Subordinated Debt Securities to the Securityholders in accordance
with this Declaration of Trust;
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(F) the appointment of a Paying Agent, Transfer Agent and
Securities Registrar in accordance with this Declaration of Trust;
(G) registering transfer of the Trust Securities in accordance
with this Declaration of Trust;
(H) to the extent provided in this Declaration of Trust, the
winding up of the affairs 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;
(I) unless otherwise determined by the Depositor, the Property
Trustee or the Administrative Trustees or as otherwise required by
the Delaware Business Trust Act or the Trust Indenture Act, to
execute on behalf of the Trust (either acting alone or together with
any or all of the Administrative Trustees) any documents that the
Administrative Trustees have the power to execute pursuant to this
Declaration of Trust; and
(J) the taking of any action incidental to the foregoing as
the Trustees may from time to time determine is necessary or
advisable to give effect to the terms of this Declaration of Trust
for the benefit of the Securityholders (without consideration of the
effect of any such action on any particular Securityholders).
(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 Junior Subordinated Debt Securities;
(C) the collection of interest, principal and any other
payments made in respect of the Junior Subordinated Debt Securities
in the Payment Account;
(D) so long as it is acting as Paying Agent, the distribution
of amounts owed to the Securityholders in respect of the Trust
Securities;
(E) the exercise of all of the rights, powers and privileges
of a holder of the Junior Subordinated Debt Securities, provided,
however, that the Property Trustee shall not exercise such rights
unless it shall have received an Opinion of Counsel to the effect
that such exercise would not cause more than an insubstantial risk
that the Trust fails to be treated as a grantor trust for federal
income tax purposes;
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(F) the sending of notices of default and other information
regarding the Trust Securities and the Junior Subordinated Debt
Securities to the Securityholders in accordance with this
Declaration of Trust;
(G) the distribution of the Trust Property in accordance with
the terms of this Declaration of Trust;
(H) to the extent provided in this Declaration of Trust, the
winding up of the affairs of and liquidation of the Trust and the
execution of the certificate of cancellation with the Secretary of
State of the State of Delaware;
(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 Declaration of Trust 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); and
(J) except as otherwise provided in this Section 2.07(a)(ii),
the Property Trustee shall have none of the duties, liabilities,
powers or the authority of the Administrative Trustees set forth in
Section 2.07(a)(i).
(b) So long as this Declaration of Trust remains in effect, the
Trust (or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transactions except as expressly provided herein or
contemplated hereby. In particular, but without limitation, the Trustees shall
not (i) acquire any investments or engage in any activities not authorized by
this Declaration of Trust, (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) knowingly 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, (v) take or
consent to any action that would result in the placement of a Lien on any of the
Trust Property, (vi) invest any proceeds received by the Trust from holding the
Junior Subordinated Debt Securities, but shall distribute all such proceeds to
Holders pursuant to the terms of this Declaration of Trust and of the Trust
Securities, (vii) acquire any assets other than the Trust Property, (viii)
possess any power or otherwise act in such a way as to vary the Trust Property,
(ix) possess any power or otherwise act in such a way as to vary the terms of
the Trust Securities in any way whatsoever (except to the extent expressly
authorized in this Declaration of Trust or by the terms of the Trust
Securities), (x) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the Trust Securities, or
(xi) other than as provided in this Declaration of Trust or by the terms of the
Trust Securities, (A) direct the time, method and place of exercising any trust
or power conferred upon the Debenture Trustee with respect to the Junior
Subordinated Debt Securities, (B) waive any past default that is waivable under
the Indenture, (C) exercise any right to rescind or annul any declaration that
the principal of all Junior Subordinated Debt Securities
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shall be due and payable, or (D) consent to any amendment, modification, or
termination of the Indenture or the Junior Subordinated Debt Securities where
such consent shall be required unless the Trust shall have received an Opinion
of Counsel to the effect that such amendment, modification or termination will
not cause more than an insubstantial risk that the Trust will be deemed an
Investment Company required to be registered under the Investment Company Act,
the Trust will not be classified as a grantor trust for United States federal
income tax purposes or the Junior Subordinated Debt Securities will not be
classified as indebtedness for such purposes. 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 Trust 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
Declaration of Trust 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 Trust Securities, 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 Trust Securities
and the determination of any and all such acts, other than actions which
must be taken by or on behalf of the Trust, and the advice to the Trustees
of actions they must take on behalf of the Trust, and the preparation for
execution and filing of 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 permit the Capital Securities to
trade as quoted or listed in or on the Private Offering, Resales and
Trading through Automated Linkages ("PORTAL") Market of the National
Association of Securities Dealers, Inc. or any other securities exchange
quotation system or the NASDAQ National Market;
(iv) the negotiation of the terms of, and the execution and
delivery of, the Purchase Agreement providing for the sale of the
Capital Securities; and
(v) 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 will not (i) be deemed to
be an "investment company" required to be registered under the Investment
Company Act of 1940, as amended, or (ii) fail to be classified as a grantor
trust for United States federal income tax purposes and so that the Junior
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Subordinated Debt Securities will be treated as indebtedness of the Depositor
for United States federal income tax purposes. In this connection, the Depositor
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this Declaration
of Trust, that each of the Depositor and the Administrative Trustees determines
in their discretion to be necessary or desirable for such purposes, as long as
such action does not adversely affect in any material respect the interests of
the Holders of the Trust Securities.
SECTION 2.08. Assets of Trust. The assets of the Trust shall
consist solely of the Trust Property.
SECTION 2.09. 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 Trust and the Securityholders in accordance with this Declaration
of Trust.
ARTICLE III
Payment Account
SECTION 3.01. 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 in and withdrawals from the Payment Account in accordance with
this Declaration of Trust. All moneys 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 or by applicable law.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Junior Subordinated Debt
Securities. Amounts held in the Payment Account shall not be invested by the
Property Trustee pending distribution thereof.
ARTICLE IV
Distributions; Redemption
SECTION 4.01. Distributions. (a) Distributions on the Trust
Securities shall be cumulative and will accumulate whether or not there are
funds of the Trust available for the payment of Distributions. Distributions
shall accrue from February 5, 1997, and, except in the event (and to the extent)
that the Depositor exercises its right to defer the payment of interest on the
Junior Subordinated Debt Securities pursuant to the Indenture, shall be payable
semiannually in arrears on February 1 and August 1 of each year, commencing on
August 1, 1997. If any date on which a Distribution is otherwise payable is not
a Business Day, then the
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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), in each case with the same force and effect as if made on such date
(each date on which distributions are payable in accordance with this Section
4.01(a), a "Distribution Date"). Accrued Distributions that are not paid on the
applicable Distribution Date will bear interest on the amount thereof (to the
extent permitted by law) at the rate per annum of 9.58% thereof, compounded
semiannually from the relevant Distribution Date.
(b) The Trust Securities represent undivided beneficial ownership
interests in the Trust Property, and, assuming payments of interest on the
Junior Subordinated Debt Securities are made when due (and before giving effect
to Additional Distributions, as defined below, if applicable), Distributions on
the Trust Securities shall be payable at a rate of 9.58% 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. The amount of Distributions payable for any period shall include
the Additional Distributions, if any.
(c) So long as no Debenture Event of Default has occurred and is
continuing, the Depositor has the right under the Indenture to defer the payment
of interest on the Junior Subordinated Debt Securities at any time and from time
to time for a period not exceeding 10 consecutive semiannual periods (an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Debt Securities. As a consequence of
any such deferral, semiannual Distributions on the Trust Securities by the Trust
will also be deferred (and the amount of Distributions to which Holders are
entitled will accumulate additional Distributions thereon at the rate of 9.58%
per annum, compounded semiannually) from the relevant payment date for such
Distributions, but not exceeding the interest rate then accruing on the Junior
Subordinated Debt Securities. In addition, in certain circumstances as provided
in the Registration Agreement, an additional amount will be payable, as
liquidated damages on the Junior Subordinated Debt Securities and as additional
distributions on the Trust Securities, respectively, at a rate of 0.25% per
annum of the Liquidation Amount. The aggregate amount of such additional amounts
payable with respect to the preceding sentence shall not exceed 0.25% per annum
(each type of increase in Distributions, described in this Section 4.01(c), an
"Additional Distribution").
(d) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand and
available in the Payment Account for the payment of such Distributions.
(e) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders of record as they appear on
the Securities Register for the Trust Securities on each January 15 and July 15.
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SECTION 4.02. Redemption. (a) On each Junior Subordinated Debt
Securities Redemption Date and on the Stated Maturity of the Junior Subordinated
Debt Securities, the Trust will be required to redeem a Like Amount of Trust
Securities at the applicable Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall identify the Trust Securities to be redeemed (including CUSIP
numbers) and shall state:
(i) the Redemption Date;
(ii) the applicable Redemption Price;
(iii) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed; and
(iv) that on the Redemption Date the Redemption Price will become
due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accrue on and after said date.
The Trust in issuing the Trust Securities may use "CUSIP", and/or
"private placement" numbers (if then generally in use), and, if so, the Property
Trustee shall indicate the "CUSIP" or "private placement" numbers of the Trust
Securities in notices of redemption and related materials as a convenience to
Securityholders; provided that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the Trust
Securities or as contained in any notice of redemption and related material. The
Depositor shall promptly notify the Property Trustee of any change in such
numbers.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the applicable Redemption Price with the proceeds from the
contemporaneous redemption of Junior Subordinated Debt Securities. Redemptions
of the Trust Securities shall be made and the applicable Redemption Price shall
be payable on each Redemption Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect
of any Trust Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 4.02(c), the Property Trustee will, so long
as the Capital Securities are in book-entry-only form, irrevocably deposit with
the Clearing Agency for the Capital Securities funds sufficient to pay the
applicable Redemption Price. With respect to Capital Securities held in
certificated form, the Property Trustee, subject to Section 4.02(c), will
irrevocably deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and will give the Paying Agent irrevocable instructions and
authority to pay the Redemption Price to the
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Holders thereof upon surrender of their Capital 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 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 will cease, except the right of such
Securityholders to receive the applicable Redemption Price and any Distribution
payable on or prior to the Redemption Date, but without interest, and such
Capital Securities will cease to be outstanding. In the event that any date on
which any applicable Redemption Price is payable is not a Business Day, then
payment of the applicable Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on such date. In the event that payment of the applicable 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 will continue to accrue, at
the then applicable rate, from the Redemption Date originally established by the
Trust for such Trust Securities to the date such applicable Redemption Price is
actually paid, in which case the actual payment date will be the date fixed for
redemption for purposes of calculating the applicable Redemption Price.
(e) Payment of the applicable Redemption Price on, and any
distributions of Junior Subordinated Debt Securities to Holders of, the Trust
Securities shall be made to the Holders thereof as they appear on the Securities
Register on the relevant record date, and, with respect to Trust Securities held
in certificated form, upon surrender of such certificated Trust Securities to
the Paying Agent.
(f) Subject to Section 4.03(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 Trust Securities. The
particular Trust Securities to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Property Trustee from the Outstanding
Trust Securities not previously called for redemption, on a pro rata basis
(based upon Liquidation Amounts) or by such other method as the Property Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $1,000 or an integral multiple of $1,000 in
excess thereof) of the Liquidation Amount of Trust Securities of a denomination
larger than $1,000. The Property Trustee shall promptly notify the Security
Registrar in writing of the Trust Securities selected for redemption and, in the
case of any Trust Securities selected for partial redemption, the Liquidation
Amount thereof to be redeemed. For all purposes of this Declaration of Trust,
unless the context otherwise requires, all provisions relating to the redemption
of Trust Securities shall relate in the case of any Trust Securities redeemed or
to be redeemed only in part, to the portion of the Liquidation Amount of Trust
Securities that has been or is to be redeemed.
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SECTION 4.03. Subordination of Common Securities. (a) Payment of
Distributions (including Additional Distributions, if applicable) on, and the
Redemption Price of the Trust Securities, as applicable, shall be made, subject
to Section 4.02(f), pro rata to the Holders of the Trust 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 or other Event of Default shall have occurred and be
continuing, no payment of any Distribution (including Additional Distributions,
if applicable) on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions (including Additional Distributions, if
applicable) on all outstanding Capital Securities for all Distribution Dates
occurring on or prior thereto, or, in the case of payment of the applicable
Redemption Price, the full amount of such Redemption Price on all outstanding
Capital Securities, shall have been made or provided for, and all funds
immediately available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions (including Additional
Distributions, if applicable) on, or the Redemption Price of, Capital Securities
then due and payable.
(b) In the case of the occurrence of any Event of Default resulting
from any Debenture Event of Default, the Holder of Common Securities will be
deemed to have waived any right to act with respect to any such Event of Default
under this Declaration of Trust until the effect of all such Events of Default
with respect to the Capital Securities have been cured, waived or otherwise
eliminated. Until all such Events of Default under this Declaration of Trust
with respect to the Capital Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Capital Securities and not on behalf of the Holder of the Common Securities,
and only the Holders of the Capital Securities will have the right to direct the
Property Trustee to act on their behalf.
SECTION 4.04. Payment Procedures. In the event Definitive Capital
Securities Certificates are issued, payments of Distributions (including
Additional Distributions, if applicable) in respect of the Capital Securities
shall be made by check mailed to the address of the Person entitled thereto at
such address as shall appear on the Securities Register. If the Capital
Securities are held by a Clearing Agency, such Distributions shall be made to
the Clearing Agency in immediately available funds, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates. 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 4.05. 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
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Service form required to be provided pursuant to the form referenced in clause
(a) hereof. The Administrative Trustees shall provide the Depositor and the
Property Trustee with a copy of all such returns and reports promptly after such
filing or furnishing. The Administrative Trustees shall comply with United
States federal withholding and backup withholding tax laws and information
reporting requirements with respect to any payments to Securityholders.
SECTION 4.06. Payment of Taxes; Duties, etc. of the Trust. Pursuant
to Section 10.06 of the Indenture, the Depositor, as issuer of the Junior
Subordinated Debt Securities, has agreed to, and it shall, promptly pay any
taxes, duties or governmental charges of whatever nature imposed on the Trust
(but not including any taxes, duties or governmental charges imposed on Holders
including, without limitation, withholding taxes) by the United States or any
other taxing authority.
SECTION 4.07. Payments Under Indenture. Any amount payable hereunder
to any Holder (and any Owner with respect thereto) shall be reduced by the
amount of any corresponding payment such Holder (and Owner) has directly
received pursuant to Section 5.08 of the Indenture.
ARTICLE V
Trust Securities Certificates
SECTION 5.01. Initial Ownership. Upon the formation of the Trust 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 5.02. Trust Securities Certificates. (a) The Capital
Securities Certificates shall be issued in blocks having minimum denominations
of $100,000 aggregate Liquidation Amount (100 Capital Securities) and integral
multiples of $1,000 in excess thereof, and the Common Securities Certificates
shall be issued in denominations of $1,000 Liquidation Amount and integral
multiples thereof. The Trust Securities Certificates shall be executed on behalf
of the Trust by the manual or facsimile signature of at least one Administrative
Trustee. 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 Declaration of Trust, 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 5.04, 5.05 and 5.06.
(b) Upon their original issuance, Capital Securities Certificates
representing Rule 144A Capital Securities shall be issued in the form of a
Global Capital Securities Certificate registered in the name of Cede & Co.
("Cede") as DTC's nominee and deposited with or on behalf of DTC for credit by
DTC to the respective accounts of the Owners thereof
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(or such other accounts as they may direct). Except as set forth herein, record
ownership of the Global Capital Security may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
(c) Upon their original issuance, Capital Securities Certificates
representing Other Capital Securities shall be issued in definitive form and may
not be represented by the Global Security.
(d) 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 5.03. Execution and Delivery of Trust Securities
Certificates. On the Closing Date, the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in
Sections 2.04 and 2.05, to be executed on behalf of the Trust and delivered to
the Property Trustee and upon such delivery the Property Trustee shall
countersign such Trust Securities Certificates and deliver such Trust Securities
Certificates upon the written order of the Depositor, signed by its chairman of
the board and president, any executive vice president or any vice president,
treasurer or assistant treasurer or controller without further corporate action
by the Depositor, in authorized denominations.
SECTION 5.04. Global Capital Security. (a) The Global Capital
Security issued under this Declaration of Trust shall be registered in the name
of Cede as nominee of the Clearing Agency and delivered to its custodian
therefor, and such Global Capital Security shall constitute a single Capital
Security for all purposes of this Declaration of Trust.
(b) Notwithstanding any other provision in this Declaration of
Trust, the Global Capital Security may not be exchanged in whole or in part for
Capital Securities registered, and no transfer of the Global Capital Security in
whole or in part may be registered, in the name of any Person other than the
Clearing Agency for such Global Capital Security, Cede, or other nominee thereof
unless (i) such Clearing Agency advises the Property Trustee in writing that
such Clearing Agency is no longer willing or able to properly discharge its
responsibilities as Clearing Agency with respect to such Global Capital
Security, and the Depositor is unable to locate a qualified successor, (ii) the
Trust at its option advises DTC in writing that it elects to terminate the
book-entry system through the Clearing Agency, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. In addition, beneficial
interests in a Global Capital Security may be exchanged by or on behalf of DTC
for certificated Capital Securities upon request by DTC, but only upon at least
20 days prior written notice given to the Property Trustee in accordance with
the Applicable Procedures.
(c) If the Global Capital Security is to be exchanged for Other
Capital Securities or cancelled in whole, it shall be surrendered by or on
behalf of the Clearing Agency or its nominee to the Securities Registrar for
exchange or cancellation as provided in this Article V. If the Global Capital
Security is to be exchanged for Other Capital Securities or cancelled in part,
or if another Capital Security is to be exchanged in whole or in part for a
beneficial interest in the Global Capital Security, then either (i) such Global
Capital Security
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shall be so surrendered for exchange or cancellation as provided in this Article
V or (ii) the Liquidation Amount thereof shall be reduced, subject to Section
5.02, or increased by an amount equal to the portion thereof to be so exchanged
or cancelled, or equal to the Liquidation Amount of such other Capital Security
to be so exchanged for a beneficial interest therein, as the case may be, by
means of an appropriate adjustment made on the records of the Security
Registrar, whereupon the Property Trustee, in accordance with the Applicable
Procedures, shall instruct the Clearing Agency or its authorized representative
to make a corresponding adjustment to its records. Upon any such surrender or
adjustment of the Global Capital Security by the Clearing Agency and Clearing
Agency Participants, accompanied by registration instructions executed by an
Administrative Trustee on behalf of the Trust and, to the extent required in
Section 5.05(c), a Restricted Capital Securities Certificate in a form
substantially similar to that attached hereto as Exhibit D, the Property Trustee
shall, subject to this Article V, countersign and deliver any executed Capital
Securities delivered to it issuable in exchange for such Global Capital Security
(or any portion thereof) in accordance with the instructions of the Clearing
Agency. The Property Trustee shall not be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be fully protected in
relying on, such instructions.
(d) The Clearing Agency or its nominee, as the registered owner of
the Global Capital Security, shall be considered the Holder of the Capital
Securities represented by the Global Capital Security for all purposes under
this Declaration of Trust and the Capital Securities, and the Owners shall hold
such interests pursuant to the Applicable Procedures and, except as otherwise
provided herein, shall not be entitled to have any of the individual Capital
Securities represented by the Global Capital Security registered in their names,
shall not receive nor be entitled to receive physical delivery of any such
Capital Securities in definitive form and shall not be considered the Holders
thereof under this Declaration of Trust. Accordingly, any such Owner's
beneficial interest in the Global Capital Security shall be shown only on, and
the transfer of such interest shall be effected only through, records maintained
by the Clearing Agency or its nominee. The Securities Registrar and the Trustees
shall be entitled to deal with the Clearing Agency for all purposes of this
Declaration of Trust relating to the Global Capital Securities (including the
payment of the Liquidation Amount of and Distributions on the Global Capital
Securities and the giving of instructions or directions to Owners of Global
Capital Securities) as the sole Holder of Global Capital Securities and shall
have no obligations to the Owners thereof. Neither the Property Trustee nor the
Securities Registrar shall have any liability in respect of any transfers
effected by the Clearing Agency.
(e) The rights of Owners of beneficial interests in the Global
Capital Security shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such Owners and
the Clearing Agency.
