<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ________to _________.
Commission file number 0-25034
GREATER BAY BANCORP
(Exact name of registrant as specified in its charter)
California 77-0387041
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2860 West Bayshore Road, Palo Alto, California 94303
(Address of principal executive offices) (Zip Code)
(650) 813-8200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Outstanding shares of Common Stock, no par value, as of May 10, 2000: 14,758,423
<PAGE>
GREATER BAY BANCORP
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999............................................................ 3
Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 and 1999.............................................. 4
Consolidated Statements of Comprehensive Income
for the Three Months Ended March 31, 2000 and 1999.............................................. 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999...................................................... 6
Notes to Consolidated Financial Statements...................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................................. 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........................................... 30
Part II. Other Information
Item 1. Legal Proceedings.................................................................................... 35
Item 2. Changes in Securities and Use of Proceeds............................................................ 35
Item 3. Default Upon Senior Securities....................................................................... 35
Item 4. Submission of Matters to a Vote of Securities Holders................................................ 35
Item 5. Other Information.................................................................................... 35
Item 6. Exhibits and Reports on Form 8-K..................................................................... 35
Signatures...................................................................................... 37
</TABLE>
2
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(Dollars in thousands) (unaudited) 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 138,937 $ 107,591
Federal funds sold 284,300 200,550
Other short term securities 805 30,257
----------------------------------
Cash and cash equivalents 424,042 338,398
Investment securities:
Available for sale, at fair value 339,450 332,133
Held to maturity, at amortized cost (fair value $220,587 and $136,481 at
March 31, 2000 and December 31, 1999, respectively) 225,892 141,725
Other securities 19,817 21,311
----------------------------------
Investment securities 585,159 495,169
Loans:
Commercial 917,326 810,399
Term real estate-commercial 522,852 484,076
----------------------------------
Total commercial 1,440,178 1,294,475
Real estate construction and land 441,085 417,326
Real estate-other 97,437 92,688
Consumer and other 111,269 123,528
Deferred loan fees and discounts (7,321) (6,840)
----------------------------------
Total loans, net of deferred fees 2,082,648 1,921,177
Allowance for loan losses (44,820) (40,421)
----------------------------------
Total loans, net 2,037,828 1,880,756
Property, premises and equipment 21,443 23,878
Interest receivable and other assets 129,170 107,887
----------------------------------
Total assets $3,197,642 $2,846,088
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand, noninterest-bearing $ 627,116 $ 514,482
MMDA, NOW and savings 1,668,289 1,463,517
Time certificates, $100,000 and over 476,975 434,540
Other time certificates 73,086 93,847
----------------------------------
Total deposits 2,845,466 2,506,386
Other borrowings 41,100 69,100
Other liabilities 53,226 47,007
----------------------------------
Total liabilities 2,939,792 2,622,493
----------------------------------
Company obligated mandatorily redeemable cumulative trust preferred
securities of subsidiary trust holding solely junior subordinated debentures 59,500 50,000
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, no par value: 4,000,000 shares authorized;
none issued - -
Common stock, no par value: 24,000,000 shares authorized;
14,458,592 and 13,964,065 shares issued and outstanding as of
March 31, 2000 and December 31, 1999, respectively 112,530 100,690
Accumulated other comprehensive loss (6,237) (5,036)
Retained earnings 92,057 77,941
----------------------------------
Total shareholders' equity 198,350 173,595
----------------------------------
Total liabilities and shareholders' equity $3,197,642 $2,846,088
==================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
(Dollars in thousands, except per share amounts) 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest on loans $ 47,679 $ 32,237
Interest on investment securities:
Taxable 7,945 5,061
Tax - exempt 1,302 875
------------------------------------------
Total interest on investment securities 9,247 5,936
Other interest income 4,304 1,976
------------------------------------------
Total interest income 61,230 40,149
------------------------------------------
INTEREST EXPENSE
Interest on deposits 22,820 13,787
Interest on long term borrowings 1,076 1,054
Interest on other borrowings 956 1,088
------------------------------------------
Total interest expense 24,852 15,929
------------------------------------------
Net interest income 36,378 24,220
Provision for loan losses 5,227 1,163
------------------------------------------
Net interest income after provision for loan losses 31,151 23,057
------------------------------------------
OTHER INCOME
Loan and international banking fees 991 449
Trust fees 924 721
Service charges and other fees 811 712
ATM network revenue 425 515
Gain on sale of SBA loans 108 302
Loss on sale of investments, net (1) -
Other income 2,827 419
------------------------------------------
Total, recurring 6,085 3,118
Warrant income, net 8,609 4
------------------------------------------
Total other income 14,694 3,122
------------------------------------------
OPERATING EXPENSES
Compensation and benefits 10,979 8,714
Occupancy and equipment 3,917 3,026
Legal and other professional fees 806 580
Telephone, postage and supplies 720 718
Marketing and promotion 564 462
Client services 500 439
FDIC insurance and regulatory assessments 202 117
Directors fees 109 209
Other real estate owned 10 21
Other 1,528 1,148
------------------------------------------
Total, recurring 19,335 15,434
Merger and other related nonrecurring costs 3,881 -
------------------------------------------
Total operating expenses 23,216 15,434
------------------------------------------
Income before provision for income taxes and extraordinary items 22,629 10,745
Provision for income taxes 9,156 4,181
------------------------------------------
Net income before extraordinary items 13,473 6,564
Extraordinary items - (88)
------------------------------------------
Net income $ 13,473 $ 6,476
==========================================
Net income per share - basic $ 0.96 $ 0.50
==========================================
Net income per share - diluted $ 0.91 $ 0.46
==========================================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
(Dollars in thousands) 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 13,473 $ 6,476
---------------------------------------
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding losses arising during period (net of taxes
of $(1,015) and $(314) for the three months ended March 31, (1,451) (449)
2000 and 1999, respectively)
Reclassification adjustment for gains included in
net income 1 -
---------------------------------------
Net change (1,452) (449)
Cash flow hedge:
Net derivative gains arising during period (net of taxes of $177
and $586 for the three months ended March 31, 2000 and 1999,
respectively) 253 838
Reclassification adjustment for expenses included
in net income (net of taxes of $1 and $(30) for the three
months ended March 31, 2000 and 1999, respectively) 2 (43)
---------------------------------------
Net change 251 881
---------------------------------------
Other comprehensive income (1,201) 432
---------------------------------------
Comprehensive income $ 12,272 $ 6,908
=======================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
GREATER BAY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
(Dollars in thousands) 2000 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows - operating activities
Net income $ 13,473 $ 6,476
Reconcilement of net income to net cash from operations:
Provision for loan losses 5,227 1,163
Depreciation and amortization 1,476 1,056
Deferred income taxes (1,810) (251)
(Gain) loss on sale of investments, net - -
Changes in:
Accrued interest receivable and other assets (16,109) (1,323)
Accrued interest payable and other liabilities 6,646 3,779
Deferred loan fees and discounts, net 481 819
--------------- ---------------
Operating cash flows, net 9,384 11,719
--------------- ---------------
Cash flows - investing activities
Maturities and partial paydowns on of investment securities:
Held to maturity 13,904 4,094
Available for sale - 19,712
Purchase of investment securities:
Held to maturity (98,098) (7,320)
Available for sale (9,896) (83,944)
Other securities 1,494 (47)
Proceeds from sale of available for sale securities - 59,545
Loans, net (162,780) (159,650)
Proceeds from sale of other real estate owned - 345
Purchase of property, premises and equipment, net 1,097 (2,679)
Purchase of insurance policies (2,524) (1,935)
--------------- ---------------
Investing cash flows, net (256,803) (171,879)
--------------- ---------------
Cash flows - financing activities
Net change in deposits 339,080 225,453
Net change in other borrowings - short term (28,000) (10,695)
Principal repayment - long term borrowings - (3,000)
Company obligated madatorially redeemable preferred
securities of subsidiary trust holding solely junior
subordinated debentures issued (proceeds from issuance of) 9,500 -
Proceeds from sale of common stock 14,750 1,793
Cash dividends (2,267) (1,764)
--------------- ---------------
Financing cash flows, net 333,063 211,787
--------------- ---------------
Net change in cash and cash equivalents 85,644 51,627
Cash and cash equivalents at beginning of period 338,398 239,285
--------------- ---------------
Cash and cash equivalents at end of period $ 424,042 $ 290,912
=============== ===============
Cash flows - supplemental disclosures
Cash paid during the period for:
Interest $ 26,306 $ 35,791
Income taxes $ 810 $ 7,729
Non-cash transactions:
Additions to other real estate owned $ - $ 105
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2000 and December 31, 1999 and for the
Three Months Ended March 31, 2000 and 1999
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Balance Sheet as of March 31, 2000, and the Consolidated
Statements of Operations, Comprehensive Income and Cash Flows for the three
months ended March 31, 2000 have been prepared by Greater Bay Bancorp (the
"Company" ) and are not audited. The results of operations for the quarter
ended March 31, 2000 are not necessarily indicative of the results expected for
any subsequent quarter or for the entire year ended December 31, 2000.
Consolidated financial statements should be read in conjunction with the
consolidated financial statements in the Current Report on Form 8-K filed on
February 1, 2000.
Consolidation and Basis of Presentation
The unaudited financial information presented was prepared on the same
basis as the audited financial statements for the year ended December 31, 1999.
The consolidated financial statements include the accounts of Greater Bay
Bancorp ("Greater Bay" on a parent-only basis, and the "Company" on a
consolidated basis) and its wholly owned subsidiaries, Bay Area Bank ("BAB"),
Bay Bank of Commerce ("BBC"), Cupertino National Bank ("CNB"), Golden Gate Bank
("Golden Gate"), Mid-Peninsula Bank ("MPB"), Mt. Diablo National Bank ("MDNB"),
Peninsula Bank of Commerce ("PBC"), GBB Capital I, GBB Capital II and GBB
Capital III and its operating divisions. All significant intercompany
transactions and balances have been eliminated. Certain reclassifications have
been made to prior periods consolidated financial statements to conform to the
current presentation. In the opinion of management such unaudited financial
statements reflect all adjustments necessary for fair statement of the results
of operations and balances for the interim period presented. The accounting and
reporting policies of the Company conform to generally accepted accounting
principles and the prevailing practices within the banking industry.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of certain revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" requires the Company to classify items of other
comprehensive income by their nature in the financial statements and display the
accumulated other comprehensive income separately from retained earnings in the
equity section of the balance sheet. The changes to the balances of accumulated
other comprehensive income are as follows:
<TABLE>
<CAPTION>
Accumulated
Other
(Dollars in thousands) Unrealized Gains Cash Flow Comprehensive
on Securities Hedges Income
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance - December 31, 1999 $ (6,540) $ 1,504 $ (5,036)
Current period change (1,452) 251 (1,201)
------------------------------------------------------------
Balance - March 30, 2000 $ (7,992) $ 1,755 $ (6,237)
============================================================
<CAPTION>
Accumulated
Other
(Dollars in thousands) Unrealized Gains Cash Flow Comprehensive
on Securities Hedges Income
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance - December 31, 1998 $ 709 $ (677) $ 32
Current period change (449) 881 432
------------------------------------------------------------
Balance - March 30, 1999 $ 260 $ 204 $ 464
============================================================
</TABLE>
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 2000 and December 31, 1999 and for the
Three Months Ended March 31, 2000 and 1999
Segment Information
In 1998, the Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131".) SFAS No. 131 supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise",
replacing the "industry segment" approach with the "management" approach. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS No. 131 did not affect results of operations or financial
position but did affect the disclosure of segment information.
NOTE 2--MERGERS
On December 14, 1999, Greater Bay and Coast Bancorp, the holding company of
Coast Commercial Bank ("CCB"), a California state chartered bank, signed a
definitive agreement for a merger between the two companies, as a result of
which CCB will become a wholly owned subsidiary of Greater Bay. The agreement
provides for Coast Bancorp shareholders to receive approximately 3,105,000
shares of Greater Bay stock subject to certain adjustments based on movements in
Greater Bay's stock price, in a tax -free exchange to be accounted for as a
pooling-of-interests. The transaction is expected to be completed in the second
quarter of 2000, subject to regulatory and shareholder approvals.
On January 26, 2000, Greater Bay, Bank of Santa Clara ("BSC") and GBB
Merger Corp. signed a definitive agreement for a merger between BSC and GBB
Merger Corp., as a result of which BSC will become a wholly owned subsidiary of
Greater Bay. The agreement provides for BSC shareholders to receive
approximately 2,017,000 shares of Greater Bay stock subject to certain
adjustments based on movements in Greater Bay's stock price in a tax-free
exchange to be accounted for as a pooling-of-interests. The transaction is
expected to be completed in the early third quarter of 2000, subject to
regulatory and shareholder approvals.
On March 21, 2000, Greater Bay, Bank of Petaluma ("BOP") and DKSS Corp.
signed a definitive agreement for a merger between BOP and DKSS, as a result of
which BOP will become a wholly owned subsidiary of Greater Bay. The agreement
provides for BOP shareholders to receive approximately 990,000 shares of Greater
Bay stock subject to certain adjustments based on changes in the Company's stock
price in a tax-free exchange to be accounted for as a pooling-of-interests. The
transaction is expected to be completed in the fourth quarter of 2000, subject
to BOP's shareholders and regulatory approvals.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 2000 and December 31, 1999 and for the
Three Months Ended March 31, 2000 and 1999
The following table sets forth certain historical information concerning
the operations of the Company, Coast Bancorp, BSC and BOP for the period
indicated and proforma combined information assuming the acquisitions had been
consummated at the beginning of the period presented.
<TABLE>
<CAPTION>
For the three months ended
(Dollars in thousands) March 31, 2000
- -------------------------------------------------------------------------
<S> <C>
Net interest income:
Greater Bay Bancorp $ 36,378
Coast Bancorp 5,538
BSC 4,958
BOP 2,231
---------------
Combined $ 49,105
===============
Provision for loan losses:
Greater Bay Bancorp $ 5,227
Coast Bancorp 87
BSC 225
BOP 15
---------------
Combined $ 5,554
===============
Net income:
Greater Bay Bancorp $ 13,473
Coast Bancorp 2,035
BSC 1,221
BOP 567
---------------
Combined $ 17,296
===============
</TABLE>
There are currently no significant transactions between the Company and
each of Coast Bancorp, BSC and BOP.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 2000 and December 31, 1999 and for the
Three Months Ended March 31, 2000 and 1999
NOTE 3--PROPERTY, PREMISES AND EQUIPMENT
During the first quarter of 2000, the Company sold bank premises with a
carrying value of $4.8 million for $5.4 million in a sale-lease back
transaction. No gain was recognized on the transaction. Gains of $535,000 have
been deferred and will be recognized over the term of the Company's lease.
NOTE 4--BORROWINGS
Other borrowings are detailed as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(Dollars in thousands) 2000 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Other borrowings:
Short term borrowings:
Securities sold under agreements
to repurchase $ - $ 40,100
Short term notes payable 100 -
Fed Fund Purchases 14,000 -
Advances under credit lines 25,000 7,000
-------------------------------
Total short term borrowings 39,100 47,100
-------------------------------
Long term borrowings:
Securities sold under agreements
to repurchase - 10,000
FHLB advances 2,000 12,000
-------------------------------
Total other long term borrowings 2,000 22,000
-------------------------------
Total other borrowings $ 41,100 $ 69,100
===============================
</TABLE>
During the three month period ended March 31, 2000 and the twelve month
period ended December 31, 1999, the average balance of securities sold under
short term agreements to repurchase were $30.3 million and $14.8 million,
respectively, and the average interest rates during those periods were 5.89% and
5.64%, respectively. Securities sold under short term agreements to repurchase
generally mature within 90 days of dates of purchase.
During the three month period ended March 31, 2000 and the twelve month
period ended December 31, 1999, the average balance of federal funds purchased
was $154,000 and $186,000, respectively, and the average interest rates during
those periods were 6.50% and 5.29%, respectively. There were $14.0 million
outstanding at March 31, 2000 and no such balances outstanding at December 31,
1999.
The FHLB advances will mature in the year 2003 and have an average interest
rate of 5.47%. The advances are collateralized by securities pledged to the
FHLB. Under the terms of the advances, the FHLB has a put option which gives it
the right to demand early repayment.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 2000 and December 31, 1999 and for the
Three Months Ended March 31, 2000 and 1999
NOTE 5--PER SHARE DATA
Net income per share is stated in accordance with SFAS No. 128 "Earnings
Per Share". Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
net income per share is computed by dividing net income by the weighted average
number of common shares plus common equivalent shares outstanding including
dilutive stock options.
The following table provides a reconciliation of the numerators and
denominators of the basic and diluted net income per share computations for the
three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
For the three months For the three months
ended March 31, 2000 ended March 31, 199
----------------------------------------- ------------------------------------
Average Average
Income Shares Per Share Income Shares Per Share
(Dollars in thousands, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- --------------------------------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 13,473 $ 6,476
Basic net income per share:
Income available to common shareholders 13,473 14,031,000 $ 0.96 6,476 13,053,000 $ 0.50
Effect of dilutive securities:
Stock options - 732,000 - - 920,000 -
------------------------------------------ ---------------------------------
Diluted net income per share:
Income available to common shareholders
and assumed conversions $ 13,473 14,763,000 $ 0.91 $ 6,476 13,973,000 $ 0.46
------------------------------------------ ---------------------------------
</TABLE>
There were options to purchase 6,475 and 475,125 shares that were
considered anti-dilutive whereby the options' exercise price was greater than
the average market price of the common shares, during the three months ended
March 31, 2000 and 1999, respectively.
Weighted average shares outstanding and all per share amounts included in
the consolidated financial statements and notes thereto are based upon the
increased number of shares giving retroactive effect to the 2000 merger with Mt.
Diablo Bancshares ("MD Bancshares") at a 0.9532 conversion ratio and the 1999
mergers with Bay Commercial Services ("BCS") at a 0.6833 conversion ratio and
Bay Area Bancshares ("BA Bancshares") at a 1.38682 conversion ratio.
NOTE 6--ACTIVIY OF BUSINESS SEGMENTS
The Company adopted SFAS No. 131. The accounting policies of the
segments are the same as those described in the "Summary of Significant
Accounting Policies." Segment data includes intersegment revenue, as well as
charges allocating all corporate-headquarters costs to each of its operating
segments. The Company evaluates the performances of its segments and allocates
resources to them based on net interest income, other income, net income before
income taxes, total assets and deposits.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 2000 and December 31, 1999 and for the
Three Months Ended March 31, 2000 and 1999
The Company is organized primarily along community banking and trust
divisions. Thirteen of the divisions have been aggregated into the "community
banking" segment. Community banking provides a range of commercial banking
services to small and medium-sized businesses, real estate developers, property
managers, business executives, professional and other individuals. The trust
division has been shown as the "trust operations" segment. The Company's
business is conducted principally in the U.S.; foreign operations are not
material.
The following table shows each segment's key operating results and
financial position for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
--------------------------------------- -------------------------------------
Community Trust Community Trust
(Dollars in thousands) Banking Operations Banking Operations
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $ 36,907 $ 118 $ 25,046 $ 57
Other income 13,804 863 2,319 725
Operating expenses, excluding merger and
other related nonrecurring costs 20,190 650 15,178 718
Net income before income taxes, merger,
and other related costs and extraordinary items (1) 25,339 286 11,097 (9)
Total assets 3,129,548 - 2,246,069 -
Deposits 2,783,363 62,103 1,938,283 45,477
Assets under management - 751,677 - 630,490
</TABLE>
(1) Includes intercompany earnings allocation charge which is eliminated in
consolidation.
A reconciliation of total segment net interest income and other income
combined, net income before income taxes, and total assets to the consolidated
numbers in each of these categories for the three months ended March 31, 2000
and 1999 is presented below.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
------------------- -------------------
<S> <C> <C>
Net interest income and other income
Total segment net interest income and other income $ 51,692 $ 28,147
Parent company net interest income and other income (620) (805)
------------------- -------------------
Consolidated net interest income and other income $ 51,072 $ 27,342
=================== ===================
Net income before taxes, merger
related nonrecurring costs and extraordinary items
Total segment net income before taxes $ 25,625 $ 11,088
Parent company net income before taxes 885 (343)
Consolidated net income before taxes
merger and other related costs and
------------------- -------------------
extraordinary items $ 26,510 $ 10,745
=================== ===================
Total assets
Total segment assets $ 3,129,548 $ 2,246,069
Parent company assets 68,094 24,225
------------------- -------------------
Consolidated total assets $ 3,197,642 $ 2,270,294
=================== ===================
</TABLE>
NOTE 7--CASH DIVIDEND
The Company declared a cash dividend of $0.15 cents per share payable
on April 15, 2000 to shareholders of record as of March 31, 2000.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Greater Bay is a bank holding company operating BAB, BBC, CNB, Golden Gate,
MPB, MDNB, and PBC. The Company also owns and operates GBB Capital I, GBB
Capital II, and GBB Capital III which are Delaware statutory business trusts,
which were formed for the exclusive purpose of issuing and selling Cumulative
Trust Preferred Securities ("TPS"). Greater Bay also includes the operating
divisions: Greater Bay Bank Contra Costa Region, Greater Bay Bank Fremont
Region, Greater Bay Bank Santa Clara Valley Commercial Banking Group, Greater
Bay Bank SBA Lending Group, Greater Bay Corporate Finance Group, Greater Bay
International Banking Division, Greater Bay Trust Company, Pacific Business
Funding and the Venture Banking Group. The Company provides a wide range of
commercial banking services to small and medium-sized businesses, real estate
developers, property managers, business executives, professionals and other
individuals. The Company operates throughout the Silicon Valley, San Francisco,
the San Francisco Peninsula and the East Bay region, with 19 offices located in
Blackhawk, Cupertino, Danville, Fremont, Hayward, Lafayette, Millbrae, Palo
Alto, Pleasanton, Redwood City, San Francisco, San Jose, San Leandro, San Mateo,
San Ramon, Santa Clara and Walnut Creek.
The following discussion and analysis is intended to provide greater
details of the results of operations and financial condition of the Company. The
following discussion should be read in conjunction with the Company's
consolidated financial data included elsewhere in this document. Certain
statements under this caption constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include but are not limited to economic conditions,
competition in the geographic and business areas in which the Company conducts
its operations, fluctuation in interest rates, credit quality and government
regulation.
RESULTS OF OPERATIONS
Net income for the first quarter of 2000 increased 107.7% to $13.5 million,
or $0.91 per diluted share, compared to net income of $6.5 million, or $0.46 per
diluted share, for the first quarter of 1999. The first quarter 2000 results
included nonrecurring warrant income of $8.6 million compared to nonrecurring
warrant income of $4,000 during the first quarter of 1999. In addition, the
first quarter of 2000 included nonrecurring merger related costs and
extraordinary items of $2.4 million compared to nonrecurring merger related
costs and extraordinary items of $88,000 in the first quarter of 1999. As a
result, net income, including nonrecurring warrant income and excluding
nonrecurring merger related expenses and extraordinary items, increased 140.9%
to $15.9 million, or $1.07 per diluted share, for the first quarter of 2000,
compared to $6.6 million, or $0.47 per diluted share, in the first quarter of
1999.
Greater Bay Bancorp's core earnings, which is its net income, excluding
nonrecurring warrant income, merger related costs and extraordinary items, for
the first quarter of 2000 increased 65.3% to $10.8 million, or $0.73 per diluted
share, compared to $6.6 million, or $0.47 per diluted share, in the first
quarter of 1999. Based on its core earnings for the first quarter of 2000,
Greater Bay Bancorp's return on average equity was 23.75%, its return on average
assets was 1.43% and its efficiency ratio was 45.53%. During the first quarter
of 1999, Greater Bay Bancorp's core earnings resulted in return on average
equity of 20.04%, return on average assets of 1.25% and an efficiency ratio of
56.46%.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The following table summarizes net income, net income per share and key
financial ratios inclusive of and exclusive of merger, nonrecurring and
extraordinary items for the three month periods presented:
<TABLE>
<CAPTION>
Income before merger, nonrecurring
and extraordinary items
-----------------------------------------
(Dollars in thousands, except per share amounts) March 31, 2000 March 31, 1999
-----------------------------------------
<S> <C> <C>
Income $ 10,843 $ 6,562
Income per share:
Basic $ 0.77 $ 0.50
Diluted $ 0.73 $ 0.47
Return on average assets 1.43% 1.25%
Return on average shareholders' equity 23.75% 20.04%
</TABLE>
<TABLE>
<CAPTION>
Income after technology gains and before
merger and extraordinary items
----------------------------------------------
(Dollars in thousands, except per share amounts) March 31, 2000 March 31, 1999
----------------------------------------------
<S> <C> <C>
Income $ 15,862 $ 6,560
Income per share:
Basic $ 1.13 $ 0.50
Diluted $ 1.07 $ 0.47
Return on average assets 2.10% 1.25%
Return on average shareholders' equity 34.75% 20.04%
</TABLE>
<TABLE>
<CAPTION>
Income after merger, nonrecurring
and extraordinary items
--------------------------------------------
(Dollars in thousands, except per share amounts) March 31, 2000 March 31, 1999
--------------------------------------------
<S> <C> <C>
Income $ 13,473 $ 6,476
Income per share:
Basic $ 0.96 $ 0.50
Diluted $ 0.91 $ 0.46
Return on average assets 1.78% 1.23%
Return on average shareholders' equity 29.43% 19.78%
</TABLE>
The Company reported net income of $13.5 million for the three months ended
March 31, 2000, a 108.0% increase over the three months ended March 31, 1999 net
income of $6.5 million. Basic net income per share was $0.96 for the three
months ended March 31, 2000, as compared to $0.50 for the three months ended
March 31, 1999. Diluted net income per share was $0.91 and $0.46 for the three
months ended March 31, 2000 and 1999, respectively. The return on average assets
and return on average shareholders' equity were 1.78% and 29.43% for the three
months ended March 31, 2000, compared with 1.23% and 19.78% for the three months
ended March 31, 1999.
The 107.7% increase in 2000 net income as compared to 1999 was the result
of significant growth in loans, investments, trust assets and deposits. For the
three months ended March 31, 2000, net interest income increased 50.2% as
compared to the three months ended March 31, 1999. This increase was primarily
due to a 43.9% increase in average interest-earning assets for the three months
ended March 31, 2000 compared to the three months ended March 31, 1999. The
increases in loans, trust assets and deposits also contributed to the 44.8%
increase in trust fees, loan and international banking fees, service charges and
other fees. Other income includes $2.1 million in appreciation recognized on the
conversion of equity securities received in the settlement of a loan into a
publicly traded equity security. Increases in operating expenses were required
to service and support the Company's growth. As a result, increases in revenue
were partially offset for the three months ended March 31, 2000 by a 25.3%
increase in recurring operating expenses, as compared to the three months ended
March 31, 1999.
For the three months ended March 31, 2000, merger and related nonrecurring
costs were $2.4 million, net of taxes, as compared to $0 the three months ended
March 31, 1999. Warrant income, net of related expenses and taxes, was $5.1
million for the three months ended March 31, 2000 as compared to $2,000 for the
three months ended March 31, 1999.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Net Interest Income
The following table presents, for the quarters indicated, condensed average
balance sheet information for the Company, together with interest income and
yields earned on average interest-earning assets and interest expense and rates
paid on average interest-bearing liabilities. Average balances are average daily
balances.
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000
-----------------------------
Average
Average Yield/
(Dollars in thousands) Balance(1) Interest Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Fed funds sold $ 260,274 $ 3,836 5.91%
Other short term securities 30,583 468 6.14%
Investment securities:
Taxable 453,518 7,945 7.03%
Tax-exempt (1) 98,529 1,302 5.30%
Loans (2), (3) 1,985,551 47,679 9.63%
----------- -----------
Total interest-earning assets 2,828,455 61,230 8.68%
Noninterest-earning assets 215,332
----------- -----------
Total assets $ 3,043,787 61,230
=========== -----------
INTEREST-BEARING LIABILITIES:
Deposits:
MMDA, NOW and Savings $ 1,597,507 16,029 4.02%
Time deposits, over $100,000 444,527 5,641 5.09%
Other time deposits 93,490 1,150 4.93%
----------- -----------
Total interest-bearing deposits 2,135,524 22,820 4.29%
Other borrowings 58,375 956 6.57%
Subordinated debt - -
----------- -----------
Total interest-bearing liabilities 2,193,899 23,776 4.35%
Trust Preferred Securities 50,940 1,076 8.47%
----------- -----------
Total interest-bearing liabilities
and capital securities 2,244,839 24,852 4.44%
Noninterest-bearing deposits 559,727
Other noninterest-bearing liabilities 55,629
Shareholders' equity 183,592
-----------
Total liabilities and shareholders'
equity $ 3,043,787 24,852
=========== -----------
Net interest income $ 36,378
===========
Including capital securities:
- ----------------------------------------------------
Interest rate spread 4.24%
Contribution of interest free funds 0.92%
Net yield on interest-earnings assets (4) 5.16%
Excluding capital securities:
- ----------------------------------------------------
Interest rate spread 4.34%
Contribution of interest free funds 0.98%
Net yield on interest-earnings assets (5) 5.31%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1999
-----------------------------
Average
Average Yield/
(Dollars in thousands) Balance(1) Interest Rate
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Fed funds sold $ 264,134 $4,161 6.25%
Other short term securities 17,365 300 6.85%
Investment securities:
Taxable 427,344 6,859 6.37%
Tax-exempt (1) 91,632 1,108 4.80%
Loans (2), (3) 1,814,744 43,140 9.43%
----------- -----------
Total interest-earning assets 2,615,219 55,568 8.43%
Noninterest-earning assets 195,887
----------- -----------
Total assets $ 2,811,106 55,568
=========== -----------
INTEREST-BEARING LIABILITIES:
Deposits:
MMDA, NOW and Savings $ 1,481,001 14,312 3.83%
Time deposits, over $100,000 412,210 4,971 4.78%
Other time deposits 96,769 1,146 4.70%
----------- -----------
Total interest-bearing deposits 1,989,980 20,429 4.07%
Other borrowings 69,015 1,030 5.92%
Subordinated debt - -
----------- -----------
Total interest-bearing liabilities 2,058,995 21,459 4.13%
Trust Preferred Securities 50,000 1,054 8.36%
----------- -----------
Total interest-bearing liabilities
and capital securities 2,108,995 22,513 4.24%
Noninterest-bearing deposits 515,061
Other noninterest-bearing liabilities 35,956
Shareholders' equity 151,094
-----------
Total liabilities and shareholders'
equity $ 2,811,106 22,513
=========== -----------
Net interest income $ 33,055
===========
Including capital securities:
- ----------------------------------------------------
Interest rate spread 4.19%
Contribution of interest free funds 0.82%
Net yield on interest-earnings assets (4) 5.01%
Excluding capital securities:
- ----------------------------------------------------
Interest rate spread 4.30%
Contribution of interest free funds 0.88%
Net yield on interest-earnings assets (5) 5.17%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
-----------------------------
Average
Average Yield/
(Dollars in thousands) Balance(1) Interest Rate
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Fed funds sold $ 78,926 $ 914 4.70%
Other short term securities 69,493 1,062 6.20%
Investment securities:
Taxable 337,185 5,061 6.09%
Tax-exempt (1) 76,668 875 4.63%
Loans (2), (3) 1,403,292 32,237 9.32%
----------- -----------
Total interest-earning assets 1,965,564 40,149 8.28%
Noninterest-earning assets 167,831
----------- -----------
Total assets $ 2,133,395 40,149
=========== -----------
INTEREST-BEARING LIABILITIES:
Deposits:
MMDA, NOW and Savings $ 1,046,066 8,820 3.42%
Time deposits, over $100,000 322,133 3,695 4.65%
Other time deposits 114,175 1,272 4.52%
----------- -----------
Total interest-bearing deposits 1,482,374 13,787 3.77%
Other borrowings 75,010 1,017 5.50%
Subordinated debt 2,443 71 11.79%
----------- -----------
Total interest-bearing liabilities 1,559,827 14,875 3.87%
Trust Preferred Securities 50,000 1,054 8.55%
----------- -----------
Total interest-bearing liabilities
and capital securities 1,609,827 15,929 4.01%
Noninterest-bearing deposits 364,366
Other noninterest-bearing liabilities 26,429
Shareholders' equity 132,773
-----------
Total liabilities and shareholders'
equity $ 2,133,395 15,929
=========== -----------
Net interest income $ 24,220
===========
Including capital securities:
- ----------------------------------------------------
Interest rate spread 4.27%
Contribution of interest free funds 0.73%
Net yield on interest-earnings assets (4) 5.00%
Excluding capital securities:
- ----------------------------------------------------
Interest rate spread 4.42%
Contribution of interest free funds 0.80%
Net yield on interest-earnings assets (5) 5.21%
</TABLE>
(1) The tax equivalent yields earned on the tax exempt securities are 7.68%,
6.94% and 6.70% for the quarters ended March 31, 2000, December 31, 1999 and
March 31, 1999, respectively, using the federal statuary rate of 34%.