SECTION 5.05. Registration of Transfer and Exchange Generally;
Certain Transfers and Exchanges; Capital Securities Certificates; Securities Act
Legends. (a) The Property Trustee shall keep or cause to be kept at its
Corporate Trust Office a register or registers for the purpose of registering
Capital Securities Certificates and Common Securities
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Certificates and transfers and exchanges of Capital Securities Certificates and
Common Securities Certificates in which the registrar and transfer agent with
respect to the Capital Securities (the "Securities Registrar"), subject to such
reasonable regulations as it may prescribe, shall provide for the registration
of Capital Securities Certificates and Common Securities Certificates (subject
to Section 5.11 in the case of Common Securities Certificates) and registration
of transfers and exchanges of Capital Securities Certificates and Common
Securities Certificates as herein provided. Such register is herein sometimes
referred to as the "Securities Register." The Property Trustee is hereby
appointed "Securities Registrar" for the purpose of registering Capital
Securities and transfers of Capital Securities as herein provided. The
provisions of Sections 8.01, 8.03 and 8.06 hereunder shall apply to the Property
Trustee also in its role as Securities Registrar.
Upon surrender for registration of transfer of any Capital Security
at the offices or agencies of the Property Trustee designated for that purpose,
the Administrative Trustees shall execute, and the Property Trustee shall
countersign and deliver, in the name of the designated transferee or
transferees, one or more new Capital Securities of any authorized denominations
of like tenor and aggregate liquidation amount and bearing such restrictive
legends as may be required by this Declaration of Trust.
At the option of the Holder, Capital Securities may be exchanged for
other Capital Securities of any authorized denominations, of like tenor and
aggregate Liquidation Amount and bearing such restrictive legends as may be
required by this Declaration of Trust, upon surrender of the Capital Securities
to be exchanged at such office or agency. Whenever any securities are so
surrendered for exchange, the Depositor shall execute and the Property Trustee
shall countersign and deliver the Capital Securities that the Holder making the
exchange is entitled to receive.
All Capital Securities issued upon any registration of transfer or
exchange of Capital Securities shall be the valid obligations of the Trust,
entitled to the same benefits under this Declaration of Trust as the Capital
Securities surrendered upon such registration of transfer or exchange.
Every Capital Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Property Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Property Trustee and the Securities Registrar, duly executed
by the Holder thereof or such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Capital Securities, but the Property Trustee or the
Securities Registrar may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Capital Securities.
Neither the Trust nor the Property Trustee shall be required,
pursuant to the provisions of this Section, (i) to issue, register the transfer
of or exchange any Capital Security during a period beginning at the opening of
business 15 days before the day of mailing of a
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notice of redemption of Capital Securities pursuant to Article IV and ending at
the close of business on the day of such mailing of the notice of redemption, or
(ii) to register the transfer of or exchange any Capital Security so selected
for redemption in whole or in part, except, in the case of any such Capital
Security to be redeemed in part, any portion thereof not to be redeemed.
(b) Certain Transfers and Exchanges. Subject to Section 5.04(c), but
notwithstanding any other provision of this Declaration of Trust, transfers and
exchanges of Capital Securities and beneficial interests in a Global Capital
Security shall be made only in accordance with this Section 5.05(b) and Section
5.04(c).
(i) Non-Global Capital Security to Global Security. If the Holder of
a Restricted Capital Security (other than the Global Security) wishes at
any time to transfer all or any portion of such Capital Security to a
Person who wishes to take delivery thereof in the form of a beneficial
interest in the Global Security, such transfer may be effected only in
accordance with the provisions of this Clause (b)(i) and subject to the
Applicable Procedures. Upon receipt by the Securities Registrar of (A)
such Capital Security as provided in Section 5.05(a) and instructions
satisfactory to the Securities Registrar directing that a beneficial
interest in the Global Security in a specified Liquidation Amount not
greater than the Liquidation Amount of such Capital Security to be
credited to a specified Clearing Agency Participant's account and (B) a
Capital Securities Certificate duly executed by such Holder or such
Holder's attorney duly authorized in writing, then the Securities
Registrar shall cancel such Capital Security (and issue a new Capital
Security in respect of any untransferred portion thereof) as provided in
Section 5.01(a) and increase the aggregate Liquidation Amount of the
Global Capital Security by the specified Liquidation Amount as provided in
Section 5.04(c).
(ii) Non-Global Security to Non-Global Security. A Capital Security
that is not a Global Capital Security may be transferred, in whole or in
part, to a Person who takes delivery in the form of another Capital
Security that is not a Global Security as provided in Section 5.05(a),
provided that if the Capital Security to be transferred in whole or in
part is a Restricted Capital Security, the Securities Registrar shall have
received a Restricted Capital Securities Certificate duly executed by the
transferor Holder or such Holder's attorney duly authorized in writing.
(iii) Exchanges Between Global Capital Security and Non-Global
Capital Security. A beneficial interest in the Global Capital Security may
be exchanged for a Capital Security that is not a Global Capital Security
as provided in Section 5.04.
(iv) Limitations Relating to Liquidation Amount. Notwithstanding any
other provision of this Declaration of Trust and unless otherwise
specified as permitted by this Declaration of Trust, Capital Securities or
portions thereof may be transferred or exchanged only in blocks having
aggregate Liquidation Amounts of not less than $100,000. Any transfer,
exchange or other disposition of Capital Securities in
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contravention of this Section 5.05(b)(iv) shall be deemed to be void and
of no legal effect whatsoever, any such transferee shall be deemed not to
be the Holder or Owner of any beneficial interest in such Capital
Securities for any purpose, including but not limited to the receipt of
Distributions on such Capital Securities, and such transferee shall be
deemed to have no interest whatsoever in such Capital Securities.
(c) Restricted Securities Legend. (i) Except as set forth in this
Section 5.05(c), all Capital Securities shall bear a Restricted Capital
Securities Legend substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY
ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER
SUCH SECURITY PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH U.S.B.
HOLDING CO., INC. (THE "CORPORATION") OR ANY AFFILIATE OF THE
CORPORATION WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) (THE "RESALE RESTRICTIONS TERMINATION DATE") ONLY (A)
TO THE CORPORATION, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE TRUST'S AND THE PROPERTY
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TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH
MAY BE OBTAINED FROM THE CORPORATION OR THE PROPERTY TRUSTEE. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTIONS TERMINATION DATE.
(ii) Subject to the following paragraphs of this Section 5.05(c), a
new Capital Security (other than a Global Capital Security) that does not
bear a Restricted Capital Securities Legend may be issued in exchange for
or in lieu of a Restricted Capital Security or any portion thereof that
bears such a legend if, in the Depositor's judgment, placing such a legend
upon such new Capital Security is not necessary to ensure compliance with
the registration requirements of the Securities Act, and the Property
Trustee, at the written direction of the Trust in the form of an Officers'
Certificate, shall countersign and deliver such a new Capital Security as
provided in this Article V.
(iii) Notwithstanding the foregoing provisions of this Section
5.05(c), a successor Capital Security of a Capital Security that does not
bear a Restricted Capital Securities Legend shall not bear such form of
legend unless the Depositor has reasonable cause to believe that such
successor Capital Security is a "restricted security" within the meaning
of Rule 144 under the Securities Act, in which case the Property Trustee,
at the written direction of the Trust in the form of an Officers'
Certificate, shall countersign and deliver a new Capital Security bearing
a Restricted Capital Securities Legend in exchange for such Successor
Capital Security as provided in this Article V.
(iv) Upon any sale or registration of transfer of a Restricted
Capital Security (including any Restricted Capital Security represented by
a Global Capital Security) pursuant to an effective registration statement
under the Securities Act or pursuant to Rule 144 under the Securities Act
after such registration ceases to be effective: (A) in the case of any
Restricted Capital Security that is a definitive Capital Security, the
Securities Registrar shall permit the Holder thereof to exchange such
Restricted Capital Security for a definitive Capital Security that does
not bear the Restricted Securities Legend and rescind any restriction on
the transfer of such Restricted Capital Security; and (B) in the case of
any Restricted Capital Security that is represented by a Global Capital
Security, the Securities Registrar shall permit the Holder of such Global
Capital Security to exchange such Global Capital Security for another
Global Capital Security that does not bear the Restricted Securities
Legend.
(v) If Restricted Capital Securities are being presented or
surrendered for registration of transfer or exchange then there shall be
(if so required by the Property
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Trustee), (A) if such Restricted Capital Securities are being delivered to
the Securities Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that effect;
or (B) if such Restricted Capital Securities are being transferred, (i) a
certification from the transferor in a form substantially similar to that
attached hereto as Exhibit D, and (ii) if the Trust or Securities
Registrar so requests, evidence reasonably satisfactory to them as to the
compliance with the restrictions set forth in the Restricted Capital
Securities Legend.
(d) Exchange Offer. The Initial Capital Securities may be exchanged
for Exchange Capital Securities (as defined in the Indenture) pursuant to the
terms set forth in the Registration Agreement and Article XII of the Indenture
(the "Exchange Offer"). The Property Trustee shall make the exchange as follows:
The Depositor shall present the Property Trustee with an Officers'
Certificate certifying the following:
(i) upon issuance of the Exchange Capital Securities, the
transactions contemplated by the Exchange Offer have been
consummated; and
(ii) the number of Initial Capital Securities properly tendered in
the Exchange Offer that are represented by a Global Capital
Security and the number of Initial Capital Securities properly
tendered in the Exchange Offer that are represented by Other
Capital Securities, the name of such Holder of such Other
Capital Securities, the liquidation amount of Initial Capital
Securities properly tendered in the Exchange Offer by each
such Holder and the name and address to which Other Capital
Securities for Exchange Capital Securities shall be registered
and sent for each such Holder.
The Property Trustee, upon receipt of (i) such Officers'
Certificate, (ii) an Opinion of Counsel (x) to the effect that the Exchange
Capital Securities have been registered under Section 5 of the Securities Act
and the Indenture, Declaration of Trust and Guarantee have been qualified under
the Trust Indenture Act and (y) with respect to the matters set forth in Section
4(s) of the Registration Agreement and (iii) a written order of the Depositor
shall authenticate (A) a Global Capital Security for Exchange Capital Securities
in aggregate Liquidation Amount equal to the aggregate Liquidation Amount of
Initial Capital Securities represented by a Global Capital Security indicated in
such Officers' Certificate as having been properly tendered and (B) Capital
Securities Certificates representing Exchange Capital Securities registered in
the names of, and in the Liquidation Amounts indicated in such Officers'
Certificate.
If, upon consummation of the Exchange Offer, less than all the
outstanding Initial Capital Securities shall have been properly tendered and not
withdrawn, the Property Trustee shall make an endorsement on the Global Capital
Security for Capital Securities indicating that reduction in the number and
aggregate Liquidation Amount represented thereby as a result of the Exchange
Offer.
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The Trust shall deliver such Capital Securities Certificates for
Exchange Capital Securities to the Holders thereof as indicated in such
Officers' Certificate.
SECTION 5.06. Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates. Provided Definitive Capital Securities Certificates are issued, if
(a) any mutilated Trust Securities Certificate shall be surrendered to the
Securities Registrar, or if the Securities Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate and (b) there shall be delivered to the Securities Registrar and the
Administrative Trustees such security or indemnity as may be required by them to
save each of the Trustees 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, 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 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 5.07. Persons Deemed Securityholders. The Trustees or the
Securities Registrar shall treat the Person in whose name any Trust Securities
are issued as the owner of such Trust Securities for the purpose of receiving
distributions and for all other purposes whatsoever, and neither the Trustees
nor the Securities Registrar shall be bound by any notice to the contrary.
SECTION 5.08. Access to List of Securityholders' Names and
Addresses. Each Holder or Owner of Trust Securities acknowledges that the
Depositor, the Property Trustee, the Delaware Trustee or the Administrative
Trustees may from time to time make reasonable use of information consisting of
such Holder's or Owner's name and address, including the furnishing of a list of
such names and addresses as contemplated hereunder, 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 5.09. Maintenance of Office or Agency. The Administrative
Trustees shall maintain an office or offices or agency or agencies where
Definitive Capital Securities Certificates, if issued, 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 may be served. The
Administrative Trustees initially designate the Corporate Trust Office of the
Property Trustee as its 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.
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SECTION 5.10. Appointment of Paying Agent. The Paying Agent shall
make Distributions to 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 any Paying
Agent if such Administrative Trustees determine in their sole discretion that
such Paying Agent shall have failed to perform its obligations under this
Declaration of Trust in any material respect. The Paying Agent shall initially
be the Property Trustee , and any co-paying agent chosen by the Property
Trustee, and acceptable to the Administrative Trustees and the Depositor. 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 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 will 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 8.01, 8.03 and 8.06 herein shall
apply to the Property Trustee also in its role as 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 Declaration of
Trust to the Paying Agent shall include any co-paying agent unless the context
requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor. For so
long as the Trust Securities remain outstanding, the Depositor will covenant (i)
to maintain 100% direct or indirect ownership of the Common Securities;
provided, however, that any permitted successor of the Depositor under the
Indenture may succeed to the Depositor's ownership of the Common Securities,
(ii) not to cause, as Depositor of the Trust, or to permit, as holder of the
Common Securities, the dissolution, winding-up or termination of the Trust,
except in connection with a distribution of the Junior Subordinated Debt
Securities as provided in this Declaration of Trust and in connection with
certain mergers, consolidations or amalgamations, each as permitted by this
Declaration of Trust, and (iii) to use its reasonable efforts to cause the Trust
to (a) remain a business trust, except in connection with the distribution of
Junior Subordinated Debt Securities to the Holders of Trust Securities in the
liquidation of the Trust, the redemption of all of the Trust Securities of the
Trust, or certain mergers, consolidations, amalgamations, each as permitted by
this Declaration of Trust, and (b) otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
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SECTION 5.12. Notices to Clearing Agency. To the extent that a
notice or other communication to the Owners is required under this Declaration
of Trust, for so long as Capital Securities are represented by a Global
Securities Certificate, the Trustees shall give all such notices and
communications specified herein to be given to Owners to the Clearing Agency,
and shall have no obligations to give duplicates thereof to the Owners.
SECTION 5.13. Rights of 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 2.09, and the Securityholders shall not have
any right or title therein other than the undivided beneficial ownership
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 Declaration of Trust. The Trust Securities shall have no preemptive or
singular rights and when issued and delivered to Securityholders against payment
of the purchase price therefor will be fully paid and nonassessable. The
Holders, 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 Capital Securities remain Outstanding, if,
upon a Debenture Event of Default, the Debenture Trustee fails or the holders of
not less than 25% in liquidation amount of the outstanding Junior Subordinated
Debt Securities fail to declare the principal amount of all of the Junior
Subordinated Debt Securities to be immediately due and payable, the Holders of
at least 25% in Liquidation Amount of the Capital Securities then Outstanding
shall have such right by a notice in writing to the Depositor and the Debenture
Trustee with a copy to the Property Trustee; and upon any such declaration such
principal amount of and the accrued interest on all of the Junior Subordinated
Debt Securities shall become immediately due and payable; provided that the
payment of principal and interest on such Junior Subordinated Debt Securities
shall remain subordinated to the extent provided in the Indenture.
At any time after such a declaration of acceleration with respect to
the Junior Subordinated Debt Securities has been made and before a judgment or
decree for payment of the money due has been obtained by the Debenture Trustee
as provided in the Indenture, the Holders of a majority in Liquidation Amount of
the Capital Securities, by written notice to the Property Trustee, the Depositor
and the Debenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Depositor has paid or deposited with the Debenture Trustee a
sum sufficient to pay
(A) all overdue installments of interest (including any
Additional Interest (as defined in the Indenture)) on all of the
Junior Subordinated Debt Securities,
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(B) the principal of (and premium, if any, on) any Junior
Subordinated Debt Securities which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate
borne by the Junior Subordinated Debt Securities, and
(C) all sums paid or advanced by the Debenture Trustee under
the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee and the Property
Trustee, their agents and counsel, and all other amounts due to the
Debenture Trustee under the Indenture and the Property Trustee
pursuant to Section 8.06 hereof; and
(ii) all Events of Default with respect to the Junior Subordinated
Debt Securities, other than the non-payment of the principal of the Junior
Subordinated Debt Securities which has become due solely by such
acceleration, have been cured or waived as provided in Section 5.13 of the
Indenture.
If the Property Trustee fails to annul any such declaration and
waive such default, the Holders of Capital Securities representing a majority in
aggregate Liquidation Amount of all the Outstanding Capital Securities shall
also have the right to rescind and annul such declaration and its consequences
by written notice to the Depositor, the Property Trustee and the Debenture
Trustee, subject to the satisfaction of the conditions set forth in Clause (i)
and (ii) of this Section 5.13(b).
The Holders of a majority in aggregate Liquidation Amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default under the Indenture, except a default in the payment of
principal or interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each Junior Subordinated Debt
Securities. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Upon receipt by the Property Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of the
Capital Securities all or part of which is represented by Global Capital
Securities, a record date shall be established for determining Holders of
Outstanding Capital Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders on such record date, or their duly designated proxies,
and only such Persons, shall be entitled to join in such notice, whether or not
such Holders remain Holders after such record date; provided that, unless such
acclamation of acceleration, or rescission and annulment, as the case may be,
shall have become effective by virtue of the requisite percentage having joined
in such notice prior to the day which is 90 days after such record date, such
notice of declaration of acceleration, or rescission and annulment, as the case
may be, shall automatically and without further action by any Holder be canceled
and of no further effect. Nothing in this paragraph shall prevent a Holder, or a
proxy of a Holder, from giving,
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after expiration of such 90 day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice which has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 5.13(b).
(c) For so long as any Capital Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Declaration of
Trust and the Indenture, upon a Debenture Event of Default specified in Section
5.01(l) or 5.01(2) of the Indenture, any Holder of Capital Securities shall have
the right to institute a proceeding directly against the Depositor, pursuant to
Section 5.08 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Junior Subordinated Debt Securities having a
principal amount equal to the Liquidation Amount of the Capital Securities of
such Holder (a "Direct Action"). Except as set forth in Sections 5.13(b) and
5.13(c), the Holders of Capital Securities shall have no right to exercise
directly any right or remedy available to the holders of, or in respect of, the
Junior Subordinated Debt Securities.
(d) A Securityholder may institute a legal proceeding directly
against the Guarantor under the Guarantee to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust or any
person or entity.
ARTICLE VI
Acts of Securityholders; Meetings; Voting
SECTION 6.01. Limitations on Capital Securityholder's Voting Rights.
(a) Except as provided in this Declaration of Trust and in the Indenture and as
otherwise required by law, no Holder of Capital 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 Holders of Capital Securities
from time to time as partners or members of an association. Unless a Debenture
Event of Default shall have occurred and be continuing, any Trustee may be
removed at any time by the vote of the Common Securityholder. The right to vote
to appoint, remove or replace the Administrative Trustees is vested exclusively
in the Depositor as the Holder of the Common Securities.
(b) So long as any Junior Subordinated Debt Securities 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 Property Trustee with
respect to such Junior Subordinated Debt Securities, (ii) waive any past default
which is waivable under Section 5.13 of the Indenture, (iii) exercise any right
to rescind or annul a declaration that the principal of all the Junior
Subordinated Debt Securities shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debt Securities, where such consent shall be required, without, in
each case, obtaining the prior approval of the
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Holders of at least a majority in aggregate Liquidation Amount of all
Outstanding Capital Securities; provided, however, that where a consent under
the Indenture would require the consent of each holder of Junior Subordinated
Debt Securities affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of Capital Securities.
The Trustees shall not revoke any action previously authorized or approved by a
vote of the Holders of Capital Securities, except by a subsequent vote of the
Holders of Capital Securities. In addition to obtaining the foregoing approvals
of the Holders of the Capital 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 will not
fail to be classified as a grantor trust for United States federal income tax
purposes on account of such action.
(c) If any proposed amendment to the Declaration of Trust provides
for, or the Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the interests, powers, preferences or
special rights of the Trust Securities, whether by way of amendment to the
Declaration of Trust or otherwise, or (ii) the dissolution, winding-up or
termination of the Trust, other than pursuant to the terms of this Declaration
of Trust, then the Holders of Outstanding Trust Securities as a class will be
entitled to vote on such amendment or proposal.
SECTION 6.02. Notice of Meetings. Notice of all meetings of the
Securityholders, stating the time, place and purpose of the meeting, shall be
given by the Property Trustee pursuant to Section 10.09 to each Securityholder
of record, at his registered address, at least 15 days and not more than 90 days
before the meeting. At any such meeting, any business properly before the
meeting may be so considered whether or not stated in the notice of the meeting.
Any adjourned meeting may be held as adjourned without further notice.
SECTION 6.03. Meetings of Securityholders. (a) No annual meeting of
Securityholders is required to be held. The Administrative Trustees, however,
shall call a meeting of Securityholders to vote on any matter upon the written
request of the Securityholders of record of 25% of the Securities (based upon
their Liquidation Amount) and the Administrative Trustees or the Property
Trustee may, at any time in their discretion, call a meeting of Securityholders
to vote on any matters as to which Securityholders are entitled to vote.
(b) Securityholders of record of 50% of the Outstanding Securities
(based upon their Liquidation Amount), present in person or represented by
proxy, shall constitute a quorum at any meeting of Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote by the
Securityholders of record present, in person or by proxy, holding more than a
majority of the Securities (based upon their Liquidation Amount) held by the
Securityholders of record present, either in person or by proxy, at such meeting
shall constitute the action of the
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Securityholders, unless this Declaration of Trust requires a greater number of
affirmative votes.
SECTION 6.04. Voting Rights. Securityholders shall be entitled to
one vote for each $1,000 of Liquidation Amount represented by their outstanding
Trust Securities in respect of any matter as to which such Securityholders are
entitled to vote.
SECTION 6.05. Proxies, etc. At any meeting of 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. Proxies may be solicited in the name of
the Property Trustee or one or more officers of the Property Trustee. Only
Securityholders of record shall be entitled to vote. When Trust Securities are
held jointly by several Persons, any one of them may vote at any meeting in
person or by proxy in respect of such Securities, but the proxy card shall be
signed by all of the Holders, unless explicitly agreed to the contrary. 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 6.06. Securityholder Action by Written Consent. Any action
which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding
Securities (based upon their 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 Declaration of Trust) shall consent to the action in
writing.
SECTION 6.07. 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
in respect of which a record date is not otherwise provided for in this
Declaration of Trust, 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 Securityholders or the payment of a distribution or other
action, as the case may be, as a record date for the determination of the
identity of the Securityholders of record for such purposes.
SECTION 6.08. Acts of Securityholders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Declaration of Trust to be given, made or taken by
Securityholders or Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Securityholders or
Owners 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
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the "Act" of the Securityholders or Owners 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
Declaration of Trust and (subject to Section 8.01) conclusive in favor of the
Trustees, if made in the manner provided in this Section 6.08.
The fact and date of the execution by any Person of any such
instrument or writing may be provided by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
The ownership of Trust Securities shall be proved by the Securities
Registrar.
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.
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.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, consent, waiver or other Act of such Securityholder or
Trustee under this Article VI, then the determination of such matter by the
Property Trustee shall be conclusive with respect to such matter.
A Holder may institute a legal proceeding directly against the
Depositor under the Guarantee Agreement to enforce its rights under the
Guarantee Agreement without first instituting a legal proceeding against the
Guarantee Trustee (as defined in the Guarantee Agreement), the Trust, any
Trustee or any other Person.
SECTION 6.09. Inspection of Records. Upon reasonable notice to the
Administrative Trustees and the Property Trustee, the records of the Trust shall
be open to inspection by Securityholders during normal business hours for any
purpose reasonably related to such Securityholder's interest as a
Securityholder.
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ARTICLE VII
Representations and Warranties
SECTION 7.01. Representations and Warranties of the Property
Trustee. The Property Trustee hereby represents and warrants for the benefit of
the Depositor and the Securityholders that:
(a) The Property Trustee is a banking corporation with trust powers,
duly organized, validly existing and in good standing under the laws of
New York, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of this Declaration
of Trust.
(b) The execution, delivery and performance by the Property Trustee
of this Declaration of Trust has been duly authorized by all necessary
corporate action on the part of the Property Trustee; and this Declaration
of Trust has been duly executed and delivered by the Property Trustee, and
constitutes a legal, valid and binding obligation of the Property Trustee,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of equity
and the discretion of the court (regardless of whether the enforcement of
such remedies is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of this Declaration of
Trust by the Property Trustee does not conflict with or constitute a
breach of the certificate of incorporation or by-laws of the Property
Trustee.
(d) At the Closing Date, the Property Trustee has not knowingly
created any liens or encumbrances on such Trust Securities.
(e) No consent, approval or authorization of, or registration with
or notice to, any New York State or federal banking authority is required
for the execution, delivery or performance by the Property Trustee, of
this Declaration of Trust.
SECTION 7.02. Representations and Warranties of the Delaware
Trustee. The Delaware Trustee hereby represents and warrants for the benefit
of the Depositor and the Securityholders that:
(a) The Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration of Trust.
(b) The execution, delivery and performance by the Delaware Trustee
of this Declaration of Trust has been duly authorized by all necessary
corporate action on the part of the Delaware Trustee; and this Declaration
of Trust has been duly executed
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and delivered by the Delaware Trustee, and constitutes a legal, valid and
binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' right generally and to general principles of equity and the
discretion of the court regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law.
(c) The execution, delivery and performance of this Declaration of
Trust by the Delaware Trustee does not conflict with or constitute a
breach of the certificate of incorporation or by-laws of the Delaware
Trustee.
(d) No consent, approval or authorization of, or registration with
or notice to, any state or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee of this
Declaration of Trust.
(e) The Delaware Trustee is an entity which has its principal place
of business in the State of Delaware.
SECTION 7.03. Representations and Warranties of Depositor. The
Depositor hereby represents and warrants for the benefit of the Securityholders
that the Trust Securities Certificates issued at the Closing Date on behalf of
the Trust have been duly authorized and will have been duly and validly
executed, issued and delivered by the Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Declaration of
Trust, and the Securityholders will be, as of each such date, entitled to the
benefits of this Declaration of Trust.
ARTICLE VIII
The Trustees
SECTION 8.01. Certain Duties and Responsibilities. (a) The duties
and responsibilities of the Trustees shall be as provided by this Declaration of
Trust and, in the case of the Property Trustee, by the Trust Indenture Act;
provided, however, that the Property Trustee shall not be subject to the
provisions of the Trust Indenture Act until such time as this Declaration of
Trust becomes qualified under the Trust Indenture Act upon the effectiveness of
a registration statement pursuant to the Registration Agreement. Notwithstanding
the foregoing, no provisions of this Declaration of Trust 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 indemnity satisfactory to it
against such risk or liability is not reasonably assured to it. Whether or not
herein expressly so provided, every provision of this Declaration of Trust
relating to the conduct or affecting the liability of or affording protection to
the Trustees shall be subject to the provisions of this Article. Nothing in this
Declaration of Trust shall be construed to release an Administrative Trustee
from liability for his own grossly negligent action, his own grossly negligent
failure to
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act, or his own willful misconduct. To the extent that, at law or in equity, an
Administrative Trustee has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to the Securityholders, 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 Declaration of Trust.
The provisions of this Declaration of Trust, to the extent that they restrict
the duties and liabilities of 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 Administrative Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each
Securityholder, by its acceptance of a Trust Security, agrees that it will 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 8.01(b) does not limit the liability of the Trustees expressly set forth
elsewhere in this Declaration of Trust or, in the case of the Property Trustee,
in the Trust Indenture Act, if applicable.
(c) No provision of this Declaration of Trust 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 Declaration of Trust;
(iii) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Junior Subordinated Debt
Securities 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 projections and limitations on liability
afforded to the Property Trustee under this Declaration of Trust 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 in writing with
the Depositor; and money held by the Property Trustee need not be
segregated from other funds held by it
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except in relation to the Payment Account maintained by the Property
Trustee pursuant to Section 3.01 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 Declaration of Trust nor shall the Property
Trustee be liable for the default or misconduct of the Administrative
Trustees or the Depositor.
SECTION 8.02. Events of Default Notices; Deferral of Interest
Payment Notices. Within 10 Business Days after the occurrence of any Event of
Default actually known to a Responsible Officer of the Property Trustee, the
Property Trustee shall transmit, in the manner and to the extent provided in
Section 10.09, 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; provided, however, that, except in the case of a
default in the payment of the principal of (or premium, if any) or interest
(including any interest) on the Trust Security, the Property Trustee shall be
fully protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Property Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders of Securities; and
provided, further, however, that, in the case of any default of the character
specified in Section 5.01(3) of the Indenture, no such notice to Holders of
Securities shall be given until at least 30 days after the occurrence thereof.
For the purpose of this Section 8.02, 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 Securities.
Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the Junior
Subordinated Debt Securities pursuant to the Indenture, the Administrative
Trustee shall transmit, in the manner and to the extent provided in Section
10.09, notice of such exercise to the Securityholders and the Property Trustee,
unless such exercise shall have been revoked.
The Property Trustee shall notify all Holders of the Capital
Securities of any notice of default received from the Debenture Trustee with
respect to the Junior Subordinated Debt Securities. The Depositor and the
Administrative Trustees are required to file within 60 days of each December 31
of each calendar year commencing December 31, 1997 with the Property Trustee a
certificate as to whether or not they are in compliance with all the conditions
and covenants applicable to them under this Declaration of Trust.
SECTION 8.03. Certain Rights of Property Trustee. Subject to the
provisions of Section 8.01:
(a) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting in good faith upon any
resolution, Opinion of Counsel, certificate, written representation of a
Holder or transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or
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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 Declaration of Trust
the Property Trustee is required to decide between alternative courses of
action or (ii) in construing any of the provisions of this Declaration of
Trust the Property Trustee finds the same ambiguous or inconsistent with
any other provisions contained herein or (iii) the Property Trustee is
unsure of the application of any Provision of this Declaration of Trust,
then, except as to any matter as to which the Securityholders are entitled
to vote under the terms of this Declaration of Trust, 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 ten
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 two Business Days), it may, but shall
be under no duty to, take or refrain from taking such action not
inconsistent with this Declaration of Trust 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
Trustee contemplated by this Declaration of Trust shall be sufficiently
evidenced by an Officers' Certificate;
(d) whenever in the administration of this Declaration of Trust, 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 (which Officers' Certificate will be evidence only for purposes
of determining entitlement to indemnification of the Property Trustee from
the Depositor but not with respect to any liability to Securityholders);
(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 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 selection
(which counsel may be counsel to the Depositor or any of its Affiliates,
and may include any of its employees) and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice; the
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Property Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration of Trust 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 Declaration of Trust at
the request or direction of any of the Securityholders pursuant to this
Declaration of Trust, unless such Securityholders shall have offered to
the Property Trustee security or indemnity satisfactory to it against the
costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(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 one or more Securityholders, 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 its trusts or powers
hereunder or perform any of its duties hereunder either directly or by or
through its agents or attorneys, and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of or for the
supervision of any such agent or attorney appointed by it with due care
hereunder;
(j) whenever in the administration of this Declaration of Trust 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 fully
protected in acting in accordance with such instructions;
(k) except as otherwise expressly provided by this Declaration of
Trust, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration of
Trust;
(1) when the Property Trustee incurs expenses or renders services in
connection with a Bankruptcy Event, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are
intended to constitute expenses of administration under any bankruptcy law
or law relating to creditors rights generally; and
(m) the Property Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer of the Property Trustee
obtains actual knowledge
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of such event or the Property Trustee receives written notice of such
event from Securityholders holding at least 25% of the Outstanding Trust
Securities (based upon Liquidation Amount).
No provision of this Declaration of Trust 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 8.04. Not Responsible for Recitals. The recitals contained
herein and in the Trust Securities Certificates shall be taken as the statements
of 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 Junior Subordinated Debt Securities.
SECTION 8.05. May Hold Securities. Except as provided in the
definition of the term "Outstanding" in Article I, 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 Trust Securities and, subject to Sections 8.08
and 8.13, may otherwise deal with the Trust with the same rights it would if it
were not a Trustee or such other agent.
SECTION 8.06. Compensation, Indemnity, Fees. Pursuant to Section
10.02 of the Indenture, the Depositor, as issuer of the Junior Subordinated Debt
Securities, 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 Declaration of Trust (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence
or willful misconduct;
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee,
(iii) any officer, director, shareholder, employee, representative or
agent of any Trustee, and (iv) any employee or agent of the Trust or its
Affiliates (referred to herein as an "Indemnified Person") from and
against any loss, damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified Person by reason of
the creation, operation or termination of the Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of
the Trust and in a manner such
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Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Declaration of Trust, except
that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason
of such Indemnified Person's negligence or willful misconduct with respect
to such acts or omissions; and
(d) to the fullest extent permitted by applicable law, to advance
expenses (including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding, from time to
time, prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Depositor of (i) a written affirmation
by or on behalf of the Indemnified Person of its or his good faith belief
that it or he has met the standard of conduct set forth in this Section
8.06 and (ii) an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall be determined that the Indemnified Person is
not entitled to be indemnified as authorized in the preceding subsection.
The provisions of this Section 8.06 shall survive the termination of
this Declaration of Trust or the earlier resignation or removal of any Trustee.
No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.06.
The Depositor and any Trustee (in the case of the Property Trustee,
subject to Section 8.08 hereof) may engage in or possess an interest in other
business ventures of any nature or description, independently or with others,
similar or dissimilar to the business of the Trust, and none of the Trust, the
Holders, the Depositor or any such Trustee shall have any rights by virtue of
this Declaration of Trust in and to such independent ventures or the income or
profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. Neither the Depositor, nor any Trustee, shall be obligated to present
any particular investment or other opportunity to the Trust even if such
opportunity is of a character that, if presented to the Trust, could be taken by
the Trust, and the Depositor or any Trustee shall have the right to take for its
own account (individually or as a partner or fiduciary) or to recommend to
others any such particular investment or other opportunity. Any Trustee may
engage or be interested in any financial or other transaction with the Depositor
or any Affiliate of the Depositor, or may act as depository for, trustee or
agent for, or act on any committee or body of holders of, securities or other
obligations of the Depositor or its Affiliates.
SECTION 8.07. 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
a national or state chartered bank and eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least $50
million. If any such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of its supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be
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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 8.07, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article; provided, however,
that the Property Trustee need not qualify under the Trust Indenture Act until
such time as this Declaration of Trust is qualified under the Trust Indenture
Act.
(b) There shall at all times be one or more Administrative Trustees
hereunder. 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. 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 8.08. 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 Declaration of Trust.
SECTION 8.09. Co-Trustees and Separate Trustee. Unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the time be located,
the Depositor and the Administrative Trustees, by agreed action of the majority
of such Trustees, shall have power to appoint, and upon the written request of
the Administrative Trustees, the Depositor shall for such purpose join with the
Administrative Trustees 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. 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 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.
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Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed 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.
(b) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee 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.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept
the resignation of or remove any co-trustee or separate trustee appointed
under this Section, and, in case a Debenture Event of Default has occurred
and is continuing, the Property Trustee shall have power to accept the
resignation of, or remove, any such co-trustee or separate trustee without
the concurrence of the Depositor. Upon the written request of the Property
Trustee, the Depositor shall join with the Property Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any
other trustee hereunder.
(e) The Property Trustee shall not be required to supervise any
co-trustee or separate trustee nor shall it be liable by reason of any act
of a co-trustee or separate trustee or any employees or agents of a
co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate
trustee.
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SECTION 8.10. Resignation and Removal; Appointment of Successor. 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 8.11.
Subject to the immediately preceding paragraph, a Relevant Trustee
may resign at any time by giving written notice thereof to the Securityholders.
If the instrument of acceptance by the successor Trustee required by Section
8.11 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 Trust, any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Holder of
Common Securities. 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 Act of the Holders of a majority in Liquidation
Amount of the Outstanding Capital Securities, delivered to the Relevant Trustee
(in its individual capacity and on behalf of the Trust). An Administrative
Trustee may be removed by Act of the Holder of Common Securities at any time.
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 Holder of Common Securities, by Act of the Holder of Common
Securities delivered to the retiring Trustee, shall promptly appoint a successor
Trustee or Trustees and the retiring Trustee shall comply with the applicable
requirements of Section 8.11. 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 be continuing, the Holders of
Capital Securities, by Act of the Holders of a majority in Liquidation Amount of
the Capital Securities then Outstanding delivered to the retiring Relevant
Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and
such successor Trustee shall comply with the applicable requirements of Section
8.11. If an Administrative Trustee shall resign, be removed or become incapable
of acting as Administrative Trustee, at a time when a Debenture Event of Default
shall have occurred and be continuing, the Holder of Common Securities, by Act
of the Holder of Common Securities delivered to the Administrative Trustee,
shall promptly appoint a successor Administrative Trustee or Administrative
Trustees and such successor Administrative Trustee or Trustees shall comply with
the applicable requirements of Section 8.11. If no successor Relevant Trustee
shall have been so appointed by the Holder of Common Securities or the Holders
of Capital Securities and accepted appointment in the manner required by Section
8.11, any Securityholder who has been a Securityholder of Trust Securities for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Relevant Trustee.
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The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all
Securityholders in the manner provided in Section 10.08 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.
Notwithstanding the foregoing or any other provision of this
Declaration of Trust, 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 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 or Delaware Trustee, as the
case may be, set forth in Section 8.07).
SECTION 8.11. Acceptance of Appointment by Successor. In the case of
the appointment hereunder of a successor Trustee, such successor Trustee so
appointed shall execute, acknowledge and deliver to the Trust and to the
retiring Trustee any 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 the rights, powers, trusts and duties of the retiring Trustee, but,
on the request of the Depositor 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 if the Property Trustee is the resigning Trustee the
Property Trustee shall duly assign, transfer and deliver to the successor
Property Trustee all Trust Property and money held by such retiring Property
Trustee hereunder.
In case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with
respect to the Trust Securities shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and which
(a) 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 (b) shall add to or change any of the
provisions of this Declaration of Trust as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees if the same trust and that each such Relevant
Trustee shall be Trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Relevant Trustee;
and upon the execution and delivery of such amendment 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; but, on request of the Trust or any
successor Relevant Trustee such retiring Relevant Trustee shall duly assign,
transfer and
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deliver to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Trust Securities and the Trust.
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 first or second preceding paragraph, as the case may be.
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.
SECTION 8.12. Merger, Conversion, Consolidation or Succession to
Business. Any Person into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Relevant Trustee
shall be a party, or any Person 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 8.13. Preferential Collection of Claims Against Depositor or
Trust. In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Property Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Property Trustee, its agents and counsel) and of the Holders allowed in
such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the
event the Property Trustee shall consent to the making of such
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payments directly to the Holders, to pay to the Property Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Property Trustee, its agents and counsel, and any other
amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or compensation affecting
the Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 8.14. Reports by Property Trustee. Upon qualification of
this Declaration of Trust under the Trust Indenture Act, within 60 days after
May 15 of each year, commencing May 15, 1997, the Property Trustee shall provide
to the Holders of the Capital Securities such reports as are required by ss. 313
of the Trust Indenture Act, if any, in the form and in the manner provided by
ss. 313 of the Trust Indenture Act. The Property Trustee shall also comply with
the requirements of ss. 313(d) of the Trust Indenture Act.
SECTION 8.15. Reports to the Property Trustee. Upon Qualification of
this Indenture under the Trust Indenture Act, 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 8.16. Evidence of Compliance with Conditions Precedent. Upon
qualification of this Indenture under the Trust Indenture Act, 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 Declaration of Trust 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 8.17. Number of Trustees. (a) The number of Trustees shall
be six; provided that the Holder of all of the Common Securities by written
instrument may increase or decrease the number of 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 Administrative Trustees is not reduced pursuant to Section 8.17(a), or
if the number of Trustees is increased pursuant to Section 8.17(a), a
vacancy shall occur. The vacancy shall be filed with a Trustee appointed
in accordance with Section 8.10.
(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
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with
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Section 8.10, 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
Declaration of Trust.
SECTION 8.18. 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 2.07(a), including any registration
statement or amendment thereto filed with the Commission, or making any other
governmental filing; 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 this
Declaration of Trust, as set forth herein.
ARTICLE IX
Termination, Liquidation and Merger
SECTION 9.01. Termination Upon Expiration Date; Termination Upon
Special Event. Unless earlier terminated, the Trust shall automatically
terminate on January 27, 2037 (the "Expiration Date"), following the
distribution of the Trust Property in accordance with Section 9.04.
SECTION 9.02. 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 or the Holder of the Common
Securities;
(b) the written direction to the Property Trustee from the
Depositor, as issuer of the Junior Subordinated Debt Securities, at any
time (which direction is optional and wholly within the discretion of the
Depositor subject to (i) receipt by the Depositor of the Opinion of
Counsel to the effect that such distribution will not be a taxable event
to Holders of the Capital Securities and (ii) receipt of prior approval of
the Federal Reserve if then required under applicable capital guidelines
or policies of the Federal Reserve (including upon the occurrence and
continuation of a Special Event in respect of the Trust) to terminate the
Trust and, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, distribute a Like Amount of the Junior
Subordinated Debt Securities to Securityholders;
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(c) the redemption of all of the Trust Securities in connection with
the redemption of all the Junior Subordinated Debt Securities (including
upon the occurrence and continuation of a Special Event pursuant to
Section 11.07(b) of the Indenture); and
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction.