(2) Nonaccrual loans are excluded in the average balance.
(3) Interest income includes loan fees of $1,420,000, $1,217,000 and $1,165,000
for the quarters ended March 31, 2000, December 31, 1999 and March 31, 1999,
respectively.
(4) Equals (a) the difference between interest income on interest-earning assets
and the interest expense on interest-bearing liabilities and capital securities,
divided by (b) average interest-earning assets for the period.
(5) Equals (a) the difference between interest income on interest-earning assets
and the interest expense on interest-bearing liabilities, divided by (b) average
interest-earning assets for the period.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Net interest income, excluding interest expense on the Trust Preferred
Securities issued by the Company ("capital securities"), for the first quarter
of 2000 was $37.5 million, a $3.4 million increase over the fourth quarter of
1999 and a $12.3 million increase over the first quarter of 1999. The increase
from the first quarter of 1999 to the first quarter of 2000 was primarily due to
the $862.9 million, or 43.9% increase in average interest-earning assets. The
increase from the fourth quarter of 1999 to the first quarter of 2000 was
primarily due to the $213.2 million, or 8.15% increase in average interest-
earning assets, which was further increased by a 14 basis points increase in the
Company's net yield on interest-earning assets from 5.17% in the fourth quarter
of 1999 to 5.31% in the first quarter of 2000.
The interest rate spread for the quarters ended March 31, 2000, December
31, 1999 and March 31, 1999, were reduced by the low spread earned on PBC's
Special Deposits (discussed in Note 7 to the consolidated financial statements
and notes thereto included in the Current Report on Form 8-K filed on February
1, 2000. As of March 31, 2000, PBC held $99.7 million in two demand deposits
accounts (the "Special Deposits"). The Special Deposits represent the proposed
settlement of class action lawsuits not involving the Company. Due to the
uncertainty of the time the Special Deposits will remain with PBC, management
has invested a significant portion of the funds from this deposit in agency
securities with maturities of less than 90 days. The average deposit balances
related to the Special Deposits were $101.1 million, $121.5 million and $99.0
million for the quarters ended March 31, 2000, December 31, 1999 and March 31,
1999 respectively, on which the Company earned a spread of approximately 3.05%,
3.10% and 3.00%, respectively. Excluding PBC's Special Deposits, the net yield
on interest earning assets would have been 5.40%, 5.28% and 5.33% for the
quarters ended March 31, 2000, December 31, 1999 and March 31, 1999
respectively. Excluding the Special Deposits, the approximate interest rate
spread would have been 4.27%, 4.23% and 4.35% for the quarters ended March 31,
2000, December 31, 1999 and March 31, 1999 respectively. The purchase of bank-
owned life insurance ("BOLI") also reduced the Company's net interest spread
since the earnings of BOLI are included in other income while the cost of
funding BOLI is included in interest expense.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The most significant impact on the Company's net interest income between
periods is derived from the interaction of changes in the volume of and rate
earned or paid on interest-earning assets and interest-bearing liabilities. The
volume of interest-earning asset dollars in loans and investments, compared to
the volume of interest-bearing liabilities represented by deposits and
borrowings, combined with the spread, produces the changes in the net interest
income between periods. The table below sets forth, for the quarters indicated,
a summary of the changes in interest income and interest expense due to average
asset and liability balances (volume) and due to changes in average interest
rates (rate). Changes in interest income and expense which are not attributable
specifically to either volume or rate, are allocated proportionately between
both variances. Nonaccrual loans are excluded from average loans. The impact
of capital securities is not included in this table.
<TABLE>
<CAPTION>
Three months Ended March 31, 2000
Compared with December 31, 1999
favorable (unfavorable)
--------------------------------------------------
(Dollars in thousands) Volume Rate Net
- --------------------------------------------------------------------- -------------- ---------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Fed funds sold $ (69) $ (256) $ (325)
Other short term securities 202 (34) 168
Investment securities:
Taxable 404 682 1,086
Tax-exempt 81 113 194
Loans 3,703 836 4,539
-------- -------- --------
Total interest-earning assets 4,321 1,341 5,662
-------- -------- --------
INTEREST-BEARING LIABILITIES:
Deposits:
MMDA, NOW and Savings (1,052) (665) (1,717)
Time deposits, over $100,000 (369) (301) (670)
Other time deposits 44 (48) (4)
-------- -------- --------
Total interest-bearing deposits (1,377) (1,014) (2,391)
Other borrowings 174 (100) 74
Subordinated debt -- -- --
-------- -------- --------
Total interest-bearing liabilities (1,203) (1,114) (2,317)
-------- -------- --------
Increase (decrease) in net interest income $ 3,118 $ 227 $ 3,345
======== ======== ========
<CAPTION>
Three months Ended March 31, 2000
Compared with March 31, 1999
favorable (unfavorable)
--------------------------------------------------
(Dollars in thousands) Volume Rate Net
- --------------------------------------------------------------------- -------------- ---------------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Fed funds sold $ 2,626 $ 296 $ 2,922
Other short term securities (584) (10) (594)
Investment securities:
Taxable 1,993 891 2,884
Tax-exempt 283 144 427
Loans 14,278 1,164 15,442
-------- -------- --------
Total interest-earning assets 18,596 2,485 21,081
-------- -------- --------
INTEREST-BEARING LIABILITIES:
Deposits:
MMDA, NOW and Savings (5,397) (1,812) (7,209)
Time deposits, over $100,000 (1,559) (387) (1,946)
Other time deposits 238 (116) 122
-------- -------- --------
Total interest-bearing deposits (6,718) (2,315) (9,033)
Other borrowings 246 (185) 61
Subordinated debt 36 35 71
-------- -------- --------
Total interest-bearing liabilities (6,436) (2,465) (8,901)
-------- -------- --------
Increase (decrease) in net interest income $ 12,160 $ 20 $ 12,180
======== ======== ========
</TABLE>
The Quarter Ended March 31, 2000 compared to March 31, 1999
-----------------------------------------------------------
Interest income in the first quarter ended March 31, 2000 increased 52.5%
to $61.2 million from $40.1 million in the same period in 1999. This was
primarily due to the $18.6 million favorable volume variance which resulted from
a $862.9 million, or 43.9%, increase in average interest-earning assets over the
comparable prior year. Average loans increased $582.3 million, or 41.5%, to 2.0
billion for the first quarter of 2000 as compared to $1.4 billion for the first
quarter of 1999.
The average yield on interest-earning assets increased 40 basis points to
8.68% in the first quarter of 2000 from 8.28% in the same period of 1999
primarily due to the increase on the yields on loans. Average yields on loans
increased 31 basis points to 9.63% in the three months ended March 31, 2000 from
9.32% for the same period in 1999, primarily as a result of increases in market
rates of interest.
Interest expense, excluding capital securities, in the first quarter of
2000 increased 59.1% to $23.8 million from $14.9 million for the same period in
1999. This increase was due to an increase in average interest-bearing
liabilities and higher interest rates paid on interest-bearing liabilities.
Average interest-bearing liabilities increased 40.7% to $2.2 billion in the
first quarter of 2000 from $1.6 billion in the same period for 1999 due to the
efforts of the Company's relationship managers in generating core deposits from
their client relationships, deposits derived from the activities of the Greater
Bay Trust Company and the Venture Banking Group.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
As a result of the foregoing, the Company's interest rate spread excluding
capital securities increased to 4.34% in the first quarter of 2000 compared to
4.42% in the same quarter one year earlier and the net yield on interest-earning
assets increased to 5.31% from 5.21%.
During the first quarter of 2000, average noninterest-bearing deposits
increased to $559.7 million from $364.4 million in the same period in 1999.
Average noninterest-bearing deposits comprised 20.8% of total deposits for the
first quarter in 2000, compared to 19.7% for the same period in 1999.
The Quarter Ended March 31, 2000, compared to December 31, 1999
---------------------------------------------------------------
Interest income increased 10.2% to $61.2 million for the first quarter of
2000, as compared to $55.6 million for the previous quarter. Average interest-
earning assets increased 8.15% in the first quarter of 2000 from $2.6 billion
for the previous quarter. The increase in interest income for the first quarter
of 2000, as compared to the prior quarter, was primarily the result of an
increase in the average balances of loans which increased $170.8 million and
investment securities which grew $33.1 million from the prior quarter. The
impact of increases in average balances on loans was enhanced by an increase in
the yield earned on those assets. The yield on the average interest-earning
assets increased 25 basis points to 8.68% in the first quarter of 2000 from
8.43% in the fourth quarter of 1999, primarily as a result of increases in
market rates of interest.
Interest expense, excluding capital securities, in the first quarter of
2000 increased 10.4% to $23.8 million from $21.5 million in the prior quarter.
The increase is the result of increased interest-bearing liabilities, which rose
to $2.2 billion for the first quarter of 2000, as compared to $2.1 billion for
the prior quarter, and a 22 basis point increase in the cost of funds which
increased to 4.35% in the first quarter of 2000.
As a result of the foregoing, the Company's interest rate spread excluding
capital securities increased to 4.34% in the first quarter of 2000 compared to
4.30% in the prior quarter and the net yield on interest-earning assets
increased to 5.31% from 5.17%.
During the first quarter of 2000, average noninterest-bearing deposits
increased to $559.7 million from $515.1 million in the fourth quarter of 1999.
Average noninterest-bearing deposits comprised 20.8% of total deposits for the
first quarter in 2000, compared to 20.6% for the prior quarter.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Certain client service expenses were incurred by the Company with respect
to its noninterest-bearing liabilities. These expenses include messenger
services, check supplies and other related items and are included in operating
expenses. Had they been included in interest expense, the impact of these
expenses on the Company's net yield on interest-earning assets would have been
as follows for each of the quarters presented.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
(Dollars in thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Average noninterest bearing demand deposits $ 559,727 $ 364,366
Client service expenses 500 439
Client service expenses, annualized 0.36% 0.49%
IMPACT ON NET YIELD ON INTEREST-EARNING ASSETS:
Net yield on interest-earning assets 5.16% 5.00%
Impact of client service expense (0.07)% (0.09)%
-----------------------------------------
Adjusted net yield on interest-earning assets (1) 5.09% 4.91%
=========================================
</TABLE>
(1) Noninterest-bearing liabilities are included in cost of funds calculations
to determine adjusted net yield of spread.
The impact on the net yield on interest-earning assets is determined by
offsetting net interest income by the cost of client service expense, which
reduces the yield on interest-earning assets. The cost for client service
expense reflects the Company's efforts to control its interest expense.
Provision for Loan Losses
The provision for loan losses represents the current period credit cost
associated with maintaining an appropriate allowance for credit losses. The loan
loss provision for each period is dependent upon many factors, including loan
growth, net charge-offs, changes in the composition of the loan portfolio,
delinquencies, management's assessment of the quality of the loan portfolio, the
value of the underlying collateral on problem loans and the general economic
conditions in the Company's market area. Periodic fluctuations in the provision
for loan losses result from management's assessment of the adequacy of the
allowance for loan losses; however, actual loan losses may vary from current
estimates.
Refer to the section "FINANCIAL CONDITION - Allowance for Loan Losses" for
a description of the methodology the Company uses in determining an adequate
allowance for loan losses.
The provision for loan losses for the first quarter of 2000 was $5.2
million, compared to $1.2 million for the first quarter of 1999. In addition,
in connection with the MD Bancshares merger, the Company made an additional
provision for loan losses of $850,000 in the first quarter of 2000 to conform to
the Company's allowance methodology. Nonperforming loans, comprised of
nonaccrual loans, restructured loans, and accruing loans past due 90 days or
more, increased from $4.1 million, or 0.27% of loans outstanding, at March 31,
1999, to $5.9 million or 0.28% of loans outstanding at March 31, 2000.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
For further information on nonperforming and classified loans and the
allowance for loan losses, see--"Nonperforming and Classified Assets" herein.
Other Income
Total other income increased to $14.7 million for the first quarter of 2000
compared to $3.1 million for the first quarter of 1999. The following table sets
forth information by category of other income for the quarters indicated.
<TABLE>
<CAPTION>
At and for the three month periods ended
------------------------------------------------------------------------------
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2000 1999 1999 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loan and international banking fees $ 991 862 871 651 449
Trust fees 924 774 768 727 721
Service charges and other fees 811 916 791 660 712
ATM network revenue 425 474 620 501 515
Gain on sale of SBA loans 108 85 272 351 302
Gain (loss) on sale of investments, net (1) (23) 4 - -
Other 2,827 3,949 1,836 591 419
------------------------------------------------------------------------------
Total, recurring 6,085 7,037 5,162 3,481 3,118
Warrant income 8,609 14,278 - 226 4
------------------------------------------------------------------------------
Total $ 14,694 $ 21,315 $ 5,162 $ 3,707 $ 3,122
==============================================================================
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
For the first quarter of 2000 as compared to the same period in 1999, the
increase in other income was a result of $542,000 increase in loan and
international banking fees, a $99,000 increase in service charges and other
fees, and a $203,000 increase in trust fees. These increases were a result of
significant growth in total loans, total deposits and trust assets. The gains
on sale of SBA loans has declined to $108,000 as compared to $302,000 for the
same quarter in 1999. The average premiums paid on SBA loans sold has declined
reducing the gains earned by the Company. Other income for the first quarter of
2000 includes $2.1 million in appreciation recognized on equity securities
received in the settlement of a loan. As discussed further below, the warrant
income resulted from the sale of stock acquired from clients in connection with
financing activities.
In November 1999, the voters of San Francisco adopted an ordinance which
prohibits financial institutions in San Francisco from imposing surcharges of
any kind to noncustomers who access automated teller machines to conduct
electronic transactions, including cash withdrawals and fund transfers. Other
cities in California have either adopted or are considering similar proposals.
The Company estimates that approximately $37,000 of ATM network revenue during
the first quarter of 2000 was derived from such type of surcharges in the City
and County of San Francisco. While the implementation of this ordinance has
been blocked through legal challenges and is not material, the adoption of
similar laws in other areas where the Company operates ATMs could cause a more
substantial reduction in ATM network revenue in the future.
Other income for the first quarter of 2000 and the first quarter of 1999
included warrant income of $8.6 million and $4,000, respectively, net of related
employee incentives. The Company holds in excess of 100 warrant positions. We
have historically obtained rights to acquire stock, in the form of warrants, in
certain clients as part of negotiated credit facilities. We may not be able to
realize gains form these equity instruments in future periods due to
fluctuations in the market prices of the underlying common stock of these
companies. The timing and amount of income, if any, from the disposition of
client warrants typically depend upon factors beyond our control, including the
general condition of the public equity markets, levels of mergers and
acquisitions activity, and legal and contractual restrictions on our ability to
sell the underlying securities. Therefore, future gains cannot be predicted with
any degree of accuracy and are likely to vary materially from period to period.
In addition, a significant portion of the income we realize from the disposition
of client warrants may be offset by expenses related to our efforts to build an
infrastructure sufficient to support our present and future business activities,
as well as expenses incurred in evaluating and pursuing new business
opportunities, or by increases to the provision for loan losses.
Operating Expenses
The following table sets forth the major components of operating expenses
for the quarters indicated.
<TABLE>
<CAPTION>
At and for the three month periods ended
March 31, December 31,
-------------------------------------------
(Dollars in thousands) 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Compensation and benefits $ 10,979 $ 10,745
Occupancy and equipment 3,917 3,449
Legal and other professional fees 806 481
Telephone, postage and supplies 720 750
Marketing and promotion 564 556
Client services 500 474
FDIC insurance and regulatory assessments 202 179
Directors' fees 109 357
Expenses on other real estate owned 10 (53)
Other 1,528 1,449
-------------------------------------------
Total operating expenses, excluding merger costs 19,335 18,387
Contribution to the GBB Foundation and related expense, net - 11,837
Merger costs 3,881 6,367
-------------------------------------------
Total operating expenses $ 23,216 $ 36,591
===============================================
Efficiency ratio, excluding trust operations 45.05% 67.20%
Efficiency ratio, excluding trust operations and before merger costs 37.30% 33.17%
Total operating expenses to average assets* 3.06% 5.16%
Total operating expenses to average assets, before
merger costs* 2.55% 2.60%
</TABLE>
<TABLE>
<CAPTION>
At and for the three month periods ended
September 30, June 30, March 31,
-----------------------------------------------
(Dollars in thousands) 1999 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensation and benefits $ 9,482 $ 9,129 $ 8,714
Occupancy and equipment 2,978 2,750 3,026
Legal and other professional fees 756 601 580
Telephone, postage and supplies 731 703 718
Marketing and promotion 450 457 462
Client services 323 138 439
FDIC insurance and regulatory assessments 167 128 117
Directors' fees 174 52 209
Expenses on other real estate owned 30 15 21
Other 1,889 2,191 1,148
-----------------------------------------------
Total operating expenses, excluding merger costs 16,980 16,164 15,434
Contribution to the GBB Foundation and related expense, net - 323 -
Merger costs - 3,965 -
-----------------------------------------------
Total operating expenses $ 16,980 $ 20,452 $ 15,434
===============================================
Efficiency ratio, excluding trust operations 47.98% 66.14% 55.41%
Efficiency ratio, excluding trust operations and before merger costs 47.98% 59.10% 55.41%
Total operating expenses to average assets* 2.66% 3.43% 2.93%
Total operating expenses to average assets, before
merger costs* 2.66% 2.71% 2.93%
</TABLE>
*Annualized
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Operating expenses totaled $23.2 million for the first quarter of 2000,
compared to $15.4 million for the first quarter of 1999. The ratio of operating
expenses to average assets, before merger costs, was 2.55% for the first quarter
of 2000 and 2.93% for the first quarter of 1999.
The efficiency ratio is computed by dividing total operating expenses by
net interest income and other income. An increase in the efficiency ratio
indicates that more resources are being utilized to generate the same
(or greater) volume of income while a decrease would indicate a more efficient
allocation of resources. The Company's efficiency ratio, excluding trust
operations and nonrecurring items, for the first quarter of 2000 was 37.30%,
compared to 55.41% for the first quarter of 1999. The Company's efficiency ratio
for the first quarter of 2000 was lowered in part by the impact of the $2.1
million in appreciation on equity securities received in settlement of a loan.
Excluding this income, the Company's efficiency ratio would have been 45.04%.
As indicated by the improvements in the efficiency ratio and ratio of total
operating expenses to average assets, the Company has been able to achieve
increasing economies of scale. For the first quarter of 2000, average assets
increased 42.7% from the first quarter of 1999, while operating expenses,
excluding nonrecurring cost, increased only 25.3%.
Compensation and benefits expenses increased for the first quarter of 2000
to $11.0 million, compared to $8.7 million for the first quarter of 1999. The
increase in compensation and benefits is due primarily to the addition of
personnel to accommodate the growth of the Company.
The increase in occupancy and equipment; telephone, postage, and supplies;
marketing and promotion; and client service expense was related to the Company's
growth.
Income Taxes
The Company's effective income tax rate for the first quarter of 2000 was
40.5%, compared to 38.9% in the first quarter of 1999. The effective rates were
lower than the statutory rate of 42.0% due to tax-exempt income on municipal
securities, state enterprise zone credits and the preferential tax treatment of
the donation of appreciated warrants to the Foundation. The reductions were
partially offset by the impact of merger and other related nonrecurring costs.
FINANCIAL CONDITION
Total assets increased 12.4% to $3.2 billion at March 31, 2000, compared to
$2.8 billion at December 31, 1999. The increase in the first quarter of 2000 was
primarily due to increases in the Company's loan portfolio funded by growth in
deposits.
Loans
Total gross loans increased 8.4% (33.7% annualized) to $2.1 billion at
March 31, 2000, compared to $1.9 billion at December 31, 1999. The increase in
the loan volume during the first three months of 2000 was primarily due to the
continued strength of the economy in the Company's market areas coupled with the
business development efforts of the Company's relationship managers.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The Company's loan portfolio is concentrated in commercial (primarily
manufacturing, service and technology) and real estate lending, with the balance
in consumer loans. While no specific industry concentration is considered
significant, the Company's lending operations are located in a market area that
is dependent on the technology and real estate industries and supporting service
companies. Thus, the Company's borrowers could be adversely impacted by a
downturn in these sectors of the economy. This could, in turn, reduce the
demand for loans and adversely impact the borrowers' abilities to repay their
loans, while also decreasing the Company's net interest margin.
The following table presents the composition of the Company's loan
portfolio at the dates indicated.
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------------------------------------------
(Dollars in thousands) Amount % Amount %
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $ 917,326 45.0% $ 810,399 43.1%
Term real estate - Commercial 522,852 25.7 484,076 25.7
------------------------------------------------------
Total commercial 1,440,178 70.7 1,294,475 68.8
Real estate construction and land 441,085 21.6 417,326 22.2
Real estate term - other 97,437 4.8 92,688 4.9
Consumer and other 111,269 5.5 123,528 6.6
------------------------------------------------------
Total loans, gross 2,089,969 102.6 1,928,017 102.5
Deferred fees and discounts, net (7,321) (0.4) (6,840) (0.4)
------------------------------------------------------
Total loans, net of deferred fees 2,082,648 102.2 1,921,177 102.1
Allowance for loan losses (44,820) (2.2) (40,421) (2.1)
------------------------------------------------------
Total loans, net $ 2,037,828 100.0% $ 1,880,756 100.0%
======================================================
<CAPTION>
March 31,
1999
----------------------------
Amount %
----------------------------
<C> <C>
Commercial $ 651,860 44.7%
Term real estate - Commercial 369,663 25.4
----------------------------
Total commercial 1,021,523 70.1
Real estate construction and land 272,300 18.7
Real estate term - other 90,417 6.2
Consumer and other 105,329 7.2
----------------------------
Total loans, gross 1,489,569 102.2
Deferred fees and discounts, net (5,598) (0.4)
----------------------------
Total loans, net of deferred fees 1,483,971 101.8
Allowance for loan losses (26,866) (1.8)
----------------------------
Total loans, net $ 1,457,105 100.0%
============================
</TABLE>
Nonperforming and Classified Assets
Management generally places loans on nonaccrual status when they become 90
days past due, unless they are well secured and in the process of collection.
When a loan is placed on nonaccrual status, any interest previously accrued but
not collected is generally reversed from income. Loans are charged off when
management determines that collection has become unlikely. Restructured loans
are those where the Banks have granted a concession on the interest paid or
original repayment terms due to financial difficulties of the borrower. Other
real estate owned ("OREO") consists of real property acquired through
foreclosure on the related collateral underlying defaulted loans.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The following table sets forth information regarding nonperforming assets
at the dates indicated.
<TABLE>
<CAPTION>
At and for the three month periods ended
March 31, December 31, September 30, June 30, March 31,
---------------------------------------------------------------------------
(Dollars in thousands) 2000 1999 1999 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Nonaccrual loans $ 5,170 $ 4,418 $ 6,028 $3,487 $ 3,104
Accruing loans past due 90 days or more 10 51 - 199 -
Restructured loans 743 807 1,492 1,034 951
-------------------------------------------------------------
Total nonperforming loans 5,923 5,276 7,520 4,720 4,055
Other real estate owned 271 271 515 595 620
-------------------------------------------------------------
Total nonperforming assets $ 6,194 $ 5,547 $ 8,035 $5,315 $ 4,675
-------------------------------------------------------------
Nonperforming assets to total loans
and other real estate owned 0.30% 0.29% 0.46% 0.33% 0.31%
Nonperforming assets to total assets 0.19% 0.19% 0.30% 0.22% 0.21%
</TABLE>
At March 31, 2000, the Company had $5.2 million in nonaccrual loans.
Interest income foregone on nonaccrual loans outstanding totaled $241,000 and
$64,000 for the three months ended March 31, 2000 and 1999, respectively.
The Company records OREO at the lower of carrying value or fair value less
estimated costs to sell. Estimated losses that result from the ongoing periodic
valuation of these properties are charged to earnings through a provision for
losses on foreclosed property in the period in which they are identified. At
March 31, 2000, OREO acquired through foreclosure had a carrying value of
$271,000, same as December 31, 1999.
The Company had $743,000 and $807,000 of restructured loans as of March 31,
2000 and December 31, 1999, respectively. There were no principal reduction
concessions allowed on restructured loans during the first quarter of 2000 or
1999. Interest income from restructured loans totaled $20,000 and $9,000 for
the three months ended March 31, 2000 and 1999, respectively. Foregone interest
income, which totaled $241,000 and $8,000 for the three months ended March 31,
2000 and 1999, respectively, would have been recorded as interest income if the
loans had accrued interest in accordance with their original terms prior to the
restructurings.
The Company has three classifications for problem loans: "substandard,"
"doubtful" and "loss." Substandard loans have one or more defined weaknesses and
are characterized by the distinct possibility that the Banks will sustain some
loss if the deficiencies are not corrected. Doubtful loans have the weaknesses
of substandard loans with the additional characteristic that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable; and there is a high possibility of loss of
some portion of the principal balance. A loan classified as "loss" is considered
uncollectible and its continuance as an asset is not warranted.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The following table sets forth the classified assets at the dates
indicated.
<TABLE>
<CAPTION>
At and for the three month periods ended
March 31, December 31, September 30, June 30, March 31,
----------------------------------------------------------------------------
(Dollars in thousands) 2000 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Substandard $ 24,398 $ 23,431 $ 25,390 $23,150 $ 16,296
Doubtful 4,739 1,850 2,134 1,139 1,026
Loss - - - - -
Other real estate owned 271 271 515 595 620
----------------------------------------------------------------------------
Classified assets $ 29,408 $ 25,552 $ 28,039 $24,884 $ 17,942
============================================================================
Classified assets to total loans and other real 1.41% 1.33% 1.61% 1.55% 1.21%
estate owned
Allowance for loan losses to total classified assets 152.41% 158.19% 117.79% 117.29% 149.74%
</TABLE>
With the exception of these classified assets, management was not aware of
any loans outstanding as of March 31, 2000 where the known credit problems of
the borrower would cause management to have serious doubts as to the ability of
such borrowers to comply with their present loan repayment terms and which would
result in such loans being included in nonperforming or classified asset tables
at some future date. Management cannot, however, predict the extent to which
economic conditions in the Company's market areas may worsen or the full impact
that such an environment may have on the Company's loan portfolio. Accordingly,
there can be no assurance that other loans will not become 90 days or more past
due, be placed on nonaccrual, become restructured loans, or other real estate
owned in the future.
Allowance For Loan Losses
The allowance for loan losses is established through a provision for loan
losses based on management's evaluation of risk inherent in the Company's loan
portfolio. The allowance is increased by provisions charged against earnings
and reduced by net loan charge-offs. Loans are charged-off when they are deemed
to be uncollectible; recoveries are generally recorded only when cash payments
are received.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
The following table sets forth information concerning the Company's
allowance for loan losses at the dates and for the quarters indicated.
<TABLE>
<CAPTION>
At and for the three month periods ended
March 31, December 31, September 30,
-------------------------------------------------
(Dollars in thousands) 2000 1999 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Period end loans outstanding $ 2,082,648 $ 1,921,177 $ 1,743,531
Average loans outstanding $ 1,985,551 $ 1,814,744 $ 1,675,088
Allowance for loan losses:
Balance at beginning of period $ 40,421 $ 33,028 $ 29,187
Charge-offs:
Commercial (1,686) (1,331) (601)
Real estate construction and land -- -- --
Real estate term -- -- --
Consumer and other (97) (80) (103)
-------------------------------------------
Total charge-offs (1,783) (1,411) (704)
-------------------------------------------
Recoveries:
Commercial 102 -- 748
Real estate construction and land -- -- --
Real estate term -- -- --
Consumer and other 3 277 42
-------------------------------------------
Total recoveries 105 277 790
-------------------------------------------
Net charge-offs (1,678) (1,134) 86
Provision charged to income (1) 6,077 8,527 3,755
-------------------------------------------
Balance at end of period $ 44,820 $ 40,421 $ 33,028
===========================================
Quarterly net charge-offs to average loans outstanding
during the period, annualized 0.34% 0.28% -0.02%
Year to date net charge-offs to average loans outstanding
during the period, annualized 0.34% 0.09% 0.02%
Allowance as a percentage of average loans outstanding 2.26% 2.23% 1.97%
Allowance as a percentage of period end loans outstanding 2.15% 2.10% 1.89%
Allowance as a percentage of non-performing loans 756.71% 766.13% 439.20%
<CAPTION>
June 30, March 31,
----------------------------
1999 1999
----------------------------
Period end loans outstanding $ 1,600,326 $ 1,483,971
Average loans outstanding $ 1,548,566 $ 1,403,292
Allowance for loan losses:
Balance at beginning of period $ 26,866 $ 25,960
Charge-offs:
Commercial (200) (226)
Real estate construction and land -- --
Real estate term -- --
Consumer and other (43) (69)
----------------------------
Total charge-offs (243) (295)
----------------------------
Recoveries:
Commercial 195 21
Real estate construction and land -- --
Real estate term 1 --
Consumer and other 5 17
----------------------------
Total recoveries 201 38
----------------------------
Net charge-offs (42) (257)
Provision charged to income (1) 2,363 1,163
----------------------------
Balance at end of period $ 29,187 $ 26,866
============================
Quarterly net charge-offs to average loans outstanding
during the period, annualized 0.01% 0.07%
Year to date net charge-offs to average loans outstanding
during the period, annualized 0.04% 0.07%
Allowance as a percentage of average loans outstanding 1.88% 1.91%
Allowance as a percentage of period end loans outstanding 1.82% 1.81%
Allowance as a percentage of non-performing loans 618.37% 662.54%
</TABLE>
- -----------------------
(1) Includes $850,000 in the first quarter of 2000, $2,300,000 in the fourth
quarter of 1999 and $400,000 in the second quarter of 1999 to conform practices
to the Company's reserve methodologies, which is included in mergers and related
nonrecurring costs.
The Company employs a systematic methodology for determining its allowance
for loan losses, which includes a monthly review process and monthly adjustment
of the allowance. The Company's process includes a periodic loan by loan review
for loans that are individually evaluated for impairment as well as detailed
reviews of other loans (either individually or in pools). This includes an
assessment of known problem loans, potential problem loans, and other loans that
exhibit indicators of deterioration.
The Company's methodology incorporates a variety of risk considerations,
both quantitative and qualitative, in establishing an allowance for loan losses
that management believes is appropriate at each reporting date. Quantitative
factors include the Company's historical loss experience, delinquency and
charge-off trends, collateral values, changes in non-performing loans, and other
factors. Quantitative factors also incorporate known information about
individual loans including borrowers' sensitivity to interest rate movements and
borrowers' sensitivity to quantifiable external factors including commodity and
finished goods prices as well as acts of nature (earthquakes, fires, etc.) that
occur in a particular period.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Qualitative factors include the general economic environment in the
Company's marketplace, and in particular, the state of the technology industries
based in the Silicon Valley and other key industries in the San Francisco Bay
Area. Size and complexity of individual credits in relation to lending
officers' background and experience levels, loan structure, extent and nature of
waivers of existing loan policies and pace of portfolio growth are other
qualitative factors that are considered in the Company's methodology. The
Company's methodology is, and has been, consistently followed. However, as the
Company adds new products, increases in complexity, and expands its geographic
coverage, the Company intends to enhance its methodology to keep pace with the
size and complexity of the loan portfolio. In this regard, the Company has
periodically engaged outside firms to independently assess the Company's
methodology, and on an ongoing basis the Company engages outside firms to
perform independent credit reviews of its loan portfolio. Management believes
that the Company's systematic methodology continues to be appropriate given the
Company's size and level of complexity.