SECTION 9.03. 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 payment of
any expenses owed by the Trust, (b) the distribution by the Property Trustee to
Securityholders upon the liquidation of the Trust pursuant to Section 9.04, or
upon the redemption of all of the Trust Securities pursuant to Section 4.02, of
all amounts required to be distributed hereunder upon the final payment of the
Trust Securities, and (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.
SECTION 9.04. Liquidation. (a) If an Early Termination Event
specified in clause (a), (b) or (d) of Section 9.02 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 Junior Subordinated Debt Securities, subject to
Section 9.04(d). Upon the written direction of any Administrative Trustee,
notice of liquidation shall be given by the Property Trustee by first-class
mail, postage prepaid, mailed not later than 30 nor more than 90 days prior to
the Liquidation Date to each Holder at such Holder's address appearing in the
Securities Register. All notices of liquidation shall:
(i) state the Liquidation Date (which in the case of any
liquidation following the occurrence of a Special Event shall
not be more than 90 days following such occurrence);
(ii) state that from and after the Liquidation Date the Trust
Securities will no longer be deemed to be Outstanding and any
Trust Securities Certificates not surrendered for exchange
will be deemed to represent a Like Amount of Junior
Subordinated Debt Securities; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for
Junior Subordinated Debt Securities, or, if Section 9.04(d)
applies, receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem
appropriate.
(b) Except where Section 9.02(c) or 9.04(d) applies, in order to
effect the liquidation of the Trust and distribution of the Junior
Subordinated Debt Securities to Securityholders, the Property Trustee
shall establish a record date for such distribution
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(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 Junior Subordinated Debt
Securities in exchange for the Outstanding Trust Securities Certificate.
(c) Except where Section 9.02(c) or 9.04(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) certificates representing a Like Amount of Junior
Subordinated Debt Securities will be issued to Holders, upon surrender of
Trust Securities Certificates to the Administrative Trustees or their
agent for exchange, (iii) any Trust Securities Certificates not so
surrendered for exchange will be deemed to represent a Like Amount of
Junior Subordinated Debt Securities accruing interest at the rate provided
for in the Junior Subordinated Debt Securities from the last Distribution
Date on which a Distribution was made on such Trust Securities
Certificates until such certificates are so surrendered (until such
certificates are so surrendered, no payments of interest or principal will
be made to the Holders of Trust Securities Certificates with respect to
such Junior Subordinated Debt Securities) and (iv) all rights of
Securityholders holding Trust Securities will cease, except the right of
such Securityholders to receive Junior Subordinated Debt Securities upon
surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this
Section 9.04, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the Junior
Subordinated Debt Securities 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 determine. In
such event, on the date of the dissolution, winding-up or other
termination of the Trust, Securityholders will be entitled to receive out
of the assets of the Trust available for distribution to Securityholders
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, an amount equal to the aggregate of Liquidation Amount of
such Holders of Trust Securities 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). Holders of the Common Securities
will be entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as aforesaid)
with Holders of Capital Securities, except that, if a Debenture Event of
Default has occurred and is continuing, the Capital Securities shall have
a priority over the Common Securities, and no payments shall be made with
respect to the Common Securities until Holders of Capital Securities have
been paid in full. Any such determination and liquidation by the Property
Trustee shall
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be conclusive upon the Securityholders and the Property Trustee shall have
no liability in connection therewith.
SECTION 9.05. 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 9.05. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Capital
Securities, the Property Trustee or the Delaware Trustee, the Trust may merge
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to a trust
organized as such under the laws of any State; provided, however, that (i) such
successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (b) substitutes for the Trust
Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities") so long as the Successor Securities rank
the same as the Trust Securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii) the Depositor
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee as the holder of the Junior Subordinated Debt
Securities, (iii) the Successor Securities (if Capital Securities) are listed or
traded, or any Successor Securities will be listed or traded upon notification
of issuance, on any national securities exchange or other organization on which
the Capital Securities are then listed or traded, if any, (iv) if the Capital
Securities, including any successor Securities, are rated by any nationally
recognized statistical rating organization prior to such transaction, such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not cause the Trust Securities (including any Successor Securities) or, if
so rated, the Junior Subordinated Debt Securities, to be downgraded by such
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect,
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Depositor has received an Opinion of Counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders of the Trust Securities (including any Successor
Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act, (viii) the Depositor or any permitted
successor or assignee 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, and (ix) the
Depositor delivers to the Property Trustee an Officer's Certificate and an
Opinion of Counsel, each to the effect that all conditions precedent in this
Section 9.05 to such transaction have been satisfied. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge with
or into, or be replaced by or convey, transfer or lease its properties and
assets
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substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the 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 10.01. Limitation of Rights of Securityholders. The death,
dissolution or incapacity of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Declaration
of Trust, 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 10.02. Liability of the Depositor. The Depositor, as issuer
of the Junior Subordinated Debt Securities, shall be liable for all the debts
and obligations of the Trust (other than with respect to payments of principal,
interest, or premium, if any, on the Trust Securities) to the extent not
satisfied out of the Trust's assets.
SECTION 10.03. Amendment. (a) This Declaration of Trust may be
amended from time to time by the Property Trustee, the Administrative Trustees
and the Depositor, without the consent of any Securityholders (i) to cure any
ambiguity, correct or supplement any provision herein which may be inconsistent
with any other provision herein, or to make any other provisions with respect to
matters or questions arising under this Declaration of Trust, which shall not be
inconsistent with the other provisions of this Declaration of Trust or (ii) to
modify, eliminate or add to any provisions of this Declaration of Trust to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are Outstanding or to ensure that the Trust will not be
required to register as an investment company under the 1940 Act; or (iii) to
modify, correct or supplement in any respect the provisions relating to the
exchange of the Trust Securities for identical securities pursuant to the
Registration Rights Agreement; provided, however, that in the case of clauses
(i) and (iii), such action shall not adversely affect in any material respect
the interests of any Securityholder, and any amendments of this Declaration of
Trust shall become effective when notice thereof is given to the
Securityholders.
(b) Except as provided in Section 10.03(c) hereof, any provision of
this Declaration of Trust may be amended by the Trustees and the Depositor
with (i) the consent of Securityholders representing not less than a
majority (based upon Liquidation Amounts) of the Trust Securities then
Outstanding and (ii) 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 will not affect
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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 1940 Act.
(c) In addition to and notwithstanding any other provision in this
Declaration of Trust, without the consent of each affected Securityholder
(such consent being obtained in accordance with Section 6.03 or 6.08
hereof), this Declaration of Trust 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 6.03 or 6.08 hereof), this
paragraph (c) of this Section 10.03 may not be amended.
(d) Notwithstanding any other provisions of this Declaration of
Trust, no Trustee shall enter into or consent to any amendment to this
Declaration of Trust which would cause the Trust to fail or cease to
qualify for the exemption from status of an investment company under the
1940 Act or fail or cease to be classified as a grantor trust for United
States federal income tax purposes.
(e) Notwithstanding anything in this Declaration of Trust to the
contrary, without the consent of the Depositor this Declaration of Trust
may not be amended in a manner which imposes any additional obligation on
the Depositor.
(f) Notwithstanding any other provision of this Declaration of
Trust, no amendment to this Declaration of Trust may be made if, as a
result of such amendment, it would cause the Trust to fail to be
classified as a grantor trust for United States federal income tax
purposes.
(g) In the event that any amendment to this Declaration of Trust is
made, the Administrative Trustees shall promptly provide to the Depositor
a copy of such amendment.
(h) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Declaration of Trust which
affects its own rights, duties or immunities under this Declaration of
Trust or would otherwise expose the Property Trustee to any liability or
be contrary to applicable law. The Property Trustee shall be entitled to
receive an Opinion of Counsel and an Officers' Certificate stating that
any amendment to this Declaration of Trust is in compliance with this
Declaration of Trust and that all conditions precedent, if any, to the
execution and delivery of such amendment have been satisfied.
SECTION 10.04. Separability. In case any provision in this
Declaration of Trust or in the Trust Securities Certificates shall be invalid,
illegal or unenforceable, the
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validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 10.05. Governing Law. This Declaration of Trust and the
rights and obligations of each of the Securityholders, the Trust and the
Trustees with respect to this Declaration of Trust and the Trust Securities
shall be construed in accordance with and governed by the laws of the State of
Delaware without regard to its conflict of laws principles. The provisions of
Sections 3540 and 3561 of Title 12 of the Delaware Code shall not apply to this
Trust.
SECTION 10.06. Payments Due on Non-Business Day. If the date fixed
for any payment on any Trust Security shall be a day that is not a Business Day,
then such payment need not be made on such date but may be made on the next
succeeding day that is a Business Day (except as otherwise provided in Section
4.02(d)), with the same force and effect as though made on the date fixed for
such payment, and no interest shall accrue thereon for the period after such
date.
SECTION 10.07. Successors. This Declaration of Trust shall be
binding upon and shall inure to the benefit of any successor to the Depositor,
the Trust or the Relevant Trustee, including any successor by operation of law.
Except in connection with a consolidation, merger or sale involving the
Depositor that is permitted under Article VI of the Indenture and pursuant to
which the assignee agrees in writing to perform the Depositor's obligations
hereunder, the Depositor shall not assign its obligations hereunder.
SECTION 10.08. Headings. The Article and Section headings are for
convenience only and shall not affect the construction of this Declaration of
Trust.
SECTION 10.09. Reports, Notices and Demands. Any report, notice,
demand or other communication which by any provision of this Declaration of
Trust 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 Capital
Securityholder, to such Capital Securityholder as such Securityholder's name and
address may appear on the Securities Register, and (b) in the case of the Holder
of Common Securities or the Depositor, to U.S.B. Holding Co., Inc., 100 Dutch
Hill Road, Orangeburg, New York 10961, Attention: Steven T. Sabatini, Executive
Vice President and Chief Financial Officer, facsimile no.: (914) 365-4600. Any
notice to Holders of Capital Securities may 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 Declaration of Trust is required or permitted to be given or served to or
upon the Trust, the Property Trustee, the Delaware Trustee or the Administrative
Trustees shall be given in writing addressed (until another address is published
by the Trust) as follows: (a) with respect
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to the Property Trustee to The Chase Manhattan Bank, 450 West 33rd Street, 15th
Floor, New York, NY 10001-2697, Attention: Corporate Trustee Administration
Department; (b) with respect to the Delaware Trustee to Chase Manhattan Bank
Delaware, 1201 Market Street, 8th Floor, Wilmington, DE 19801, Attention:
Corporate Trustee Administration Department; and (c) with respect to the
Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention: Office of the Executive Vice President". 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 10.10. Agreement Not to Petition. Each of the Trustees and
the Depositor agree for the benefit of the Securityholders that, until at least
one year and one 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)
(collectively, "Bankruptcy Laws") or otherwise join in the commencement of any
proceeding against the Trust under any Bankruptcy Laws. In the event the
Depositor takes action in violation of this Section 10.10, the Property Trustee
agrees, for the benefit of Securityholders, that at the expense of the
Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be estopped and precluded
therefrom and such other defenses, if any, as counsel for the Trustee or the
Trust may assert. The provisions of this Section 10.10 shall survive the
termination of this Declaration of Trust.
SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture
Act. This Declaration of Trust will not be qualified under the Trust Indenture
Act except upon the effectiveness of a registration statement and the
consummation of an exchange offer pursuant to the Registration Rights Agreement.
By its terms, however, this Declaration of Trust incorporates certain provisions
of the Trust Indenture Act. Upon the effectiveness of any such registration
statement, clauses (a), (b), (c) and (d), below, shall apply to this Declaration
of Trust.
(a) This Declaration of Trust is subject to the provisions of the
Trust Indenture Act that are required to be part of this Declaration of
Trust 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
Declaration of Trust by any of the provisions of the Trust Indenture Act,
such required provision shall control. If any provision of this
Declaration of Trust modifies or excludes any provision of the Trust
Indenture Act which may be so modified or excluded, the latter provision
shall be
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deemed to apply to this Declaration of Trust as so modified or excluded,
as the case may be.
(d) The application of the Trust Indenture Act to this Declaration
of Trust shall not affect the nature of the Securities as securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 10.12. Acceptance of Terms of Declaration of Trust,
Guarantee and 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 DECLARATION OF TRUST 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 DECLARATION OF TRUST SHALL BE BINDING, OPERATIVE AND
EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
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U.S.B. HOLDING CO., INC.,
Depositor
by /s/ [ILLEGIBLE]
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
Property Trustee
by /s/ Sheik Wiltshire
----------------------------------
Name: Sheik Wiltshire
Title: (Second Vice President)
CHASE MANHATTAN BANK DELAWARE,
not in its individual capacity but
solely as Trustee
by /s/ John J. Cashin
----------------------------------
Name: John J. Cashin
Title: Senior Trust Officer
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/s/ Thomas E. Hales
-------------------------------
Thomas E. Hales
as Administrative Trustee
/s/ Michael H. Fury
-------------------------------
Michael H. Fury
as Administrative Trustee
/s/ Raymond J. Crotty
-------------------------------
Raymond J. Crotty
as Administrative Trustee
/s/ Steven T. Sabatini
-------------------------------
Steven T. Sabatini
as Administrative Trustee
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EXHIBIT A
CERTIFICATE OF TRUST
The undersigned, the trustee of Union State Capital Trust I,
desiring to form a business trust pursuant to the Delaware Business Trust Act,
12 Del. C. Section 3801, hereby certify as follows:
(a) The name of the business trust formed hereby is "Union State
Capital Trust I" (the "Trust").
(B) The name and business address of the trustee of the Trust that
has its principal place of business in the State of Delaware are as
follows:
Chase Manhattan Bank Delaware
1201 Market Street, 9th Floor, Wilmington, DE 19801.
(C) This Certificate of Trust shall be effective as of the date of
filing.
Dated: January , 1997
CHASE MANHATTAN BANK DELAWARE, not in its
individual capacity but solely as trustee
by _______________________________________
Name:
Title:
Thomas E. Hales, not in his individual
capacity but solely as trustee
__________________________________________
Michael H. Fury, not in his individual
capacity but solely as trustee
__________________________________________
Raymond J. Crotty, not in his individual
capacity but solely as trustee
__________________________________________
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Steven T. Sabatini, not in his individual
capacity but solely as trustee
__________________________________________
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EXHIBIT B
IF THE CAPITAL SECURITY IS A RESTRICTED SECURITY,
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH U.S.B. HOLDING CO., INC. (THE "CORPORATION") OR ANY AFFILIATE OF THE
CORPORATION WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTIONS TERMINATION DATE") ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE TRUST'S AND THE
PROPERTY TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE
OBTAINED FROM THE TRUST OR THE PROPERTY TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTIONS
TERMINATION DATE."
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IF THE CAPITAL SECURITIES CERTIFICATE IS TO BE A GLOBAL SECURITIES
CERTIFICATE, INSERT--[This Capital Securities Certificate is a Global
Capital Securities Certificate within the meaning of the Declaration of
Trust hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depositary") or a nominee of the
Depositary. This Capital Securities Certificate is exchangeable for
Capital Securities Certificates registered in the name of a person other
than the Depositary or its nominee only in the limited circumstances
described in the Declaration of Trust and no transfer of this Capital
Securities Certificate (other than a transfer of this Capital Securities
Certificate as a whole by the Depositary to a nominee of the Depositary or
by a nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in the limited circumstances
described in the Declaration of Trust.
Unless this Capital Securities Certificate is presented by an
authorized representative of The Depositary Trust Company, 55 Water
Street, New York ,to Union State Capital Trust I or its agent for
registration of transfer, exchange or payment, and any Capital Securities
Certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of The Depositary Trust
Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
The Capital Securities are issued, and may be transferred, only in
blocks having an aggregate Liquidation Amount of not less than $100,000.
Any transfer, sale or other disposition of Capital Securities in a block
having a Liquidation Amount of less than $100,000 shall be deemed to be
void and of no legal effect whatsoever. Any such transferee shall be
deemed not to be the Holder of such Capital Securities for any purpose,
including but not limited to the receipt of Distributions on such Capital
Securities, and such transferee shall be deemed to have no interest
whatsoever in such Capital Securities.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), NO
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY
PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON
INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THIS CAPITAL
SECURITIES CERTIFICATE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR
HOLDER IS COVERED BY THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT
OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60,
91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY
PURCHASER OR HOLDER OF THIS CAPITAL SECURITIES CERTIFICATE OR
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ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING HEREOF THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND
IS NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF
ANY PLAN, OR (B) IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE
96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR
HOLDING.
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Liquidation Amount of
Certificate Number Capital Securities
CUSIP NO. [ ]
Certificate Evidencing Capital Securities
of
Union State Capital Trust I
[____]% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Union State Capital Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that Cede &
Co. (the "Holder") is the registered owner of ________ ( ) Capital Securities of
the Trust representing an undivided beneficial interest in the assets of Trust
and designated Union State Capital Trust I ___% Capital Securities (Liquidation
Amount $1,000 per Capital Security) (the "Capital Securities"). The Capital
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 5.05 of the Declaration
of Trust (as defined below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities are set
forth in, and this certificate and the Capital Securities presented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Declaration of Trust of the Trust dated as of _____ __,
1997, as the same may be amended from time to time (the "Declaration of Trust")
among U.S.B. Holding Co., Inc., as Depositor, The Chase Manhattan Bank, as
Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee and the
Administrative Trustees named therein, including the designation of the terms of
Capital Securities as set forth therein. The Holder is entitled to the benefits
of the Guarantee Agreement entered into by U.S.B. Holding Co., Inc., a
corporation, and The Chase Manhattan Bank, as Guarantee trustee, dated as of
_______ __, 1997, (the "Guarantee"), to the extent provided therein. The Trust
will furnish a copy of the Declaration of Trust and the Guarantee to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office.
Terms used but not defined herein have the meanings set forth in the
Declaration of Trust.
Upon receipt of this certificate, the Holder is bound by the
Declaration of Trust and is entitled to benefits thereunder.
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IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this Certificate this day of , .
UNION STATE CAPITAL TRUST I
by___________________________________
Name:
Title: Administrative Trustee
COUNTERSIGNED AND REGISTERED:
THE CHASE MANHATTAN BANK,
as Property Trustee
by___________________________________
Authorized Officer
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Capital Security to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints agent to transfer this Capital Security Certificate on
the books of the Trust. The agent may substitute another to act for him or her.
Date:_____________________________
Signature:______________________________________________________________________
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
The signatures should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant
to SEC Rule 17Ad-15.
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EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
Liquidation Amount of
Certificate Number Capital Securities
Certificate Evidencing Common Securities
of
Union State Capital Trust I
[____]% Common Securities
(Liquidation Amount $1,000 per Common Security)
Union State Capital Trust I, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that U.S.B.
Holding Co., Inc. (the "Holder") is the registered owner of _____ ( ) common
securities of the Trust representing beneficial interests of the Trust and
designated the [____]% Common Securities (Liquidation Amount $1,000 per Common
Security) (the "Common Securities"). Except as provided in Section 5.11 of the
Declaration of Trust (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 Declaration of Trust of
the Trust dated as of _____ __, 1997, as the same may be amended from time to
time (the "Declaration of Trust") among U.S.B. Holding Co., Inc., as Depositor,
The Chase Manhattan Bank, as Property Trustee, Chase Manhattan Bank Delaware, as
Delaware Trustee, and the Administrative Trustees named therein, including the
designation of the terms of the Common Securities as set forth therein. The
Trust will furnish a copy of the Declaration of Trust 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
Declaration of Trust and is entitled to the benefits thereunder.
Terms used but not defined herein have the meanings set forth in the
Declaration of Trust.
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IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust
has executed this certificate this day of , .
UNION STATE CAPITAL TRUST I
by___________________________________
Name:
Title: Administrative Trustee
COUNTERSIGNED AND REGISTERED:
THE CHASE MANHATTAN BANK,
as Property Trustee
by___________________________________
Authorized Officer
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EXHIBIT D
[Form of Restricted Securities Certificate]
RESTRICTED CAPITAL SECURITIES CERTIFICATE
(For transfers pursuant to ss. 5.05(b)
of the Declaration of Trust)
[__________________________________],
as Security Registrar
[address]
Re: 9.58% Capital Securities of
Union State Capital Trust I (the "Trust")
(the "Capital Securities")
Reference is made to the Amended and Restated Declaration of Trust,
dated as of February 5, 1997 (the "Declaration of Trust"), among U.S.B. Holding
Co., Inc., as Depositor, The Chase Manhattan Bank, as Property Trustee, Chase
Manhattan Bank Delaware, as Delaware Trustee, and the Administrative Trustees
named therein. Terms used herein and defined in the Declaration of Trust or in
Regulation D, Rule 144A or Rule 144 under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), are used herein as so defined.
This certificate relates to $______________ aggregate Liquidation
Amount of Capital Securities, which are evidenced by the following
certificate(s) (the "Specified Securities"):
CUSIP No(s).
CERTIFICATE No(s).
CURRENTLY IN BOOK-ENTRY FORM: ___Yes ___No (check one)
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Capital Securities
Certificate, they are held through the Clearing Agency or a Clearing Agency
Participant in the name of the Undersigned, as or on behalf of the Owner. If the
Specified Securities are not represented by a Global Capital Securities
Certificate, they are registered in the name of the Undersigned, as or on behalf
of the Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Restricted Capital Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being
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effected pursuant to an effective registration statement under the Securities
Act, it is being effected in accordance with one of the following (CHECK ONE):
___ (1) transferred to the Corporation; or
___ (2) exchanged for the undersigned's own account without transfer; or
___ (3) transferred pursuant to and in compliance with Rule 144A under
the Securities Act; or
___ (4) to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933 that is acquiring the Capital Securities
for its own account, or for the account of such an institutional
"accredited investor," for investment purposes and not with a
view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act; or
___ (5) transferred pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless such transfer is being effected in accordance with one of the above, the
Transfer Agent will refuse to register any of the Capital Securities evidenced
by this certificate in the name of any person other than the Holder thereof;
provided, however, that if (4) or (5) is applicable, the Securities Registrar
may require, prior to registering any such transfer of the Capital Securities
such legal opinions, certifications and other information as the Trust has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, such as the exemption provided by Rule 144
under such Act; provided, further, that if (3) is applicable, the transferee
must also certify that it is a qualified institutional buyer as defined in Rule
144A.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Depositor, the Trust and the Initial
Purchaser.
Dated: __________________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By: _______________________________
Name:
Title:
-74-
<PAGE>
(If the Undersigned is a corporation,
partnership or fiduciary, the title of the
person signing on behalf of the Undersigned
must be stated.)
-75-
UNION STATE CAPITAL TRUST I
$20,000,000
9.58% Capital Securities
(Liquidation Amount $1,000 per Capital
Security) fully and unconditionally
guaranteed, as described herein,
by
U.S.B. Holding by Co., Inc.
PURCHASE AGREEMENT
New York, New York
January 31, 1997
Keefe, Bruyette & Woods, Inc.
Two World Trade Center, 85th Floor
New York, New York 10048
Ladies and Gentlemen:
Union State Capital Trust I (the "Trust"), a statutory business
trust organized under the Business Trust Act (the "Business Trust Act") of the
State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. (Section
3801 et seq.)), and U.S.B. Holding Co., Inc., a Delaware corporation (the
"Company"), as depositor of the Trust and as guarantor, propose to issue and
sell to Keefe, Bruyette & Woods, Inc. (the "Initial Purchaser") 20,000 of the
Trust's 9.58% Capital Securities, liquidation amount $1,000 per Capital Security
(the "Capital Securities" and, together with the Guarantee (as defined), the
"Securities"). The Capital Securities will represent undivided beneficial
ownership interests in the assets of the Trust, will be guaranteed by the
Company as to the payment of distributions, and as to payments on liquidation or
redemption, to the extent set forth in a guarantee agreement (the "Guarantee")
dated as of February 5, 1997 between the Company and The Chase Manhattan Bank, a
New York banking corporation validly existing under the laws of the State of New
York, as trustee (the "Guarantee Trustee"). The Capital Securities are to be
issued pursuant to the Amended and Restated Declaration of Trust (the
"Declaration") dated as of February 5, 1997 among Thomas E. Hales, Michael H.
Fury, Raymond J. Crotty and Steven T. Sabatini (each an "Administrative Trustee"
and, collectively, the "Administrative Trustees"), The Chase Manhattan Bank, as
property trustee (the "Property Trustee"), Chase Manhattan Bank Delaware, a
Delaware banking
<PAGE>
corporation, as Delaware trustee (the "Delaware Trustee") and the Company, as
depositor. The proceeds of the sale by the Trust of the Capital Securities and
its Common Securities, liquidation amount $1,000 per Common Security (the
"Common Securities"), are to be invested in the 9.58% Junior Subordinated Debt
securities (the "Debt Securities") of the Company having an aggregate principal
amount equal to the aggregate liquidation amount of the Capital Securities and
the Common Securities, to be issued pursuant to a Junior Subordinated Indenture,
as supplemented from time to time (the "Indenture"), dated as of February 5,
1997 between the Company and The Chase Manhattan Bank, as Trustee (the
"Indenture Trustee"). Holders (including subsequent transferees) of the
Securities will have the registration rights set forth in the Registration
Agreement (the "Registration Agreement") to be entered into among the Company,
the Trust and the Initial Purchaser.
The sale of the Securities to the Initial Purchaser will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Trust and
the Company that you will offer and sell the Securities purchased by you
hereunder in accordance with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Company and the
Trust have prepared a final offering memorandum, dated January 31, 1997
(including any and all exhibits thereto and the documents incorporated by
reference therein, the "Final Memorandum"). The Final Memorandum sets forth
certain information concerning the Company, the Trust and the Securities. The
Company hereby confirms that it has authorized the use of the Final Memorandum,
and any amendment or supplement thereto, in connection with the offer and sale
of the Securities by the Initial Purchaser. Unless stated to the contrary, all
references herein to the Final Memorandum are to the Final Memorandum dated the
date hereof and are not meant to include any amendment or supplement thereto.
1. Representations and Warranties. Each of the Company and the
Trust, jointly and severally, represents and warrants to the Initial Purchaser
as of the date hereof and as of the Closing Date (as defined below), as set
forth below in this Section 1.
(a) The Final Memorandum, at the date hereof, does not, and at the
Closing Date will not (and any amendment or supplement thereto, at the
date thereof and at the Closing Date, will not), contain any untrue
2
<PAGE>
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that no
representation or warranty is made by the Company or the Trust as to the
information contained in or omitted from the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company or the Trust by or on
behalf of the Initial Purchaser specifically for inclusion therein (all
such information contemplated by this proviso shall be collectively
referred to herein as the "Initial Purchaser Information").
(b) The documents incorporated or deemed to be incorporated by
reference in the Final Memorandum at the time they were or hereafter are
filed with the Securities and Exchange Commission (the "Commission")
complied and will comply in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations of the Commission thereunder, and, when read
together with the other information in the Final Memorandum, at the date
of the Final Memorandum and at the Closing Date, do not and will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(c) Deloitte & Touche LLP are independent certified public
accountants with respect to the Company under Rule 101 of the AICPA's
"Code of Professional Conduct," and its interpretation and rulings.
(d) The historical financial statements, together with the related
schedules and notes, included or incorporated by reference in the Final
Memorandum present fairly the consolidated financial position of the
Company and its consolidated subsidiaries, at the dates indicated and the
statement of income, changes in stockholders, equity and cash flows of the
Company and its consolidated subsidiaries, for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") in the United States applied on a
consistent basis throughout the periods involved, except as disclosed in
the notes to such financial statements; the supporting schedules, if any,
included or incorporated by reference in the Final Memorandum present
fairly the financial condition and results of opera-
3
<PAGE>
tions of the Company and its subsidiaries as of and for the periods
indicated therein; and the summary financial data included or incorporated
by reference in the Final Memorandum are accurately extracted and derived
from the financial statements included or incorporated by reference in the
Final Memorandum.
(e) Since December 31, 1996, except as otherwise stated in the Final
Memorandum or contemplated thereby, there has not been (A) any material
adverse change, in the financial condition, earnings or business affairs
of the Trust, or the Company and its subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) any transaction entered into by the Trust,
the Company or any of its subsidiaries, other than in the ordinary course
of business, that is material to the Trust, or the Company and its
subsidiaries, considered as one enterprise, or (C) any dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock, other than regular quarterly dividends on the
Company's common stock and dividends declared, paid or made in accordance
with the terms of any series of the Company's preferred stock.
(f) Neither the Company nor the Trust, nor any of their Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on its or their behalf has,
directly or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of the Securities under the Securities Act.
(g) Neither the Company nor the Trust, nor any of their Affiliates,
nor any person acting on its or their behalf has engaged or will engage in
any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States.
(h) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(i) The Company will assist the Initial Purchaser in obtaining by
the Closing Date notification from the National Association of Securities
Dealers, Inc. Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market that the Capital Securities have been
designated PORTAL-eligible securities in
4
<PAGE>
accordance with the rules and regulations of the National Association of
Securities Dealers, Inc.
(j) Neither the Company nor the Trust is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended
(together with the rules and regulations thereunder, the "Investment
Company Act"), and after giving effect to the offer and sale of the
Capital Securities and the application of the proceeds thereof as
described in the Final Memorandum, neither will be an "investment company"
or a company "controlled" by an investment company within the meaning of
the Investment Company Act.
(k) The Company is subject to and in compliance in all material
respects with the reporting requirements of Section 15 and Section 1S(d)
of the Exchange Act.
(1) Neither the Company nor the Trust has paid or agreed to pay to
any person any compensation for soliciting another to purchase any of the
Securities (except as contemplated by this Agreement).
(m) The information provided by the Company pursuant to Section 5(h)
hereof will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(n) The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act with the power
and authority to own property and to conduct its business as described in
the Final Memorandum and to enter into and perform its obligations under
this Agreement, the Indenture, the Declaration, the Securities and the
Registration Agreement (collectively, the "Operative Documents"). The
Trust is duly qualified to transact business as a foreign entity and is in
good standing in each jurisdiction in which such qualification is
necessary, except where the failure to so qualify or be in good standing
would not have a material adverse effect on the Trust. The Trust is not a
party to or otherwise bound by any agreement other than those described in
the Final Memorandum.
(o) The Declaration has been duly authorized by the Company and, on
the Closing Date, will have been duly executed and delivered by the
Company and the Administrative Trustees, and, assuming due authoriza-
5
<PAGE>
tion, execution and delivery by the Delaware Trustee and the Property
Trustee, be a valid and binding obligation of the Company and the
Administrative Trustees, enforceable against them in accordance with its
terms, subject to applicable bankruptcy, moratorium, insolvency,
fraudulent conveyance and similar laws affecting creditors, rights
generally and to general principles of equity and a covenant of good faith
and fair dealing ("Bankruptcy and Equity") and except that the
indemnification provisions may be limited by federal or state securities
laws or the public policy underlying such laws ("Public Policy"). Each of
the Administrative Trustees of the Trust is an employee of the Company and
has been duly authorized by the Company to execute and deliver the
Declaration.
(p) Each of the Guarantee and the Indenture has been duly authorized
by the Company and, on the Closing Date will have been duly executed and
delivered by the Company, and, assuming due authorization, execution and
delivery by the Guarantee Trustee, in the case of the Guarantee and by the
Indenture Trustee, in the case of the Indenture, will be a valid and
binding obligation of the Company enforceable against it in accordance
with its terms, subject to Bankruptcy and Equity.
(q) The Capital Securities and the Common Securities have been duly
authorized by the Declaration and, when issued and delivered against
payment therefor on the Closing Date to the Initial Purchaser, in the case
of the Capital Securities, and to the Company, in the case of the Common
Securities, will be validly issued fully paid and nonassessable undivided
beneficial interests in the assets of the Trust. The issuance of neither
the Capital Securities nor the Common Securities is subject to preemptive
or other similar rights. On the Closing Date, all of the issued and
outstanding Common Securities of the Trust will be directly owned by the
Company free and clear of any pledge, security interest, claim, lien or
other encumbrance.
(r) The Debt Securities have been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture,
and, when authenticated in the manner provided for in the Indenture and
delivered against payment therefor as described in the Final Memorandum,
will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture enforceable against the Company in
accordance with their terms, subject to Bankruptcy and Equity.
6
<PAGE>
(s) This Agreement has been duly authorized, executed and delivered
by the Company and the Trust. The Registration Agreement has been duly
authorized by the Trust and, at the Closing Date, will have been duly
executed and delivered by the Company and the Trust and will constitute a
valid and binding agreement of the Company and the Trust, enforceable
against the Company and the Trust in accordance with its terms subject to
Bankruptcy and Equity and Public Policy.
(t) The Operative Documents will, on the Closing Date, conform in
all material respects to the descriptions thereof contained in the Final
Memorandum.
(u) The Trust is not in violation of the certificate of trust filed
with the State of Delaware (the "Trust Certificate") or the Declaration or
any provision of the Business Trust Act. The execution, delivery and
performance by the Company and the Trust of the Operative Documents to
which it is a party, and the consummation of the transactions contemplated
herein or therein, will not conflict with or constitute a breach of, or a
default under, or result in the creation or imposition of any lien, charge
or other encumbrance upon any property or assets of the Trust, the Company
or any of the Company's subsidiaries pursuant to any contract, indenture,
mortgage, loan agreement, note lease or other instrument to which the
Trust, the Company or any of its subsidiaries is a party or by which any
of them may be bound, or to which any of the property or assets of any of
them is subject, except for a conflict, breach, default, lien, charge or
encumbrance which could not reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the consummation of the
transactions contemplated herein or therein, nor will such action result
in a violation of the Declaration or the Business Trust Act.
(v) There is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company, threatened,
against or affecting the Trust or the Company or any of its subsidiaries,
which is required to be disclosed in the Final Memorandum (other than as
disclosed therein), or which in the reasonable judgment of the Trust or
the Company might result in a Material Adverse Effect, or which in the
reasonable judgment of the Company might materially and adversely affect
the properties or assets thereof or the consummation of the transactions
contemplated by the Operative Documents or the performance by the Trust or
the Company of their
7
<PAGE>
respective obligations hereunder or thereunder; the aggregate of all
pending legal or governmental proceedings to which the Trust or the
Company or any subsidiary is a party or of which any of their respective
property or assets is the subject which are not described in the Final
Memorandum, including ordinary routine litigation incidental to the
business, are, in the reasonable judgment of the Company, not likely to
result in a Material Adverse Effect.
(w) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, other than those that have been made or obtained, is
necessary or required for the performance by the Company or the Trust of
their obligations hereunder.
(x) The Company is a duly organized and validly existing corporation
in good standing under the laws of the State of Delaware and is duly
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended, and has the corporate power and authority to own its
properties and conduct its business as described in the Final Memorandum
and the documents incorporated by reference therein; Union State Bank (the
"Bank") is a duly organized and validly existing New York State chartered
commercial bank and continues to hold a valid certificate to do business
as such and has full power and authority to conduct its business as such;
U.S.B. Reality Corp. ("USB Realty") is a duly organized and validly
existing corporation in good standing under the laws of the State of New
York and has the corporate power and authority to own its properties and
conduct its business as such; and, except as set forth in the Final
Memorandum, each of the Company, the Bank and USB Realty is in all
material respects in compliance with all laws, rules, regulations,
directives and published interpretations issued or administered by, all
conditions imposed in writing by and all agreements entered into with, any
bank regulatory agency, authority or body having jurisdiction over the
Company, the Bank or USB Realty or any of their respective assets,
operations or businesses; each of the Company, the Bank and USB Realty
holds all material licenses, certificates and permits from governmental
authorities necessary for the conduct of its business as described in the
Final Memorandum; and other than the Bank and USB Realty, there is no
direct or indirect significant subsidiary of the Company, as that term is
defined in Rule 1-02(w) of Regulation S-X, and there are no other
subsidiaries of the Company
8
<PAGE>
which individually, or in the aggregate, own or lease property or conduct
business which is material to the properties or business of the Company
and its subsidiaries taken as a whole.
(y) The Bank and USB Realty are duly authorized, and the Company is
duly qualified as a foreign corporation, to do business and each is in
good standing in all jurisdictions in which the nature of its business or
the character or location of its assets require such authorization or
qualification and in which the failure to be so authorized or to qualify,
as the case may be, could reasonably be expected to, in the aggregate,
have a Material Adverse Effect; all of the issued and outstanding capital
stock of each of the Bank and USB Realty has been duly authorized and
validly issued and is fully paid and non-assessable; all of the issued and
outstanding shares of capital stock of the Bank, and all of the issued and
outstanding shares of common stock of USB Realty, are owned by the Company
free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim.
(z) Any certificate signed by any trustee of the Trust or any duly
authorized officer of the Company or any material subsidiary and delivered
to you or to counsel for the Initial Purchaser in connection with the
Closing shall be deemed a representation and warranty by the Trust or the
Company, as the case may be, to the Initial Purchaser as to the matters
covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
and the Trust agree that the Trust will sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Trust, at a purchase price of
$1,000 per Capital Security, plus accrued distributions, if any, from February
5, 1997 to the Closing Date, 20,000 Capital Securities.
As compensation to the Initial Purchaser for its commitment
hereunder and in view of the fact that the proceeds of the sale of the
Securities will be used to purchase Debt Securities of the Company, the Company
hereby agrees to pay at the Closing Time to the Initial Purchaser in immediately
available funds $35.00 per Security to be delivered by the Trust hereunder at
the Closing Time.
3. Delivery and Payment. Delivery of and payment for the Securities
shall be made at 10:00 AM, New York City time, on February 5, 1997, which date
and time may be post-
9
<PAGE>
poned by agreement among the Initial Purchaser, the Trust and the Company (such
date and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the Initial
Purchaser against payment by the Initial Purchaser of the purchase price thereof
to or upon the order of the Trust by wire transfer drawn and payable in same day
funds or such other manner of payment as may be agreed by the Company, the Trust
and the Initial Purchaser. Delivery of the Securities shall be made at such
location as the Initial Purchaser shall reasonably designate at least one
business day in advance of the Closing Date and payment for the Securities shall
be made at the office of Skadden, Arps, Slate, Meagher & Flom LLP ("Counsel to
the Initial Purchaser"), 919 Third Avenue, New York, New York, or paid to such
bank account as is specified by the Company. Certificates for the Capital
Securities shall be registered in such names and in such denominations as the
Initial Purchaser may request not less than three full business days in advance
of the Closing Date.
The Company agrees to have the Capital Securities available for
inspection, checking and packaging by the Initial Purchaser in New York, New
York, not later than 10:00 A.M. on the business day prior to the Closing Date.
4. Offering of Securities. The Initial Purchaser represents and
warrants to and agrees with the Company and the Trust that:
(a) It has not offered or sold, and will not offer or sell, any
Securities except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
and to whom notice has been given that such sale is being made in reliance
on Rule 144A, or (ii) to other institutional "accredited investors" (as
defined in Rule 501(a)(1),(2), (3) or (7) of Regulation D) who provide to
it and to the Company a letter in the form of Exhibit A hereto.
(b) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Securities in the United States by means of
any form of general solicitation or general advertising (within the
meaning of Regulation D) in the United States.
5. Agreements. Each of the Company and the Trust agrees with
the Initial Purchaser that:
(a) The Company, as promptly as possible, will furnish to the
Initial Purchaser, without charge,
10
<PAGE>
during the period referred to in paragraph (c) below, as many copies of
the Final Memorandum and any amendments and supplements thereto as it may
reasonably request. The Company will pay the expenses of printing or other
production of all documents relating to the offering, purchase, sale and
delivery of the Securities.
(b) The Company will not amend or supplement the Final Memorandum,
other than by filing documents under the Exchange Act which are
incorporated by reference therein, without the prior written consent of
the Initial Purchaser; provided, however, that prior to the completion of
the distribution of the Securities by the Initial Purchaser (as determined
by the Initial Purchaser and communicated to the Company), the Company
will not file any document under the Exchange Act which is incorporated by
reference in the Final Memorandum unless, prior to such proposed filing,
the Company has furnished the Initial Purchaser with a copy of such
document for its review and the Initial Purchaser has not reasonably
objected to the filing of such document. The Company will promptly advise
the Initial Purchaser when any document filed under the Exchange Act which
is incorporated by reference in the Final Memorandum shall have been filed
with the Commission.