While this methodology utilizes historical and other objective information,
the establishment of the allowance for loan losses and the classification of
loans, is to some extent, based on the judgment and experience of management.
In general, management feels that the allowance for loan losses is adequate as
of March 31, 2000. However, future changes in circumstances, economic
conditions or other factors could cause management to increase or decrease the
allowance for loan losses as necessary.
At March 31, 2000, the allowance for loan losses was $44.8 million,
consisting of a $30.8 million allocated allowance and a $14.0 million
unallocated allowance. The unallocated allowance recognizes the model and
estimation risk associated with the allocated allowances, and management's
evaluation of various conditions, the effects of which are not directly measured
in determining the allocated allowance. The evaluation of the inherent loss
regarding these conditions involves a higher degree of uncertainty because they
are not identified with specific problem credits or portfolio segments. The
conditions evaluated in connection with the unallocated allowance include the
following at the balance sheet date:
. The strength and duration of the current business cycle and existing general
economic and business conditions affecting our key lending areas; economic
and business conditions affecting our key lending portfolios;
. Seasoning of the loan portfolio, growth in loan volumes and changes in loan
terms; and
. The results of bank regulatory examinations.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Liquidity and Cash Flow
The objective of liquidity management is to maintain each Bank's ability to
meet the day-to-day cash flow requirements of its clients who either wish to
withdraw funds or require funds to meet their credit needs. The Company must
manage its liquidity position to allow the Banks to meet the needs of their
clients while maintaining an appropriate balance between assets and liabilities
to meet the return on investment expectations of its shareholders. The Company
monitors the sources and uses of funds on a daily basis to maintain an
acceptable liquidity position. In addition to liquidity from core deposits and
repayments and maturities of loans and investments, the Banks utilize brokered
deposit lines, sell securities under agreements to repurchase and borrow
overnight federal funds.
Greater Bay is a company separate and apart from the Banks. It must provide
for its own liquidity. Substantially all of Greater Bay's revenues are obtained
from management fees, interest received on its investments and dividends
declared and paid by the Banks. There are statutory and regulatory provisions
that could limit the ability of the Banks to pay dividends to Greater Bay. At
March 31, 2000, the Banks had approximately $53.9 million in the aggregate
available to be paid as dividends to Greater Bay. Management of Greater Bay
believes that such restrictions will not have an impact on the ability of
Greater Bay to meet its ongoing cash obligations. As of March 31, 2000, Greater
Bay did not have any material commitments for capital expenditures.
Net cash provided by operating activities, consisting primarily of net
income and increases in interest payable and other liabilities, totaled $9.4
million and $11.7 million for the three months ended March 31, 2000 and 1999,
respectively. Cash used for investing activities totaled $256.8 million and
$171.9 million for the three months ended March 31, 2000 and 1999, respectivley.
The funds used for investing activities primarily represent increases in loans
and investment securities for each year reported.
For the three months ended March 31, 2000 net cash provided by financing
activities was $333.1 million, compared to $211.8 million for the three months
ended March 31, 2000. Historically, the primary financing activity of the
Company has been through deposits. For the three months ended March 31, 2000
and 1999, deposit gathering activities generated cash of $339.1 million and
$225.5 million, respectively. This represents a total of 101.8% and 106.5% of
the financing cash flows for the three months ended March 31, 2000 and 1999,
respectively. The Company has supplemented its financing activities through the
issuance of Trust Preferred Securities and common stock. See "Capital
Resources" for further discussion below.
Capital Resources
Shareholders' equity at March 31, 2000 increased to $198.4 million from
$173.4 million at December 31, 1999. Greater Bay paid dividends of $0.15 and
$0.48 per share during the three months ended March 31, 2000 and the twelve
months ended December 31, 1999, respectively, excluding dividends paid by
subsidiaries prior to the completion of their mergers.
In the first quarter of 2000 and the fourth quarter of 1999 the Company
issued 324,324 and 535,000 shares of common stock in a private placement,
respectively. The proceeds from the offering were $11.5 million and $19.0
million, respectively, net of issuance costs. Greater Bay used a portion of the
net proceeds from the offering to supplement the capital of the Banks and
intends to use the remainder for general corporate purposes.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
In 1997, the Company issued $20.0 million in TPS to enhance its regulatory
capital base, while also providing added liquidity. In 1998, the Company
completed a second offering of TPS in an aggregate amount of $30.0 million. In
the first quarter of 2000, the Company completed a third offering of TPS in an
aggregate amount of $9.5 million. Under applicable regulatory guidelines, the
TPS qualifies as Tier I capital up to a maximum of 25% of Tier I capital. Any
additional portion of TPS would qualify as Tier 2 capital. As of March 31,
2000, $59.5 million of the TPS qualified as Tier I capital. As the Company's
shareholders' equity increases, the amount of Tier I capital that can be
comprised of TPS will increase.
The Company is committed to remaining well-capitalized as defined by
regulatory guidelines. If deposit and loan growth continues at current levels,
it is anticipated the Company will need to raise additional capital to remain
well-capitalized in 2000. The Company is evaluating an additional issuance of
TPS as well as other alternatives to meet this anticipated increase in required
capital. We anticipate that we will be able to leverage any further issuance of
TPS and therefore we do not anticipate that the raising of additional TPS would
be dilutive to future net income per share. However, the impact of raising any
additional capital on net income per share will depend on the type of capital
raised, the terms of the capital, the time period required to invest the capital
funds into earning-assets and the type of assets funded.
A banking organization's total qualifying capital includes two components,
core capital (Tier 1 capital) and supplementary capital (Tier 2 capital). Core
capital, which must comprise at least half of total capital, includes common
shareholders' equity, qualifying perpetual preferred stock, trust preferred
securities and minority interests, less goodwill. Supplementary capital includes
the allowance for loan losses (subject to certain limitations), other perpetual
preferred stock, trust preferred securities, certain other capital instruments
and term subordinated debt. The Company's major capital components are
shareholders' equity and TPS in core capital, and the allowance for loan losses
in supplementary capital.
At March 31, 2000, the minimum risk-based capital requirements to be
considered adequately capitalized were 4.0% for core capital and 8.0% for total
capital. Federal banking regulators have also adopted leverage capital
guidelines to supplement risk-based measures. The leverage ratio is determined
by dividing Tier 1 capital as defined under the risk-based guidelines by average
total assets (not risk-adjusted) for the preceding quarter.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991, the Federal Reserve, the OCC and the FDIC have adopted regulations setting
forth a five-tier system for measuring the capital adequacy of the financial
institutions they supervise. The capital levels of the Company at March 31, 2000
and the two highest levels recognized under these regulations are as follows.
These ratios all exceeded the well-capitalized guidelines shown below.
<TABLE>
<CAPTION>
Tier 1 Total
Leverage Risk-Based Risk-Based
Ratio Capital Ratio Capital Ratio
----- ------------- -------------
<S> <C> <C> <C>
Company 8.86% 10.10% 11.48%
Well-capitalized 5.00% 6.00% 10.00%
Adequately capitalized 4.00% 4.00% 8.00%
</TABLE>
In addition, at March 31, 2000, each of the Banks had levels of capital
that exceeded the well-capitalized guidelines.
29
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial performance is impacted by, among other factors,
interest rate risk and credit risk. The Company utilizes no derivatives to
mitigate its credit risk, relying instead on loan review and an adequate loan
loss reserve (see "--Allowance for Loan Losses" herein).
Interest rate risk is the risk of loss in value due to changes in interest
rates. This risk is addressed by the Company's Asset Liability Management
Committee ("ALCO"), which includes senior management representatives. The ALCO
monitors and considers methods of managing interest rate risk by monitoring
changes in net portfolio values and net interest income under various interest
rate scenarios. The ALCO attempts to manage the various components of the
Company's balance sheet to minimize the impact of sudden and sustained changes
in interest rates on net portfolio value and net interest income.
The Company's exposure to interest rate risk is reviewed on at least a
quarterly basis by the Board of Directors and the ALCO. Interest rate risk
exposure is measured using interest rate sensitivity analysis to determine the
Company's change in net portfolio value in the event of hypothetical changes in
interest rates and interest liabilities. If potential changes to net portfolio
value and net interest income resulting from hypothetical interest rate swings
are not within the limits established by the Board, the Board may direct
management to adjust its asset and liability mix to bring interest rate risk
within Board-approved limits.
In order to reduce the exposure to interest rate fluctuations, the Company
has developed strategies to manage its liquidity, lengthen the effective
maturities of certain interest-earning assets, and shorten the effective
maturities of certain interest-bearing liabilities. The Company has focused its
investment activities on securities with generally medium-term (8 years to 12
years) maturities or average lives. The Company has utilized short-term
borrowings and deposit marketing programs to adjust the term to repricing of its
liabilities. In addition, the Company has utilized an interest rate swap to
manage the interest rate risk of the TPS II securities. This interest rate swap
is not an "ineffective hedge" and is accounted for under Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities".
Interest rate sensitivity analysis is used to measure the Company's
interest rate risk by computing estimated changes in net portfolio value of its
cash flows from assets, liabilities and off-balance sheet items in the event of
a range of assumed changes in market interest rates. Net portfolio value
represents the market value of portfolio equity and is equal to the market value
of assets minus the market value of liabilities, with adjustments made for off-
balance sheet items. This analysis assesses the risk of loss in market rate
sensitive instruments in the event of sudden and sustained increases and
decreases in market interest rates of 100 basis points. The following table
presents the Company's projected change in net portfolio value for these rate
shock levels as of March 31, 2000. All market rate sensitive instruments
presented in this table are classified as either held to maturity or available
for sale. The Company has no trading securities.
<TABLE>
<CAPTION>
(Dollars in thousands) Projected Change
Change in ----------------------------
Interest Rates Net Porfolio Value Dollars Percentage
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
100 basis point rise $ 529,853 $ 6,777 1.30%
Base scenario 523,077 - -
100 basis point decline 515,499 (7,577) -1.45%
</TABLE>
30
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
The preceding table indicates that at March 31, 2000, in the event of a
sudden and sustained decrease in prevailing market interest rates, the Company's
net portfolio value would be expected to increase. However, the foregoing
analysis does not attribute additional value to the Company's noninterest-
bearing deposit balances, which have a significantly higher market value during
periods of increasing interest rates.
Net portfolio value is calculated based on the net present value of
estimated cash flows utilizing market prepayment assumptions and market rates of
interest provided by independent broker quotations and other public sources.
Computation of forecasted effects of hypothetical interest rate changes is
based on numerous assumptions, including relative levels of market interest
rates, loan prepayments and deposit decay, and should not be relied upon as
indicative of actual future results. Further, the computations do not
contemplate any actions the ALCO could undertake in response to changes in
interest rates.
Certain shortcomings are inherent in the method of analysis presented in
the computation of net portfolio value. Actual values may differ from those
projections presented should market conditions vary from assumptions used in the
calculation of the net portfolio value. Certain assets, such as adjustable-rate
loans, which represent one of the Company's loan products, have features which
restrict changes in interest rate on a short-term basis and over the life of the
assets. In addition, the proportion of adjustable-rate loans in the Company's
portfolio could decrease in future periods if market interest rates remain at or
decrease below current levels due to refinancing activity. Further, in the event
of a change in interest rates, prepayment and early withdrawal levels would
likely deviate significantly from those assumed in the net portfolio value.
Finally, the ability of many borrowers to repay their adjustable-rate mortgage
loans may decrease in the event of significant interest rate increases.
Interest Rate Risk Management
Interest rate risk management is a function of the repricing
characteristics of the Company's portfolio of assets and liabilities. Interest
rate risk management focuses on the maturity structure of assets and liabilities
and their repricing characteristics during periods of changes in market interest
rates. Effective interest rate risk management seeks to ensure that both assets
and liabilities respond to changes in interest rates within an acceptable time
frame, thereby minimizing the effect of interest rate movements on net interest
income. Interest rate sensitivity is measured as the difference between the
volumes of assets and liabilities in the Company's current portfolio that are
subject to repricing at various time horizons: one day or immediate, two days to
six months, seven to twelve months, one to three years, four to five years, over
five years and on a cumulative basis. The differences are known as interest
sensitivity gaps.
31
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
The following table shows interest sensitivity gaps for different intervals
as of March 31, 2000.
<TABLE>
<CAPTION>
Immediate or 2 Days to 7 Months to 1 Year to 3 4 Years to
One Day 6 Months 12 Months Years 5 Years
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets (Dollars in thousands)
Cash and Due $ 1,475 $ -- $ -- $ -- $ --
Federal Funds Sold 285,105 -- -- -- --
Investment Securities -- 25,247 19,019 118,298 74,862
Loans 1,004,262 538,509 79,603 155,459 139,875
Allowance for Loan Losses/Unearned Fees -- -- -- -- --
Other Assets -- -- -- -- --
--------------------------------------------------------------
Total Assets $1,290,842 $ 563,756 $ 98,622 $ 273,757 $ 214,737
==============================================================
Liabilities and Equity
Deposits $2,295,306 $ 472,150 $ 65,566 $ 10,912 $ 1,366
Other Borrowings 14,100 25,000 -- -- 2,000
Trust Preferred Securities -- -- -- -- --
Other Liabilities -- -- -- -- --
Shareholders Equity -- -- -- -- --
--------------------------------------------------------------
Total Liab/Equity $2,309,406 $ 497,150 $ 65,566 $ 10,912 $ 3,366
==============================================================
Gap $(1,018,564) $ 66,606 $ 33,056 $ 264,845 $ 211,371
Cumulative Gap $(1,018,564) $(951,958) $(918,902) $(656,057) $(444,687)
Cumulative Gap/Total Assets -31.9% -29.8% -28.7% -20.5% -13.9%
<CAPTION>
More than 5 Total Rate Non-Rate
Years Sensitive Sensitive Total
-------------------------------------------------
Assets
Cash and Due $ -- $ 1,475 $ 137,462 $ 138,937
Federal Funds Sold -- 285,105 -- 285,105
Investment Securities 361,207 598,633 (13,474) 585,159
Loans 164,449 2,082,156 492 2,082,648
Allowance for Loan Losses/Unearned Fees -- -- (44,820) (44,820)
Other Assets -- -- 150,612 150,612
-------------------------------------------------
Total Assets $ 525,656 $2,967,369 $ 230,273 $3,197,642
=================================================
Liabilities and Equity
Deposits $ 166 $2,845,466 $ -- $2,845,466
Other Borrowings -- 41,100 -- 41,100
Trust Preferred Securities 59,500 59,500 -- 59,500
Other Liabilities -- -- 53,226 53,226
Shareholders Equity -- -- 198,350 198,350
-------------------------------------------------
Total Liab/Equity $ 59,666 $2,946,066 $ 251,576 $3,197,642
=================================================
Gap $ 465,990 $ 21,303 $ (21,303) $ --
Cumulative Gap $ 21,303 $ 21,303 $ -- $ --
Cumulative Gap/Total Assets 0.7% 0.7% -- --
</TABLE>
32
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
The foregoing table indicates that the Company had a one year gap of $918.9
million, or 28.7% of total assets, at March 31, 2000. In theory, this would
indicate that at March 31, 2000, $918.9 million more in liabilities than assets
would reprice if there was a change in interest rates over the next year. Thus,
if interest rates were to increase, the gap would tend to result in a higher net
interest margin. Conversely, if interest rates decreased, the gap may result in
decreases net interest margin. However, changes in the mix of earning assets or
supporting liabilities can either increase or decrease the net interest margin
without affecting interest rate sensitivity. In addition, the interest rate
spread between an asset and its supporting liability can vary significantly
while the timing of repricing of both the asset and its supporting liability can
remain the same, thus impacting net interest income. This characteristic is
referred to as basis risk and, generally, relates to the repricing
characteristics of short-term funding sources such as certificates of deposit.
The impact of fluctuations in interest rates on the Company's projected
next twelve month net interest income and net income has been evaluated through
an interest rate shock simulation modeling analysis that includes various
assumptions regarding the repricing relationship of assets and liabilities, as
well as the anticipated changes in loan and deposit volumes over differing rate
environments. As of March 31, 2000,the analysis indicates that the Company's
net interest income would increase a maximum of 11.64% if rates rose 200 basis
points immediately and would decrease a maximum of 11.27% if rates declined 200
basis points immediately. In addition, the results indicate that notwithstanding
the Company's gap position, which would indicate that the net interest margin
increases when rates rise, the Company's net interest margin increases during
rising rate periods due to the basis risk imbedded in the Company's interest-
bearing liabilities. The Company has revised the assumptions used in performing
this analysis following a detailed review of its ALCO pricing history. As a
result, the anticipated impact of interest rate changes on the Company's net
interest income has increased since December 31, 1998.
In addition, while this analysis indicates the probable impact of interest
rate movements on the Company's net interest income, it does not take into
consideration other factors that would impact this analysis. These factors would
include management's and ALCO's actions to mitigate the impact to the Company
and the impact of the Company's credit risk profile during periods of
significant interest rate movements.
Varying interest rate environments can create unexpected changes in
prepayment levels of assets and liabilities which are not reflected in the
interest sensitivity analysis table. These prepayments may have significant
effects on the Company's net interest margin. Because of these factors and
others, an interest sensitivity gap report may not provide a complete assessment
of the Company's exposure to changes in interest rates.
Year 2000 State of Readiness
The Company's mission critical systems successfully responded to the
century date change. Accordingly, the Company's core banking systems, including
the application software for its deposit, loan and trust computer systems, as
well as the electronic funds transfers system with the Federal Reserve, were
fully operational and accurately processing customer information and
transactions. During 2000, the Company will continue to monitor its systems and
those of its major vendors, suppliers and clients to ensure continued
compliance.
33
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
Recent Accounting Developments
In April 1999, the Financial Accounting Standards Board ("FASB") reached
tentative conclusions on the future of the pooling-of-interests method of
accounting for business combinations. These tentative decisions include the
decision that the pooling-of-interests method of accounting will no longer be an
acceptable method to account for business combinations between independent
parties and that there should be a single method of accounting for all business
combinations, and that method is the purchase method. The FASB agreed that the
purchase method should be applied prospectively to business combination
transactions that are initiated after the final standard is issued. The FASB
has issued an exposure draft during the third quarter of 1999 and expects a
final standard will be issued and become effective in the fourth quarter of
2000. A portion of the Company's business strategy is to pursue acquisition
opportunities so as to expand its market presence and maintain growth levels. A
change in the accounting for business combinations could have a negative impact
on the Company's ability to realize those business strategies.
34
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings -- Not applicable
ITEM 2. Changes in Securities and Use of Proceeds -
On March 23, 2000, Greater Bay completed a private offering pursuant to Rule 506
under the Securities Act of 1933, as amended, of 324,324 shares of restricted
common stock to institutional investors. Keefe, Bruyette, and Woods, Inc. acted
as a placement agent for the offering. Proceeds from the offering were
$12,000,000, less placement agent fees of $513,000. On April 26, 2000, Greater
Bay filed a registration statement on Form S-3 (333-35622) to register the
shares for resale, which became effective on May 10, 2000. Greater Bay intends
to use the net proceeds from the offering for general corporate purposes.
ITEM 3. Defaults Upon Senior Securities -- Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders - Not applicable
ITEM 5. Other Information -- Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
The Exhibits listed below are filed or incorporated by reference as part of this
Report.
(a) Exhibits
EXHIBIT
NO. EXHIBITS
- ------- --------
2.1 Agreement and Plan of Reorganization by and between Greater Bay Bancorp
and Coast Bancorp dated December 14, 1999 (Incorporated by reference
from Greater Bay Bancorp's Current Report on Form 8-K filed with the
SEC on December 16, 1999.).
2.2 Agreement and Plan of Reorganization, dated as of January 26, 2000, by
and among Greater Bay Bancorp, Bank of Santa Clara and GBB Merger Corp.
(incorporated by reference to Exhibit 2 from Registrant's Current
Report on Form 8-K dated February 3, 2000).
2.3 Agreement and Plan of Reorganization, dated as of March 21, 2000, by
and among Greater Bay Bancorp, Bank of Petaluma and DKSS Corp
(incorporated by reference to Exhibit 2 from Registrant's Current
Report on Form 8-K dated March 22, 2000).
4.1 Securities Purchase Agreement, dated as of March 22, 2000, by and
between Greater Bay Bancorp and the investors identified therein
(incorporated by reference to Exhibit 4.1 from Registrant's Current
Report on Form 8-K dated March 24, 2000).
4.2 Registration Rights Agreement dated as of March 23, 2000, by and
between Greater Bay Bancorp and the investors identified therein
(incorporated by reference to Exhibit 4.2 from Registrant's Current
Report on Form 8-K dated March 24, 2000).
4.3 Amended and Restated Declaration of Trust of GBB Capital III, dated as
of March 23, 2000.
4.4 Indenture, dated as of March 23, 2000, between Greater Bay Bancorp and
The Bank of New York, as trustee.
4.5 Guarantee Agreement, dated as of March 23, 2000, by and between Greater
Bay Bancorp and The Bank of New York, as trustee.
27.1 Financial Data Schedule.
- --------
35
<PAGE>
(b) Reports on Form 8-K
During the quarter ended March 31 2000, the Registrant filed the following
Current Reports on Form 8-K: (1) Form 8-K dated February 1, 2000 (reporting the
completion of the merger with Mt. Diablo Bancshares and containing supplemental
consolidated financial statements reflecting the merger with Mt. Diablo
Bancshares); (2) Form 8-K dated February 3, 2000 (reporting signing of merger
agreement with Bank of Santa Clara); (3) Form 8-K dated February 4, 2000
(containing press release regarding positive results of the year 2000 rollover,
year end earnings and the completion of the merger with Mt. Diablo Bancshares);
(4) Form 8-K dated March 22, 2000 (reporting the signing of merger agreement
with Bank of Petaluma); (5) Form 8-K dated March 24, 2000 (reporting the
consummation of a private equity offering and the completion of the issuance of
$9,500,000 in Fixed Rate Capital Pass-Through Securities) and (6) Form 8-K
dated March 31, 2000 (reporting the Registrant's interim financial data as of
February 29, 2000 showing 30 days of post-combination operating results. Upon
filing of this interim financial data, the Registrant's supplemental
consolidated financial statements included in the Registrant's Current Report on
Form 8-K, filed with the SEC on February 1, 2000, became the historical
consolidated financial statements of the Registrant.).
36
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THE REGISTRANT HAS CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GREATER BAY BANCORP
(Registrant)
By:
/s/ Steven C. Smith
- -------------------
Steven C. Smith
Executive Vice President, Chief Administrative Officer and
Chief Financial Officer
Date: May 10, 2000
37
<PAGE>
Exhibit 4.3
==============================================
AMENDED AND RESTATED DECLARATION
OF TRUST
GBB CAPITAL III
Dated as of March 23, 2000
==============================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
<S> <C>
SECTION 1.1 Definitions.................................................................. 1
ARTICLE II
ORGANIZATION
SECTION 2.1 Name......................................................................... 9
SECTION 2.2 Office....................................................................... 9
SECTION 2.3 Purpose...................................................................... 9
SECTION 2.4 Authority.................................................................... 9
SECTION 2.5 Title to Property of the Trust............................................... 9
SECTION 2.6 Powers and Duties of the Trustees and the Administrators..................... 9
SECTION 2.7 Prohibition of Actions by the Trust and the Trustees......................... 13
SECTION 2.8 Powers and Duties of the Institutional Trustee............................... 14
SECTION 2.9 Certain Duties and Responsibilities of the Trustees and Administrators....... 16
SECTION 2.10 Certain Rights of Institutional Trustee...................................... 17
SECTION 2.11 Delaware Trustee............................................................. 19
SECTION 2.12 Execution of Documents....................................................... 20
SECTION 2.13 Not Responsible for Recitals or Issuance of Securities....................... 20
SECTION 2.14 Duration of Trust............................................................ 20
SECTION 2.15 Mergers...................................................................... 20
ARTICLE III
SPONSOR
SECTION 3.1 Sponsor's Purchase of Common Securities...................................... 22
SECTION 3.2 Responsibilities of the Sponsor.............................................. 22
ARTICLE IV
TRUSTEES AND ADMINISTRATORS
SECTION 4.1 Number of Trustees........................................................... 22
SECTION 4.2 Delaware Trustee............................................................. 23
SECTION 4.3 Institutional Trustee; Eligibility........................................... 23
SECTION 4.4 Certain Qualifications of the Delaware Trustee Generally..................... 23
SECTION 4.5 Administrators............................................................... 23
SECTION 4.6 Delaware Trustee............................................................. 24
SECTION 4.7 Appointment, Removal and Resignation of Trustees and Administrators.......... 24
SECTION 4.8 Vacancies Among Trustees..................................................... 25
SECTION 4.9 Effect of Vacancies.......................................................... 26
SECTION 4.10 Meetings of the Trustees and the Administrators.............................. 26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 4.11 Delegation of Power.......................................................... 26
SECTION 4.12 Conversion, Consolidation or Succession to Business.......................... 27
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 Distributions................................................................ 27
ARTICLE VI
ISSUANCE OF SECURITIES
SECTION 6.1 General Provisions Regarding Securities...................................... 27
SECTION 6.2 Paying Agent, Transfer Agent and Registrar................................... 28
SECTION 6.3 Form and Dating.............................................................. 28
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates............................ 29
SECTION 6.5 Temporary Securities......................................................... 29
SECTION 6.6 Cancellation................................................................. 30
SECTION 6.7 Rights of Holders; Waivers of Past Defaults.................................. 30
ARTICLE VII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 7.1 Dissolution and Termination of Trust......................................... 32
ARTICLE VIII
TRANSFER OF INTERESTS
SECTION 8.1 General...................................................................... 32
SECTION 8.2 Transfer Procedures and Restrictions......................................... 34
SECTION 8.3 Deemed Security Holders...................................................... 35
ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 9.1 Liability.................................................................... 36
SECTION 9.2 Exculpation.................................................................. 36
SECTION 9.3 Fiduciary Duty............................................................... 36
SECTION 9.4 Indemnification.............................................................. 37
SECTION 9.5 Outside Businesses........................................................... 40
SECTION 9.6 Compensation; Fee............................................................ 40
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE X
ACCOUNTING
<S> <C>
SECTION 10.1 Fiscal Year.................................................................. 41
SECTION 10.2 Certain Accounting Matters................................................... 41
SECTION 10.3 Banking...................................................................... 42
SECTION 10.4 Withholding.................................................................. 42
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments................................................................... 42
SECTION 11.2 Meetings of the Holders of Securities; Action by Written Consent............. 44
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL
TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of Institutional Trustee...................... 45
SECTION 12.2 Representations and Warranties of Delaware Trustee........................... 46
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices...................................................................... 47
SECTION 13.2 Governing Law................................................................ 48
SECTION 13.3 Intention of the Parties..................................................... 48
SECTION 13.4 Headings..................................................................... 48
SECTION 13.5 Successors and Assigns....................................................... 48
SECTION 13.6 Partial Enforceability....................................................... 49
SECTION 13.7 Counterparts................................................................. 49
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
OF
GBB CAPITAL III
March 23, 2000
AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated
and effective as of March 23, 2000, by the Trustees (as defined herein), the
Administrators (as defined herein), the Sponsor (as defined herein) and the
holders, from time to time, of undivided beneficial interests in the Trust (as
defined herein) to be issued pursuant to this Declaration;
WHEREAS, certain of the Trustees, the Administrators and the Sponsor
established GBB Capital III (the "Trust"), a statutory business trust under the
Delaware Business Trust Act pursuant to a Declaration of Trust dated as of March
8, 2000 (the "Original Declaration"), and a Certificate of Trust filed with the
Secretary of State of the State of Delaware on March 10, 2000, for the sole
purpose of issuing and selling certain securities representing undivided
beneficial interests in the assets of the Trust and investing the proceeds
thereof in certain debentures of the Debenture Issuer (as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees, the Administrators and the Sponsor, by
this Declaration, amend and restate each and every term and provision of the
Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory business trust under the Business Trust Act
(as defined herein) and that this Declaration constitutes the governing
instrument of such statutory business trust, the Trustees declare that all
assets contributed to the Trust will be held in trust for the benefit of the
holders, from time to time, of the securities representing undivided beneficial
interests in the assets of the Trust issued hereunder, subject to the provisions
of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions
-----------
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
<PAGE>
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act (as defined herein) has
the same meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Additional Interest" has the meaning set forth in Section 3.06 of the
-------------------
Indenture.
"Administrative Action" has the meaning set forth in paragraph 4(a) of
---------------------
Annex I.
"Administrators" means each of Steven C. Smith, Shawn E. Saunders and
--------------
Mark Eschen, solely in such Person's capacity as Administrator of the Trust
created and continued hereunder and not in such Person's individual capacity, or
such Administrator's successor in interest in such capacity, or any successor
appointed as herein provided.
"Affiliate" has the same meaning as given to that term in Rule 405 of
---------
the Securities Act or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized
------------------
to bind such Person.
"Bankruptcy Event" means, with respect to any Person:
----------------
(a) a court having jurisdiction in the premises enters a decree or
order for relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoints a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of such Person or for any substantial part of
its property, or orders the winding-up or liquidation of its affairs, and such
decree, appointment or order remains unstayed and in effect for a period of 90
consecutive days; or
(b) such Person commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, consents
to the entry of an order for relief in an involuntary case under any such law,
or consents to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of such Person of any substantial part of its property, or makes any general
assignment for the benefit of creditors, or fails generally to pay its debts as
they become due.
"Business Day" means any day other than Saturday, Sunday or any other
------------
day on which banking institutions in New York are permitted or required by any
applicable any applicable law to close.
2
<PAGE>
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
------------------
Code, 12 Del. Code (S) 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Capital Securities" has the meaning set forth in 6.1(a).
------------------
"Capital Security Certificate" means a Certificate representing a
----------------------------
Capital Security substantially in the form of Exhibit A-1.
"Capital Treatment Event" has the meaning set forth in paragraph 4(a)
-----------------------
of Annex I.
"Certificate" means any certificate evidencing Securities.
-----------
"Closing Date" has the meaning set forth in the Placement Agreement.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
----------
"Common Securities" has the meaning set forth in Section 6.1(a).
-----------------
"Common Security Certificate" means a definitive Certificate in fully
---------------------------
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"Company Indemnified Person" means (a) any Administrator; (b) any
--------------------------
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.
"Comparable Treasury Issue" has the meaning set forth in paragraph
-------------------------
4(a) of Annex I.
"Comparable Treasury Price" has the meaning set forth in paragraph
-------------------------
4(a) of Annex I.
"Corporate Trust Office" means the office of the Institutional Trustee
----------------------
at which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at 101 Barclay Street, Floor 21 West,
New York, NY 10286.
"Covered Person" means: (a) any Administrator, officer, director,
--------------
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Greater Bay Bancorp, a bank holding company
----------------
incorporated in California, in its capacity as issuer of the Debentures under
the Indenture; including any successors or assigns.
3
<PAGE>
"Debenture Trustee" means The Bank of New York, as trustee under the
-----------------
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.
"Debentures" means the 10 7/8% Junior Subordinated Deferrable Interest
----------
Debentures due 2030 to be issued by the Debenture Issuer under the Indenture.
"Deferred Interest" means any interest on the Debentures that would
-----------------
have been overdue and unpaid for more than one Distribution Payment Date but for
the imposition of an Extension Period, and the interest that shall accrue (to
the extent that the payment of such interest is legally enforceable) on such
interest at the rate per annum equal to 10 7/8%, compounded semi-annually from
the date on which such Deferred Interest would otherwise have been due and
payable until paid or made available for payment.
"Definitive Capital Securities" means any Capital Securities in
-----------------------------
definitive form issued by the Trust.
"Delaware Trustee" has the meaning set forth in Section 4.2.
----------------
"Direct Action" has the meaning set forth in Section 2.8(e).
-------------
"Distribution" means a distribution payable to Holders of Securities
------------
in accordance with Section 5.1.
"Distribution Payment Date" has the meaning set forth in paragraph
-------------------------
2(b) of Annex I.