(c) If at any time prior to the completion of the distribution of
the Securities by the Initial Purchaser (as determined by the Initial
Purchaser), any event occurs as a result of which the Final Memorandum, as
then amended or supplemented, would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it should be necessary to amend or
supplement the Final Memorandum to comply with applicable law, the Company
will promptly notify the Initial Purchaser of the same and, subject to the
requirements of paragraph (b) of this Section 5, will prepare and provide
to the Initial Purchaser pursuant to paragraph (a) of this Section 5 an
amendment or supplement which will correct such statement or omission or
effect such compliance.
(d) The Company and the Trust will arrange for the qualification of
the Securities for sale by the Initial Purchaser under the laws of such
jurisdictions in the United States as the Initial Purchaser may reasonably
designate and will maintain such qualifications in effect so long as
required for the sale of the Securities. The Company will promptly advise
the
11
<PAGE>
Initial Purchaser of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Capital Securities
for sale in any Jurisdiction or the initiation or threatening of any
proceeding for such purpose.
(e) From and after the date hereof until the third anniversary of
the date hereof, the Company and the Trust will not, and will not permit
any of its "affiliates" (as defined in Rule 144A) to, resell any
Securities which constitute "restricted securities under Rule 144 that
have been reacquired by any of them.
(f) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf will, directly or indirectly, make offers or
sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of the Securities under
the Securities Act.
(g) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D)
in connection with any offer or sale of the Securities in the United
States.
(h) So long as any of the Securities are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, the Company
will, during any period in which it is not subject to and in compliance
with Section 13 or 15(d) of the Exchange Act, provide to each holder of
such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request
of such holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Securities Act.
(i) Each of the Company and the Trust will cooperate with the
Initial Purchaser and use its respective best efforts to permit the
Securities to be eligible for clearance and settlement through The
Depository Trust Company.
(j) In connection with any disposition of Securities pursuant to a
transaction made in compliance with paragraph 1 of Exhibit A, the Company
will reissue certificates evidencing such Securities without a restrictive
legend (provided, if requested, that the legal opinion referred to therein
so permits).
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<PAGE>
(k) During the period of three years after the last date of original
issuance of the Securities, neither the Company nor the Trust will be or
become an "investment company" under the Investment Company Act.
(l) Prior to August 4, 1997, neither the Trust nor the Company will,
without the prior written consent of the Initial Purchaser, directly or
indirectly, issue, sell, offer or agree to sell, grant any option for the
sale of, or otherwise dispose of, or enter into an agreement to sell
Capital Securities, any security convertible into exchangeable or
exercisable for Capital Securities or the Debt Securities or any of the
debt securities substantially similar (including provisions with respect
to the deferral of interest) to the Debt Securities or any equity security
substantially similar to the Capital Securities (except for the Securities
issued pursuant to this Agreement).
6. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase the Securities shall be subject
to the accuracy of the representations and warranties on the part of the Company
and the Trust contained herein at the date and time that this Agreement is
executed and delivered by the parties hereto (the "Execution Time"), and the
Closing Date, to the accuracy of the statements of the Company and the Trust
made in any certificates pursuant to the provisions hereof, to the performance
by the Company and the Trust of their respective obligations hereunder in all
material respects and to the following additional conditions:
(a) The Company and the Trust shall have furnished to the Initial
Purchaser the opinion of Cadwalader, Wickersham & Taft, counsel to the
Company and the Trust, dated the Closing Date, to the effect that:
(i) the Company is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware
and is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended, and has the corporate power
and authority to own its properties and conduct its business as
described in the Final Memorandum; the Bank is a duly organized and
validly existing New York State chartered commercial bank and
continues to hold a valid certificate to do business as such and has
full power and authority to conduct its business as such; USB Realty
is a duly organized and validly existing corporation in good
standing under the
13
<PAGE>
laws of the State of New York and has the corporate power and
authority to own its properties and conduct its business as such;
each of the Company, the Bank and USD Realty holds all material
licenses, certificates and permits from governmental authorities
necessary for the conduct of its business as described in the Final
Memorandum; and other than the Bank and USB Realty, there is no
significant subsidiary of the Company, as that term is defined in
Rule 1-02(w) of Regulation S-X, and there are no other subsidiaries
of the Company which individually, or in the aggregate, own or lease
property or conduct business which is material to the properties or
business of the Company and its subsidiaries taken as a whole;
(ii) the Bank and USB Realty are duly authorized, and the
Company is duly qualified as a foreign corporation, to do business
and are in good standing in all jurisdictions in which such
authorization or qualification is required and in which the failure
to be so authorized or to qualify, as the case may be, could
reasonably be expected to, in the aggregate, have any material
adverse effect upon the business, condition or properties of the
Company and its subsidiaries taken as a whole;
(iii) all the outstanding shares of capital stock of the Bank
and USB Realty have been duly and validly authorized and issued and
are fully paid and nonassessable; and all the outstanding shares of
capital stock of the Bank and all of the outstanding shares of
common stock of USB Realty are owned by the Company either directly
or through wholly-owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims, liens or
encumbrances;
(iv) the Company's authorized equity capitalization is as set
forth in the Final Memorandum and the Securities, the Debt
Securities and the Common Securities conform to the description
thereof contained in the Final Memorandum; the holders of the
outstanding shares of capital stock of the Company are not entitled
to any preemptive or other rights to subscribe for the Securities,
the Debt Securities or the Common Securities pursuant to Delaware
law or the Company's charter, and to the knowledge of such counsel
after due
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inquiry, such counsel is not aware of the existence of such rights
pursuant to any agreement;
(v) to the knowledge of such counsel, after due inquiry, (A)
there is no pending or threatened action, suit or proceeding before
any court or governmental agency, authority or body or any
arbitrator involving the Company, the Trust or the Bank of a
character required to be disclosed in the Final Memorandum which is
not so disclosed; and (B) there is no franchise, contract or other
document of a character required to be described in the Final
Memorandum, which is not so described;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the Registration Agreement has been duly authorized,
executed and delivered by the Company, and constitutes a legal,
valid and binding instrument enforceable against the Company and the
Trust in accordance with its terms (subject, as to the enforcement
of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors, rights generally from
time to time in effect and except that the indemnification
provisions may be limited by federal or state securities laws or the
public policy underlying such laws);
(viii) the Indenture has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Company in accordance with its terms
(subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors, rights generally from time to time in effect);
the Debt Securities have been duly and validly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Trust, will
constitute legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture;
(ix) the Guarantee has been duly authorized, executed and
delivered, and constitutes a legal, valid and binding instrument
enforceable against the Company in accordance with its terms
(subject, as to the enforcement of remedies, to applicable
15
<PAGE>
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors, rights generally from time to time in effect);
(x) all of the issued and outstanding Common Securities will
be owned directly by the Company free and clear of any security
interest, claims, liens or encumbrances;
(xi) no consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by
the Company or the Trust of the transactions contemplated by this
Agreement, the Registration Agreement, the Declaration, the
Indenture and the Guarantee, except such as may be required under
the blue sky or securities laws of any jurisdiction in connection
with the purchase and sale of the Securities by the Initial
Purchaser and such other approvals (specified in such opinion) as
have been obtained, and except in connection with the registration
of the Securities and the Debt Securities;
(xii) neither the issue and sale of the Securities or the Debt
Securities, the execution and delivery of the Declaration, the
Indenture, the Guarantee or the Registration Agreement, the
consummation of any other of the transactions herein or therein
contemplated nor the fulfillment of the terms hereof or thereof will
conflict with, result in a breach or violation of, or constitute a
default under or violate (A) any of the terms, conditions or
provisions of the charter or by-laws of the Company, the Bank or USB
Realty or the Declaration, (B) to the knowledge of such counsel,
after due inquiry, any of the terms, conditions or provisions of any
material document, agreement or other instrument to which the
Company, the Bank or USB Realty or the Trust is a party or by which
any of them or their property is bound, (C) any law or regulation
normally applicable to transactions of this type or, to the
knowledge of such counsel after due inquiry, any judgment, order,
decree or ruling applicable to the Company, the Bank, USB Realty or
the Trust of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the
Company, the Bank, USB Realty or the Trust;
(xiii) assuming the accuracy of the representations and
warranties and compliance with the agreements contained herein, no
registration of
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the Securities or the Debt Securities under the Securities Act is
required, and no qualification of the Declaration, the Indenture or
the Guarantee under the Trust Indenture Act of 1939, as amended, is
necessary, for the offer and sale by the Initial Purchaser of the
Securities in the manner contemplated by this Agreement;
(xiv) neither the Company nor the Trust is an "investment
company" within the meaning of the Investment Company Act, and after
giving effect to the offer and sale of the Securities and the
application of the proceeds thereof as described in the Final
Memorandum, neither will be an "investment company" as defined in
the Investment Company Act;
(xv) the Securities, the Common Securities, the Debt
Securities and each of the Guarantee, the Registration Agreement,
the Indenture and the Declaration conform in all material respects
to the descriptions thereof contained in the Final Memorandum; and
(xvi) the statements of legal matters, documents or
proceedings, and legal conclusions, if any, set forth in the Final
Memorandum under the headings "Exchange Offer; Registration Rights",
"Description of Capital Securities", "Description of Junior
Subordinated Debt Securities", "Relationship Among the Capital
Securities, the Junior Subordinated Debt Securities and the
Guarantee" and "Description of the Guarantee" fairly present the
information called for and fairly summarize the matters referred to
therein.
(xvii) the Trust is and will be classified as a grantor trust
for federal income tax purposes and not as a partnership or an
association taxable as a corporation;
(xviii) the Debt Securities will be classified as indebtedness
of the Company for United States federal income tax purposes;
(xix) the statements made under the heading "Certain Federal
Income Considerations" in the Final Memorandum, in so far as such
statements purport to summarize certain federal income tax laws of
the United States, constitute a fair and accurate summary of the
principal United States
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federal income tax consequences of an investment in the Securities;
(xx) the Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Business
Trust Act, and all filings required under the Delaware Business
Trust Act with respect to the creation and valid existence of the
trust as a business trust have been made;
(xxi) this Agreement and the Registration Agreement have been
duly executed and delivered by the Trust;
(xxii) the Declaration constitutes a valid and binding
obligation of the Company, and is enforceable against the Company in
accordance with its terms, subject to Bankruptcy and Equity and
Public Policy;
(xxiii) under the Delaware Business Trust Act and the
Declaration, the Trust has the trust power and authority (i) to
execute and deliver, and to perform its obligations under, this
Agreement and the Registration Agreement, and (ii) to issue and
perform its obligations under the Capital Securities and the Common
Securities;
(xxiv) under the Delaware Business Trust Act and the
Declaration, the execution and delivery by the Trust of this
Agreement and the Registration Agreement, and the performance by the
Trust of its obligations thereunder, have been duly authorized by
all necessary trust action on the part of the Trust;
(xxv) the Capital Securities have been duly authorized by the
Declaration and, when authenticated and paid for, will be duly and
validly issued and fully paid and nonassessable undivided beneficial
interests in the assets of the Trust, entitled to the benefits of
the Declaration; the holders, as beneficial owners of the Trust,
subject to Bankruptcy and Equity and Public Policy;
(xxvi) the holders of the Capital Securities will 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; pro-
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<PAGE>
vided, however, that the holders may be obligated, pursuant to the
Declaration, (A) to provide indemnity and/or security in connection
with and pay taxes or governmental charges arising from transfers or
exchanges of Securities certificates and the issuance of replacement
Securities certificates, and (B) to provide security or indemnity in
connection with requests of or directions to the Property Trustee to
exercise its rights and powers under the Declaration;
(xxvii) under the Delaware Business Trust Act and the
Declaration, the issuance of the Capital Securities and the Common
Securities is not subject to preemptive rights;
(xxviii) the Common Securities have been duly authorized by
the Declaration and, when authenticated and paid for, will be duly
and validly issued and fully paid undivided beneficial interests in
the assets of the Trust, entitled to the benefits of the
Declaration; and
(xxix) the (a) purchase of the Debt Securities by the Trust
and, (b) the distribution of the Debt Securities by the Trust in the
circumstances contemplated by the Declaration, and (c) the
performance by the Trust of this Agreement and the Registration
Agreement and the consummation of the transactions contemplated
thereunder, will not conflict with or result in a breach or
violation of any of the terms or provisions of the certificate of
the Trust or the Declaration or any statute, order, rule or
regulation of the State of Delaware or any governmental agency or
body of the State of Delaware having jurisdiction over the Trust or
any of its properties.
Such counsel shall also state that, in the course of preparation by
the Company of the Final Memorandum, such counsel has participated in
conferences with officers and other representatives of the Company and the
Trust, representatives of the independent public accountants for the Company and
the Trust, representatives of the Initial Purchaser and representatives of
counsel for the Initial Purchaser, at which conferences such counsel made
inquiries of such officers, representatives and accountants and discussed the
contents of the Final Memorandum and related matters and, although such counsel
has not independently verified and is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (other than as
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<PAGE>
expressly set forth in such counsel's opinion), no facts have come to the
attention of such counsel which would lead such counsel to believe that the
Final Memorandum (other than the financial or statistical information contained
therein or omitted therefrom as to which such counsel need not express an
opinion), as of its date or on the Closing Date, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company, the Trust and public officials.
All references in this Section 6(a) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the Closing Date.
(b) The Chase Manhattan Bank shall have furnished to the Initial
Purchaser the opinion of Pryor, Cashman, Sherman & Flynn, special counsel
to The Chase Manhattan Bank, dated the Closing Date, to the effect that:
(i) The Chase Manhattan Bank has been duly incorporated and is
validly existing as a banking corporation in good standing under the
laws of the State of New York;
(ii) each of the Declaration, the Indenture and the Guarantee
has been duly authorized, executed and delivered by the Property
Trustee, the Indenture Trustee and the Guarantee Trustee,
respectively, and constitutes a legal, valid and binding instrument
enforceable against the Property Trustee, the Indenture Trustee and
the Guarantee Trustee in accordance with its respective terms
(subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors, rights generally from time to time in effect);
(iii) no consent, approval, authorization or order of any
federal or New York State banking authority is required for the
consummation of the transactions contemplated by the Declaration,
the Indenture or the Guarantee by the Property Trustee, the
Indenture Trustee or the Guarantee Trustee, respectively; and
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<PAGE>
(iv) neither the execution and delivery of the Declaration,
the Indenture or the Guarantee, the consummation of any other of the
transactions herein or therein contemplated nor the fulfillment of
the terms hereof or thereof will conflict with, result in a breach
or violation of, or constitute a default under any law or the
charter or by-laws of The Chase Manhattan Bank or the terms of any
indenture or other agreement or instrument known to such counsel and
to which The Chase Manhattan Bank is a party or bound or any
judgment, order or decree known to such counsel to be applicable to
The Chase Manhattan Bank of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over The Chase Manhattan Bank.
(c) Chase Manhattan Bank Delaware shall have furnished to the
Initial Purchaser the opinion of Pryor, Cashman, Sherman & Flynn, special
counsel to Chase Manhattan Bank Delaware, dated the Closing Date, to the
effect that Chase Manhattan Bank Delaware has been duly incorporated and
is validly existing as a banking corporation in good standing under the
laws of the State of Delaware; and has full corporate power and authority
to act as trustee of a statutory business trust under the laws of the
State of Delaware.
(d) The Initial Purchaser shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to the Initial Purchaser, such
opinion or opinions, dated the Closing Date, with respect to the issuance
and sale of the Securities, the Final Memorandum (as amended or
supplemented at the Closing Date) and other related matters as the Initial
Purchaser may reasonably require, and the Company and the Trust shall have
furnished to such counsel such documents as they may request for the
purpose of enabling them to pass upon such matters.
(e) The Company shall have furnished to the Initial Purchaser a
certificate of the Company, signed by the Chairman of the Board and
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Final Memorandum, any amendment or
supplement to the Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Company and the
Trust in this Agreement are true and correct in all material
respects on and
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<PAGE>
as of the Closing Date with the same effect as if made on the
Closing Date, and the Company and the Trust have complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
and
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no material adverse
change in the financial condition, earnings, business or properties
of the Company and its subsidiaries, whether or not arising from
transactions in the ordinary course of business, except as set forth
in the Final Memorandum (exclusive of any amendment or supplement
thereto).
(f) At the Closing Date, Deloitte & Touche LLP shall have furnished
to the Initial Purchaser a letter or letters, dated as of the Closing
Date, in form and substance satisfactory to the Initial Purchaser,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to initial purchasers with respect to the
financial statements and certain financial information contained in the
Final Memorandum.
(g) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have
been (i) any change or decrease specified in the letter or letters
referred to in paragraph (f) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business
or properties of the Company and its subsidiaries the effect of which, in
any case referred to in clause (i) or (ii) above, is, in the judgment of
the Initial Purchaser, so material and adverse as to make it impractical
or inadvisable to market the Capital Securities as contemplated by the
Final Memorandum.
(h) Prior to the Closing Date, the Company and the Trust shall have
furnished to the Initial Purchaser such further information, certificates
and documents as the Initial Purchaser may reasonably request.
(i) The Registration Agreement shall have been duly executed and
delivered by the Company and the Trust, and each of the Declaration,
Indenture and Guarantee shall have been duly executed and delivered by
each of the parties thereto.
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<PAGE>
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and Counsel to the Initial Purchaser,
this Agreement and all obligations of the Initial Purchaser hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial Purchaser.
Notice of such cancellation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York, on the Closing Date.
7. Reimbursement of Expenses. If the sale of the Securities provided
for herein is not consummated because any condition to the obligations of the
Initial Purchaser set forth in Section 6 hereof is not satisfied, because of any
termination pursuant to Section 9 hereof or because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Initial Purchaser, the Company will reimburse the Initial Purchaser upon demand
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which any of them may become subject under the Securities Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Final
Memorandum or any information provided by the Company to any holder or
prospective purchaser of Securities pursuant to Section 5 hereof, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under
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<PAGE>
which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made in the Final Memorandum, or in any amendment thereof or
supplement thereto, in reliance upon and in conformity with written
information furnished to the Company or the Trust by or on behalf of the
Initial Purchaser specifically for inclusion therein (which the parties
hereto understand consists only of the Initial Purchaser Information).
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) The Initial Purchaser agrees to indemnify and hold harmless each
of the Company and the Trust, their respective directors, officers or
trustees, as the case may be, and each person who controls the Company or
the Trust, as the case may be, within the meaning of either the Securities
Act or the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Initial Purchaser, but only with reference to
written information relating to the Initial Purchaser furnished to the
Company or the Trust by or on behalf of the Initial Purchaser specifically
for inclusion in the Final Memorandum (or in any amendment or supplement
thereto). This indemnity agreement will be in addition to any liability
which the Initial Purchaser may otherwise have. The Company acknowledges
that the Initial Purchaser Information constitutes the only information
furnished in writing by or on behalf of the Initial Purchaser for
inclusion in the Final Memorandum (or in any amendment or supplement
thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph
(a) or (b) above unless and to the extent it did not otherwise learn of
such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint counsel
of
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<PAGE>
the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided,
however, that such counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ one separate counsel (and, in addition, one local
counsel in any relevant jurisdiction for an indemnified party), and the
indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying
party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
the institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchaser
agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses")
to which the Company, the Trust and the Initial Purchaser may be subject
in such proportion as is appropriate to reflect the relative benefits
received by the Trust, the Company and by the Initial Purchaser from the
offering of the Securities. If the allocation provided by
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<PAGE>
the immediately preceding sentence is unavailable for any reason, the
Company and the Initial Purchaser shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Company and of the Initial Purchaser in connection
with the statements or omissions which resulted in such Losses as well as
any other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net proceeds from the
offering of the Securities (before deducting expenses), and benefits
received by the Initial Purchaser shall be deemed to be equal to the
compensation received by or credited to the Initial Purchaser in
connection with its purchase of the Securities hereunder. Relative fault
shall be determined by reference to whether any alleged untrue statement
or omission relates to information provided by the Company or the Trust,
on the one hand, or the Initial Purchaser, on the other. The Company, the
Trust and the Initial Purchaser agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who
controls the Initial Purchaser within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of
the Initial Purchaser shall have the same rights to contribution as the
Initial Purchaser, and each person who controls the Company or the Trust
within the meaning of either the Securities Act or the Exchange Act and
each officer and director of the Company or trustee of the Trust shall
have the same rights to contribution as the Company, subject in each case
to the applicable terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Initial Purchaser, by notice given to the Company
prior to delivery of and payment for the Securities, (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Final Memorandum, any material adverse
change in the financial condition, the earnings or the business affairs of the
Trust or the Company and its subsidiaries, considered as one enterprise, whether
or not arising in the ordinary course of business, (ii) trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or limited, or minimum or maximum prices for trading
have been fixed, or maximum
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<PAGE>
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any governmental authority, (iii) a banking moratorium shall have been
declared either by Federal or New York State authorities or (iv) if there has
occurred any material adverse change in the financial markets in the United
States, or there shall have occurred any outbreak or escalaion of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the reasonable judgment of the Initial Purchaser, impracticable or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum.
10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or the Trust or their respective officers or Trustees and of the Initial
Purchaser set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Initial Purchaser or the Company or the Trust or any of the officers, directors,
trustees or controlling persons referred to in Section 8 hereof, and will
survive delivery of and payment for the Securities. The provisions of Sections 7
and 8 hereof shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telegraphed and confirmed to Keefe, Bruyette & Woods,
Inc., at Two World Trade Center - 85th Floor, New York, New York 10048; or,
if sent to the Company or the Trust, will be mailed, delivered or telegraphed
and confirmed to it at 100 Dutch Hill Road, Orangeburg, New York 10962,
Attention: Steven T. Sabatini, Executive Vice President.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, trustees and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(h) hereof, no other
person will have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
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<PAGE>
14. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York, New York, are authorized or
obligated by law, executive order or regulation to close.
15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Trust, the Company and the Initial Purchaser.
Very truly yours,
UNION STATE CAPITAL TRUST I
By: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title:
U.S.B. HOLDING CO., INC.,
By: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:
KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Joseph A. Lenihan
---------------------------------
Name: Joseph A. Lenihan
Title: Senior Vice President
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EXHIBIT A
Form of Investment Letter for
Institutional Accredited Investors
January __, 1997
U.S.B. Holding Co., Inc.
100 Dutch Hill Road
Orangeburg, New York 10962
Keefe, Bruyette & Woods, Inc.
Two World Trade Center, 85th Floor
New York, New York 10048
Dear Sirs:
In connection with our proposed purchase of ____________% Capital
Securities (together with the Guarantee (as defined) the "Securities") of Union
State Capital Trust I, a Delaware statutory business trust (the "Trust") and a
guarantee agreement (the "Guarantee") dated as of January 1, 1997, between
U.S.B. Holding Co., Inc. (the "Company") and The Chase Manhattan Bank, we
confirm that:
1. We understand that the Securities, and the Junior Subordinated
Debentures due 2027 (the "Debentures") of the Company have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold except as permitted in the following sentence.
We understand and agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, (x) that such Securities
are being offered only in a transaction not involving any public offering
within the meaning of the Securities Act, and (y) that if we should
resell, pledge or otherwise transfer such Securities or Debentures within
three years after the last date of the original issuance of the Securities
or, if later, within three months after we cease to be an affiliate
(within the meaning of Rule 144 under the Securities Act) of the Company,
such Securities and Debentures may be resold, pledged or transferred only
(i) to the Company, (ii) so long as the Securities and Debentures are
eligible for resale pursuant to Rule 144A under the Securities Act ("Rule
144A"), to a person whom we reasonably believe is a "qualified
institutional buyer"
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(as defined in Rule 144A) ("Qualified Institutional Buyer") that purchases
for its own account or for the account of a Qualified Institutional Buyer
to whom notice is given that the resale, pledge or transfer is being made
in reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the
certificates if such securities are not in book-entry form), (iii)
pursuant to an exemption from registration under the Securities Act
provided by Rule 144 (if applicable) under the Securities Act, or (iv)
pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any
state of the United States, and we will notify any purchaser of the
Securities or Debentures from us of the above resale restriction, if then
applicable. We further understand that, in connection with any transfer of
the Securities or Debentures by us, the Company and the Property Trustee
(or, in the case of the Debentures, the Indenture Trustee) may request,
and, if so requested we will furnish, such certificates, legal opinions
and other information as they may reasonably require to confirm that any
such transfer complies with the foregoing restrictions.
2. We are able to fend for ourselves in the transactions
contemplated by the offering memorandum, we have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Securities or the
Debentures and we and any accounts for which we are acting are each able
to bear the economic risk of our or its investment and can afford the
complete loss of such investment.
3. We understand that the minimum aggregate stated liquidation
amount of Securities that may be purchased by an institutional "accredited
investor" is $100,000.
4. We understand that the Company and Keefe, Bruyette & Woods, Inc.
(the "Initial Purchaser") and others will rely upon the truth and accuracy
of the foregoing acknowledgments, representations and agreements, and we
will agree that if any of the acknowledgments, representations and
warranties deemed to have been made by us by our purchase of the
Securities, for our own account or for one or more accounts as to each of
which we exercise sole investment discretion, are no longer accurate, we
shall promptly notify the Company and the Initial Purchaser.
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5. We are acquiring the Securities purchased by us for investment
purposes, and not for distribution, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion and we
are or such account is an institution which is an "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act).
6. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
________________________________
(Name of purchaser)
By: ____________________________
Name:
Title:
Date:
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UNION STATE CAPITAL TRUST I
$20,000,000
9.58% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
Fully and Unconditionally Guaranteed
by
U.S.B. HOLDING CO., INC.
REGISTRATION AGREEMENT
New York, New York
February 5, 1997
Keefe, Bruyette & Woods, Inc.
Two World Trade Center, 85th Floor
New York, New York 10048
Dear Sirs:
Union State Capital Trust I, a Delaware statutory business trust
(the "Trust"), and U.S.B. Holding Co., Inc., a Delaware corporation (the
"Company"), as guarantor, propose to issue and sell to Keefe, Bruyette & Woods,
Inc. (the "Purchaser"), upon the terms set forth in a purchase agreement dated
as of January 31, 1997 by and among the parties hereto (the "Purchase
Agreement"), 20,000 of the Trust's 9.58% Capital Securities, liquidation amount
$1,000 per Capital Security (the "Capital Securities" and together with the
guarantee by the Company of the payment of the Capital Securities to the extent
set forth in the Guarantee (as defined herein), the "Pass-through Securities")
(the "Initial Placement"). The proceeds of the sale by the Trust of the
Pass-through Securities and its 9.58% Common Securities, liquidation amount
$1,000 per Common Security (the "Common Securities"), are to be invested in the
9.58% Junior Subordinated Debt Securities of the Company having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities and the Common Securities (the "Junior Subordinated Debt
Securities"). As an inducement to you to enter into the Purchase Agreement and
in satisfaction
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of a condition to your obligations thereunder, the Trust and the Company agree
with you, (i) for your benefit and (ii) for the benefit of the holders from time
to time (each of the foregoing a "Holder" and together the "Holders") of the
Securities (as defined herein) or the Exchange Securities (as defined herein),
as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Additional Distributions" has the meaning given such term in
Section 7 hereof.
"Affiliate" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person.
"Closing Date" has the meaning given such term in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Declaration" means the Amended and Restated Declaration of Trust
relating to the Capital Securities and the Exchange Capital Securities dated as
of February 5, 1996, among the Company, as Depositor, Thomas E. Hales, Michael
H. Fury, Raymond J. Crotty and Steven J. Sabatini, as administrative trustees,
the Property Trustee and Chase Manhattan Bank Delaware, a Delaware banking
corporation, as Delaware trustee, as the same may be amended from time to time
in accordance with the terms thereof.
"Distribution Event" shall mean the distribution of Junior
Subordinated Debt Securities or Exchange Junior Subordinated Debt Securities, as
the case may be, to the holders of Capital Securities or Exchange Capital
Securities, as the case may be, as provided in the Declaration.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Capital Securities" means securities of the Trust to be
issued under the Declaration and which are identical in all material respects to
the Capital Securities (except that the distribution rate step-up provisions and
the transfer restrictions will be modified or eliminated, as appropriate).
"Exchange Guarantee" means the guarantee by the Company of the
Exchange Capital Securities, identical in all material respects to the
Guarantee.
"Exchange Junior Subordinated Debt Securities" means debt securities
of the Company to be issued under the Junior Subordinated Indenture and which
are identical in all material respects to the Junior Subordinated Debt
Securities (except that the interest rate step-up provisions and the transfer
restrictions will be modified or eliminated, as appropriate).
"Exchange Offer Registration Period" means the 180-day period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Trust and the Company on an appropriate form under the Act with
respect to the Registered Exchange Offer (and, if a Distribution Event shall not
have occurred prior to the effectiveness of such Exchange Offer Registration
Statement and the Company shall not have elected to include the Junior
Subordinated Debt Securities held by the Trust in the Registered Exchange Offer
pursuant to Section 2(g) hereof, with respect to the distribution of the Junior
Subordinated Debt Securities upon the occurrence of a Distribution Event), and
all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
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"Exchange Pass-through Securities" means the Exchange Capital
Securities together with the Exchange Guarantee.
"Exchange Securities" means (i) if a Distribution Event shall not
have occurred prior to the Registered Exchange Offer, (a) the Exchange
Pass-through Securities and (b) if the Company shall elect to include the Junior
Subordinated Debt Securities held by the Trust in the Registered Exchange offer
pursuant to Section 2(g) hereof, the Exchange Junior Subordinated Debt
Securities or (ii) if a Distribution Event shall have occurred prior to the
Registered Exchange Offer, the Exchange Junior Subordinated Debt Securities.
"Exchanging Dealer" means any Holder (which may include the
Purchaser) which is a broker-dealer electing to exchange Securities acquired for
its own account as a result of market-making activities or other trading
activities for Exchange Securities.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Guarantee" means the guarantee by the Company of certain
obligations of the Trust with respect to the Capital Securities and the Common
Securities pursuant to the Guarantee Agreement dated as of February 5, 1997
between the Company and the Guarantee Trustee.
"Guarantee Trustee" "Indenture Trustee" and "Property Trustee" each
mean The Chase Manhattan Bank, a New York banking corporation.
"Holder" has the meaning set forth in the preamble hereto.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Junior Subordinated Indenture" means the Junior Subordinated
Indenture relating to the Junior Subordinated Debt Securities and the Exchange
Junior Subordinated Debt Securities dated as of February 5, 1997 between the
Company and the Indenture Trustee.
"Liquidated Damages" has the meaning given such term in Section 7
hereof.
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"Majority Holders" means the Holders of a majority of the aggregate
liquidation amount or of the aggregate principal amount, as applicable, of
securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A under the Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Securities or the Exchange Securities, covered by such Registration
Statement, and all amendments and supplements to the Prospectus, including
post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders
to issue and deliver to such Holders a like liquidation amount or principal
amount, as the case may be, of the Exchange Securities, in exchange for (i) if a
Distribution Event shall not have occurred, (a) the Pass-Through Securities and
(b) if the Company shall elect to include the Junior Subordinated Debt
Securities held by the Trust in the Registered Exchange Offer pursuant to
Section 2(g) hereof, the Junior Subordinated Debt Securities or (ii) if a
Distribution Event shall have occurred, the Junior Subordinated Debt Securities.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the Exchange Securities pursuant to the provisions of this Agreement, and
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Securities" means (i) if a Distribution Event shall not have
occurred, the Pass-through Securities and the Junior Subordinated Debt
Securities or (ii) if a Distribution Event shall have occurred, the Junior
Subordinated Debt Securities.
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"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning given such term in
Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Trust and the Company pursuant to the provisions of Section 3
hereof that covers some or all of the Securities or the Exchange Securities, as
applicable, on an appropriate form under Rule 415 under the Act, or any similar
rule that may be adopted by the Commission, and amendments and supplements to
such registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Trustee" means the Guarantee Trustee, the Indenture Trustee or
the Property Trustee, as applicable.
"Underwriter" means any underwriter of Securities in connection with
an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of Exchange Securities by
Exchanging Dealers. (a) The Trust and the Company shall prepare and, not later
than 150 days following the Closing Date, shall file with the Commission the
Exchange Offer Registration Statement. The Trust and the Company shall use their
best efforts to cause the Exchange Offer Registration Statement to become
effective under the Act within 180 days of the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Trust and the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Trust or the Company
within the meaning of the Act, acquires the Exchange Securities in the ordinary
course of such Holder's business and has no arrangements with any person to
participate in the distribution (within the meaning of the Act) of the Exchange
Securities) to transfer such Exchange Securities from and after their receipt
without any limitations or restrictions under the Act and without mate-
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rial restrictions under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the Trust and
the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Trust and the Company shall:
(i) accept for exchange all Securities validly tendered and not
withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each
Holder of tendered Securities, Exchange Securities equal in liquidation
amount or principal amount, as the case may be, to the Securities of such
Holder so accepted for exchange therefor.
(e) The Purchaser and the Trust and the Company acknowledge that,
pursuant to interpretations by the Commission's staff of Section 5 of the Act,
and in the absence of an applicable exemption therefrom, each Exchanging Dealer
is required to deliver a Prospectus in connection with a sale of any Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Securities acquired for its own account as a
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result of market-making activities or other trading activities. Accordingly, the
Trust and the Company shall:
(i) include the information set forth in Annex A hereto on the cover
of the Exchange Offer Registration Statement, in Annex B hereto in the
forepart of the Exchange Offer Registration Statement in a section setting
forth details of the Registered Exchange Offer, and in Annex C hereto in
the underwriting or plan of distribution section of the Prospectus forming
a part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use their best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Act during the Exchange Offer
Registration Period for delivery of the Prospectus forming a part thereof
by Exchanging Dealers in connection with sales of Exchange Securities
received pursuant to the Registered Exchange Offer, as contemplated by
Section 4(h) below.
(f) In the event that the Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of unsold Securities purchased
by it in the Initial Placement, at the request of the Purchaser, the Company
shall issue and deliver to the Purchaser, in exchange for such Securities, a
like principal amount of Exchange Securities (provided that such Exchange
Securities shall include legends with respect to restrictions on transfer), and
the Company shall, starting on the date of effectiveness of the Exchange Offer
Registration Statement and ending on the close of business on the 180th day
following such date, make available as many copies of the Exchange Offer
Registration Statement prospectus, as amended or supplemented, as reasonably
requested by the Purchaser. The Trust and the Company shall seek to cause the
CUSIP Service Bureau to issue the same CUSIP number for such Exchange Securities
as for Exchange Securities issued pursuant to the Registered Exchange Offer. The
Purchaser agrees to promptly notify the Company in writing following its resale
of the Securities purchased in the Initial Placement.
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(g) Notwithstanding anything in this Agreement to the contrary, if a
Distribution Event shall not have occurred prior to the Registered Exchange
Offer, the Company may offer to, and the Trust shall agree to, exchange the
Junior Subordinated Debt Securities held by the Trust for an identical principal
amount of Exchange Junior Subordinated Debt Securities as part of the Registered
Exchange Offer; provided, however that, until a Distribution Event shall have
occurred, such Exchange Junior Subordinated Debt Securities shall include
appropriate legends with respect to transfer restrictions.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Trust and the
Company determine upon advice of their outside counsel that they are not
permitted to effect the Registered Exchange Offer as contemplated by Section 2
hereof, or (ii) the Company shall determine in good faith that there is a
reasonable likelihood, or that a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in a material adverse tax
consequence to the Company, or (iii) for any reason the Exchange Offer
Registration Statement is not declared effective within 180 days of the Closing
Date, or (iv) upon the request of the Purchaser with respect to any Securities
held by it, if such Purchaser is not permitted, in the reasonable opinion of its
counsel, pursuant to applicable law or applicable interpretations of the staff
of the Commission to participate in the Exchange Offer and thereby receive
securities that are freely tradeable without restriction under the Act and
applicable blue sky or state securities laws the following provisions shall
apply:
(a) The Trust and the Company shall, as promptly as practicable (but
in no event more than 60 days after so required or requested pursuant to this
Section 3), file with the Commission and thereafter use their best efforts to
cause to be declared effective under the Act a Shelf Registration Statement
relating to the offer and sale of the Securities or the Exchange Securities, as
applicable, by the Holders from time to time in accordance with the methods of
distribution elected by such Holders and set forth in such Shelf Registration
Statement; provided, however, that with respect to Exchange Securities received
by the Purchaser in exchange for Securities constituting any portion of its
unsold allotment, the Trust and the Company may, if permitted by current
interpretations by the Commission's staff,
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file a post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of their obligations under this paragraph (a) with
respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) The Trust and the Company shall use their best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of three
years (or, if Rule 144(k) is amended to provide a shorter restrictive period,
such shorter period) from the Closing Date, or such shorter period that will
terminate when all the Securities or Exchange Securities, as applicable, covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period").
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent specified, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Trust and the Company shall furnish to you, prior to the
filing thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use their best efforts to reflect in
each such document, when so filed with the Commission, such comments as
you reasonably may propose.
(b) The Trust and the Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all material
respects with the Act, (ii) any Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
(iii) any Prospectus
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forming part of any Registration Statement, and any amendment or
supplement to such Prospectus, does not, during the period when delivery
thereof is required, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading.
(c) (1) The Trust and the Company shall advise the Purchaser and, in
the case of a Shelf Registration Statement, the Holders of securities
covered thereby to the extent specified in (i) below, and, if requested by
you or any such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto
has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) The Trust and the Company shall advise the Purchaser and, in the
case of a Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an Exchange Offer Registration Statement, any
Exchanging Dealer which has provided in writing to the Trust and the
Company a telephone or facsimile number and address for notices, and, if
requested by you or any such Holder or Exchanging Dealer, confirm such
advice in writing of:
(i) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) the receipt by the Company or the Trust of any
notification with respect to the suspension of the qualification of
the securities included therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
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(iii) the suspension of the use of the Prospectus.
(d) The Trust and the Company shall use their best efforts to obtain
the withdrawal of any order suspending the effectiveness or use of any
Registration Statement at the earliest possible time.
(e) The Trust and the Company shall furnish to each Holder of
securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits (including those incorporated by reference).
(f) The Trust and the Company shall, during the Shelf Registration
Period, deliver to each Holder of securities included within the coverage
of any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Trust and the Company consent to
the use of the Prospectus or any amendment or supplement thereto as to
which no notice has been given pursuant to paragraph 4(c)(2) by each of
the Holders selling securities in connection with the offering and sale of
the securities covered by the Prospectus or any amendment or supplement
thereto.
(g) The Trust and the Company shall furnish to each Exchanging
Dealer which so requests, without charge, at least one copy of the
Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, any documents
incorporated by reference therein, and, if the Exchanging Dealer so
requests in writing, all exhibits (including those incorporated by
reference).
(h) The Trust and the Company shall, during the Exchange Offer
Registration Period, promptly deliver to each Exchanging Dealer, without
charge, as many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably re-
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quest for delivery by such Exchanging Dealer in connection with a sale of
Exchange Securities received by it pursuant to the Registered Exchange
Offer; and the Trust and the Company consent to the use of the Prospectus
or any amendment or supplement thereto as to which no notice has been
given pursuant to paragraph 4(c)(2) by any such Exchanging Dealer, as
aforesaid.
(i) Prior to the Registered Exchange Offer or the effectiveness of a
Registration Statement with respect to any other offering of securities,
the Trust and the Company shall, if required by applicable law, register
or qualify or cooperate with the Holders of securities included therein
and their respective counsel in connection with the registration or
qualification of such securities for offer and sale under the securities
or blue sky laws of such jurisdictions as any such Holders reasonably
request in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such United States jurisdictions
of the securities covered by such Registration Statement; provided,
however, that neither the Trust nor the Company will be required to
qualify generally to do business in any jurisdiction where it is not then
so qualified or to take any action that would subject it to general
service of process or to taxation in any such jurisdiction where it is not
then so subject.
(j) Unless the applicable securities shall be in book-entry only
form, the Trust and the Company shall cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of
certificates representing Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request prior to
sales of securities pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraphs
c(l)(ii) or (c)(2)(iii) above, the Trust and the Company shall prepare as
soon as possible a post-effective amendment to any Registration Statement
or an amendment or supplement to the related Prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
securities included therein, the Prospectus will not include an untrue
statement of a material fact or omit to state any
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material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(l) The Trust and the Company shall use their best efforts to cause
The Depository Trust Company ("DTC") on the first business day following
the effective date of any Shelf Registration Statement hereunder or as
soon as possible thereafter to remove (i) from any existing CUSIP number
assigned to the Pass-through Securities or Junior Subordinated Debt
Securities, as the case may be, any designation indicating that such
securities are "restricted securities", which efforts shall include
delivery to DTC of a letter executed by the Trust and the Company
substantially in the form of Annex E hereto and (ii) any other stop or
restriction on DTC's system with respect to such securities. In the event
the Trust and the Company are unable to cause DTC to take the actions
described in the immediately preceding sentence, the Company shall take
such actions as you may reasonably request to provide, as soon as
practicable, a CUSIP number for the Pass-through Securities or Junior
Subordinated Debt Securities, as the case may be, registered under such
Registration Statement and to cause such CUSIP number to be assigned to
such securities (or to the maximum aggregate principal amount of such
securities to which such number may be assigned). Upon compliance with the
foregoing requirements of this Section 4(l), the Trust and the Company
shall provide the Trustee with printed certificates for such securities,
in a form eligible for deposit with DTC.