"Event of Default" means any one of the following events (whatever the
----------------
reason for such event 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 an Indenture Event of Default;
(b) default by the Trust in the payment of any Redemption Price of any
Security when it becomes due and payable;
(c) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Declaration (other than those
specified in clause (b) above) and continuation of such default or breach for a
period of 30 days after there has been given, by registered or certified mail to
the Trustees and to the Sponsor 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
(d) the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.
4
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, or any successor legislation.
"Extension Period" has the meaning set forth in paragraph 2(b) of
----------------
Annex I.
"Federal Reserve" has the meaning set forth in paragraph 3 of Annex I.
---------------
"Fiduciary Indemnified Person" shall mean the Institutional Trustee,
----------------------------
the Delaware Trustee, any Affiliate of the Institutional Trustee or the Delaware
Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee and the Delaware Trustee.
"Fiscal Year" has the meaning set forth in Section 10.1
-----------
"Guarantee" means the guarantee agreement to be dated as of March 23,
---------
2000, of the Sponsor in respect of the Capital Securities.
"Holder" means a Person in whose name a Certificate representing a
------
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
------------------
Indemnified Person.
"Indenture" means the Indenture dated as of March 23, 2000, among the
---------
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued.
"Indenture Event of Default" means an "Event of Default" as defined in
--------------------------
the Indenture.
"Institutional Trustee" means the Trustee meeting the eligibility
---------------------
requirements set forth in Section 4.3.
"Interest" means any interest due on the Debentures, including any
--------
Deferred Interest and Defaulted Interest (as each such term is defined in the
Indenture).
"Investment Company" means an investment company as defined in the
------------------
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in paragraph 4(a)
------------------------
of Annex I.
"Legal Action" has the meaning set forth in Section 2.8(e).
------------
5
<PAGE>
"Liquidation" has the meaning set forth in paragraph 3 of Annex I.
-----------
"Liquidation Distribution" has the meaning set forth in paragraph 3 of
------------------------
Annex I.
"Majority in liquidation amount of the Securities" means Holder(s) of
------------------------------------------------
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.
"Officers' Certificates" means, with respect to any Person, a
----------------------
certificate signed by two Authorized Officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for it in this Declaration shall include:
(a) a statement that each officer signing the 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 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.
"Paying Agent" has the meaning specified in Section 6.2.
------------
"Payment Amount" has the meaning set forth in Section 5.1.
--------------
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Placement Agreement" means the Placement Agreement relating to the
-------------------
offering and sale of Capital Securities in the form of Exhibit E.
"PORTAL" has the meaning set forth in Section 2.6(a)(i).
------
"Primary Treasury Dealer" has the meaning set forth in paragraph 4(a)
-----------------------
of Annex I.
"Property Account" has the meaning set forth in Section 2.8(c).
----------------
6
<PAGE>
"Pro Rata" has the meaning set forth in paragraph 8 of Annex I.
--------
"QIB" means a "qualified institutional buyer" as defined under Rule
---
144A of the Securities Act.
"Quorum" means a majority of the Administrators or, if there are only
------
two Administrators, both of them.
"Quotation Agent" has the meaning set forth in paragraph 4(a) of Annex
---------------
I.
"Redemption/Distribution Notice" has the meaning set forth in
------------------------------
paragraph 4(e) of Annex I.
"Redemption Price" has the meaning set forth in paragraph 4(a) of
----------------
Annex I.
"Registrar" has the meaning set forth in Section 6.2.
---------
"Reference Treasury Dealer" has the meaning set forth in paragraph
-------------------------
4(a) of Annex I.
"Reference Treasury Dealer Quotations" has the meaning set forth in
------------------------------------
paragraph 4(a) of Annex I.
"Relevant Trustee" has the meaning set forth in Section 4.7(a).
----------------
"Remaining Life" has the meaning set forth in paragraph 4(a) of Annex
--------------
I.
"Responsible Officer" means, with respect to the Institutional
-------------------
Trustee, any officer within the Corporate Trust Office of the Institutional
Trustee, including any vice-president, any assistant vice-president, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Institutional Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Restricted Securities Legend" has the meaning set forth in Section
----------------------------
8.2(c).
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
---------
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act.
---------
"Securities" means the Common Securities and the Capital Securities.
----------
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time or any successor legislation.
7
<PAGE>
"Sponsor" means Greater Bay Bancorp, a bank holding company
-------
incorporated in California, or any successor entity in a merger, consolidation
or amalgamation, in its capacity as sponsor of the Trust.
"Successor Delaware Trustee" has the meaning set forth in Section
--------------------------
4.7(a).
"Successor Entity" has the meaning set forth in Section 2.15(b).
----------------
"Successor Institutional Trustee" has the meaning set forth in Section
-------------------------------
4.7(a).
"Successor Securities" has the meaning set forth in Section 2.15(b).
--------------------
"Super Majority" has the meaning set forth in paragraph 5(b) of Annex
--------------
I.
"Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.
---------
"10% in liquidation amount of the Securities" means Holder(s) of
-------------------------------------------
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"Transfer Agent" has the meaning set forth in Section 6.2.
--------------
"Treasury Rate" has the meaning set forth in paragraph 4(a) of Annex
-------------
I.
"Treasury Regulations" means the income tax regulations, including
--------------------
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trustee" or "Trustees" means each Person who has signed this
------- --------
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
--------------
or owing to, the Property Account and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Institutional Trustee pursuant to the trusts of this
Declaration.
8
<PAGE>
"U.S. Person" means a United States Person as defined a Section
-----------
7701(a)(30) of the Code.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust is named "GBB Capital III," as such
----
name may be modified from time to time by the Administrators following written
notice to the Holders of the Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Administrators.
SECTION 2.2 Office. The address of the principal office of the
------
Trust is c/o Greater Bay Bancorp, 2860 West Bayshore Road, Palo Alto, CA 94303.
On ten Business Days written notice to the Holders of the Securities, the
Administrators may designate another principal office which, shall be in a State
of the United States or the District of Columbia.
SECTION 2.3 Purpose. The exclusive purposes and functions of the
-------
Trust are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures and (c) except as otherwise limited herein, to
engage in only those other activities necessary or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be classified for
United States federal income tax purposes as a grantor trust.
SECTION 2.4 Authority. Except as specifically provided in this
---------
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by a Trustee
in accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Trustees acting on behalf of the Trust, no Person
shall be required to inquire into the authority of the Trustees to bind the
Trust. Persons dealing with the Trust are entitled to rely conclusively on the
power and authority of the Trustees as set forth in this Declaration. The
Administrators shall have only those ministerial duties set forth herein with
respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders.
SECTION 2.5 Title to Property of the Trust. Except as provided in
------------------------------
Section 2.8 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, legal title to all assets of the Trust
shall be vested in the Trust. The Holders shall not have legal title to any part
of the assets of the Trust, but shall have an undivided beneficial interest in
the assets of the Trust.
SECTION 2.6 Powers and Duties of the Trustees and the
-----------------------------------------
Administrators.
- --------------
(a) The Trustees and the Administrators shall conduct the affairs of
the Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance with
the following provisions (i) and (ii), the
9
<PAGE>
Trustees and the Administrators shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
or the Administrators, as the case may be, under this Declaration, and to
perform all acts in furtherance thereof, including without limitation, the
following:
(i) Each Administrator 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 Securities;
(B) to cause the Trust to enter into, and to execute and deliver
on behalf of the Trust, such agreements as may be necessary or
desirable in connection with the purposes and function of the Trust,
including agreements with the Paying Agent;
(C) ensuring compliance with the Securities Act, applicable state
securities or blue sky laws;
(D) if and at such time determined by the Sponsor at the request
of the Holders, assisting in the designation of the Capital Securities
for trading in the Private Offering, Resales and Trading through the
Automatic Linkages ("PORTAL") system;
------
(E) the sending of notices (other than notices of default) and
other information regarding the Securities and the Debentures to the
Holders in accordance with this Declaration;
(F) the consent to the appointment of a Paying Agent, Transfer
Agent and Registrar in accordance with this Declaration, which consent
shall not be unreasonably withheld;
(G) execution and delivery of the Securities in accordance with
this Declaration;
(H) execution and delivery of closing certificates, pursuant to
the Placement Agreement and the application for a taxpayer
identification number;
(I) unless otherwise determined by the Institutional Trustee or
the Holders of a Majority in liquidation amount of the Securities or
as otherwise required by the Business Trust Act, to execute on behalf
of the Trust (either acting alone or together with any or all of the
Administrators) any documents that the Administrators have the power
to execute pursuant to this Declaration;
(J) the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine is necessary to
give effect
10
<PAGE>
to the terms of this Declaration for the benefit of the Holders
(without consideration of the effect of any such action on any
particular Holder);
(K) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including
Distributions, voting rights, redemptions and exchanges, and to issue
relevant notices to the Holders of Capital Securities and Holders of
Common Securities as to such actions and applicable record dates; and
(L) to duly prepare and file all applicable tax returns and tax
information reports that are required to be filed with respect to the
Trust on behalf of the Trust.
(ii) As among the Trustees and the Administrators, the Institutional
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 Property Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other payments
made in respect of the Debentures in the Property Account;
(D) the distribution through the Paying Agent of amounts owed to
the Holders in respect of the Securities;
(E) the exercise of all of the rights, powers and privileges of a
holder of the Debentures;
(F) the sending of notices of default and other information
regarding the Securities and the Debentures to the Holders in
accordance with this Declaration;
(G) the distribution of the Trust Property in accordance with the
terms of this Declaration;
(H) to the extent provided in this Declaration, the winding up of
the affairs of and liquidation of the Trust and the preparation,
execution and filing of the certificate of cancellation with the
Secretary of State of the State of Delaware;
(I) after any Event of Default (provided that such Event of
--------
Default is not by or with respect to the Institutional Trustee) the
taking of any action incidental to the foregoing as the Institutional
Trustee may from time to time determine is necessary or advisable to
give effect to the terms of this Declaration and protect and conserve
the Trust Property for the benefit of the Holders
11
<PAGE>
(without consideration of the effect of any such action on any
particular Holder); and
(J) to take all action that may be necessary for the
preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under
the laws of the State of Delaware and of each other jurisdiction in
which such existence is necessary to protect the limited liability of
the Holders of the Capital Securities or to enable the Trust to effect
the purposes for which the Trust was created.
(b) So long as this Declaration remains in effect, the Trust (or the
Trustees or Administrators acting on behalf of the Trust) shall not undertake
any business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, neither the Trustees nor the Administrators
may cause the Trust to (i) acquire any investments or engage in any activities
not authorized by this Declaration, (ii) sell, assign, transfer, exchange,
mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or
interests therein, including to Holders, except as expressly provided herein,
(iii) take any action that would cause the Trust to fail or cease to qualify as
a "grantor trust" for United States federal income tax purposes, (iv) incur any
indebtedness for borrowed money or issue any other debt or (v) take or consent
to any action that would result in the placement of a lien on any of the Trust
Property. The Institutional Trustee shall, at the sole cost and expense of the
Trust, 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
Holders in their capacity as Holders.
(c) In connection with the issuance and sale of the Capital
Securities, the Sponsor 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 Sponsor in furtherance of the following prior to the date
of this Declaration are hereby ratified and confirmed in all respects):
(i) the taking of any action necessary to obtain an exemption from
the Securities Act;
(ii) the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Capital
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 Sponsor deems
necessary or advisable in order to comply with the applicable laws of any
such States in connection with the sale of the Capital Securities;
(iii) the negotiation of the terms of, and the execution and delivery
of, the Placement Agreement providing for the sale of the Capital
Securities; and
(iv) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
12
<PAGE>
(d) Notwithstanding anything herein to the contrary, the
Administrators and the Holders of a Majority in liquidation amount of the Common
Securities are authorized and directed to conduct the affairs of the Trust and
to operate the Trust so that (i) the Trust will not be deemed to be an
"investment company" required to be registered under the Investment Company Act
and (ii) the Trust will not fail to be classified as a grantor trust for United
States federal income tax purposes. The Administrator and the Holders of a
Majority in liquidation amount of the Common Securities shall not take any
action inconsistent with the treatment of the Debentures as indebtedness of the
Debenture Issuer for United States federal income tax purposes. In this
connection, the Holders of a Majority in liquidation amount of the Common
Securities are authorized to take any action, not inconsistent with applicable
laws, the Original Declaration or this Declaration, as amended from time to
time, that such Holders determine in their discretion to be necessary or
desirable for such purposes, even if such action adversely affects the interests
of the Holders of the Capital Securities.
(e) All expenses incurred by the Administrators or the Trustees
pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Trustees shall have no obligations with respect to such expenses.
(f) The assets of the Trust shall consist of the Trust Property.
(g) Legal title to all Trust Property shall be vested at all times
in the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee for the benefit of the Trust and
neither the Administrators nor the Holders in accordance with this Declaration.
SECTION 2.7 Prohibition of Actions by the Trust and the Trustees.
----------------------------------------------------
(a) The Trust shall not, and the Institutional Trustee shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of the
Securities pursuant to the terms of this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided herein;
(iii) possess Trust Property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(v) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Securities;
(vi) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the Securities; or
13
<PAGE>
(vii) other than as provided in this Declaration (including Annex I),
(A) direct the time, method and place of exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures, (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 the
Debentures shall be due and payable, or (D) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required unless the Trust shall have received an opinion
of counsel to the effect that such modification will not cause the Trust to
cease to be classified as a grantor trust for United States federal income
tax purposes.
SECTION 2.8 Powers and Duties of the Institutional Trustee.
----------------------------------------------
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust. The right, title and interest of the Institutional Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Institutional Trustee in accordance with Section 4.7. Such vesting
and cessation of title shall be effective whether or not conveyancing documents
with regard to the Debentures have been executed and delivered.
(b) The Institutional Trustee shall not transfer its right, title
and interest in the Debentures to the Administrators or to the Delaware Trustee.
(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest bearing trust
account (the "Property Account") in the United States (as defined in
----------------
Treasury Regulations section 301.7701-7), in the name of and under the
exclusive control of the Institutional Trustee, and maintained in the
Institutional Trustee's trust department, on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of
the Debentures held by the Institutional Trustee, deposit such funds into
the Property Account and make payments to the Holders of the Capital
Securities and Holders of the Common Securities from the Property Account
in accordance with Section 5.1. Funds in the Property Account shall be
held uninvested until disbursed in accordance with this Declaration;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Capital Securities and the
Common Securities to the extent the Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrators in accordance with the terms of the Securities, engage in
such ministerial activities as shall be necessary or appropriate to effect
the distribution of the Debentures to Holders of Securities upon the
occurrence of certain circumstances pursuant to the terms of the
Securities.
14
<PAGE>
(d) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities.
(e) The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust (a "Legal Action") which
------------
arises out of or in connection with an Event of Default of which a Responsible
Officer of the Institutional Trustee has actual knowledge or the Institutional
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act; provided, however, that if an Event of Default has occurred and is
-------- -------
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a Holder of the Capital Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such Holder (a "Direct Action")
-------------
on or after the respective due date specified in the Debentures. In connection
with such Direct Action, the rights of the Holders of the Common Securities will
be subrogated to the rights of such Holder of the Capital Securities to the
extent of any payment made by the Debenture Issuer to such Holder of the Capital
Securities in such Direct Action; provided, however, that a Holder of the Common
-------- -------
Securities may exercise such right of subrogation only so long as an Event of
Default with respect to the Capital Securities has occurred and is continuing.
(f) The Institutional Trustee shall continue to serve as a Trustee
until either:
(i) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders of the Securities pursuant to the
terms of the Securities; or
(ii) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 4.7.
(g) The Institutional Trustee shall have the legal power to exercise
all of the rights, powers and privileges of a Holder of the Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.
The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.
15
<PAGE>
SECTION 2.9 Certain Duties and Responsibilities of the Trustees and
-------------------------------------------------------
Administrators.
- --------------
(a) The Institutional 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 Declaration and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 6.7), the Institutional
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) The duties and responsibilities of the Trustees and the
Administrators shall be as provided by this Declaration and, in the case of the
Institutional Trustee, by the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Declaration shall require the Trustees or
Administrators to expend or risk their own funds or otherwise incur any
financial liability in the performance of any of their duties hereunder, or in
the exercise of any of their rights or powers. Whether or not therein expressly
so provided, every provision of this Declaration relating to the conduct or
affecting the liability of or affording protection to the Trustees or
Administrators shall be subject to the provisions of this Article. Nothing in
this Declaration shall be construed to release an Administrator or Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct. To the extent that, at law or in equity, a Trustee or
an Administrator has duties and liabilities relating to the Trust or to the
Holders, such Trustee or Administrator shall not be liable to the Trust or to
any Holder for such Trustee's or Administrator's good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of the Administrators or
the Trustees otherwise existing at law or in equity, are agreed by the Sponsor
and the Holders to replace such other duties and liabilities of the
Administrators or the Trustees.
(c) All payments made by the Institutional Trustee or a Paying Agent
in respect of the 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 Institutional Trustee
or a Paying Agent to make payments in accordance with the terms hereof. Each
Holder, by its acceptance of a 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 and the
Administrators are not personally liable to it for any amount distributable in
respect of any Security or for any other liability in respect of any Security.
This Section 2.9(c) does not limit the liability of the Trustees expressly set
forth elsewhere in this Declaration or, in the case of the Institutional
Trustee, in the Trust Indenture Act.
(d) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability with respect to matters that are within the
authority of the Institutional Trustee under this Declaration for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
16
<PAGE>
(i) the Institutional Trustee shall not be liable for any error or
judgment made in good faith by an Authorized Officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Institutional 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 Capital Securities or the Common Securities, as
applicable, relating to the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee, or
exercising any trust or power conferred upon the Institutional Trustee
under this Declaration;
(iii) the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and the
Property Account shall be to deal with such property in a similar manner as
the Institutional Trustee deals with similar property for its own account,
subject to the protections and limitations on liability afforded to the
Institutional Trustee under this Declaration and the Trust Indenture Act;
(iv) the Institutional Trustee shall not be liable for any interest
on any money received by it except as it may otherwise agree in writing
with the Sponsor; and money held by the Institutional Trustee need not be
segregated from other funds held by it except in relation to the Property
Account maintained by the Institutional Trustee pursuant to Section
2.8(c)(i) and except to the extent otherwise required by law; and
(v) the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with their
respective duties under this Declaration, nor shall the Institutional
Trustee be liable for any default or misconduct of the Administrators or
the Sponsor.
SECTION 2.10 Certain Rights of Institutional Trustee. Subject to
---------------------------------------
the provisions of Section 2.9:
(a) the Institutional Trustee may conclusively rely and shall fully
be protected in acting or refraining from acting in good faith upon any
resolution, opinion of counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders of Capital Securities are entitled to vote under the
terms of this Declaration, the Institutional Trustee may deliver a notice to the
Sponsor requesting the Sponsor's opinion as to
17
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the course of action to be taken and the Institutional Trustee shall take such
action, or refrain from taking such action, as the Institutional Trustee shall
be directed, in which event the Institutional Trustee shall have no liability
except for its own negligence or willful misconduct;
(c) any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;
(d) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may request and conclusively rely upon an Officers' Certificate as to factual
matters which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;
(e) the Institutional 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 Institutional Trustee may consult with counsel of its
selection (which counsel may be counsel to the Sponsor or any of its Affiliates)
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;
(g) the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction; provided,
--------
that nothing contained in this Section 2.10(g) shall be taken to relieve the
Institutional Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Declaration;
(h) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Institutional 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 Institutional 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 with due care by it hereunder;
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(j) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action hereunder,
the Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities, which instructions may be given only by the Holders of the
same proportion in liquidation amount of the Capital Securities as would be
entitled to direct the Institutional Trustee under the terms of the Capital
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 in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;
(l) when the Institutional 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;
(m) the Institutional Trustee shall not be charged with knowledge of
an Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder;
(n) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action; and
(o) no provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional 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 Institutional 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 Institutional
Trustee shall be construed to be a duty.
SECTION 2.11 Delaware Trustee. Notwithstanding any other provision
----------------
of this Declaration other than Section 4.2, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of any of the Trustees or the Administrators
described in this Declaration. Except as set forth in Section 4.2, the Delaware
Trustee shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of (S) 3807 of the Business Trust Act.
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SECTION 2.12 Execution of Documents. Subject to the provisions of
----------------------
Section 2.11, unless otherwise determined in writing by the Institutional
Trustee, and except as otherwise required by the Business Trust Act, the
Institutional Trustee, or any one or more of the Administrators, as the case may
be, is authorized to execute on behalf of the Trust any documents that the
Trustees or the Administrators, as the case may be, have the power and authority
to execute pursuant to Section 2.6.
SECTION 2.13 Not Responsible for Recitals or Issuance of
-------------------------------------------
Securities. The recitals contained in this Declaration and the Securities shall
- ----------
be taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration, the Debentures or the Securities.
SECTION 2.14 Duration of Trust. The Trust, unless dissolved
-----------------
pursuant to the provisions of Article VII hereof, shall have existence for
fifty-five (55) years from the Closing Date.
SECTION 2.15 Mergers. (a) The Trust may not consolidate,
-------
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets substantially as an entirety to any corporation or
other body, except as described in this Section 2.15(b) and (c).
(b) The Trust may, with the consent of the Institutional Trustee and
without the consent of the Delaware Trustee or the Holders of the Capital
Securities, consolidate, amalgamate, merge with or into, or be replaced by a
trust organized as such under the laws of any State; provided, that:
--------
(i) if the Trust is not the Survivor, such successor entity (the
"Successor Entity") either:
-----------------
(A) expressly assumes all of the obligations of the Trust under
the Securities; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor
---------
Securities") so that the Successor Securities rank the same as the
----------
Securities rank with respect to Distributions and payments upon
Liquidation, redemption and otherwise;
(ii) the Institutional Trustee expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(iii) the Capital Securities or any Successor Securities are listed,
or any Successor Securities will be listed upon notification of issuance,
on any national securities exchange or with another organization on which
the Capital Securities are then listed or quoted, if any;
20
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(iv) such merger, consolidation, amalgamation or replacement does
not cause the Capital Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the Holders
of the Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of such Holders' interests
in the Successor Entity as a result of such merger, consolidation,
amalgamation or replacement);
(vi) such Successor Entity has a purpose substantially identical to
that of the Trust;
(vii) prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect
that:
(A) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of
the Holders of the Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the
Holders' interest in the Successor Entity);
(B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be
required to register as an Investment Company;
(C) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will continue to be
classified as a grantor trust for United States federal income tax
purposes; and
(viii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided by
the Guarantee; and
(ix) prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an Officers'
Certificate of the Administrators and an opinion of counsel, each to the
effect that all conditions precedent of this paragraph (b) to such
transaction have been satisfied.
(c) Notwithstanding Section 2.15(b), the Trust shall not, except
with the consent of Holders of 100% in liquidation amount of the Securities,
consolidate, amalgamate, merge with or into, or to be replaced by any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it if such consolidation, amalgamation, merger or replacement
would cause the Trust or Successor Entity to be classified as other than a
grantor trust for United States federal income tax purposes.
21
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ARTICLE III
SPONSOR
SECTION 3.1 Sponsor's Purchase of Common Securities. On the
---------------------------------------
Closing Date, the Sponsor will purchase all of the Common Securities issued by
the Trust, in an amount at least equal to 3% of the capital of the Trust, at the
same time as the Capital Securities are sold.
SECTION 3.2 Responsibilities of the Sponsor. In connection with
-------------------------------
the issue and sale of the Capital Securities, the Sponsor shall have the
exclusive right and responsibility to engage in the following activities:
(a) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;
(b) to prepare for filing and request the Administrators to cause the
filing by the Trust, as may be appropriate, of an application to the PORTAL
system, for listing or quotation upon notice of issuance of any Capital
Securities, if required ; and
(c) to negotiate the terms of and/or execute on behalf of the Trust,
the Placement Agreement and other related agreements providing for the sale of
the Capital Securities.
ARTICLE IV
TRUSTEES AND ADMINISTRATORS
SECTION 4.1 Number of Trustees. The number of Trustees initially
------------------
shall be two, and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in liquidation
amount of the Capital Securities voting as a class at a meeting of the Holders
of the Capital Securities; provided, however, that there shall be a Delaware
-------- -------
Trustee if required by Section 4.2; and there shall always be one Trustee who
shall be the Institutional Trustee, and such Trustee may also serve as Delaware
Trustee if it meets the applicable requirements, in which case Section 2.11
shall have no application to such entity in its capacity as Institutional
Trustee.
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SECTION 4.2 Delaware Trustee. If required by the Business Trust
----------------
Act, one Trustee (the "Delaware Trustee") shall be:
----------------
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which is organized under the
laws of the United States or any State thereof or the District of Columbia, has
its principal place of business in the State of Delaware, and otherwise meets
the requirements of applicable law, including (S)3807 of the Business Trust Act.
SECTION 4.3 Institutional Trustee; Eligibility. (a) There shall
----------------------------------
at all times be one Trustee which shall act as Institutional Trustee which
shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the Trust;
and
(iii) be a banking corporation organized and doing business under the
laws of the United States of America or any State thereof or of the
District of Columbia authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million U.S.
dollars ($50,000,000), and subject to supervision or examination by
Federal, State or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then for the purposes of this Section 4.3(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Institutional Trustee shall cease to be
eligible to so act under Section 4.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section
4.7(a).
(c) If the Institutional Trustee has or shall acquire any
"conflicting interest" within the meaning of (S) 310(b) of the Trust Indenture
Act, the Institutional Trustee shall either eliminate such interest or resign,
to the extent and in the manner provided by, and subject to this Declaration.
(d) The initial Institutional Trustee shall be The Bank of New
York.
SECTION 4.4 Certain Qualifications of the Delaware Trustee
----------------------------------------------
Generally. The Delaware Trustee shall be a U.S. Person and either a natural
- ---------
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 4.5 Administrators. Each Administrator shall be a U.S.
--------------
Person. The initial Administrators shall be Steven C. Smith, Shawn E. Saunders
and Mark Eschen. There shall at all times be at least one Administrator.
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Except where a requirement for action by a specific number of
Administrators is expressly set forth in this Declaration and except with
respect to any action the taking of which is the subject of a meeting of the
Administrators any action required or permitted to be taken by the
Administrators may be taken by, and any power of the Administrators may be
exercised by, or with the consent of, any one such Administrator.
SECTION 4.6 Initial Delaware Trustee. The initial Delaware
------------------------
Trustee shall be The Bank of New York (Delaware).
SECTION 4.7 Appointment, Removal and Resignation of Trustees and
----------------------------------------------------
Administrators.
- --------------
(a) No resignation or removal of any Trustee (the "Relevant Trustee")
----------------
and no appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of this Section 4.7.
Subject to the immediately preceding paragraph, a Relevant Trustee may
resign at any time by giving written notice thereof to the Holders of the
Securities and by appointing a successor Relevant Trustee. Upon the resignation
of the Institutional Trustee, the Institutional Trustee shall appoint a
successor by requesting from each of Bank One Trust Company, NA, Bankers Trust
Company and State Street Bank & Trust Company, its expenses and charges to serve
as the successor Institutional Trustee on a form provided by the Administrators,
and selecting the Person who agrees to the lowest expense and charges (the
"Successor Institutional Trustee"). If the instrument of acceptance by the
-------------------------------
successor Relevant Trustee required by Section 4.7 shall not have been delivered
to the Relevant Trustee within 60 days after the giving of such notice of
resignation or delivery of the instrument of removal, the Relevant Trustee may
petition, at the expense of the Trust, any Federal, State or District of
Columbia court of competent jurisdiction for the appointment of a successor
Relevant Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Relevant Trustee. The Institutional
Trustee shall have no liability for the selection of such successor pursuant to
this Section 4.7.
The Institutional Trustee or the Delaware Trustee, or both of them,
may be removed by the act of the Holders of a Majority in liquidation amount of
the Capital Securities, delivered to the Relevant Trustee (in its individual
capacity and on behalf of the Trust) if an Event of Default shall have occurred
and be continuing. If any Trustee shall be so removed, 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 Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of this Section 4.7. If
no successor Relevant Trustee shall have been so appointed by the Holders of a
Majority in liquidation amount of the Capital Securities and accepted
appointment in the manner required by this Section 4.7, within 30 days after
delivery of an instrument of removal, the Relevant Trustee or any Holder who has
been a Holder of the Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any Federal, State or
District of Columbia court of competent jurisdiction for the
24
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appointment of a successor Relevant Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a successor
Relevant Trust or Trustees.
The Institutional Trustee shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 4.7(b) and shall give notice to the
Sponsor. Each notice shall include the name of the successor Relevant Trustee
and the address of its Corporate Trust Office if it is the Institutional
Trustee.
Notwithstanding the foregoing or any other provision of this
Declaration, in the event a Delaware Trustee who is a natural person dies or
becomes incompetent or incapacitated, the vacancy created by such death,
incompetence or incapacity may be filled by the Institutional Trustee following
the procedures in this Section 4.7 (with the successor being a Person who
satisfies the eligibility requirement for a Delaware Trustee set forth in this
Declaration) (the "Successor Delaware Trustee").
--------------------------
(b) 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
Securities and the Trust and (b) shall add to or change any of the provisions of
this Declaration 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 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 of any successor Relevant Trustee such retiring Relevant
Trustee shall duly assign, transfer and 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 Securities and the Trust.
(c) No Institutional Trustee or Delaware Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
(d) The Holders of the Capital Securities will have no right to vote
to appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Holder of the Common Securities.
SECTION 4.8 Vacancies Among Trustees. If a Trustee ceases to hold
------------------------
office for any reason and the number of Trustees is not reduced pursuant to
Section 4.1, or if the number of Trustees is increased pursuant to Section 4.1,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
the Trustees or, if there are more than two, a majority of the
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Trustees shall be conclusive evidence of the existence of such vacancy. The
vacancy shall be filled with an a Trustee appointed in accordance with Section
4.7.
SECTION 4.9 Effect of Vacancies. The death, resignation,
-------------------
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee shall not operate to dissolve,
terminate or annul the Trust. Whenever a vacancy in the number of Trustees shall
occur, until such vacancy is filled by the appointment of a Trustee in
accordance with Section 4.7, the Institutional Trustee shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by this Declaration.
SECTION 4.10 Meetings of the Trustees and the Administrators.
-----------------------------------------------
Meetings of the Trustees or the Administrators shall be held from time to time
upon the call of any Trustee or Administrator, as applicable. Regular meetings
of the Trustees and the Administrators, respectively, may be in person in the
United States or by telephone, at a place (if applicable) and time fixed by
resolution of the Trustees or the Administrators, as applicable. Notice of any
in-person meetings of the Trustees or the Administrators shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 48 hours before such meeting. Notice of any
telephonic meetings of the Trustees or the Administrators or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Trustee or an Administrator, as the case may be, at a meeting
shall constitute a waiver of notice of such meeting except where a Trustee or an
Administrator, as the case may be, attends a meeting for the express purpose of
objecting to the transaction of any activity on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Declaration, any action of the Trustees or the Administrators, as the case may
be, may be taken at a meeting by vote of a majority of the Trustees or the
Administrators present (whether in person or by telephone) and eligible to vote
with respect to such matter; provided, that a Quorum is present, or without a
--------
meeting by the unanimous written consent of the Trustees or the Administrators.
Meetings of the Trustees and the Administrators together shall be held from the
time to time upon the call of any Trustee or Administrator.
SECTION 4.11 Delegation of Power. (a) Any Trustee or any
-------------------
Administrator, as the case may be, may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents
contemplated in Section 2.6; and
(b) the Trustees shall have power to delegate from time to time to
such of their number or to any officer of the Trust that is a U.S. Person, the
doing of such things and the execution of such instruments either in the name of
the Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
26
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SECTION 4.12 Conversion, Consolidation or Succession to Business.
---------------------------------------------------
Any Person into which the Institutional Trustee or the Delaware Trustee, as the
case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, provided such Person
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 Distributions. Holders shall receive Distributions in
-------------
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of interest (including
any Additional Interest or Deferred Interest) and/or principal on the Debentures
held by the Institutional Trustee (the amount of any such payment being a
"Payment Amount"), the Institutional Trustee shall and is directed, to the
--------------
extent funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to Holders.
------------
ARTICLE VI
ISSUANCE OF SECURITIES
SECTION 6.1 General Provisions Regarding Securities.
---------------------------------------
(a) The Administrators shall on behalf of the Trust issue one series
of capital securities substantially in the form of Exhibit A-1 representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I (the "Capital Securities") and one series of common
------------------
securities representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Annex I (the "Common Securities").
-----------------
The Trust shall issue no securities or other interests in the assets of the
Trust other than the Capital Securities and the Common Securities. The Capital
Securities rank pari passu and payment thereon shall be made Pro Rata with the
Common Securities except that, where an Event of Default has occurred and is
continuing, the rights of Holders of the Common Securities to payment in respect
of Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights to payment of the Holders of the Capital Securities.
(b) The Certificates shall be signed on behalf of the Trust by one or
more Administrators. Such signature shall be the facsimile or manual signature
of any Administrator. In case any Administrator of the Trust who shall have
signed any of the Securities shall cease to be such Administrator before the
Certificates so signed shall be delivered by the Trust, such
27
<PAGE>
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Administrator; and any Certificate may be
signed on behalf of the Trust by such person who, at the actual date of
execution of such Security, shall be an Administrator of the Trust, although at
the date of the execution and delivery of the Declaration any such person was
not such an Administrator. A Capital Security shall not be valid until
authenticated by the manual signature of an Authorized Officer of the
Institutional Trustee. Such signature shall be conclusive evidence that the
Capital Security has been authenticated under this Declaration. Upon written
order of the Trust signed by one Administrator, the Institutional Trustee shall
authenticate the Capital Securities for original issue. The Institutional
Trustee may appoint an authenticating agent that is a U.S. Person acceptable to
the Trust to authenticate the Capital Securities. A Common Security need not be
so authenticated.
(c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(e) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration and the Guarantee.
SECTION 6.2 Paying Agent, Transfer Agent and Registrar. The Trust
------------------------------------------
shall maintain in New York, New York, an office or agency where the Capital
Securities may be presented for payment (the "Paying Agent"), and an office or
------------
agency where Securities may be presented for registration of transfer (the
"Transfer Agent"). The Trust shall keep or cause to be kept at such office or
--------------
agency a register for the purpose of registering Securities and transfers and
exchanges of Securities, such register to be held by a registrar (the
"Registrar"). The Administrators may appoint the Paying Agent, the Registrar
---------
and the Transfer Agent, and may appoint one or more additional Paying Agents or
one or more co-Registrars, or one or more co-Transfer Agents in such other
locations as it shall determine. The term "Paying Agent" includes any
------------
additional paying agent, the term "Registrar" includes any additional registrar
---------
or co-Registrar and the term "Transfer Agent" includes any additional transfer
--------------
agent. The Administrators may change any Paying Agent without prior notice to
any Holder. The Administrators shall notify the Institutional Trustee of the
name and address of any Paying Agent, Transfer Agent and Registrar not a party
to this Declaration. The Administrators hereby appoint the Institutional
Trustee to act as Paying Agent, Transfer Agent and Registrar for the Capital
Securities and the Common Securities. The Institutional Trustee or any of its
Affiliates in the United States may act as Paying Agent, Transfer Agent or
Registrar.
SECTION 6.3 Form and Dating. The Capital Securities and the
---------------
Institutional Trustee's certificate of authentication thereon shall be
substantially in the form of Exhibit A-1, and the Common Securities shall be
substantially in the form of Exhibit A-2, each of which is hereby incorporated
in and expressly made a part of this Declaration. Certificates may be typed,
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printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Administrators, as conclusively evidenced by their
execution thereof. The Securities may have letters, numbers, notations or other
marks of identification or designation and such legends or endorsements required
by law, stock exchange rule, agreements to which the Trust is subject, if any,
or usage (provided, that any such notation, legend or endorsement is in a form
--------
acceptable to the Sponsor). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Institutional
Trustee in writing. Each Capital Security shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and to the extent applicable, the Institutional
Trustee, the Delaware Trustee, the Administrators and the Sponsor, by their
execution and delivery of this Declaration, expressly agree to such terms and
provisions and to be bound thereby. Capital Securities will be issued only in
blocks having a stated liquidation amount of not less than $1,000.
The Capital Securities are being offered and sold by the Trust
pursuant to the Placement Agreement in definitive, registered form without
coupons with the Restricted Securities Legend.
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If:
-------------------------------------------------
(a) any mutilated Certificates should be surrendered to the Registrar,
or if the Registrar shall receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Registrar, the Administrators and
the Institutional Trustee such security or indemnity as may be required by them
to keep each of them harmless; then, in the absence of notice that such
Certificate shall have been acquired by a bona fide purchaser, an Administrator
on behalf of the Trust shall execute (and in the case of a Capital Security
Certificate, the Institutional Trustee shall authenticate) and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like denomination. In connection with the
issuance of any new Certificate under this Section 6.4, the Registrar or the
Administrators 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 Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 6.5 Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, the Administrators may prepare and, in the case of the
Capital Securities, the Institutional Trustee shall authenticate, temporary
Securities. Temporary Securities shall be substantially in form of definitive
Securities but may have variations that the Administrators consider appropriate
for temporary Securities. Without unreasonable delay, the Administrators shall
prepare and, in the case of the Capital Securities, the Institutional Trustee
shall authenticate definitive Securities in exchange for temporary Securities.
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SECTION 6.6 Cancellation. The Administrators at any time may
------------
deliver Securities to the Institutional Trustee for cancellation. The Registrar
shall forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.
SECTION 6.7 Rights of Holders; Waivers of Past Defaults.
-------------------------------------------
(a) The legal title to the Trust Property is vested exclusively in the
Institutional Trustee (in its capacity as such) in accordance with Section 2.5,
and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
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
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights and when issued and delivered to Holders against payment of
the purchase price therefor will be fully paid and nonassessable by the Trust.
(b) For so long as any Capital Securities remain outstanding, if, upon
an Indenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least a majority in liquidation amount of the Capital Securities
then outstanding shall have the right to make such declaration by a notice in
writing to the Institutional Trustee, the Sponsor and the Debenture Trustee.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee fails to annul any such declaration and
waive such default, the Holders of at least a majority in liquidation amount of
the Capital Securities, by written notice to the Institutional Trustee, the
Sponsor and the Debenture Trustee, may rescind and annul such declaration and
its consequences if:
(i) the Sponsor has paid or deposited with the Debenture Trustee a
sum sufficient to pay
(A) all overdue installments of interest on all of the
Debentures,
(B) any accrued Deferred Interest on all of the Debentures,
(C) the principal of (and premium, if any, on) any Debentures
that have become due otherwise than by such declaration of
acceleration and interest and Deferred Interest thereon at the rate
borne by the Debentures, and
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(D) all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Debenture Trustee and the Institutional Trustee, their
agents and counsel; and
(ii) all Indenture Events of Default, other than the non-payment of
the principal of the Debentures that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.07 of the
Indenture.
The Holders of at least a majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Indenture Event of Default, except a default or
Indenture Event of Default in the payment of principal or interest (unless such
default or Indenture Event of 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 or
Indenture Event of Default in respect of a covenant or provision that under the
Indenture cannot be modified or amended without the consent of the holder of
each outstanding Debenture. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
Upon receipt by the Institutional Trustee of written notice declaring
such an acceleration, or rescission and annulment thereof, by Holders of any
part of the 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
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that, unless such declaration of acceleration, or rescission and
--------
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that 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 that 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 6.7.
(d) Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.7, the Holders of at least a majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Trust Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
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ARTICLE VII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 7.1 Dissolution and Termination of Trust. (a) The Trust shall
------------------------------------
dissolve on the first to occur of:
(i) unless earlier dissolved, on March 8, 2055, the expiration of
the term of the Trust;
(ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust
or the Debenture Issuer;
(iii) (other than in connection with a merger, consolidation or
similar transaction not prohibited by the Indenture, this Declaration or
the Guarantee, as the case may be) upon the filing of a certificate of
dissolution or its equivalent with respect to the Sponsor; upon the
revocation of the charter of the Sponsor and the expiration of 90 days
after the date of revocation without a reinstatement thereof;
(iv) upon the distribution of the Debentures to the Holders of the
Securities, upon exercise of the right of the Holder of all of the
outstanding Common Securities to dissolve the Trust as provided in Annex I
hereto;
(v) upon the entry of a decree of judicial dissolution of the Holder
of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;
(vi) when all of the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to
the Holders in accordance with the terms of the Securities; or
(vii) before the issuance of any Securities, with the consent of all
of the Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 7.1(a), and after satisfaction of liabilities to
creditors of the Trust as required by applicable law, including Section 3808 of
the Business Trust Act, and subject to the terms set forth in Annex I, the
Institutional Trustee shall terminate the Trust by filing a certificate of
cancellation with the Secretary of State of the State of Delaware.
(c) The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.
ARTICLE VIII
TRANSFER OF INTERESTS
SECTION 8.1 General.
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(a) Where Capital Securities are presented to the Registrar or a co-
registrar with a request to register a transfer or to exchange them for an equal
number of Capital Securities represented by different certificates, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met. To permit registrations of transfer and
exchanges, the Trust shall issue and the Institutional Trustee shall
authenticate Capital Securities at the Registrar's request.
(b) Upon issuance of the Common Securities, the Sponsor shall
acquire and retain beneficial and record ownership of the Common Securities and
for so long as the Securities remain outstanding, the Sponsor shall maintain
100% ownership of the Common Securities; provided, however, that any permitted
-------- -------
successor of the Sponsor under the Indenture that is a U.S. Person may succeed
to the Sponsor's ownership of the Common Securities.
(c) Capital Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by applicable law,
any transfer or purported transfer of any Security not made in accordance with
this Declaration shall be null and void and will be deemed to be of no legal
effect whatsoever and 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.
(d) The Registrar shall provide for the registration of Securities
and of transfers of Securities, which will be effected without charge but only
upon payment (with such indemnity as the Registrar may require) in respect of
any tax or other governmental charges that may be imposed in relation to it.
Upon surrender for registration of transfer of any Securities, the Registrar
shall cause one or more new Securities to be issued in the name of the
designated transferee or transferees. Every Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Institutional Trustee pursuant
to Section 6.6. A transferee of a Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Security. By acceptance of a Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.
(e) The Trust shall not be required (i) to issue, register the
transfer of, or exchange any Securities during a period beginning at the opening
of business 15 days before the day of any selection of Securities for redemption
and ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
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SECTION 8.2 Transfer Procedures and Restrictions.
------------------------------------
(a) General. (i) The Capital Securities shall bear the Restricted
-------
Securities Legend, which shall not be removed unless there is delivered to the
Trust such satisfactory evidence, which may include an opinion of counsel
licensed to practice law in the State of New York or the State of California, as
may be reasonably required by the Trust, that neither the legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of the Securities Act or that such Securities
are not "restricted" within the meaning of Rule 144 under the Securities Act.
Upon provision of such satisfactory evidence, the Institutional Trustee, at the
written direction of the Trust, shall authenticate and deliver Capital
Securities that do not bear the legend.
(b) Transfer and Exchange of Capital Securities. When Capital
-------------------------------------------
Securities are presented to the Registrar (x) to register the transfer of such
Capital Securities, or (y) to exchange such Capital Securities for an equal
number of Capital Securities of another number, the Registrar shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Capital Securities
-------- -------
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Trust and the Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing and (i) if such Capital Securities are being
transferred to a QIB, accompanied by a certificate of the transferee
substantially in the form set forth as Exhibit C hereto or (ii) if such Capital
Securities are being transferred otherwise than to a QIB, accompanied by a
certificate of the transferee substantially in the form set forth as Exhibit B
hereto.
(c) Legend. Except as permitted by Section 8.2(a), each Capital
------
Security shall bear a legend (the "Restricted Securities Legend") in
----------------------------
substantially 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 OR 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 ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B)
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, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
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OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE
ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (C) OR (D) 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 DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
(d) Obligations with Respect to Transfers and Exchanges of Capital
--------------------------------------------------------------
Securities.
- ----------
(i) To permit registrations of transfers and exchanges, the Trust
shall execute and the Institutional Trustee shall authenticate Capital
Securities at the Registrar's request.
(ii) Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Registrar or the
Sponsor may require) in respect of any tax or other governmental charge
that may be imposed in relation to it.
(iii) The Registrar shall not be required to register the transfer of
or exchange of any Capital Security during a period beginning at the
opening of business 15 days before the day of any selection of any Capital
Security for redemption set forth in the terms and ending at the close of
business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of Capital Securities to be
redeemed.
(iv) All Capital Securities issued upon any registration of transfer
or exchange pursuant to the terms of this Declaration shall evidence the
same security and shall be entitled to the same benefits under this
Declaration as the Capital Securities surrendered upon such registration of
transfer or exchange.
SECTION 8.3 Deemed Security Holders. The Trust, the Administrators, the
-----------------------
Trustees, the Paying Agent, the Transfer Agent or the Registrar may treat the
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Trustees, the
Paying Agent, the Transfer Agent or the Registrar shall have actual or other
notice thereof.
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ARTICLE IX
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 9.1 Liability. (a) Except as expressly set forth in this
---------
Declaration, the Guarantee and the terms of the Securities, the Sponsor shall
not be:
(i) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the Securities
which shall be made solely from assets of the Trust; and
(ii) required to pay to the Trust or to any Holder of the Securities
any deficit upon dissolution of the Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for all of
the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders
of the Capital Securities 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.
SECTION 9.2 Exculpation. (a) No Indemnified Person shall be liable,
-----------
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and, if selected by such Indemnified Person,
has been selected by such Indemnified Person with reasonable care by or on
behalf of the Trust, including information, opinions, reports or statements as
to the value and amount of the assets, liabilities, profits, losses or any other
facts pertinent to the existence and amount of assets from which Distributions
to Holders of Securities might properly be paid.
SECTION 9.3 Fiduciary Duty. (a) To the extent that, at law or in
--------------
equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict
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the duties and liabilities of an Indemnified Person otherwise existing at law or
in equity (other than the duties imposed on the Institutional Trustee under the
Trust Indenture Act), are agreed by the parties hereto to replace such other
duties and liabilities of the Indemnified Person.
(b) Whenever in this Declaration an Indemnified Person is permitted
or required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or
by applicable law.
SECTION 9.4 Indemnification. (a) (i) The Sponsor shall indemnify, to
---------------
the full extent permitted by law, any Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by reason
of the fact that he is or was an Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnified
Person did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted by
law, any Indemnified Person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or
in the right of the Trust to procure a judgment in its favor by reason of
the fact that he is or was an Indemnified Person against expenses
(including attorneys' fees and expenses) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Trust and except that no such
indemnification shall be made in respect of any claim, issue or matter as
to which such Indemnified Person shall have been adjudged to be liable to
the Trust unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such Court of
Chancery or such other court shall deem proper.
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(iii) To the extent that an Indemnified Person shall be successful on
the merits or otherwise (including dismissal of an action without prejudice
or the settlement of an action without admission of liability) in defense
of any action, suit or proceeding referred to in paragraphs (i) and (ii) of
this Section 9.4(a), or in defense of any claim, issue or matter therein,
he shall be indemnified, to the full extent permitted by law, against
expenses (including attorneys' fees and expenses) actually and reasonably
incurred by him in connection therewith.
(iv) Any indemnification of an Administrator under paragraphs (i) and
(ii) of this Section 9.4(a) (unless ordered by a court) shall be made by
the Sponsor only as authorized in the specific case upon a determination
that indemnification of the Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (A) by
the Administrators by a majority vote of a Quorum consisting of such
Administrators who were not parties to such action, suit or proceeding, (B)
if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of
disinterested Administrators so directs, by independent legal counsel in a
written opinion, or (C) by the Common Security Holder of the Trust.
(v) To the fullest extent permitted by law, expenses (including
attorneys' fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit
or proceeding referred to in paragraphs (i) and (ii) of this Section 9.4(a)
shall be paid by the Sponsor in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf
of such Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Sponsor as
authorized in this Section 9.4(a). Notwithstanding the foregoing, no
advance shall be made by the Sponsor if a determination is reasonably and
promptly made (A) by the Administrators by a majority vote of a Quorum of
disinterested Administrators, (B) if such a Quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested Administrators so directs,
by independent legal counsel in a written opinion or (C) by the Common
Security Holder of the Trust, that, based upon the facts known to the
Administrators, counsel or the Common Security Holder at the time such
determination is made, such Indemnified Person acted in bad faith or in a
manner that such Person did not believe to be in or not opposed to the best
interests of the Trust, or, with respect to any criminal proceeding, that
such Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in instances
where the Administrators, independent legal counsel or the Common Security
Holder reasonably determine that such Person deliberately breached his duty
to the Trust or its Common or Capital Security Holders.
(vi) Each Trustee, at the sole cost and expense of the Sponsor,
retains the right to representation by counsel of its own choosing in any
action, suit or any other proceeding hereunder or against it by relation to
the foregoing, without affecting its right to indemnification hereunder or
waiving any rights afforded to it under this Declaration or applicable law.
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(b) The Sponsor shall indemnify, to the fullest extent permitted by
applicable law, each Indemnified Person from and against any and all loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person arising out of or in connection
with or 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 Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person by this
Declaration, 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 gross negligence or willful misconduct with respect to such
acts or omissions.
(c) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4 shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4 shall be deemed to be provided by a
contract between the Sponsor and each Indemnified Person who serves in such
capacity at any time while this Section 9.4 is in effect. Any repeal or
modification of this Section 9.4 shall not affect any rights or obligations then
existing.
(d) The Sponsor or the Trust may purchase and maintain insurance on
behalf of any Person who is or was an Indemnified Person against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Sponsor would have the power to indemnify
him against such liability under the provisions of this Section 9.4.
(e) For purposes of this Section 9.4, references to "the Trust"
shall include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person.
The provisions of this Section shall survive the termination of this
agreement or the earlier resignation or removal of the Institutional Trustee.
The obligations of the Sponsor under this Section 9.4 to compensate and
indemnify the Trustees and to pay or reimburse the Trustees for expenses,
disbursements and advances shall constitute additional indebtedness
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hereunder. Such additional indebtedness shall be secured by a lien prior to that
of the Securities upon all property and funds held or collected by the Trustees
as such, except funds held in trust for the benefit of the holders of particular
Securities.
SECTION 9.5 Outside Businesses. Any Covered Person, the Sponsor, the
------------------
Delaware Trustee and the Institutional Trustee (subject to Section 4.3(c)) 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 the Trust and the Holders of Securities shall have no rights
by virtue of this Declaration 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. None of any Covered Person, the Sponsor, the Delaware Trustee or the
Institutional 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 any Covered Person,
the Sponsor, the Delaware Trustee and the Institutional 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
Covered Person, the Delaware Trustee and the Institutional Trustee may engage or
be interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or its Affiliates.
SECTION 9.6 Compensation; Fee. The Sponsor agrees:
-----------------
(a) to pay to the Trustees from time to time such compensation for
all services rendered by them hereunder as the parties shall agree from time to
time (which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust); and
(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 (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct.
The provisions of this Section 9.6 shall survive the dissolution of
the Trust and the termination of this Declaration and the removal or resignation
of any Trustee.
No Trustee may claim any lien or charge on any property of the Trust
as a result of any amount due pursuant to this Section 9.6.
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ARTICLE X
ACCOUNTING
SECTION 10.1 Fiscal Year. The fiscal year (the "Fiscal Year") of the
----------- -----------
Trust shall be the calendar year, or such other year as is required by the Code.
SECTION 10.2 Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Trust, the
Administrators shall keep, or cause to be kept at the principal office of the
Trust in the United States, as defined for purposes of Treasury regulations
section 301.7701-7, full books of account, records and supporting documents,
which shall reflect in reasonable detail each transaction of the Trust. The
books of account shall be maintained on the accrual method of accounting, in
accordance with generally accepted accounting principles, consistently applied.
The books of account and the records of the Trust shall be examined by and
reported upon as of the end of each Fiscal Year of the Trust by a firm of
independent certified public accountants selected by the Administrators.
(b) The Administrators shall cause to be prepared at the principal
office of the Trust in the United States, as defined for purposes of Treasury
regulations section 301.7701-7, and delivered to each of the Holders of
Securities, within 90 days after the end of each Fiscal Year of the Trust,
annual financial statements of the Trust, including a balance sheet of the Trust
as of the end of such Fiscal Year, and the related statements of income or loss
which shall be examined by and reported upon by a firm of independent certified
public accountants selected by the Administrators.
(c) The Administrators shall cause to be duly prepared and delivered
to each of the Holders of Securities Form 1099 or such other annual United
States federal income tax information statement required by the Code, containing
such information with regard to the Securities held by each Holder as is
required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Administrators
shall endeavor to deliver all such statements within 30 days after the end of
each Fiscal Year of the Trust.
(d) The Administrators shall cause to be duly prepared in the United
States, as defined for purposes of Treasury regulations section 301.7701-7, and
filed an annual United States federal income tax return on a Form 1041 or such
other form required by United States federal income tax law, and any other
annual income tax returns required to be filed by the Administrators on behalf
of the Trust with any state or local taxing authority.
(e) So long as the only Holder of the Capital Securities is Regional
Diversified Funding Limited, the Administrators will cause the Sponsor's reports
on Forms FR Y- 9C, FR Y-9LP and FR Y-6 to be delivered to the Holder promptly
following their filing with the Federal Reserve.
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SECTION 10.3 Banking. The Trust shall maintain one or more bank accounts
-------
in the United States, as defined for purposes of Treasury regulations section
301.7701-7, in the name and for the sole benefit of the Trust; provided,
--------
however, that all payments of funds in respect of the Debentures held by the
- -------
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.
SECTION 10.4 Withholding. The Institutional Trustee or any Paying Agent
-----------
and the Administrators shall comply with all withholding requirements under
United States federal, state and local law. The Institutional Trustee or any
Paying Agent shall request, and each Holder shall provide to the Institutional
Trustee or any Paying Agent, such forms or certificates as are necessary to
establish an exemption from withholding with respect to the Holder, and any
representations and forms as shall reasonably be requested by the Institutional
Trustee or any Paying Agent to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Administrators shall file required
forms with applicable jurisdictions and, unless an exemption from withholding is
properly established by a Holder, shall remit amounts withheld with respect to
the Holder to applicable jurisdictions. To the extent that the Institutional
Trustee or any Paying Agent is required to withhold and pay over any amounts to
any authority with respect to distributions or allocations to any Holder, the
amount withheld shall be deemed to be a Distribution to the Holder in the amount
of the withholding. In the event of any claimed overwithholding, Holders shall
be limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual Distributions made, the
Institutional Trustee or any Paying Agent may reduce subsequent Distributions by
the amount of such withholding.
ARTICLE XI
AMENDMENTS AND MEETINGS
SECTION 11.1 Amendments. (a) Except as otherwise provided in this
----------
Declaration or by any applicable terms of the Securities, this Declaration may
only be amended by a written instrument approved and executed by
(i) the Institutional Trustee, and
(ii) if the amendment affects the rights, powers, duties, obligations
or immunities of the Delaware Trustee, the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XI, no
amendment shall be made, and any such purported amendment shall be void and
ineffective:
(i) unless the Institutional Trustee shall have first received
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities); and
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(B) an opinion of counsel (who may be counsel to the Sponsor or
the Trust) that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the Securities); and
(ii) if the result of such amendment would be to
(A) cause the Trust to cease to be classified for purposes of
United States federal income taxation as a grantor trust;
(B) reduce or otherwise adversely affect the powers of the
Institutional Trustee in contravention of the Trust Indenture Act;
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act; or
(D) cause the Debenture Issuer to be unable to treat an amount
equal to the Liquidation Amount of the Debentures as "Tier 1 Capital"
for purposes of the capital adequacy guidelines of the Federal
Reserve.
(c) Except as provided in Section 11.1(d), (e) or (h), no amendment
shall be made, and any such purported amendment shall be void and ineffective
unless the Holders of a Majority in liquidation amount of the Capital Securities
shall have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or (ii) restrict
the right of a Holder to institute suit for the enforcement of any such payment
on or after such date.
(e) Section 8.1(b) and 8.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.
(f) Article III shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities.
(g) the rights of the Holders of the Capital Securities under
Article IV to increase or decrease the number of, and appoint and remove,
Trustees shall not be amended without the consent of the Holders of a Majority
in liquidation amount of the Capital Securities.
(h) This Declaration may be amended by the Institutional Trustee and
the Holders of a Majority in the liquidation amount of the Common Securities
without the consent of the Holders of the Capital Securities to:
(i) cure any ambiguity;
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(ii) correct or supplement any provision in this Declaration that may
be defective or inconsistent with any other provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor; and
(iv) modify, eliminate or add to any provision of this Declaration to
such extent as may be necessary to ensure that the Trust will be classified
for United States federal income tax purposes at all times as a grantor
trust and will not be required to register as an "investment company" under
the Investment Company Act (including without limitation to conform to any
change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the
Investment Company Act or written change in interpretation or application
thereof by any legislative body, court, government agency or regulatory
authority) which amendment does not have a material adverse effect on the
right, preferences or privileges of the Holders of Securities;
provided, however, that no such modification, elimination or addition
-------- -------
referred to in clauses (i), (ii) or (iii) shall adversely affect the powers,
preferences or special rights of Holders of Capital Securities.
SECTION 11.2 Meetings of the Holders of Securities; Action by Written
--------------------------------------------------------
Consent.
- -------
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrators (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading, if any. The Administrators shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 10% in liquidation amount of such class of Securities. Such
direction shall be given by delivering to the Administrators one or more calls
in a writing stating that the signing Holders of the Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of the Securities calling a meeting shall specify in
writing the Certificates held by the Holders of the Securities exercising the
right to call a meeting and only those Securities represented by such
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of the
Securities:
(i) notice of any such meeting shall be given to all the Holders of
the Securities having a right to vote thereat at least 7 days and not more
than 60 days before the date of such meeting. Whenever a vote, consent or
approval of the Holders of the Securities is permitted or required under
this Declaration or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading, if any, such vote, consent
or approval may be given at a meeting of the Holders of the Securities.
Any action that may be taken at a meeting of the Holders of the Securities
may be taken
44
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without a meeting if a consent in writing setting forth the action so taken
is signed by the Holders of the Securities owning not less than the minimum
amount of Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of the
Securities having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the
Holders of the Securities entitled to vote who have not consented in
writing. The Administrators may specify that any written ballot submitted
to the Holders of the Securities for the purpose of taking any action
without a meeting shall be returned to the Trust within the time specified
by the Administrators;
(ii) each Holder of a Security may authorize any Person to act for it
by proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder of the
Securities executing it. Except as otherwise provided herein, all matters
relating to the giving, voting or validity of proxies shall be governed by
the General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders of the Securities were stockholders of a
Delaware corporation; each meeting of the Holders of the Securities shall
be conducted by the Administrators or by such other Person that the
Administrators may designate; and
(iii) unless the Business Trust Act, this Declaration, the terms of
the Securities, the Trust Indenture Act or the listing rules of any stock
exchange on which the Capital Securities are then listed for trading, if
any, otherwise provides, the Administrators, in their sole discretion,
shall establish all other provisions relating to meetings of Holders of
Securities, including notice of the time, place or purpose of any meeting
at which any matter is to be voted on by any Holders of the Securities,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote; provided, however, that each meeting shall be conducted in the United
States (as that term is defined in Treasury regulations section 301.7701-
7).
ARTICLE XII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 12.1 Representations and Warranties of Institutional Trustee. The
-------------------------------------------------------
Trustee that acts as initial Institutional Trustee represents and warrants to
the Trust and to the Sponsor at the date of this Declaration, and each Successor
Institutional Trustee represents and warrants to the Trust and the Sponsor at
the time of the Successor Institutional Trustee's acceptance of its appointment
as Institutional Trustee, that:
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(a) the Institutional Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the laws of
the United States with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary corporate
action on the part of the Institutional Trustee. This Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional 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 (regardless of
whether considered in a proceeding in equity or at law);
(c) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and
(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 Institutional Trustee of this Declaration.
SECTION 12.2 Representations and Warranties of Delaware Trustee.
--------------------------------------------------
The Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, 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.
(b) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Declaration. This
Declaration under Delaware law constitutes a legal, valid and binding obligation
of the Delaware Trustee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, insolvency and
other similar laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
(c) 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.
(d) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the
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State of Delaware and, in either case, a Person that satisfies for the Trust the
requirements of Section 3807 of the Business Trust Act.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices. All notices provided for in this Declaration
-------
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrators at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Holders of the Securities:
GBB Capital III
c/o Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, CA 94303
Attention: Steven C. Smith
Telecopy: 650-494-9193
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
The Bank of New York (Delaware)
White Clay Center, Route 273
Newark, Delaware
Attention: Corporate Trust Administration
Telecopy:
(c) if given to the Institutional Trustee, at the Institutional
Trustee's mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):
The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Attention: Corporate Trust Administration
Telecopy: 212-819-5915
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice of to the Trust):
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Greater Bay Bancorp
2860 West Bayshore Road
Palo Alto, CA 94303
Attention: Steven C. Smith
Telecopy: 650-494-9193
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 13.2 Governing Law. This Declaration and the rights of the
-------------
parties hereunder shall be governed by and interpreted in accordance with the
law of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
-------- -------
that there shall not be applicable to the Trust, the Trustees or this
Declaration any provision of the laws (statutory or common) of the State of
Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets or (g)
the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees as set
forth or referenced in this Declaration. Section 3540 of Title 12 of the
Delaware Code shall not apply to the Trust.
SECTION 13.3 Intention of the Parties. It is the intention of the
------------------------
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
SECTION 13.4 Headings. Headings contained in this Declaration are
--------
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 13.5 Successors and Assigns. Whenever in this Declaration
----------------------
any of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to
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be included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
SECTION 13.6 Partial Enforceability. If any provision of this
----------------------
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 13.7 Counterparts. This Declaration may contain more than
------------
one counterpart of the signature page and this Declaration may be executed by
the affixing of the signature of each of the Trustees and Administrators to any
of such counterpart signature pages. All of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.
49
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
THE BANK OF NEW YORK (DELAWARE)
as Delaware Trustee
By: /s/ William T. Lewis
-----------------------------
Name: William T. Lewis
Title: Senior Vice President
THE BANK OF NEW YORK
as Institutional Trustee
By: /s/ Annette L. Kos
------------------------------
Name: Annette L. Kos
Title: Assistant Vice President
GREATER BAY BANCORP
as Sponsor
By: /s/ Steven C. Smith
------------------------------
Name : Steven C. Smith
Title: Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
GBB CAPITAL III
By: /s/ Steven C. Smith
------------------------------
Administrator
By: /s/ Shawn E. Saunders
------------------------------
Administrator
By: /s/ Mark Eschen
------------------------------
Administrator
50
<PAGE>
ANNEX I
TERMS OF
FIXED RATE CAPITAL TRUST PASS-THROUGH SECURITIES(R) (Trups(R))
Pursuant to Section 6.1 of the Amended and Restated Declaration of
Trust, dated as of March 23, 2000 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration):
1. Designation and Number. (a) Capital Securities. 9,500 Capital
----------------------
Securities of GBB Capital III (the "Trust"), with an aggregate stated
liquidation amount with respect to the assets of the Trust of Nine Million Five
Hundred Thousand ($9,500,000) and a stated liquidation amount with respect to
the assets of the Trust of $1,000 per Capital Security, are hereby designated
for the purposes of identification only as the "Fixed Rate Capital Trust Pass-
through Securities"(R) (the "Capital Securities"). The Capital Security
Certificates evidencing the Capital Securities shall be substantially in the
form of Exhibit A-1 to the Declaration, with such changes and additions thereto
or deletions therefrom as may be required by ordinary usage, custom or practice
or to conform to the rules of any stock exchange on which the Capital Securities
are listed, if any.
(b) Common Securities. 294 Common Securities of the Trust (the "Common
Securities") will be evidenced by Common Security Certificates substantially in
the form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.
2. Distributions. (a) Distributions payable on each Security will
-------------
be payable at an annual rate equal to 10 7/8% (the "Coupon Rate") of the stated
liquidation amount of $1,000 per Security, such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee. Except as set
forth below in respect of an Extension Period, Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions and any such
compounded distributions payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of Distributions payable for any period
will be computed for any full semi-annual period on the basis of a 360-day year
of twelve 30-day months.