(m) The Trust and the Company shall use their best efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable after
the effective date of the applicable Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Act.
(n) The Trust and the Company shall cause the Junior Subordinated
Indenture, the Declaration and the Guarantee to be qualified under the
Trust Indenture Act in a timely manner.
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(o) The Trust and the Company may require each Holder of securities
to be sold pursuant to any Shelf Registration Statement to furnish to the
Trust and the Company such information regarding such Holder and the
distribution of such securities by such Holder as the Trust and the
Company may from time to time reasonably require for inclusion in such
Registration Statement, and securities of a holder that does not provide
information necessary for inclusion in such Registration Statement may be
omitted from any Shelf Registration Statement.
(p) The Trust and the Company shall, if reasonably requested, and in
no event more than three times, promptly incorporate in a Prospectus
supplement or post-effective amendment to a Shelf Registration Statement,
such information as the Managing Underwriters and Majority Holders
reasonably agree should be included therein and shall make all required
filings of such Prospectus supplement or post-effective amendment as soon
as notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Trust and
the Company shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite or
facilitate the registration or the disposition of the Securities or the
Exchange Securities, as the case may be, and in connection therewith, if
an underwriting agreement is entered into, cause the same to contain
indemnification provisions and procedures no less favorable than those set
forth in Section 6 (or such other provisions and procedures acceptable to
the Majority Holders and the Managing Underwriters, if any) with respect
to all parties to be indemnified pursuant to Section 6.
(r) In the case of any Shelf Registration Statement, the Trust and
the Company shall (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, subject to their
acceptance of the provisions of this Section 4(r), any underwriter
participating in any distribution pursuant to such Registration Statement,
and any attorney, accountant or other agent retained by the Holders or any
such underwriter all relevant financial and other
15
<PAGE>
records, pertinent corporate documents and properties of the Trust or the
Company and its subsidiaries as shall reasonably be required in connection
with the discharge of their due diligence obligations; (ii) cause the
Company's officers, directors and employees and any relevant trustee to
supply all relevant information reasonably requested by the Holders or any
such underwriter, attorney, accountant or agent in connection with any
such Registration Statement as is customary for similar due diligence
examinations; provided, however, that, in the case of clause (i) and (ii)
above, any information that is designated in writing by the Trust or the
Company, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by the Holders and any such
underwriter, attorney, accountant or agent and any person acting on behalf
of any of them, unless such disclosure is made in connection with a court
proceeding or required by law, or such information becomes available to
the public generally or through a third party without an accompanying
obligation of confidentiality; and provided further, however, that the
foregoing inspection and information gathering shall be coordinated on
behalf of the Holders and the other parties entitled thereto by one
counsel designated by and on behalf of such Holders and other parties;
(iii) make such representations and warranties to the Holders of
securities registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings and covering such matters as are
customarily covered in representations and warranties requested in primary
underwritten offerings; (iv) obtain opinions of counsel to the Trust and
the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the Managing
Underwriters, if any) addressed to each selling Holder and the
underwriters, if any, covering such matters and with such exceptions as
are customarily covered or taken in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Holders and underwriters (it being agreed that the matters to be covered
by such counsel shall include, without limitation, as of the date of the
opinions and as of the effective date of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, a
statement
16
<PAGE>
by such counsel regarding the absence from such Registration Statement and
the Prospectus included therein, as then amended or supplemented,
including the documents incorporated by reference therein, of an untrue
statement of a material fact or the omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading); (v) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each selling
Holder of securities registered thereunder and the underwriters, if any,
in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings;
and (vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 4(k) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Trust and the Company. The foregoing actions
set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(r) shall
be performed at (A) the effectiveness of such Registration Statement and
each post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement as and to the extent required
thereunder.
(s) In the case of any Exchange Offer Registration Statement, if
requested by the Purchaser, the Trust and the Company shall (i) make
reasonably available for inspection by the Purchaser, and any attorney,
accountant or other agent retained by the Purchaser, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries or the Trust as shall reasonably be
required in connection with the discharge of their due diligence
obligations; (ii) cause the Company's officers, directors and employees
and any relevant trustee to supply all relevant information reasonably
requested by the Purchaser or any such attorney, accountant or agent in
connection with any such Registration State-
17
<PAGE>
ment as is customary for similar due diligence examinations; provided,
however, that, in the case of clause (i) and (ii) above, any information
that is designated in writing by the Company or the Trust, in good faith,
as confidential at the time of delivery of such information shall be kept
confidential by the Purchaser and any such attorney, accountant or agent,
unless such disclosure is made in connection with a court proceeding or
required by law, or such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality; (iii) make such representations and warranties to the
Purchaser, in form, substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings and covering such
matters; (iv) obtain opinions of counsel to the Trust and the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Purchaser and its counsel,
addressed to the Purchaser, covering such matters as are customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by the Purchaser or its counsel (it
being agreed that the matters to be covered by such counsel shall include,
without limitation, as of the date of the opinions and as of the effective
date of the Registration Statement or most recent post-effective amendment
thereto, as the case may be, a statement by such counsel regarding the
absence from such Registration Statement and the Prospectus included
therein, as then amended or supplemented, including the documents
incorporated by reference therein, of an untrue statement of a material
fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading); (v) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to the Purchaser, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten offerings,
or if requested by the Purchaser or its counsel in lieu of a
18
<PAGE>
"cold comfort" letter, an agreed-upon procedures letter under Statement on
Auditing Standards No. 35, covering matters requested by the Purchaser or
its counsel; and (vi) deliver such documents and certificates as may be
reasonably requested by the Purchaser or its counsel, including those to
evidence compliance with Section 4(k) and with conditions customarily
contained in underwriting agreements. The foregoing actions set forth in
clauses (iii), (iv), (v), and (vi) of this Section 4(s) shall be
performed, if requested by the Purchaser, at the closing of the Registered
Exchange offer and the effective date of any post-effective amendment to
the Exchange Offer Registration Statement.
5. Registration Expenses. The Trust and the Company shall bear all
expenses incurred in connection with the performance of their obligations under
Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration
Statement, will reimburse the Holders for the reasonable fees and disbursements
of one firm or counsel designated by the Majority Holders to act as counsel for
the Holders in connection therewith, and, in the case of any Exchange offer
Registration Statement, will reimburse the Purchaser for the reasonable fees and
disbursements of counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of securities covered thereby (including the Purchaser and, with respect
to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of either
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement as originally filed or in any amendment thereof, or
in any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required
19
<PAGE>
to be stated therein or necessary to make the statements therein not misleading,
and agrees to reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that (i) the Company will not be liable in any case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Trust and the Company by or on behalf of any such
Holder specifically for inclusion therein and (ii) such indemnity with respect
to any untrue statement or omission in any preliminary Prospectus relating to a
Shelf Registration Statement shall not inure to the benefit of any Holder from
whom the person asserting any such loss, claim, damage or liability purchased
the securities that are the subject thereof, to the extent that any such loss,
claim, damage or liability of such Holder occurs under the circumstances where
it shall have been determined by a court of competent jurisdiction by final and
nonappealable judgment that (w) the Trust and the Company had previously
furnished copies of the final Prospectus to such Holder, (x) delivery of the
final Prospectus was required by the Act to be made to such person, (y) the
untrue statement or omission of a material fact contained in the preliminary
Prospectus was completely corrected in the final Prospectus and (z) there was
not sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the final Prospectus. This
indemnity agreement will be in addition to any liability which the Trust and the
Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses (as
defined below) of, as provided in Section 6(d) hereof, any underwriters of
securities registered under a Shelf Registration Statement, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Purchasers and the selling
Holders provided in this Section 6(a) and shall, if requested by any
underwriter, enter into an underwriting agreement reflecting such agreement, as
provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration Statement
(including the Purchaser and, with respect
20
<PAGE>
to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer) shall be required to severally agree to indemnify and hold
harmless (i) the Trust and the Company, (ii) each of the Company's directors,
(iii) each of the Company's officers or any trustee of the Trust who signs such
Registration Statement and (iv) each person who controls the Company or the
Trust within the meaning of either the Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to each such Holder, but only
with reference to written information relating to such Holder furnished to the
Trust or the Company by or on behalf of such Holder specifically for inclusion
in the documents referred to in the foregoing indemnity. This indemnity
agreement will be in addition to any liability which any such Holder may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above or paragraph
(d) below unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than obligations
provided under this Section 6. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel) (it
being understood that the indemnifying party shall not be liable for the fees,
costs and expenses of more than one separate counsel (and, to the extent
necessary, one local counsel in each jurisdiction)), and the indemnifying party
shall bear the reasonable fees, costs and expenses of
21
<PAGE>
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on
22
<PAGE>
the other hand, from the Initial Placement and the Registration Statement which
resulted in such Losses. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the indemnifying party and the
indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Trust and the Company shall be deemed to be equal to the total net
proceeds from the Initial Placement (before deducting expenses) as set forth on
the cover page of the Final Memorandum. Benefits received by the Purchaser shall
be deemed to be equal to the total purchase discounts, commissions or
compensation as set forth on the cover page of the Final Memorandum, and
benefits received by any other Holders shall be deemed to be equal to the
excess, if any, of the value to such Holder of receiving Securities or Exchange
Securities, as applicable, registered under the Act over the value to such
Holder of holding Securities not registered under the Act. Benefits received by
any underwriter shall be deemed to be equal to the total underwriting discounts
and commissions, as set forth on the cover page of the Prospectus forming a part
of the Registration Statement which resulted in such Losses. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by the indemnifying party, on the one
hand, or by the indemnified party, on the other hand. The parties agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 6, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company or the Trust within the meaning of either the
Act or the Exchange Act, each officer of the Company and each trustee of the
Trust who shall have signed the Registration Statement and each director of the
Company and each trustee of the Trust shall have the same rights to contribution
as the Company, subject in each case to the applicable terms and conditions of
this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, the
Company or the Trust
23
<PAGE>
or any of the officers, directors, trustees or controlling persons referred to
in Section 6 hereof, and will survive the sale by a Holder of securities covered
by a Registration Statement.
7. Liquidated Damages and Additional Distributions Under Certain
Circumstances.
If (i) (A) neither the Exchange offer Registration Statement nor a
Shelf Registration Statement is filed with the Commission on or prior to
the 150th day after the Closing Date or (B) notwithstanding that the
Company and the Trust have consummated or will consummate an Exchange
Offer, the Company and the Trust are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not filed on or prior
to the date required by Section 3, then, commencing on the day after
either such required filing date, liquidated damages ("Liquidated
Damages") shall accrue on the principal amount of the Junior Subordinated
Debt Securities, and additional distributions ("Additional Distributions")
shall accumulate on the liquidation amount of the Capital Securities, each
at a rate of .25% per annum; or
(ii) (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to the 180th day after the Closing Date or (B) notwithstanding that
the Company and the Trust have consummated or will consummate an Exchange
Offer, the Company and the Trust are required to file a Shelf Registration
Statement and such Shelf Registration Statement is not declared effective
by the Commission on or prior to the 30th day after the date such Shelf
Registration Statement was required to be filed, then, commencing on the
181st day after the Closing Date, Liquidated Damages shall accrue on the
principal amount of the Junior Subordinated Debt Securities, and
Additional Distributions shall accumulate on the liquidation amount of the
Trust Securities, each at a rate of .25% per annum; or
(iii) (A) the Trust has not exchanged Exchange Capital Securities
for all Capital Securities or the Company has not exchanged the Exchange
Guarantee or Exchange Junior Subordinated Debt Securities for the
Guarantee and all Junior Subordinated Debt Securities
24
<PAGE>
validly tendered in accordance with the terms of the Exchange Offer on or
prior to the 30th day after the date on which the Exchange Offer
Registration Statement was declared effective or (B) if applicable, the
Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective or usable by the Holders at
any time prior to the third anniversary of the Closing Date (other than
after such time as all Capital Securities have been disposed of
thereunder), then Liquidated Damages shall accrue on the principal amount
of Junior Subordinated Debt Securities, and Additional Distributions shall
accumulate on the Liquidation Amount of the Trust Securities, each at a
rate of .250% per annum commencing on (x) the 31st day after such
effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective or usable in the case of (B)
above; provided that if the Shelf Registration Statement has ceased to be
effective or usable solely as a result of (x) the filing by the Company of
a post-effective amendment to such Shelf Registration Statement to
incorporate annual audited financial information with respect to the
Company where such post-effective amendment is not yet effective and must
be declared effective to permit Holders to use the related Prospectus or
(y) the occurrence of other material events with respect to the Company or
the Trust (provided the Company is proceeding promptly and in good faith
to amend the Shelf Registration Statement to describe such events), then
Liquidated Damages and Additional Distributions shall not accrue during
such period for which the Shelf Registration Statement is not effective or
usable unless such period exceeds 45 days;
provided, however, that neither the Liquidated Damages rate on the Junior
Subordinated Debt Securities, nor the Additional Distributions rate on the
Liquidation Amount of the Trust Securities, payable pursuant to this Section 7
may exceed in the aggregate .25% per annum; provided, further, however, that (1)
upon the filing of the Exchange Offer Registration Statement or the Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement (in the case of clause (ii) above), (3) upon the exchange
of Exchange Capital Securities, the Exchange Guarantee and Exchange Junior
Subordinat-
25
<PAGE>
ed Debt Securities for all Capital Securities, the Guarantee and Junior
Subordinated Debt Securities tendered (in the case of clause (iii)(A) above), or
upon the effectiveness of the Shelf Registration Statement which had ceased to
remain effective (in the case of clause (iii)(B) above), and (4) upon the
expiration of the Shelf Registration Period, Liquidated Damages on the Junior
Subordinated Debt Securities, and Additional Distributions on the Liquidation
Amount of the Trust Securities as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
Any amounts of Liquidated Damages and Additional Distributions due
pursuant to the foregoing paragraphs will be payable in cash on February 1 and
August 1 each year to the holders of record on the preceding January 15 and July
15, respectively.
8. Miscellaneous.
(a) No Inconsistent Agreements. Each of the Trust and the Company
has not, as of the date hereof, entered into, nor shall it, on or after
the date hereof, enter into, any agreement with respect to the Securities
that is inconsistent with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Trust and the Company have
obtained the written consent of the Holders of at least a majority of the
then outstanding aggregate liquidation amount or principal amount, as the
case may be, of Securities (or, after the consummation of any Exchange
Offer in accordance with Section 2 hereof, of Exchange Securities);
provided, however, that, with respect to any matter that affects the
rights of the Purchaser hereunder, the Trust and the Company shall obtain
the written consent of the Purchaser. Notwithstanding the foregoing
(except the foregoing proviso), a waiver or consent to departure from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose securities are being sold pursuant to a
26
<PAGE>
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by the Majority Holders, determined
on the basis of securities being sold rather than registered under such
Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this
Section 8(c), which address initially is, with respect to each
Holder, the address of such Holder maintained by the Securities
Registrar (as defined in the Declaration), with a copy in like
manner to the Purchaser;
(2) if to you, initially at the address set forth in the
Purchase Agreement; and
(3) if to the Company or the Trust, initially at the address
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given when received.
The Purchaser, the Trust or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company or the Trust thereto, subsequent Holders of Securities and/or
Exchange Securities. The Trust and the Company hereby agree to extend the
benefits of this Agreement to any Holder of Securities and/or Exchange
Securities and any such Holder may specifically enforce the provisions of this
Agreement as if an original party hereto.
27
<PAGE>
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in said State.
(h) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Trust or the Company. Whenever the
consent or approval of Holders of a specified percentage of liquidation amount
or principal amount, as the case may be, of Securities or Exchange Securities is
required hereunder, Securities or Exchange Securities, as applicable, held by
the Trust or the Company or their respective Affiliates (other than subsequent
Holders of Securities or Exchange Securities if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Securities or
Exchange Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
28
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Trust, the Company and you.
Very truly yours,
Very truly yours,
UNION STATE CAPITAL TRUST I
by: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title:
U.S.B. HOLDING CO., INC.,
by: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title:
Accepted in New York, New York
February 5, 1997
KEEFE, BRUYETTE & WOODS, INC.
by: /s/ [ILLEGIBLE]
-----------------------------
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Securities acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Trust and the Company have agreed that, ending on the close of
business on the 180th day following the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution".
1
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
1
<PAGE>
ANNEX C
Plan of Distribution
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Trust and the Company have agreed that, starting on the
Expiration Date and ending on the close of business on the 180th day following
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 199 , all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Trust and the Company will not receive any proceeds from any
sale of Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Securities may be deemed to be an "underwriter" within the meaning
of the Securities Act and any profit of any such resale of Exchange Securities
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
1
<PAGE>
For a period of 180 days after the Expiration Date, the Trust and
the Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Trust and the Company have
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Securities) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
[If applicable, add information required by Regulation S-K Items
507 and/or 508.]
2
<PAGE>
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:______________________________________________________
Address:___________________________________________________
___________________________________________________
Rider B
If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Securities. If the undersigned is a broker-dealer that
will receive Exchange Securities for its own account in exchange for Securities,
it represents that the Securities to be exchanged for Exchange Securities were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Securities; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
1
<PAGE>
ANNEX E
FORM OF LETTER TO BE PROVIDED BY ISSUER TO
THE DEPOSITORY TRUST COMPANY
Union State Capital Trust I
U.S.B. Holding Co., Inc.
100 Dutch Hill Road
Orangeburg, New York 10962
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004
Re: 9.58% Capital Securities (the "Securities") of Union State
Capital Trust I, fully and unconditionally guaranteed by
U.S.B. Holding Co., Inc.
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission has
declared effective a Registration Statement on Form S-3 under the Securities Act
of 1933 with regard to all of the Securities referenced above. Accordingly,
there is no longer any restriction as to whom such Securities may be sold and
any restrictions on the CUSIP designation are no longer appropriate and may be
removed. I understand that upon receipt of this letter, DTC will remove any stop
or restriction on its system with respect to this issue.
As always, please do not hesitate to call if we can be of further
assistance.
UNION STATE CAPITAL TRUST I
by: __________________________
Authorized Officer
U.S.B. HOLDING CO., INC.
by: __________________________
Authorized Officer
1
EXHIBIT XI
U.S.B. HOLDING CO., INC.
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---------- ---------- ----------
(000's, Except Share Data)
Weighted average number of common
shares outstanding 6,165,111 6,058,642 5,854,950
Assuming exercise of options reduced
by the number of shares which could
have been purchased with the proceeds
from exercise of such options 347,886 246,116 225,942
---------- ---------- ----------
Weighted average common and
common equivalent shares 6,512,997 6,304,758 6,080,892
========== ========== ==========
Net income $ 9,414 $ 9,327 $ 7,000
Less: Preferred stock dividend requirements 294 315 315
---------- ---------- ----------
Net income available to common shareholders $ 9,120 $ 9,012 $ 6,685
========== ========== ==========
Net income per common and
common equivalent share $ 1.40 $ 1.43 $ 1.10
========== ========== ==========
U.S.B. HOLDING CO., INC.
SUBSDIARIES
EXHIBIT 21
DECEMBER 31, 1996
Union State Bank
100 Dutch Hill Rd.
Orangeburg, N.Y. 10962
Ad Con Inc.
100 Dutch Hill Rd.
Orangeburg, N.Y. 10962
U.S.B. Realty Corp (subsidiary of Union State Bank)
100 Dutch Hill Rd.
Orangeburg, N.Y. 10962
Union State Capital Trust I (as of January 27, 1997)
100 Dutch Hill Rd.
Orangeburg, N.Y. 10962
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-72788 of U.S.B. Holding Co., Inc. (the "Corporation") on Form S-3 and
Registration Nos. 33-80678, 33-02065 and 290674 on Forms S-8 of our report dated
January 24, 1997 (February 5, 1997 as to Note 17), incorporated by reference in
the Corporation's 1996 Annual Report on Form 10-K and appearing in the
Corporation's 1996 Annual Report to Shareholders.
/s/ Deloitte & Touche LLP
Stamford, Connecticut
March 24, 1997
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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0
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<EXPENSE-OTHER> 18,179
<INCOME-PRETAX> 14,188
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