(b) Distributions on the Securities will be cumulative, will accrue
from the date of original issuance, and will be payable, subject to extension of
distribution payment periods as described herein, semi-annually in arrears on
March 8 and September 8 of each year, commencing on September 8, 2000 (each, a
"Distribution Payment Date") when, as and if available for payment. The
Debenture Issuer has the right under the Indenture to defer payments of interest
on the Debentures by extending the interest payment period for up to 10
consecutive semi-annual periods (each, an "Extension Period") at any time and
from time to time on the
I-1
<PAGE>
Debentures, subject to the conditions described below, although such interest
would continue to accrue on the Debentures, and interest will accrue on such
Deferred Interest at an annual rate equal to 10 7/8%, compounded semi-annually
to the extent permitted by law during any Extension Period. No Extension Period
may end on a date other than a Distribution Payment Date. At the end of any such
Extension Period the Debenture Issuer shall pay all Deferred Interest; provided,
--------
however, that no Extension Period may extend beyond the Maturity Date and
- -------
provided further, that, during any such Extension Period, the Debenture Issuer
- -------- -------
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
Debenture Issuer's capital stock, (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Debenture Issuer that rank pari passu in all respects with or
junior in interest to the Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Debenture Issuer of the debt securities of any
subsidiary of the Debenture Issuer (including all guarantees, other than the
Guarantee, issued by the Debenture Issuer with respect to the preferred
beneficial interests, if any, issued to trusts other than the Trust to be issued
by the Debenture Issuer, if any, in each case similar to the Trust) (other than
(a) repurchases, redemptions or other acquisitions of shares of capital stock of
the Debenture Issuer in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend reinvestment
or stockholder stock purchase plan or in connection with the issuance of capital
stock of the Debenture Issuer (or securities convertible into or exercisable for
such capital stock) as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Debenture Issuer's capital stock (or
any capital stock of a subsidiary of the Debenture Issuer) for any class or
series of the Debenture Issuer's capital stock or of any class or series of the
Debenture Issuer's indebtedness for any class or series of the Debenture
Issuer's capital stock, (c) the purchase of fractional interests in shares of
the Debenture Issuer's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any stockholder's rights
plan, or the issuance of rights, stock or other property under any stockholder's
rights plan, or the redemption or repurchase of rights pursuant thereto, or (e)
any dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
Extension Period, the Debenture Issuer may further extend such period, provided
that such period together with all such previous and further consecutive
extensions thereof shall not exceed 10 consecutive semi-annual periods, or
extend beyond the Maturity Date. Upon the termination of any Extension Period
and upon the payment of all Deferred Interest, the Debenture Issuer may commence
a new Extension Period, subject to the foregoing requirements. No interest or
Deferred Interest shall be due and payable during an Extension Period, except at
the end thereof, but each installment of interest that would otherwise have been
due and payable during such Extension Period shall bear Deferred Interest. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, or, if such date is not a Distribution
Payment Date, on the immediately following Distribution Payment Date, to Holders
of the Securities as they appear on the books and records of the Trust on the
record date immediately preceding such date. Distributions on the Securities
must be paid on the dates payable (after giving effect to any Extension Period)
to the extent that
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the Trust has funds available for the payment of such distributions in the
Property Account of the Trust. The Trust's funds available for Distribution to
the Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be selected by the
Administrators, which dates shall be 15 days before the relevant payment dates.
Distributions payable on any Securities that are not punctually paid on any
Distribution Payment Date, as a result of the Debenture Issuer having failed to
make a payment under the Debentures, as the case may be, when due (taking into
account any Extension Period), will cease to be payable to the Person in whose
name such Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name such
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on which Distributions
are payable on the Securities is not a Business Day, then payment of the
Distribution 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 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 such payment date.
(d) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed pro rata (as defined herein) among the Holders of the Securities.
3. Liquidation Distribution Upon Dissolution. In the event of the
-----------------------------------------
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each, a "Liquidation") other than in connection with a redemption of
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation amount of $1,000 per Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless in connection with such Liquidation, the Debentures in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Coupon Rate of,
and bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on, and having the same record date as, such Securities,
after paying or making reasonable provision to pay all claims and obligations of
the Trust in accordance with Section 3808(e) of the Business Trust Act, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange for
such Securities.
The Sponsor, as the Holder of all of the Common Securities, has the
right at any time to dissolve the Trust (including without limitation upon the
occurrence of a Tax Event, an Investment Company Event or a Capital Treatment
Event), subject to the receipt by the Debenture Issuer of prior approval from
the Board of Governors of the Federal Reserve System (the "Federal Reserve"), if
then required under applicable capital guidelines or policies of the Federal
Reserve and, after satisfaction of liabilities to creditors of the Trust, cause
the
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<PAGE>
Debentures to be distributed to the Holders of the Securities on a Pro Rata
basis in accordance with the aggregate stated liquidation amount thereof.
The Trust shall dissolve on the first to occur of (i) March 8, 2055,
the expiration of the term of the Trust, (ii) a Bankruptcy Event with respect to
the Sponsor, Trust or the Debenture Issuer, (iii) (other than in connection with
a merger, consolidation or similar transaction not prohibited by the Indenture,
this Declaration or the Guarantee, as the case may be) upon the revocation of
the charter of the Sponsor and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) the distribution to the Holders
of the Securities of the Debentures, upon exercise of the right of the Holder of
all of the outstanding Common Securities to dissolve the Trust as described
above, (v) the entry of a decree of a judicial dissolution of the Sponsor or the
Trust, or (vi) when all of the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been paid to the
Holders in accordance with the terms of the Securities. As soon as practicable
after the dissolution of the Trust and upon completion of the winding up of the
Trust, the Trust shall terminate upon the filing of a certificate of
cancellation with the Secretary of State of the State of Delaware.
If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in the immediately preceding paragraph, the Trust shall be
liquidated by the Trustees of the Trust as expeditiously as such Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust, to the Holders of the Securities, the Debentures on a
Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such
distribution is determined by the Institutional Trustee not to be practical, in
which event such Holders will be entitled to receive out of the assets of the
Trust available for distribution to the Holders, after satisfaction of
liabilities of creditors of the Trust to the extent not satisfied by the
Debenture Issuer, an amount equal to the Liquidation Distribution. An early
Liquidation of the Trust pursuant to clause (iv) above shall occur if the
Institutional Trustee determines that such Liquidation is possible by
distributing, after satisfaction of liabilities to creditors of Trust, to the
Holders of the Securities on a Pro Rata basis, the Debentures, and such
distribution occurs.
If, upon any such Liquidation 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 the amounts payable directly by the
Trust on such Capital Securities shall be paid to the Holders of the Trust
Securities on a pro rata basis, except that if an Event of Default has occurred
and is continuing, the Capital Securities shall have a preference over the
Common Securities with regard to such distributions.
Upon any such Liquidation of the Trust involving a distribution of the
Debentures, if at the time of such Liquidation, the Capital Securities were
rated by at least one nationally-recognized statistical rating organization, the
Debenture Issuer will use its reasonable best efforts to obtain from at least
one such or other rating organization a rating for the Debentures.
After the date for any distribution of the Debentures upon dissolution
of the Trust, (i) the Securities of the Trust will be deemed to be no longer
outstanding, and (ii) any certificates representing the Capital Securities will
be deemed to represent undivided beneficial interests in
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such of the Debentures as have an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
distribution rate of, and bearing accrued and unpaid interest equal to accrued
and unpaid distributions on, the Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or reissuance.
4. Redemption and Distribution.
---------------------------
(a) The Debentures will mature on March 8, 2030. The Debentures may
be redeemed by the Debenture Issuer, in whole or in part, on any March 1 or
September 1 on or after March 8, 2010, at the Redemption Price, upon not less
than 30 days nor more than 60 day's notice to Holders of such Debentures. In
addition, upon the occurrence and continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event, the Debentures may be redeemed by
the Debenture Issuer in whole or in part, at any time within 90 days following
the occurrence of such Tax Event, Investment Company Event or Capital Treatment
Event, as the case may be (the "Special Redemption Date"), at the Special
Redemption Price , upon not less than 30 nor more than 60 days' notice to
Holders of such Debentures so long as such Tax Event, Investment Company Event
or Capital Treatment Event, as the case may be, is continuing. In each case,
the right of the Debenture Issuer to redeem the Debentures is subject to the
Debenture Issuer having received prior approval from the Federal Reserve, if
then required under applicable capital guidelines or policies of the Federal
Reserve.
"Tax Event" means the receipt by the Debenture Issuer and the Trust of
an opinion of counsel experienced in such matters to the effect that, as a
result of any amendment to or change (including any announced prospective
change) in the laws or any regulations thereunder of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action")) or judicial decision
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Debenture Issuer or the Trust and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of issuance of the Debentures, there is more than an
insubstantial risk that: (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Debentures; (ii) interest payable by the
Debenture Issuer on the Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Debenture Issuer, in whole or in part,
for United States federal income tax purposes; or (iii) the Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Investment Company Event" means the receipt by the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or written change (including
any announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" that is required to be registered under the
Investment
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Company Act of 1940, as amended which change or prospective change becomes
effective or would become effective, as the case may be, on or after the date of
the issuance of the Debentures.
"Capital Treatment Event" means the receipt by the Trust of an opinion
of counsel experienced in such matters to the effect that, as a result of the
occurrence of any amendment to, or change (including any announced prospective
change) in, the laws of the United States or any political subdivision thereof
or therein, or as the result of any official or administrative pronouncement or
action or decision interpreting or applying such laws, rules or regulations,
which amendment or change is effective or which pronouncement, action or
decision is announced on or after the date of issuance of the Debentures, there
is more than an insubstantial risk that the Debenture Issuer will not be
entitled to treat an amount equal to the aggregate Liquidation Amount of the
Debentures as "Tier I Capital" (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve, as then in effect and
applicable to the Debenture Issuer; provided, however, that the distribution of
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the Debentures in connection with the Liquidation of the Trust by the Debenture
Issuer shall not in and of itself constitute a Capital Treatment Event unless
such Liquidation shall have occurred in connection with a Tax Event or an
Investment Company Event.
"Special Event" means any of a Capital Treatment Event, a Tax Event or
an Investment Company Event.
"Redemption Price" means the price set forth in the following table
for any Redemption Date or Special Redemption Date that occurs within the
twelve-month period beginning in the relevant year indicated below, expressed in
percentage of the principal amount of the Debt Securities being redeemed:
Year Percentage
---- ----------
March 8, 2010 105.438
March 8, 2011 104.894
March 8, 2012 104.350
March 8, 2013 103.806
March 8, 2014 103.263
March 8, 2015 102.719
March 8, 2016 102.175
March 8, 2017 101.631
March 8, 2018 101.088
March 8, 2019 100.544
March 8, 2020 and after 100.000
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<PAGE>
plus accrued and unpaid interest on such Debentures to the Redemption
Date or, in the case of a redemption due to the occurrence of a Special Event,
to the Special Redemption Date.
"Special Redemption Price" means (1) if the Special Redemption Date is
before March 8, 2010, the greater of (a) 100% of the principal amount of the
Debentures being redeemed or (b) as determined by a Quotation Agent, the sum of
the present values of scheduled payments of principal and interest from the
Special Redemption Date to March 8, 2010 (the "Remaining Life") discounted to
the Special Redemption Date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate plus 0.45%, plus, in
the case of either (a) or (b), accrued and unpaid interest on such Debentures to
the Special Redemption Date and (2) if the Special Redemption Date is on or
after March 8, 2010, the Redemption Price for such Special Redemption Date.
"Comparable Treasury Issue" means with respect to any Special
Redemption Date the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life 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 to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
March 8, 2010, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.
"Comparable Treasury Price" means (a) the average of five Reference
Treasury Dealer Quotations for such Special Redemption Date, after excluding the
highest and lowest such Reference Treasury Dealer Quotations, or (b) if the
Quotation Agent obtains fewer than five such Reference Treasury Dealer
Quotations, the average of all such Quotations.
"Primary Treasury Dealer" shall mean a primary United States
Government securities dealer in New York City.
"Quotation Agent" means Salomon Smith Barney, Inc. and its successors;
provided, however, that if the foregoing shall cease to be a primary United
States Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Debenture Issuer shall substitute therefor another Primary
Treasury Dealer.
"Redemption Date" shall mean the date fixed for the redemption of
Capital Securities, which shall be any March 8 or September 8 commencing on
March 8, 2010.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Debenture Trustee after
consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Quotation Agent, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference
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<PAGE>
Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day
preceding such Redemption Date.
"Treasury Rate" means (i) the yield, under the heading which
represents the average for the week immediately prior to the date of
calculation, 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 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 Special Redemption Date. The
Treasury Rate shall be calculated on the third Business Day preceding the
Special Redemption Date.
(b) Upon the repayment in full at maturity or redemption in whole or
in part of the Debenture (other than following the distribution of the Debenture
to the Holders of the Securities), the proceeds from such repayment or payment
shall concurrently be applied to redeem Pro Rata at the applicable Redemption
Price, Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Debenture so repaid or redeemed; provided, however, that
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holders of such Securities shall be given not less than 30 nor more than 60
days' notice of such redemption (other than at the scheduled maturity of the
Debenture).
(c) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be as described in Section
4(e)(ii) below.
(d) The Trust may not redeem fewer than all the outstanding Capital
Securities unless all accrued and unpaid Distributions have been paid on all
Capital Securities for all semi-annual Distribution periods terminating on or
before the date of redemption.
(e) Redemption or Distribution Procedures.
(i) Notice of any redemption of, or notice of distribution of the
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder of Securities to
be redeemed or exchanged not fewer than 30 nor more than 60 days before the
date fixed for redemption or exchange thereof which, in the case of a
redemption, will be the date fixed for redemption of the Debentures. For
purposes of the calculation of the date of redemption or exchange and the
dates on which notices are given pursuant to this Section 4(e)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
such Securities. Each Redemption/Distribution Notice shall be addressed to
the Holders of such Securities at
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<PAGE>
the address of each such Holder appearing on the books and records of the
Trust. No defect in the Redemption/Distribution Notice or in the mailing
thereof with respect to any Holder shall affect the validity of the
redemption or exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be redeemed shall be
redeemed Pro Rata from each Holder of Capital Securities.
(iii) If the Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this Section 4 (which notice will be
irrevocable), then, provided that the Institutional Trustee has a
sufficient amount of cash in connection with the related redemption or
maturity of the Debentures, the Institutional Trustee will pay the relevant
Redemption Price to the Holders of such Securities by check mailed to the
address of each such Holder appearing on the books and records of the Trust
on the redemption date. If a Redemption/Distribution Notice shall have
been given and funds deposited as required then immediately prior to the
close of business on the date of such deposit Distributions will cease to
accrue on the Securities so called for redemption and all rights of Holders
of such Securities so called for redemption will cease, except the right of
the Holders of such Securities to receive the applicable Redemption Price
specified in Section 4(a), but without interest on such Redemption Price.
If any date fixed for redemption of Securities is not a Business Day, then
payment of any such 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 fixed for redemption. If payment of the
Redemption Price in respect of any Securities is improperly withheld or
refused and not paid either by the Trust or by the Debenture Issuer as
guarantor pursuant to the Guarantee, Distributions on such Securities will
continue to accrue at the then applicable rate from the original redemption
date to the actual date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of
calculating the Redemption Price. In the event of any redemption of the
Capital Securities issued by the Trust in part, the Trust shall not be
required to (i) issue, register the transfer of or exchange any Security
during a period beginning at the opening of business 15 days before any
selection for redemption of the Capital Securities and ending at the close
of business on the earliest date on which the relevant notice of redemption
is deemed to have been given to all Holders of the Capital Securities to be
so redeemed or (ii) register the transfer of or exchange any Capital
Securities so selected for redemption, in whole or in part, except for the
unredeemed portion of any Capital Securities being redeemed in part.
(iv) Redemption/Distribution Notices shall be sent by the
Administrators on behalf of the Trust (A) in respect of the Capital
Securities, to the Holders thereof, and (B) in respect of the Common
Securities, to the Holder thereof.
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<PAGE>
(v) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), and provided
that the acquiror is not the Holder of the Common Securities or the obligor
under the Indenture, the Sponsor or any of its subsidiaries may at any time
and from time to time purchase outstanding Capital Securities by tender, in
the open market or by private agreement.
5. Voting Rights - Capital Securities. (a) Except as provided
----------------------------------
under Sections 5(b) and 7 and as otherwise required by law and the Declaration,
the Holders of the Capital Securities will have no voting rights. The
Administrators are required to call a meeting of the Holders of the Capital
Securities if directed to do so by Holders of at least 10% in liquidation amount
of the Capital Securities.
(b) Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available under the Indenture as the holder of the Debentures, (ii) waive any
past default that is waivable under the Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable or (iv) consent on behalf of all the Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required; provided, however, that, where
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a consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in principal amount of Debentures (a
"Super Majority") affected thereby, the Institutional Trustee may only give such
consent or take such action at the written direction of the Holders of at least
the proportion in liquidation amount of the Capital Securities outstanding which
the relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. If the Institutional Trustee fails to enforce its rights
under the Debentures after the Holders of a Majority in liquidation amount of
such Capital Securities have so directed the Institutional Trustee, to the
fullest extent permitted by law, a Holder of the Capital Securities may
institute a legal proceeding directly against the Debenture Issuer to enforce
the Institutional Trustee's rights under the Debentures without first
instituting any legal proceeding against the Institutional Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Debenture Issuer to pay interest or principal on the Debentures on the date the
interest or principal is payable (or in the case of redemption, the redemption
date), then a Holder of record of the Capital Securities may directly institute
a proceeding for enforcement of payment, on or after the respective due dates
specified in the Debentures, to such Holder directly of the principal of or
interest on the Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of the Capital Securities of such Holder. The
Institutional Trustee shall notify all Holders of the Capital Securities of any
default actually known to the Institutional Trustee with respect to the
Debentures unless (x) such default has been cured prior to the giving of such
notice or (y) the Institutional Trustee determines in good faith that the
withholding of such notice is in the interest of the Holders of such Capital
Securities, except where the default relates to the payment of principal of or
interest on any of the Debentures. Such notice shall state that such Indenture
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<PAGE>
Event of Default also constitutes an Event of Default hereunder. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the Institutional Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder
of the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the direction of the Holders of the Securities with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided, however,
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that where a consent under the Indenture would require the consent of a Super
Majority, the Institutional Trustee may only give such consent at the direction
of the Holders of at least the proportion in liquidation amount of such Trust
Securities outstanding which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of the
Holders of the Securities unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of
the corresponding Event of Default hereunder. Any required approval or direction
of Holders of the Capital Securities may be given at a separate meeting of
Holders of the Capital Securities convened for such purpose, at a meeting of all
of the Holders of the Securities in the Trust or pursuant to written consent.
The Institutional Trustee will cause a notice of any meeting at which Holders of
the Capital Securities are entitled to vote, or of any matter upon which action
by written consent of such Holders is to be taken, to be mailed to each Holder
of record of the Capital Securities. Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the Holders of
the Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.
Notwithstanding that Holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall, for purposes
of such vote or consent, be treated as if such Capital Securities were not
outstanding.
In no event will Holders of the Capital Securities have the right to
vote to appoint, remove or replace the Administrators, which voting rights are
vested exclusively in the Sponsor as the Holder of all of the Common Securities
of the Trust. Under certain circumstances as more
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fully described in the Declaration, Holders of Capital Securities have the right
to vote to appoint, remove or replace the Institutional Trustee and the Delaware
Trustee.
6. Voting Rights - Common Securities. (a) Except as provided under
---------------------------------
Sections 6(b), 6(c) and 7 and as otherwise required by law and the Declaration,
the Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance
with Article VI of the Declaration, to vote to appoint, remove or replace any
Administrators.
(c) Subject to Section 6.7 of the Declaration and only after each
Event of Default (if any) with respect to the Capital Securities has been cured,
waived or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under the Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures shall
be due and payable, provided, however, that, where a consent or action under the
-------- -------
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Notwithstanding this Section 6(c), the Institutional
Trustee shall not revoke any action previously authorized or approved by a vote
or consent of the Holders of the Capital Securities. Other than with respect to
directing the time, method and place of conducting any proceeding for any remedy
available to the Institutional Trustee or the Debenture Trustee as set forth
above, the Institutional Trustee shall not take any action described in (i),
(ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of
tax counsel to the effect that for the purposes of United States federal income
tax the Trust will not be classified as other than a grantor trust on account of
such action. If the Institutional Trustee fails to enforce its rights under the
Declaration to the fullest extent permitted by law, any Holder of the Common
Securities may institute a legal proceeding directly against any Person to
enforce the Institutional Trustee's rights under the Declaration, without first
instituting a legal proceeding against the Institutional Trustee or any other
Person.
Any approval or direction of Holders of the Common Securities may be
given at a separate meeting of Holders of the Common Securities convened for
such purpose, at a meeting of all of the Holders of the Securities in the Trust
or pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of the Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such
I-12
<PAGE>
Holders are entitled to vote or of such matter upon which written consent is
sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. Amendments to Declaration and Indenture. (a) In addition to any
---------------------------------------
requirements under Section 11.1 of the Declaration, if any proposed amendment to
the Declaration provides for, or the Trustees otherwise propose to effect, (i)
any action that would adversely affect the powers, preferences or special rights
of the Securities, whether by way of amendment to the Declaration or otherwise,
or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of
the Declaration, then the Holders of outstanding Securities, voting together as
a single class, will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of the
Holders of at least a Majority in liquidation amount of the Securities, affected
thereby; provided, however, if any amendment or proposal referred to in clause
-------- -------
(i) above would adversely affect only the Capital Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Institutional Trustee as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
-------- -------
a Super Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding.
(c) Notwithstanding the foregoing, no amendment or modification may be
made to a Declaration if such amendment or modification would (i) cause the
Trust to be classified for purposes of United States federal income taxation as
other than a grantor trust, (ii) reduce or otherwise adversely affect the powers
of the Institutional Trustee or (iii) cause the Trust to be deemed an
"investment company" which is required to be registered under the Investment
Company Act.
(d) Notwithstanding any provision of the Declaration, the right of any
Holder of the Capital Securities to receive payment of distributions and other
payments upon redemption or otherwise, on or after their respective due dates,
or to institute a suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder. For the protection and enforcement of the foregoing provision, each and
every Holder of the Capital Securities shall be entitled to such relief as can
be given either at law or equity.
I-13
<PAGE>
8. Pro Rata. A reference in these terms of the Securities to any
--------
payment, distribution or treatment as being "Pro Rata" shall mean pro rata to
each Holder of the Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Capital Securities Pro Rata according to the aggregate liquidation amount of the
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities outstanding.
9. Ranking. The Capital Securities rank pari passu with and payment
-------
thereon shall be made Pro Rata with the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price of, any Common Security, and no other
payment on account of redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all outstanding Capital Securities for all distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all outstanding
Capital Securities then called for redemption, shall have been made or provided
for, and all funds immediately available to the Institutional Trustee shall
first be applied to the payment in full in cash of all Distributions on, or the
Redemption Price of, the Capital Securities then due and payable.
10. Acceptance of Guarantee and Indenture. Each Holder of the
-------------------------------------
Capital Securities and the Common Securities, by the acceptance of such
Securities, agrees to the provisions of the Guarantee, including the
subordination provisions therein and to the provisions of the Indenture.
11. No Preemptive Rights. The Holders of the Securities shall have
--------------------
no preemptive or similar rights to subscribe for any additional securities.
12. Miscellaneous. These terms constitute a part of the Declaration.
-------------
The Sponsor will provide a copy of the Declaration, the Guarantee, and the
Indenture to a Holder without charge on written request to the Sponsor at its
principal place of business.
I-14
<PAGE>
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF 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 OR 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 ONLY (A) TO THE DEBENTURE ISSUER OR THE TRUST, (B)
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, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN
"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 (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE DEBENTURE
ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (C) OR (D) 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 DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY AGREES THAT IT
WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION MAY BE
REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.
A-1-1
<PAGE>
Certificate Number P-1 Number of Capital Securities 9,500
CUSIP NO ___________
Certificate Evidencing Capital Securities
of
GBB Capital III
Fixed Rate Capital Pass-through Securities(R) (TruPS(R))
(liquidation amount $1,000 per Capital Security)
GBB Capital III, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that ______________ (the
"Holder") is the registered owner of securities of the Trust representing
undivided beneficial interests in the assets of the Trust, designated the Fixed
Rate Capital Trust Pass-through Securities(R) (liquidation amount $1,000 per
Capital Security) (the "Capital Securities"). Subject to the Declaration (as
defined below), 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. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities represented hereby are issued pursuant to, and shall in
all respects be subject to, the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of March 23, 2000, among [__________]
and [__________], as Administrators, The Bank of New York (Delaware), as
Delaware Trustee, The Bank of New York, as Institutional Trustee, Greater Bay
Bancorp, as Sponsor, and the holders from time to time of undivided beneficial
interests in the assets of the Trust, including the designation of the terms of
the Capital Securities as set forth in Annex I to the Declaration, as the same
may be amended from time to time (the "Declaration"). Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration. The
Holder is entitled to the benefits of the Guarantee to the extent provided
therein. The Sponsor will provide a copy of the Declaration, the Guarantee, and
the Indenture to the Holder without charge upon written request to the Trust at
its principal place of business.
Upon receipt of this Security, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.
This Capital Security is governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to principles of
conflict of laws.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Trust has duly executed this certificate.
GBB CAPITAL III
By:________________________________
Name:
Title: Administrator
Dated:_____________________________
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Capital Securities referred to in the within-
mentioned Declaration.
THE BANK OF NEW YORK, as the
Institutional Trustee
By:________________________________
Authorized Officer
Dated:_____________________________
A-1-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be payable at an
annual rate of 10 7/8% (the "Coupon Rate") of the stated liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Except as set forth below in
respect of an Extension Period, Distributions in arrears for more than a semi-
annual period will bear interest thereon compounded semi-annual at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions" as
used herein includes cash distributions, any such compounded interest and any
Additional Interest payable on the Debentures unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds available therefor. The amount of Distributions
payable for any period will be computed for any full semi-annual Distribution
period on the basis of a 360-day year of twelve 30-day months.
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable semi-annually in arrears on March 8 and September 8 of each
year, commencing on September 8, 2000. The Debenture Issuer has the right under
the Indenture to defer payments of interest on the Debentures by extending the
interest payment period for up to 10 consecutive semi-annual periods (each, an
"Extension Period") at any time and from time to time on the Debentures, subject
to the conditions described below, although such interest would continue to
accrue on the Debentures, and Interest will accrue on such Deferred Interest, at
an annual rate equal to 10 7/8%, compounded semi-annually to the extent
permitted by law during any Extension Period. No Extension Period may end on a
date other than a Distribution Payment Date. At the end of any such Extension
Period the Debenture Issuer shall pay all Deferred Interest then accrued and
unpaid on the Debentures; provided however, that no Extension Period may extend
-------- -------
beyond the Maturity Date. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 10 consecutive semi-annual periods, or extend beyond the Maturity
Date. Upon the termination of any Extension Period and upon the payment of all
Deferred Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Deferred Interest shall be
due and payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Deferred Interest. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, or, if such date is not a Distribution Payment
Date, on the immediately following Distribution Payment Date, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date. Distributions on the Securities must be
paid on the dates payable (after giving effect to any Extension Period) to the
extent that the Trust has funds available for the payment of such distributions
in the Property Account of the Trust. The Trust's funds available for
Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
A-1-4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:
____________________
____________________
____________________
(Insert assignee's social security or tax identification number)
____________________
____________________
____________________
(Insert address and zip code of assignee), and irrevocably appoints ___________
as 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)
Signature Guarantee:/1/_____________________________
______________________________
/1/ Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-1-5
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.
THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED.
Certificate Number c-1 Number of Common Securities 249
Certificate Evidencing Common Securities
of
GBB Capital III
GBB Capital III, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby certifies that [__________] (the
"Holder") is the registered owner of common securities of the Trust representing
undivided beneficial interests in the assets of the Trust (the "Common
Securities"). The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Common Securities represented hereby are
issued pursuant to, and shall in all respects be subject to, the provisions of
the Amended and Restated Declaration of Trust of the Trust dated as of March 23,
2000, among [__________] and [__________], as Administrators, The Bank of New
York (Delaware), as Delaware Trustee, The Bank of New York, as Institutional
Trustee, Greater Bay Bancorp as Sponsor and the holders from time to time of
undivided beneficial interest in the assets of the Trust including the
designation of the terms of the Common Securities as set forth in Annex I to the
Declaration, as the same may be amended from time to time (the "Declaration").
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The Holder is entitled to the benefits of the Guarantee to
the extent provided therein. The Sponsor will provide a copy of the Declaration,
the Guarantee and the Indenture to the Holder without charge upon written
request to the Sponsor at its principal place of business.
As set forth in the Declaration, where an Event of Default has
occurred and continuing, the rights of Holders of Common securities to payment
in respect of Distributions and payments upon Liquidation, redemption or
otherwise are subordinated to the rights of payment of Holders of the Capital
Securities.
Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance of this Certificate, the Holder agrees to treat, for
United States federal income tax purposes, the Debentures as indebtedness and
the Common Securities as evidence of undivided beneficial ownership in the
Debentures.
A-2-1
<PAGE>
This Common Security is governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to principles of conflict of
laws.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this 23rd
day of March, 2000.
GBB CAPITAL III
By:______________________________
Name:
Title: Administrator
A-2-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be payable at an
annual rate of 10 7/8% (the "Coupon Rate") of the stated liquidation amount of
$1,000 per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Except as set forth below in
respect of an Extension Period, Distributions in arrears for more than a semi-
annual period will bear interest thereon compounded semi-annual at the Coupon
Rate (to the extent permitted by applicable law). The term "Distributions" as
used herein includes cash distributions, any such compounded interest and any
Additional Interest payable on the Debentures unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds available therefor. The amount of Distributions
payable for any period will be computed for any full semi-annual Distribution
period on the basis of a 360-day year of twelve 30-day months.
Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable semi-annually in arrears on March 8 and September 8 of each
year, commencing on September 8, 2000. The Debenture Issuer has the right under
the Indenture to defer payments of interest on the Debentures by extending the
interest payment period for up to 10 consecutive semi-annual periods (each, an
"Extension Period") at any time and from time to time on the Debentures, subject
to the conditions described below, although such interest would continue to
accrue on the Debentures, and Interest will accrue on such Deferred Interest, at
an annual rate equal to 10 7/8%, compounded semi-annually to the extent
permitted by law during any Extension Period. No Extension Period may end on a
date other than a Distribution Payment Date. At the end of any such Extension
Period the Debenture Issuer shall pay all Deferred Interest then accrued and
unpaid on the Debentures; provided however, that no Extension Period may extend
-------- -------
beyond the Maturity Date. Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 10 consecutive semi-annual periods, or extend beyond the Maturity
Date. Upon the termination of any Extension Period and upon the payment of all
Deferred Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Deferred Interest shall be
due and payable during an Extension Period, except at the end thereof, but each
installment of interest that would otherwise have been due and payable during
such Extension Period shall bear Deferred Interest. If Distributions are
deferred, the Distributions due shall be paid on the date that the related
Extension Period terminates, or, if such date is not a Distribution Payment
Date, on the immediately following Distribution Payment Date, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date. Distributions on the Securities must be
paid on the dates payable (after giving effect to any Extension Period) to the
extent that the Trust has funds available for the payment of such distributions
in the Property Account of the Trust. The Trust's funds available for
Distribution to the Holders of the Securities will be
A-2-4
<PAGE>
limited to payments received from the Debenture Issuer. The payment of
Distributions out of moneys held by the Trust is guaranteed by the Guarantor
pursuant to the Guarantee.
The Capital Securities shall be redeemable as provided in the
Declaration.
A-2-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:
___________________
___________________
___________________
(Insert assignee's social security or tax identification number)
___________________
___________________
___________________
(Insert address and zip code of assignee), and irrevocably appoints
___________ as 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)
Signature Guarantee:/2/
______________________________
/2/ Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-6
<PAGE>
EXHIBIT B
FORM OF TRANSFEREE CERTIFICATE
TO BE EXECUTED BY TRANSFEREES OTHER THAN QIBS
__________, [ ]
[Sponsor].
[Trust]
[Address]
Re: Purchase of $1,000 stated liquidation amount of Fixed Rate Capital Trust
Pass-through Securities(R) (TruPS)(R)(the "Capital Securities") of
------------------------------------------------------------------------
[Trust]
-------
Ladies and Gentlemen:
In connection with our purchase of the Capital Securities we confirm
that:
1. We understand that the Fixed Rate Capital Trust Pass-through
Securities(SM) (the "Capital Securities") (including the guarantee (the
"Guarantee") of [__________] ("[___________]") executed in connection therewith)
and the Fixed Rate Junior Subordinated Deferrable Interest Debentures due 2030
(the "Subordinated Debt Securities") of [________] (the "Company") (the Capital
Securities, the Guarantee and the Subordinated Debt Securities together being
referred to herein as "Offered Securities"), have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered or sold except as permitted in the following sentence. We agree on our
own behalf and on behalf of any investor account for which we are purchasing the
Offered Securities that, if, we decide to offer, sell or otherwise transfer any
such Offered Securities, such offer, sale or transfer will be made only (a) to
[_________] or [________], (b) pursuant to Rule 144A under the Securities Act,
to a person we reasonably believe is a qualified institutional buyer under Rule
144A (a "QIB") that purchases for its own account or for the account of a QIB
and to whom notice is given that the transfer is being made in reliance on Rule
144A, (c) to an "accredited investor" with the meaning of subparagraph (a) (1),
(2), (3) or (7) of Rule 501 under the Securities Act that is acquiring Offered
Securities for its own account or for the account of such an accredited investor
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of the Securities Act, or
(d) pursuant to another available exemption from the registration requirements
of the Securities Act, subject in each of the foregoing cases to any
requirements of law that the disposition of our property or compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Offered Securities is proposed to be made pursuant to
clause (c) or (d) above the transferor shall deliver a letter from the
transferee substantially in the form of this letter to [________________] as
Transfer Agent, which shall provide as applicable, among other things, that the
transferee is an "accredited investor" within the meaning of subparagraph (a)
(1), (2), (3) or (7) of Rule 501 under the Securities Act that is acquiring such
Securities for investment purposes and not for distribution in violation of the
Securities Act. We acknowledge on our behalf and on behalf of any investor
account for which we are purchasing Securities that the [______] and
[__________]
B-1
<PAGE>
reserve the right prior to any offer, sale or other transfer pursuant to clauses
(d) or (e) to require the delivery of any opinion of counsel, certifications
and/or other information satisfactory to the Trust and the Company. We
understand that the certificates for any Offered Security that we receive will
bear a legend substantially to the effect of the foregoing.
2. We are an "accredited investor" with the meaning of subparagraph
(a) (1), (2), (3) or (7) of Rule 501 under the Securities Act purchasing for our
own account or for the account of such an "accredited investor," and we are
acquiring the Offered Securities for the investment purposes and not with view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act and 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 Offered Securities, and we and any account for which we are
acting are each able to bear the economic risks of our or its investment.
3. We are acquiring the Offered Securities purchased by us for our
own account (or for one or more accounts as to each of which we exercise sole
investment discretion and have authority to make, and do make, the statements
contained in this letter) and not with a view to any distribution of the Offered
Securities, subject, nevertheless, to the understanding that the disposition of
our property will at all times be and remain within our control.
4. In the event that we purchase any Capital Securities or any
Subordinated Debt Securities, we will acquire such Capital Securities having an
aggregate stated liquidation amount of not less than $1,000 or such Subordinated
Debt Securities having an aggregate principal amount not less than $1,000, for
our own account and for each separate account for which we are acting.
5. We acknowledge that we either (A) are not a fiduciary of a
pension, profit-sharing or other employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (a "Plan"), or an
entity whose assets include "plan assets" by reason of any Plan's investment in
the entity and are not purchasing the Offered Securities on behalf of or with
"plan assets" by reason of any Plan's investment in the entity and is not
purchasing the Offered Securities on behalf of or with "plan assets" of any Plan
or (B) are eligible for the exemptive relief available under one ore more of the
following prohibited transaction class exemptions ("PTCEs") issued by the U.S.
Department of Labor: PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
6. We acknowledge that [_________] and [_______] and others will
rely upon the truth and accuracy of the foregoing acknowledges, representations,
warranties and agreements and agree that if any of the acknowledgments,
representations, warranties and agreements deemed to have been made by our
purchase of the Offered Securities are no longer accurate, we shall promptly
notify the Initial Purchasers. If we are acquiring any Offered Securities as a
fiduciary or agent for one or more investor accounts, we represent that we have
sole discretion with respect to each such investor account and that we have full
power to make the foregoing acknowledgments, representations and agreement on
behalf of each such investor account.
B-2
<PAGE>
Very truly yours,
___________________________
(Name of Purchaser)
By:________________________
Date:______________________
Upon transfer of the Offered Securities would be registered in the
name of the new beneficial owner as follows.
Name:_________________________
Address:______________________
Taxpayer ID Number:___________
B-3
<PAGE>
EXHIBIT C
FORM OF TRANSFEREE CERTIFICATE
TO BE EXECUTED FOR QIBs
__________, [ ]
[Sponsor]
[Trust]
[Address]
Re: Purchase of $1,000 stated liquidation amount of Fixed Rate Capital Trust
Pass-through Securities(R) (Trups)(R) (the "Capital Securities") of [Trust]
---------------------------------------------------------------------------
Reference is hereby made to the Amended and Restated Declaration dated
as of March 23, 2000 (the "Declaration") among [____________] and [__________],
as Administrators, The Bank of New York (Delaware), as Delaware Trustee, The
Bank of New York, as Institutional Trustee, [___________], as Sponsor, and the
holders from time to time of undivided beneficial interest in the assets of
[Trust]. Capitalized terms used but not defined herein shall have the meanings
given them in the Declaration.
This letter relates to $[_______________] aggregate liquidation amount
of Capital Securities which are held in the name of [name of transferor] (the
"Transferor").
In connection with such request, and in respect to such Capital
Securities, the transferor does hereby certify that such Capital Securities are
being transferred in accordance with (i) the transfer restrictions set forth in
the Capital Securities and (ii) Rule 144A under the United States Securities Act
of 1933, as amended ("Rule 144A"), to a transferee that the Transferor
reasonably believes is purchasing the Capital Securities for its own account or
an account with respect to which the transferee exercises sole investment
discretion and the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with applicable securities laws of
any state of the United States or any other jurisdiction.
You are entitled to rely upon this letter and 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.
______________________________________
(Name of Transferor)
By:___________________________________
Name:_________________________
Title:________________________
Date:__________________________________
C-1
<PAGE>
EXHIBIT D
SPECIMEN OF INITIAL DEBENTURE
D-1
<PAGE>
EXHIBIT E
PLACEMENT AGREEMENT
E-1
<PAGE>
Exhibit 4.4
GREATER BAY BANCORP
as Issuer
INDENTURE
Dated as of March 23, 2000
THE BANK OF NEW YORK
as Trustee
JUNIOR SUBORDINATED DEBT SECURITIES
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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Page
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Parties................................................................. 1
Recitals................................................................ 1
Authorization of Indenture.............................................. 1
Compliance with Legal Requirements...................................... 1
Purpose of and Consideration for Indenture.............................. 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.............................................. 1
Additional Interest............................................ 1
Affiliate...................................................... 1
Authenticating Agent........................................... 2
Bankruptcy Law................................................. 2
Board of Directors............................................. 2
Board Resolution............................................... 2
Business Day................................................... 2
Capital Securities............................................. 2
Capital Securities Guarantee................................... 2
Capital Treatment Event........................................ 2
Certificate.................................................... 3
Common Securities.............................................. 3
Company........................................................ 3
Comparable Treasury Issue...................................... 3
Comparable Treasury Price...................................... 3
Custodian...................................................... 3
Debt Security or Debt Securities............................... 3
Debt Security Register......................................... 3
Declaration.................................................... 3
Default........................................................ 4
Defaulted Interest............................................ 4
Deferred Interest.............................................. 4
Event of Default............................................... 4
Extension Period............................................... 4
Federal Reserve................................................ 4
Finance Subsidiary............................................. 4
Indenture...................................................... 5
Institutional Trustee.......................................... 5
Interest Payment Date.......................................... 5
Interest Rate.................................................. 5
Investment Company Event....................................... 5
Liquidation Amount............................................. 5
Maturity Date.................................................. 5
Officers' Certificate.......................................... 5
</TABLE>
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<TABLE>
<S> <C>
Opinion of Counsel...................................................................... 5
outstanding............................................................................. 5
Person.................................................................................. 6
Predecessor Security.................................................................... 6
Primary Treasury Dealer................................................................. 6
Principal Office of the Trustee......................................................... 6
Quotation Agent......................................................................... 6
Redemption Date......................................................................... 6
Reference Treasury Dealer............................................................... 7
Reference Treasury Dealer Quotations.................................................... 7
Remaining Life.......................................................................... 7
Responsible Officer..................................................................... 7
Securityholder, holder of Debt Securities............................................... 7
Senior Indebtedness..................................................................... 8
Special Event........................................................................... 8
Special Redemption Date................................................................. 8
Special Redemption Price................................................................ 8
Subsidiary.............................................................................. 8
Tax Event............................................................................... 9
Treasury Rate........................................................................... 9
The Trust............................................................................... 9
Trust Indenture Act..................................................................... 9
Trust Securities........................................................................ 10
Trustee................................................................................. 10
ARTICLE II
DEBT SECURITIES
SECTION 2.01. Authentication and Dating......................................................... 10
SECTION 2.02. Form of Trustee's Certificate of Authentication................................... 11
SECTION 2.03. Form and Denomination of Debt Securities.......................................... 11
SECTION 2.04. Execution of Debt Securities...................................................... 11
SECTION 2.05. Exchange and Registration of Transfer of Debt Securities.......................... 12
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt Securities.............................. 13
SECTION 2.07. Temporary Debt Securities......................................................... 14
SECTION 2.08. Payment of Interest............................................................... 15
SECTION 2.09. Cancellation of Debt Securities Paid, etc......................................... 16
SECTION 2.10. Computation of Interest........................................................... 16
SECTION 2.11. Extension of Interest Payment Period.............................................. 16
SECTION 2.12. CUSIP Numbers..................................................................... 17
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest; Agreed Treatment
of the Debt Securities and the Capital Securities............................... 18
SECTION 3.02. Offices for Notices and Payments, etc............................................. 18
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office................................ 19
SECTION 3.04. Provision as to Paying Agent...................................................... 19
SECTION 3.05. Certificate to Trustee............................................................ 20
</TABLE>
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<TABLE>
<S> <C>
SECTION 3.06. Additional Sums................................................................... 20
SECTION 3.07. Compliance with Consolidation Provisions.......................................... 20
SECTION 3.08. Limitation on Dividends........................................................... 21
SECTION 3.09. Covenants as to the Trust......................................................... 21
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists............................................................ 22
SECTION 4.02. Preservation and Disclosure of Lists.............................................. 22
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
SECTION 5.01. Events of Default................................................................. 23
SECTION 5.02. Payment of Debt Securities on Default; Suit Therefor.............................. 25
SECTION 5.03. Application of Moneys Collected by Trustee........................................ 26
SECTION 5.04. Proceedings by Securityholders.................................................... 27
SECTION 5.05. Proceedings by Trustee............................................................ 27
SECTION 5.06. Remedies Cumulative and Continuing................................................ 27
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders..................................................... 28
SECTION 5.08. Notice of Defaults................................................................ 28
SECTION 5.09. Undertaking to Pay Costs.......................................................... 29
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee............................................ 29
SECTION 6.02. Reliance on Documents, Opinions, etc.............................................. 30
SECTION 6.03. No Responsibility for Recitals, etc............................................... 31
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or
Registrar May Own Debt Securities............................................... 32
SECTION 6.05. Moneys to be Held in Trust........................................................ 32
SECTION 6.06. Compensation and Expenses of Trustee.............................................. 32
SECTION 6.07. Officers' Certificate as Evidence................................................. 33
SECTION 6.08. Eligibility of Trustee............................................................ 33
SECTION 6.09. Resignation or Removal of Trustee................................................. 33
SECTION 6.10. Acceptance by Successor Trustee................................................... 35
SECTION 6.11. Succession by Merger, etc......................................................... 36
SECTION 6.12. Authenticating Agents............................................................. 37
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders......................................................... 38
SECTION 7.02. Proof of Execution by Securityholders............................................. 38
SECTION 7.03. Who Are Deemed Absolute Owners.................................................... 39
SECTION 7.04. Debt Securities Owned by Company Deemed Not Outstanding........................... 39
SECTION 7.05. Revocation of Consents; Future Holders Bound...................................... 39
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.............................................................. 40
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<TABLE>
<S> <C>
SECTION 8.02. Call of Meetings by Trustee....................................................... 40
SECTION 8.03. Call of Meetings by Company or Securityholders.................................... 40
SECTION 8.04. Qualifications for Voting......................................................... 41
SECTION 8.05. Regulations....................................................................... 41
SECTION 8.06. Voting............................................................................ 41
SECTION 8.07. Quorum; Actions................................................................... 42
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of Securityholders........................ 43
SECTION 9.02. Supplemental Indentures with Consent of Securityholders........................... 44
SECTION 9.03. Effect of Supplemental Indentures................................................. 45
SECTION 9.04. Notation on Debt Securities....................................................... 45
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished to
Trustee......................................................................... 45
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.01. Optional Redemption.............................................................. 46
SECTION 10.02. Special Event Redemption......................................................... 46
SECTION 10.03. Notice of Redemption; Selection of Debt Securities............................... 46
SECTION 10.04. Payment of Debt Securities Called for Redemption................................. 47
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01. Company May Consolidate, etc., on Certain Terms.................................. 47
SECTION 11.02. Successor Entity to be Substituted............................................... 48
SECTION 11.03. Opinion of Counsel to be Given to Trustee........................................ 48
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.01. Discharge of Indenture........................................................... 49
SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee.................................. 49
SECTION 12.03. Paying Agent to Repay Moneys Held................................................ 49
SECTION 12.04. Return of Unclaimed Moneys....................................................... 50
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 13.01. Indenture and Debt Securities Solely Corporate Obligations....................... 50
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.01. Successors....................................................................... 50
SECTION 14.02. Official Acts by Successor Entity................................................ 50
SECTION 14.03. Surrender of Company Powers...................................................... 51
SECTION 14.04. Addresses for Notices, etc....................................................... 51
SECTION 14.05. Governing Law.................................................................... 51
SECTION 14.06. Evidence of Compliance with Conditions Precedent................................. 51
SECTION 14.07. Non-Business Days................................................................ 52
SECTION 14.08. Table of Contents, Headings, etc................................................. 52
SECTION 14.09. Execution in Counterparts........................................................ 52
SECTION 14.10. Separability..................................................................... 52
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<S> <C>
SECTION 14.11. Assignment....................................................................... 52
SECTION 14.12. Acknowledgment of Rights......................................................... 52
ARTICLE XV
SUBORDINATION OF DEBT SECURITIES
SECTION 15.01. Agreement to Subordinate......................................................... 53
SECTION 15.02. Default on Senior Indebtedness................................................... 53
SECTION 15.03. Liquidation; Dissolution; Bankruptcy............................................. 54
SECTION 15.04. Subrogation...................................................................... 55
SECTION 15.05. Trustee to Effectuate Subordination.............................................. 56
SECTION 15.06. Notice by the Company............................................................ 56
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness............................ 57
SECTION 15.08. Subordination May Not Be Impaired................................................ 57
</TABLE>
v
<PAGE>
THIS INDENTURE, dated as of March 23, 2000, between Greater Bay
Bancorp, a bank holding company incorporated in California (hereinafter
sometimes called the "Company"), and The Bank of New York, as trustee
(hereinafter sometimes called the "Trustee"),
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issuance of its 10 7/8% Junior Subordinated Deferrable
Interest Debentures due 2030 (the "Debt Securities") under this Indenture to
provide, among other things, for the execution and authentication, delivery and
administration thereof, the Company has duly authorized the execution of this
Indenture; and
WHEREAS, all acts and things necessary to make this Indenture a valid
agreement according to its terms, have been done and performed;
NOW, THEREFORE, This Indenture Witnesseth:
In consideration of the premises, and the purchase of the Debt
Securities by the holders thereof, the Company covenants and agrees with the
Trustee for the equal and proportionate benefit of the respective holders from
time to time of the Debt Securities as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions
--------------------------
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture and of any indenture supplemental hereto shall have the
respective meanings specified in this Section 1.01. All accounting terms used
herein and not expressly defined shall have the meanings assigned to such terms
in accordance with generally accepted accounting principles and the term
"generally accepted accounting principles" means such accounting principles as
are generally accepted at the time of any computation. 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.
"Additional Interest" shall have the meaning set forth in Section
3.06.
"Affiliate" means, with respect to a specified Person, any Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with the specified Person. For purposes of this definition,
"control" when used with respect to any 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.
1
<PAGE>
"Allocable Amounts," when used with respect to any Senior
Indebtedness, means all amounts due or to become due on such Senior Indebtedness
less, if applicable, any amount which would have been paid to, and retained by,
the holders of such Senior Indebtedness (whether as a result of the receipt of
payments by the holders of such Senior Indebtedness from the Company or any
other obligor thereon or from an holders of, or trustee in respect of, other
indebtedness that is subordinate and junior in right of payment to such Senior
Indebtedness pursuant to any provision of such indebtedness for the payment over
of amounts received on account of such indebtedness to the holders of such
Senior Indebtedness or otherwise) but for the fact that such Senior Indebtedness
is subordinate or junior in right of payment to (or subject to a requirement
that amounts received on such Senior Indebtedness be paid over to obligees on)
trade accounts payable or accrued liabilities arising in the ordinary course of
business.
"Authenticating Agent" means any agent or agents of the Trustee which
at the time shall be appointed and acting pursuant to Section 6.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the board of directors or the executive
committee or any other duly authorized designated officers of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in New York City are permitted or
required by any applicable law to close.
"Capital Securities" means undivided beneficial interests in the
assets of GBB Capital III which rank pari passu with Common Securities issued by
GBB Capital III; provided, however, that upon the occurrence of an Event of
-------- -------
Default (as defined in the Declaration), the rights of holders of such Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of holders of such
Capital Securities.
"Capital Securities Guarantee" means, in respect of the guarantee that
the Company may enter into with The Bank of New York or other Persons that
operates directly or indirectly for the benefit of holders of Capital Securities
of GBB Capital III.
"Capital Treatment Event" means the receipt by the Company and the
Trust of an opinion of counsel experienced in such matters to the effect that
reasonable determination by the Company that, as a result of the occurrence of
any amendment to, or change (including any announced prospective change) in, the
laws of the United States or any political subdivision thereof or therein, or as
the result of any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of issuance of the Debt Securities, there is more than an
insubstantial risk that the Company will not
2
<PAGE>
be entitled to treat an amount equal to the aggregate Liquidation Amount of the
Debt Securities as "Tier I Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve, as then in
effect and applicable to the Company provided, however, that the distribution of
-------- -------
the Debt Securities in connection with the liquidation of the Trust by the
Company shall not in and of itself constitute a Capital Treatment Event by the
Company shall not in and of itself constitute a Capital Treatment Event unless
such liquidation shall have occurred in connection with a Tax Event or an
Investment Company Event.
"Certificate" means a certificate signed by any one of the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company.
"Common Securities" means undivided beneficial interests in the assets
of GBB Capital III which rank pari passu with Capital Securities issued by GBB
Capital III; provided, however, that upon the occurrence of an Event of Default
-------- -------
(as defined in the Declaration), the rights of holders of such Common Securities
to payment in respect of distributions and payments upon liquidation, redemption
and otherwise are subordinated to the rights of holders of such Capital
Securities.
"Company" means Greater Bay Bancorp, a bank holding company
incorporated in California, and, subject to the provisions of Article XI, shall
include its successors and assigns.
"Comparable Treasury Issue" means with respect to any Special
Redemption Date, the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life 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 to the Remaining Life. If no United States Treasury security has a
maturity which is within a period from three months before to three months after
March 8, 2010, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.
"Comparable Treasury Price" means (a) the average of five Reference
Treasury Dealer Quotations for such Special Redemption Date, after excluding the
highest and lowest 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.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Debt Security" or "Debt Securities" has the meaning stated in the
first recital of this Indenture.
"Debt Security Register" has the meaning specified in Section 2.05.
"Declaration" means the Amended and Restated Declaration of Trust of
GBB Capital III, as amended or supplemented from time to time.
3
<PAGE>
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.08.
"Deferred Interest" has the meaning set forth in Section 2.11.
"Event of Default" means any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Extension Period" has the meaning set forth in Section 2.11.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Finance Subsidiary" means a special purpose vehicle created expressly
for the purpose of financing the activities of the Company and its subsidiaries.
"Indebtedness Ranking on a Partity with the Debt Securities" shall
mean (i) indebtedness, whether outstanding on the date of execution of this
indenture or hereafter created, assumed or incurred, to the extent such
indebtedness by its terms ransk pari passu with and not prior or senior to the
Debt Securities in the right of payment upon the happening of the dissolution,
winding up, liquidation or reorganization of the Company including, without
limitation the Company's 9.75% Junior Subordinated Deferrable Interest
Debentures, maturing on March 31, 2027 ("1997 Junior Subordinated Debentures")
and the Company's Floating Rate Junior Subordinate Deferrable Interest
Debentures, maturing on September 15, 2028 (the "1998 Junior Subordinated
Debentures") and (ii) all other debt securities, and guarantees in respect of
those debt securities, issued to any trust other than the Trust, or a trustee of
such trust, partnership or other entity affiliated with the company, that is a
Finance Subsidiary in connection with the issuance by such Finance Subsidiary of
equity securities or other securities guaranteed by the Company pursuant to an
instrument that ranks pari passu with or junior in right of payment to the
Capital Securities Guarantee, including, without limitation, the Company's
guarantee issued pursuant to the 1997 Junior Subordinated Debentures and the
Company's guarantee issued pursuant to the 1998 Junior Subordinated Debentures.
The securing of any indebtedness otherwise constituting indebtedness Ranking on
Parity with the Debt Securities shall not be deemed to prevent such indebtedness
from constituting Indebtedness Ranking on a Parity with the Debt Securities with
respect to any assets of the Company not securing such indebtedness.
"Indebtedness Ranking Junior to the Debt Securities" shall mean any
indebtedness, whether outstanding on the date of execution of this Indenture or
hereafter created, assumed or incurred, to the extent such indebtedness by its
terms ranks junior to and not pari passu with or prior to the Debt Securities in
right of payment upon the happening of the dissolution or winding-up or
liquidation or reorganization of the Company. The securing of any indebtedness
otherwise constituting Indebtedness Ranking Junior to the Debt Securities shall
not be deemed to prevent such Indebtedness from constituting Indebtedness
Ranking Junior to the Debt Securities with respect to any assets of the Company
not securing such indebtedness.
4
<PAGE>
"Indenture" means this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented, or
both.
"Institutional Trustee" has the meaning set forth in the Declaration.
"Interest Payment Date" means each March 8 and September 8 during the
term of this Indenture.
"Interest Rate" means 10 7/8%.
"Investment Company Event" means the receipt by GBB Capital III of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or written change (including
any announced prospective change) in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority, there is more than an insubstantial risk that GBB Capital III is or
will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended, which change or
prospective change becomes effective or would become effective, as the case may
be, on or after the date of the issuance of the Debt Securities.
"Liquidation Amount" means the stated amount of $1,000 per Trust
Security.
"Maturity Date" means March 8, 2030.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Vice Chairman, the President, any Managing Director or any Vice
President, and by the Chief Financial Officer, the Treasurer, an Assistant
Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee. Each such
certificate shall include the statements provided for in Section 14.06 if and to
the extent required by the provisions of such Section.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company, or may be other
counsel satisfactory to the Trustee. Each such opinion shall include the
statements provided for in Section 14.06 if and to the extent required by the
provisions of such Section.
"Other Debentures" shall mean all junior subordinated debentures other
than the Debt Securities issued by the Company from time to time and sold to
trusts other than the Trust to be established by the Company (if any), in each
case similar to the Trust.
"Other Guarantees" shall mean all guarantees other than the Capital
Securities Guarantee issued by the Company with respect to preferred beneficial
interests (if any) issued to trusts other than the Trust to be established by
the Company (if any), in each case similar to the Trust.
The term "outstanding," when used with reference to Debt Securities,
subject to the provisions of Section 7.04, means, as of any particular time, all
Debt Securities authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except
5
<PAGE>
(a) Debt Securities theretofore canceled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;
(b) Debt Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other than
the Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent); provided that,
if such Debt Securities, or portions thereof, are to be redeemed prior to
maturity thereof, notice of such redemption shall have been given as
provided in Article Fourteen or provision satisfactory to the Trustee shall
have been made for giving such notice; and
(c) Debt Securities paid pursuant to Section 2.06 or in lieu of or in
substitution for which other Debt Securities shall have been authenticated
and delivered pursuant to the terms of Section 2.06 unless proof
satisfactory to the Company and the Trustee is presented that any such Debt
Securities are held by bona fide holders in due course.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Debt Security means every
previous Debt Security evidencing all or a portion of the same debt as that
evidenced by such particular Debt Security; and, for the purposes of this
definition, any Debt Security authenticated and delivered under Section 2.06 in
lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Debt Security.
"Primary Treasury Dealer" means a primary United States Government
securities dealer in New York City.
"Principal Office of the Trustee," or other similar term, means the
office of the Trustee, at which at any particular time its corporate trust
business shall be principally administered, which at the time of the execution
of this Indenture shall be 101 Barclay Street, Floor 21 West, New York, NY
10286.
"Quotation Agent" means Salomon Smith Barney, Inc. and its successors;
provided, however, that if the foregoing shall cease to be a Primary Treasury
- -------- -------
Dealer, the Company shall substitute therefor another Primary Treasury Dealer.
"Redemption Date" has the meaning set forth in Section 10.01.
"Redemption Price" means the price set forth in the following table
for any Redemption Date or Special Redemption Date that occurs within the
twelve-month period beginning in the relevant year indicated below, expressed in
percentage of the principal amount of the Debt Securities being redeemed:
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Year Beginning Percentage
-------------- ----------
March 8, 2010 105.438
March 8, 2011 104.894
March 8, 2012 104.350
March 8, 2013 103.806
March 8, 2014 103.263
March 8, 2015 102.719
March 8, 2016 102.175
March 8, 2017 101.631
March 8, 2018 101.088
March 8, 2019 100.544
March 8, 2020 and after 100.000
plus accrued and unpaid interest on such Debentures to the Redemption
Date, in the case of a redemption due to the occurrence of a Special Event, to
the Special Redemption Date.
"Reference Treasury Dealer" means (i) the Quotation Agent and (ii) any
other Primary Treasury Dealer selected by the Trustee after consultation with
the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Quotation Agent, of the bid and asked prices 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 at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
"Remaining Life" means, with respect to any Debt Security, the period
from the Special Redemption Date for such Debt Security to March 8, 2010.
"Responsible Officer" means, with respect to the Trustee, any officer
within the Principal Office of the Trustee, including any vice-president, any
assistant vice-president, any secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or other officer of the Principal
Trust Office of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Securityholder," "holder of Debt Securities" or other similar terms,
means any Person in whose name at the time a particular Debt Security is
registered on the register kept by the Company or the Trustee for that purpose
in accordance with the terms hereof.
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"Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of the
Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, notes, bonds or other similar instruments issued by the Company;
(ii) all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the Company
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of the Company
for the reimbursement of any letter of credit, any banker's acceptance, any
security purchase facility, any repurchase agreement or similar arrangement, any
interest rate swap, any other hedging arrangement, any obligation under options
or any similar credit or other transaction; (v) all obligations of the type
referred to in clauses (i) through (iv) above of other Persons for the payment
of which the Company is responsible or liable as obligor, guarantor or
otherwise; and (vi) all obligations of the type referred to in clauses (i)
through (v) above of other Persons secured by any lien on any property or asset
of the Company (whether or not such obligation is assumed by 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 or pari passu in right of payment to the Debt Securities, except for
Indebtedness Ranking Junior to the Debt Securities and Indebtedness Ranking
Junior to the Debt Securities. Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
"Special Event" means any of a Tax Event, an Investment Company Event
or a Capital Treatment Event.
"Special Redemption Date" has the meaning set forth in 10.02.
"Special Redemption Price" means (1) if the Special Redemption Date is
before March 8, 2010, the greater of (a) 100% of the principal amount of the
Debt Securities being redeemed pursuant to Section 10.02 and (b) as determined
by a Quotation Agent, the sum of the present values of scheduled payments of
principal and interest over the Remaining Life of such Debt Securities,
discounted to the Special Redemption Date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus
0.45%, plus, in the case of either (a) or (b), accrued and unpaid interest on
such Debt Securities to Special Redemption Date and (2) if the Special
Redemption Date is on or after March 8, 2010, the Redemption Price for such
Special Redemption Date.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of the outstanding partnership or
similar interests of which shall at the time be owned by such Person, or by one
or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries, and (iii) any limited partnership of which such Person or any of
its Subsidiaries is a general partner. For the purposes of this definition,
"voting stock" means shares, interests, participations or other equivalents in
the equity interest (however designated) in such Person having ordinary voting
8
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power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of the occurrence of a contingency.
"Tax Event" means the receipt by the Company and GBB Capital III of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to or change (including any announced prospective change) in
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action")) or judicial decision
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Company or GBB Capital III and whether or not subject
to review or appeal, which amendment, clarification, change, Administrative
Action or decision is enacted, promulgated or announced, in each case on or
after the date of issuance of the Debt Securities, there is more than an
insubstantial risk that: (i) GBB Capital III is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Debt Securities; (ii) interest
payable by the Company on the Debt Securities is not, or within 90 days of the
date of such opinion, will not be, deductible by the Company, in whole or in
part, for United States federal income tax purposes; or (iii) GBB Capital III
is, or will be within 90 days of the date of such opinion, subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
"Treasury Rate" means (i) the yield, under the heading which
represents the average for the week immediately prior to the date of
calculation, 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 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 Special Redemption Date. The
Treasury Rate shall be calculated on the third Business Day preceding the
Special Redemption Date.
"Trust" means GBB Capital III, the Delaware business trust, or any
other similar trust created for the purpose of issuing Capital Securities in
connection with the issuance of Debt Securities under this Indenture, of which
the Company is the sponsor.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
9
<PAGE>
"Trust Securities" means Common Securities and Capital Securities of
GBB Capital III.
"Trustee" means the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.
ARTICLE II
DEBT SECURITIES
SECTION 2.01. Authentication and Dating.
----------------------------------------
Upon the execution and delivery of this Indenture, or from time to
time thereafter, Debt Securities in an aggregate principal amount not in excess
of $10,310,000 may be executed and delivered by the Company to the Trustee for
authentication, and the Trustee shall thereupon authenticate and make available
for delivery said Debt Securities to or upon the written order of the Company,
signed by its Chairman of the Board of Directors, Vice Chairman, President or
Chief Financial Officer, one of its Managing Directors or one of its Vice
Presidents and by its Secretary, any Assistant Secretary, Treasurer or any
Assistant Treasurer, without any further action by the Company hereunder. In
authenticating such Debt Securities, and accepting the additional
responsibilities under this Indenture in relation to such Debt Securities, the
Trustee shall be entitled to receive, and (subject to Section 6.01) shall be
fully protected in relying upon:
(a) a copy of any Board Resolution or Board Resolutions relating
thereto and, if applicable, an appropriate record of any action taken
pursuant to such resolution, in each case certified by the Secretary or an
Assistant Secretary of the Company as the case may be; and
(b) an Opinion of Counsel prepared in accordance with Section
14.06 which shall also state:
(1) that such Debt Securities, when authenticated and
delivered by the Trustee and issued by the Company in each case
in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally binding
obligations of the Company; and
(2) that all laws and requirements in respect of the
execution and delivery by the Company of the Debt Securities,
have been complied with and that authentication and delivery of
the Debt Securities by the Trustee will not violate the terms of
this Indenture.
The Trustee shall have the right to decline to authenticate and
deliver any Debt Securities under this Section if the Trustee, being advised by
counsel, determines that such action may not lawfully be taken or if a
Responsible Officer of the Trustee in good faith shall determine that such
action would expose the Trustee to personal liability to existing holders.
10
<PAGE>
The definitive Debt Securities shall be typed, printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers executing such Debt Securities, as evidenced
by their execution of such Debt Securities.
SECTION 2.02. Form of Trustee's Certificate of Authentication.
--------------------------------------------------------------
The Trustee's certificate of authentication on all Debt Securities
shall be in substantially the following form:
This is one of the Debt Securities referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK, AS TRUSTEE
By:_________________________
Authorized Officer
Dated: ______________________
SECTION 2.03. Form and Denomination of Debt Securities.
-------------------------------------------------------
The Debt Securities shall be in registered, certificated form without
coupons and in minimum denominations of $1,000 and any multiple of $1,000 in
excess thereof. The Debt Securities shall be numbered, lettered, or otherwise
distinguished in such manner or in accordance with such plans as the officers
executing the same may determine with the approval of the Trustee as evidenced
by the execution and authentication thereof.
SECTION 2.04. Execution of Debt Securities.
-------------------------------------------
The Debt Securities shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of its Chairman of the Board of
Directors, Vice Chairman, President or Chief Financial Officer, one of its
Managing Directors or one of its Executive Vice Presidents, Senior Vice
Presidents or Vice Presidents and by the manual or facsimile signature of its
Secretary, one of its Assistant Secretaries, its Treasurer or one of its
Assistant Treasurers, under its corporate seal which may be affixed thereto or
printed, engraved or otherwise reproduced thereon, by facsimile or otherwise,
and which need not be attested. Only such Debt Securities as shall bear thereon
a certificate of authentication substantially in the form herein before recited,
executed by the Trustee or the Authenticating Agent by the manual signature of
an authorized officer, shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. Such certificate by the Trustee or the
Authenticating Agent upon any Debt Security executed by the Company shall be
conclusive evidence that the Debt Security so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Debt Securities shall cease to be such officer before the Debt Securities so
signed shall have been authenticated and delivered by the Trustee or the
Authenticating Agent, or disposed of by the Company, such Debt Securities
nevertheless may be authenticated and delivered or disposed of as though the
Person who signed such Debt Securities had not ceased to be such officer of the
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<PAGE>
Company; and any Debt Security may be signed on behalf of the Company by such
Persons as, at the actual date of the execution of such Debt Security, shall be
the proper officers of the Company, although at the date of the execution of
this Indenture any such person was not such an officer.
Every Debt Security shall be dated the date of its authentication.
SECTION 2.05. Exchange and Registration of Transfer of Debt
------------------------------------------------------------
Securities.
- -----------
The Company shall cause to be kept, at the office or agency maintained
for the purpose of registration of transfer and for exchange as provided in
Section 3.02, a register (the "Debt Security Register") for the Debt Securities
issued hereunder in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration and transfer of all
Debt Securities as in this Article Two provided. Such register shall be in
written form or in any other form capable of being converted into written form
within a reasonable time.
Debt Securities to be exchanged may be surrendered at the principal
corporate trust office of the Trustee or at any office or agency to be
maintained by the Company for such purpose as provided in Section 3.02, and the
Company shall execute, the Company or the Trustee shall register and the Trustee
or the Authenticating Agent shall authenticate and make available for delivery
in exchange therefor the Debt Security or Debt Securities which the
Securityholder making the exchange shall be entitled to receive. Upon due
presentment for registration of transfer of any Debt Security at the principal
corporate trust office of the Trustee or at any office or agency of the Company
maintained for such purpose as provided in Section 3.02, the Company shall
execute, the Company or the Trustee shall register and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery in the
name of the transferee or transferees a new Debt Security for a like aggregate
principal amount. Registration or registration of transfer of any Debt Security
by the Trustee or by any agent of the Company appointed pursuant to Section
3.02, and delivery of such Debt Security, shall be deemed to complete the
registration or registration of transfer of such Debt Security.
All Debt Securities presented for registration of transfer or for
exchange or payment shall (if so required by the Company or the Trustee or the
Authenticating Agent) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee or the Authenticating Agent duly executed by, the holder or his
attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Debt Securities, but the Company or the Trustee may require payment
of a sum sufficient to cover any tax, fee or other governmental charge that may
be imposed in connection therewith.
The Company or the Trustee shall not be required to exchange or
register a transfer of any Debt Security for a period of 15 days next preceding
the date of selection of Debt Securities for redemption.
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<PAGE>
Notwithstanding the foregoing, Debt Securities may not be transferred
except in compliance with the restricted securities legend set forth below (the
"Restrictive Securities Legend"), unless otherwise determined by the Company in
accordance with applicable law:
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 OR 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 ONLY (A) TO THE COMPANY, (B) 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, (C) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "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 (D) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE
INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS
SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt Securities
-------------------------------------------------------------------
In case any Debt Security shall become mutilated or be destroyed, lost
or stolen, the Company shall execute, and upon its written request the Trustee
shall authenticate and deliver, a new Debt Security bearing a number not
contemporaneously outstanding, in exchange and substitution for the mutilated
Debt Security, or in lieu of and in substitution for the Debt Security so
destroyed, lost or stolen. In every case the applicant for a substituted Debt
Security shall furnish to the Company and the Trustee such security or indemnity
as may be required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Company and
the Trustee evidence to their satisfaction of the destruction, loss or theft of
such Debt Security and of the ownership thereof.
The Trustee may authenticate any such substituted Debt Security and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issuance of any substituted Debt Security, the Company may
require the payment of a sum
13
<PAGE>
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses connected therewith. In case any Debt
Security which has matured or is about to mature or has been called for
redemption in full shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debt Security, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Debt Security) if the applicant for such payment shall furnish to the Company
and the Trustee such security or indemnity as may be required by them to save
each of them harmless and, in case of destruction, loss or theft, evidence
satisfactory to the Company and to the Trustee of the destruction, loss or theft
of such Security and of the ownership thereof.
Every substituted Debt Security issued pursuant to the provisions of
this Section 2.06 by virtue of the fact that any such Debt Security is
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Debt Security shall
be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debt Securities
duly issued hereunder. All Debt Securities shall be held and owned upon the
express condition that, to the extent permitted by applicable law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debt Securities and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.07. Temporary Debt Securities.
----------------------------------------
Pending the preparation of definitive Debt Securities, the Company may
execute and the Trustee shall authenticate and make available for delivery
temporary Debt Securities that are typed, printed or lithographed. Temporary
Debt Securities shall be issuable in any authorized denomination, and
substantially in the form of the definitive Debt Securities but with such
omissions, insertions and variations as may be appropriate for temporary Debt
Securities, all as may be determined by the Company. Every such temporary Debt
Security shall be executed by the Company and be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Debt Securities. Without unreasonable delay the
Company will execute and deliver to the Trustee or the Authenticating Agent
definitive Debt Securities and thereupon any or all temporary Debt Securities
may be surrendered in exchange therefor, at the principal corporate trust office
of the Trustee or at any office or agency maintained by the Company for such
purpose as provided in Section 3.02, and the Trustee or the Authenticating Agent
shall authenticate and make available for delivery in exchange for such
temporary Debt Securities a like aggregate principal amount of such definitive
Debt Securities. Such exchange shall be made by the Company at its own expense
and without any charge therefor except that in case of any such exchange
involving a registration of transfer the Company may require payment of a sum
sufficient to cover any tax, fee or other governmental charge that may be
imposed in relation thereto. Until so exchanged, the temporary Debt Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Debt Securities authenticated and delivered hereunder.
14
<PAGE>
SECTION 2.08. Payment of Interest.
----------------------------------
Each Debt Security will bear interest at the Interest Rate from and
including the original date of issuance of such Debt Security until the Maturity
Date, and on any overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) Deferred Interest on any overdue
installment of interest (including Defaulted Interest), payable (subject to the
provisions of Article XII) on each Interest Payment Date commencing on September
8, 2000. Interest and any Deferred Interest on any Debt Security that is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date for Debt Securities shall be paid to the Person in whose name said Debt
Security (or one or more Predecessor Securities) is registered at the close of
business on the regular record date for such interest installment except that
interest and any Deferred Interest payable on the Maturity Date shall be paid to
the Person to whom principal is paid. In the event that any Debt Security or
portion thereof is called for redemption and the redemption date is subsequent
to a regular record date with respect to any Interest Payment Date and prior to
such Interest Payment Date, interest on such Debt Security will be paid upon
presentation and surrender of such Debt Security.
Any interest on any Debt Security, other than Deferred Interest, that
is payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered holder on the relevant regular record date by virtue
of having been such holder; and such Defaulted Interest shall be paid by the
Company to the Persons in whose names such Debt Securities (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 such Debt 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
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 fifteen nor less than ten days
prior to the date of the proposed payment and not less than ten 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 Securityholder at his or her address as it
appears in the Debt Security Register, not less than ten days prior to 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 such Debt
Securities (or their respective Predecessor Securities) are registered on such
special record date and shall be no longer payable.
Any interest scheduled to become payable on an Interest Payment Date
occurring during an Extension Period shall not be Defaulted Interest and shall
be payable on such other date as may be specified in the terms of such Debt
Securities.
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The term "regular record date" as used in this Section shall mean
either the fifteenth day of the month immediately preceding the month in which
an Interest Payment Date shall occur, if such Interest Payment Date is the first
day of a month, or the last day of the month immediately preceding the month in
which an Interest Payment shall occur, if such Interest Payment Date is the
fifteenth day of a month, whether or not such date is a Business Day.
Subject to the foregoing provisions of this Section, each Debt
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Debt Security shall carry the rights to
interest accrued and unpaid, and to accrue, that were carried by such other Debt
Security.
SECTION 2.09. Cancellation of Debt Securities Paid, etc.
---------------------------------------------------------
All Debt Securities surrendered for the purpose of payment,
redemption, exchange or registration of transfer, shall, if surrendered to the
Company or any paying agent, be surrendered to the Trustee and promptly canceled
by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be
promptly canceled by it, and no Debt Securities shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Indenture. All
Debt Securities canceled by any Authenticating Agent shall be delivered to the
Trustee. The Trustee shall destroy all canceled Debt Securities unless the
Company otherwise directs the Trustee in writing. If the Company shall acquire
any of the Debt Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debt
Securities unless and until the same are surrendered to the Trustee for
cancellation.
SECTION 2.10. Computation of Interest.
--------------------------------------
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months.
SECTION 2.11. Extension of Interest Payment Period.
---------------------------------------------------
So long as no Event of Default has occurred and is continuing, the
Company shall have the right, from time to time and without causing an Event of
Default, to defer payments of interest on the Debt Securities by extending the
interest payment period on the Debt Securities at any time and from time to time
during the term of the Debt Securities, for up to ten consecutive semi-annual
periods (each such extended interest payment period, an "Extension Period"),
during which Extension Period no interest shall be due and payable. No
Extension Period may end on a date other than an Interest Payment Date. During
any Extension Period, interest will continue to accrue on the Debt Securities
and interest on such accrued interest (such accrued interest and interest
thereon referred to herein as "Deferred Interest") will accrue at the Interest
Rate, compounded semi-annually from the date such Deferred Interest would have
been payable were it not for the Extension Period, both to the extent permitted
by law. No interest or Deferred Interest shall be due and payable during an
Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Deferred Interest. At the end of any such Extension Period the
Company shall pay all Deferred Interest then accrued and unpaid on the Debt
Securities; provided, however, that no Extension Period may extend beyond the
-------- --------
Maturity Date; and provided further, however, that
-------- ------- -------
16
<PAGE>
during any such 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 or (ii)
make any payment of principal of or interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company (including Other
Debentures) that rank pari passu in all respects with or junior in interest to
the 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
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Debt Securities (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Company in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Company (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Company's capital stock (or any capital
stock of a subsidiary of the Company) for any class or series of the Company's
capital stock or of any class or series of the Company's indebtedness for any
class or series of the Company's capital stock, (c) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (d) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock). Prior
to the termination of any Extension Period, the Company may further extend such
period, provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed ten consecutive semi-annual
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all Deferred Interest, the Company may
commence a new Extension Period, subject to the foregoing requirements. The
Company must give the Trustee notice of its election to begin such Extension
Period at least one Business Day prior to the earlier of (i) the date interest
on the Debt Securities would have been payable except for the election to begin
such Extension Period or (ii) the date such interest is payable, but in any
event not less than one Business Day prior to such record date. The Trustee
shall give notice of the Company's election to begin a new Extension Period to
the Securityholders.
SECTION 2.12. CUSIP Numbers.
----------------------------
The Company in issuing the Debt Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to 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 Debt Securities or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debt 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 in writing of any change in the CUSIP numbers.
17
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ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest; Agreed
-----------------------------------------------------------------
Treatment of the Debt Securities.
- ---------------------------------
(a) The Company covenants and agrees that it will duly and punctually
pay or cause to be paid the principal of and premium, if any, and interest on
the Debt Securities at the place, at the respective times and in the manner
provided in this Indenture and the Debt Securities. At the option of the
Company, each installment of interest on the Debt Securities may be paid (i) by
mailing checks for such interest payable to the order of the holders of Debt
Securities entitled thereto as they appear on the registry books of the Company
or (ii) by wire transfer to any account with a banking institution located in
the United States designated by such Person to the paying agent no later than
the related record date.
(b) The Company will treat the Debt Securities as indebtedness, and
the amounts payable in respect of the principal amount of such Debt Securities
as interest, for all U.S. federal income tax purposes. All payments in respect
of such Debt Securities will be made free and clear of U.S. withholding tax to
any beneficial owner thereof that has provided an Internal Revenue Service Form
W8 BEN (or any substitute or successor form) establishing its non-U.S. status
for U.S. federal income tax purposes.
(c) The Company has no present intention to exercise its right under
Section 2.11 to defer payments of interest on the Debt Securities by commencing
an Extension Period.
(d) The Company believes that the likelihood that it would exercise
its right under Section 2.11 to defer payments of interest on the Debt
Securities by commencing an Extension Period at any time during which the Debt
Securities are outstanding is remote because of the restrictions that would be
imposed on the Company's ability to declare or pay dividends or distributions
on, or to redeem, purchase or make a liquidation payment with respect to, any of
its outstanding equity and on the Company's ability to make any payments of
principal of or interest on, or repurchase or redeem, any of its debt securities
that rank pari passu in all respects with (or junior in interest to) the Debt
Securities.
SECTION 3.02. Offices for Notices and Payments, etc.
----------------------------------------------------
So long as any of the Debt Securities remain outstanding, the Company
will maintain in Texas, an office or agency where the Debt Securities may be
presented for payment, an office or agency where the Debt Securities may be
presented for registration of transfer and for exchange as in this Indenture
provided and an office or agency where notices and demands to or upon the
Company in respect of the Debt Securities or of this Indenture may be served.
The Company will give to the Trustee written notice of the location of any such
office or agency and of any change of location thereof. Until otherwise
designated from time to time by the Company in a notice to the Trustee, or
specified as contemplated by Section 2.05, such office or agency for all of the
above purposes shall be the office or agency of the Trustee. In case the
Company shall fail to maintain any such office or agency in Texas, or shall fail
to give such notice of the
18
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location or of any change in the location thereof, presentations and demands may
be made and notices may be served at the principal corporate trust office of the
Trustee.
In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside Texas, where the Debt
Securities may be presented for registration of transfer and for exchange in the
manner provided in this Indenture, and the Company may from time to time rescind
such designation, as the Company may deem desirable or expedient; provided,
--------
however, that no such designation or rescission shall in any manner relieve the
- -------
Company of its obligation to maintain any such office or agency in Texas, for
the purposes above mentioned. The Company will give to the Trustee prompt
written notice of any such designation or rescission thereof.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.
-----------------------------------------------------------------
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.09, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
-------------------------------------------
(a) If the Company shall appoint a paying agent other than the
Trustee, it will cause such paying agent to execute and deliver to the Trustee
an instrument in which such agent shall agree with the Trustee, subject to the
provision of this Section 3.04,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, or interest, if any,
on the Debt Securities (whether such sums have been paid to it by the
Company or by any other obligor on the Debt Securities) in trust for
the benefit of the holders of the Debt Securities;
(2) that it will give the Trustee prompt written notice of any
failure by the Company (or by any other obligor on the Debt
Securities) to make any payment of the principal of and premium, if
any, or interest, if any, on the Debt Securities when the same shall
be due and payable; and
(3) that it will, at any time during the continuance of any
Event of Default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest, if
any, on the Debt Securities, set aside, segregate and hold in trust for the
benefit of the holders of the Debt Securities a sum sufficient to pay such
principal, premium or interest so becoming due and will notify the Trustee in
writing of any failure to take such action and of any failure by the Company (or
by any other obligor under the Debt Securities) to make any payment of the
principal of and premium, if any, or interest, if any, on the Debt Securities
when the same shall become due and payable.
19
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Whenever the Company shall have one or more paying agents for the Debt
Securities, it will, on or prior to each due date of the principal of and
premium, if any, or interest, if any, on the Debt Securities, deposit with a
paying agent a sum sufficient to pay the principal, premium or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless such paying agent is the Trustee) the Company shall
promptly notify the Trustee in writing of its action or failure to act.
(c) Anything in this Section 3.04 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Debt Securities, or for any other reason, pay, or
direct any paying agent to pay to the Trustee all sums held in trust by the
Company or any such paying agent, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.04 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 3.04 is subject
to Sections 12.03 and 12.04.
SECTION 3.05. Certificate to Trustee.
-------------------------------------
The Company will deliver to the Trustee on or before 120 days after
the end of each fiscal year in each year, so long as Debt Securities are
outstanding hereunder, a Certificate stating that in the course of the
performance by the signers of their duties as officers of the Company they would
normally have knowledge of any default by the Company in the performance of any
covenants contained herein, stating whether or not they have knowledge of any
such default and, if so, specifying each such default of which the signers have
knowledge and the nature thereof.
SECTION 3.06. Additional Interest.
-------------------
If and for so long as the Trust is the holder of all Debt Securities
and the Trust is required to pay any additional taxes, duties, assessments or
other governmental charges as a result of a Tax Event, the Company will pay such
additional amounts (the "Additional Interest") on the Debt Securities as shall
be required so that the net amounts received and retained by the Trust after
paying taxes, duties, assessments or other governmental charges will be equal to
the amounts the Trust would have received if no such taxes, duties, assessments
or other governmental charges had been imposed. Whenever in this Indenture or
the Debt Securities there is a reference in any context to the payment of
principal of or interest on the Debt Securities, such mention shall be deemed to
include mention of payments of the Additional Interest provided for in this
paragraph to the extent that, in such context, Additional Interest is, was or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Interest (if applicable) in any
provisions hereof shall not be construed as excluding Additional Interest in
those provisions hereof where such express mention is not made, provided,
--------
however, that the deferral of the payment of interest during an Extension Period
- -------
pursuant to Section 2.11 shall not defer the payment of any Additional Interest
that may be due and payable.
SECTION 3.07. Compliance with Consolidation Provisions.
----------------------------------------
20
<PAGE>
The Company will not, while any of the Debt Securities remain
outstanding, consolidate with, or merge into, or merge into itself, or sell or
convey all or substantially all of its property to any other Person unless the
provisions of Article XI hereof are complied with.
SECTION 3.08. Limitation on Dividends.
-----------------------
If Debt Securities are initially issued to the Trust or a trustee of
such trust in connection with the issuance of Trust Securities by the Trust
(regardless of whether Debt Securities continue to be held by such trust) and
(i) there shall have occurred and be continuing any event that would constitute
an Event of Default, (ii) the Company shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee, or (iii) the
Company shall have given notice of its election to defer payments of interest on
the Debt Securities by extending the interest payment period as provided herein
and such period, or any extension thereof, shall be continuing, then 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 or (ii) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company (including Other Debentures) that rank pari passu in all respects with
or junior in interest to the 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 (including Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the Debt Securities
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Company (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default, (b) as
a result of any exchange or conversion of any class or series of the Company's
capital stock (or any capital stock of a subsidiary of the Company) for any
class or series of the Company's capital stock or of any class or series of the
Company's indebtedness for any class or series of the Company's capital stock,
(c) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock).
SECTION 3.09. Covenants as to the Trust.
-------------------------
For so long as such Trust Securities remain outstanding, the Company
shall maintain 100% ownership of the Common Securities; provided, however, that
-------- -------
any permitted successor of the Company under this Indenture may succeed to the
Company's ownership of such Common Securities. The Company, as owner of a
majority of the Common Securities shall cause the Trust (a) to remain a
statutory business trust, except in connection with a distribution
21
<PAGE>
of Debt Securities to the holders of Trust Securities in liquidation of the
Trust, the redemption of all of the Trust Securities or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, (b) to
otherwise continue to be classified as a grantor trust for United States federal
income tax purposes and (c) to use its reasonable efforts to cause each holder
of Trust Securities to be treated as owning an undivided beneficial interest in
the Debt Securities.
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
----------------------
The Company covenants and agrees that it will furnish or caused to be
furnished to the Trustee:
(a) on each regular record date for the Debt Securities, a list, in
such form as the Trustee may reasonably require, of the names and addresses of
the Securityholders of the Debt Securities as of such record date; 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;
except that no such lists need be furnished under this Section 4.01 so long as
the Trustee is in possession thereof by reason of its acting as Debt Security
registrar.
SECTION 4.02. Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Debt Securities (1) contained in the most recent list furnished to it as
provided in Section 4.01 or (2) received by it in the capacity of Debt
Securities registrar (if so acting) hereunder. The Trustee may destroy any list
furnished to it as provided in Section 4.01 upon receipt of a new list so
furnished.
(b) In case three or more holders of Debt Securities (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee reasonable proof that each such applicant has owned a Debt Security for
a period of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Debt Securities with respect to their rights under this Indenture or under
such Debt Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall
within five Business Days after the receipt of such application, at its
election, either:
(1) afford such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of subsection
(a) of this Section 4.02, or
22
<PAGE>
(2) inform such applicants as to the approximate number of
holders of Debt Securities whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.02, and as to the
approximate cost of mailing to such Securityholders the form of proxy or
other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Securityholder of Debt Securities whose name and address appear in
the information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or
other communication which is specified in such request with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Securities and Exchange Commission, if permitted or
required by applicable law, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the holders of all Debt
Securities, as the case may be, or would be in violation of applicable law.
Such written statement shall specify the basis of such opinion. If said
Commission, as permitted or required by applicable law, after opportunity for a
hearing upon the objections specified in the written statement so filed, shall
enter an order refusing to sustain any of such objections or if, after the entry
of an order sustaining one or more of such objections, said Commission shall
find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Securityholders with reasonable
promptness after the entry of such order and the renewal of such tender;
otherwise the Trustee shall be relieved of any obligation or duty to such
applicants respecting their application.
(c) Each and every holder of Debt Securities, by receiving and
holding the same, agrees with Company and the Trustee that neither the Company
nor the Trustee nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Debt Securities in accordance with the provisions of subsection (b) of this
Section 4.02, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
UPON AN EVENT OF DEFAULT
SECTION 5.01. Events of Default.
-----------------
The following Events of Default shall be "Events of Default" with
respect to Debt Securities:
(a) the Company defaults in the payment of any interest upon any Debt
Security when it becomes due and payable, and continuance of such default for a
period of 30 days; or
23
<PAGE>
(b) the Company defaults in the payment of all or any part of the
principal of (or premium, if any, on) any Debt Securities as and when the same
shall become due and payable either at maturity, upon redemption (including
redemption for any sinking fund), by declaration of acceleration or otherwise;
or
(c) the Company defaults in the performance of, or breaches, any of
its covenants or agreements in Sections 3.06, 3.07, 3.08 and 3.09 of this
Indenture (other than a covenant or agreement a default in whose performance or
whose breach 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
principal amount of the outstanding Debt 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
(d) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or
(e) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
If an Event of Default occurs and is continuing with respect to the
Debt Securities, then, and in each and every such case, unless the principal of
the Debt Securities shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities then outstanding hereunder, by notice in writing to the Company
(and to the Trustee if given by Securityholders), may declare the entire
principal of the Debt Securities and the interest accrued thereon, if any, to be
due and payable immediately, and upon any such declaration the same shall become
immediately due and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Debt Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Debt Securities and the principal
of and premium, if any, on the Debt Securities which shall have become due
otherwise than by acceleration (with interest upon such principal and premium,
if any, and Deferred Interest, to the extent permitted by law) and such amount
as shall be sufficient to cover reasonable compensation to the Trustee and each
predecessor Trustee, their respective agents, attorneys and
24
<PAGE>
counsel, and all other amounts due to the Trustee pursuant to Section 6.06,
and if any and all Events of Default under this Indenture, other than the non-
payment of the principal of or premium, if any, on Debt Securities which shall
have become due by acceleration, shall have been cured, waived or otherwise
remedied as provided herein -- then and in every such case the holders of a
majority in aggregate principal amount of the Debt Securities then outstanding,
by written notice to the Company and to the Trustee, may waive all defaults and
rescind and annul such declaration and its consequences, but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Debt Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the Debt
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Debt Securities on Default; Suit Therefor.
----------------------------------------------------
The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Debt Securities as and
when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or (b) in case default shall be made in the
payment of the principal of or premium, if any, on any of the Debt Securities as
and when the same shall have become due and payable, whether at maturity of the
Debt Securities or upon redemption or by declaration of acceleration or
otherwise -- then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Debt Securities the whole amount
that then shall have become due and payable on all Debt Securities for principal
and premium, if any, or interest, or both, as the case may be, including
Deferred Interest accrued on the Debt Securities; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including a reasonable compensation to the Trustee, its agents,
attorneys and counsel, and any other amounts due to the Trustee under Section
6.06. In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on such Debt
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on such Debt Securities wherever situated the
moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Debt Securities
under Bankruptcy Law, or in case a receiver or trustee shall have been appointed
for the property of the Company or such other obligor, or in the case of any
other similar judicial proceedings relative to the Company or other obligor upon
the Debt Securities, or to the creditors or property of the Company or such
other obligor, the Trustee, irrespective of whether the principal of the Debt
Securities shall then be due and payable as therein expressed or by declaration
of acceleration or
25
<PAGE>
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 5.02, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a
claim or claims for the whole amount of principal and interest owing and unpaid
in respect of the Debt Securities and, in case of any judicial proceedings, to
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all other
amounts due to the Trustee under Section 6.06) and of the Securityholders
allowed in such judicial proceedings relative to the Company or any other
obligor on the Debt Securities, or to the creditors or property of the Company
or such other obligor, unless prohibited by applicable law and regulations, to
vote on behalf of the holders of the Debt Securities in any election of a
trustee or a standby trustee in arrangement, reorganization, liquidation or
other bankruptcy or insolvency proceedings or Person performing similar
functions in comparable proceedings, and to collect and receive any moneys or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of its charges and expenses; and any receiver, assignee
or trustee in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee such amounts as shall be sufficient to
cover reasonable compensation to the Trustee, each predecessor Trustee and their
respective agents, attorneys and counsel, and all other amounts due to the
Trustee under Section 6.06.
Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Debt Securities or the rights of any holder thereof or to authorize the Trustee
to vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Debt Securities, may be enforced by the Trustee without the
possession of any of the Debt Securities, or the production thereof at any trial
or other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall be for the ratable benefit of the holders of
the Debt Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Debt Securities, and it shall not be necessary to make any holders of the
Debt Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
------------------------------------------
Any moneys collected by the Trustee shall be applied in the following
order, at the date or dates fixed by the Trustee for the distribution of such
moneys, upon presentation of the several Debt Securities in respect of which
moneys have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:
26
<PAGE>
First: To the payment of costs and expenses incurred by, and
reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all
other amounts due to the Trustee under Section 6.06;
Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon Debt
Securities for principal (and premium, if any), and interest on the Debt
Securities, in respect of which or for the benefit of which money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due on such Debt Securities for principal (and premium, if any) and
interest, respectively; and
Fourth: The balance, if any, to the Company.
SECTION 5.04. Proceedings by Securityholders.
------------------------------
No holder of any Debt Security shall have any right to institute any
suit, action or proceeding for any remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of an Event of Default
with respect to the Debt Securities and unless the holders of not less than 25%
in aggregate principal amount of the Debt Securities then outstanding shall have
given the Trustee a written request to institute such action, suit or proceeding
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred thereby, and
the Trustee for 60 days after its receipt of such notice, request and offer of
indemnity shall have failed to institute any such action, suit or proceeding;
provided, that no holder of Debt Securities shall have any right to prejudice
- --------
the rights of any other holder of Debt Securities, obtain priority or preference
over any other such holder or enforce any right under this Indenture except in
the manner herein provided and for the equal, ratable and common benefit of all
holders of Debt Securities.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Debt Security to receive payment of the principal of,
premium, if any, and interest, on such Debt Security when due, or to institute
suit for the enforcement of any such payment, shall not be impaired or affected
without the consent of such holder. For the protection and enforcement of the
provisions of this Section, each and every Securityholder and the Trustee shall
be entitled to such relief as can be given either at law or in equity.
SECTION 5.05. Proceedings by Trustee.
----------------------
In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
----------------------------------
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Except as otherwise provided in Section 2.06, all powers and remedies
given by this Article V to the Trustee or to the Securityholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any other
powers and remedies available to the Trustee or the holders of the Debt
Securities, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture or
otherwise established with respect to the Debt Securities, and no delay or
omission of the Trustee or of any holder of any of the Debt Securities to
exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power, or shall be
construed to be a waiver of any such default or an acquiescence therein; and,
subject to the provisions of Section 5.04, every power and remedy given by this
Article V or by law to the Trustee or to the Securityholders may be exercised
from time to time, and as often as shall be deemed expedient, by the Trustee or
by the Securityholders.
SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------
Majority of Securityholders.
- ---------------------------
The holders of a majority in aggregate principal amount of the Debt
Securities affected (voting as one class) at the time outstanding 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 such Debt Securities; provided, however, that
-------- -------
(subject to the provisions of Section 6.01) the Trustee shall have the right to
decline to follow any such direction if the Trustee shall determine that the
action so directed would be unjustly prejudicial to the holders not taking part
in such direction or if the Trustee being advised by counsel determines that the
action or proceeding so directed may not lawfully be taken or if a Responsible
Officer of the Trustee shall determine that the action or proceedings so
directed would involve the Trustee in personal liability. Prior to any
declaration accelerating the maturity of the Debt Securities, the holders of a
majority in aggregate principal amount of the Debt Securities at the time
outstanding may on behalf of the holders of all of the Debt Securities waive (or
modify any previously granted waiver of) any past default or Event of Default
and its consequences, except a default (a) in the payment of principal of,
premium, if any, or interest on any of the Debt Securities, (b) in respect of
covenants or provisions hereof which cannot be modified or amended without the
consent of the holder of each Debt Security affected, or (c) in respect of the
covenants contained in Section 3.09; provided, however, that if the Debt
-------- -------
Securities are held by the Trust or a trustee of such trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation preference of Trust Securities of the Trust shall have
consented to such waiver or modification to such waiver; provided, further, that
if the consent of the holder of each outstanding Debt Security is required, such
waiver shall not be effective until each holder of the Trust Securities of the
Trust shall have consented to such waiver. Upon any such waiver, the default
covered thereby shall be deemed to be cured for all purposes of this Indenture
and the Company, the Trustee and the holders of the Debt Securities shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this Section 5.07, said
default or Event of Default shall for all purposes of the Debt Securities and
this Indenture be deemed to have been cured and to be not continuing.
SECTION 5.08. Notice of Defaults.
------------------
28
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The Trustee shall, within 90 days after a Responsible Officer of the
Trustee shall have received notice or obtained actual knowledge of the
occurrence of a default with respect to the Debt Securities, mail to all
Securityholders, as the names and addresses of such holders appear upon the Debt
Security Register, notice of all defaults with respect to the Debt Securities
known to the Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purpose of this Section 5.08
being hereby defined to be the events specified in subsections (a), (b), (c),
(d) and (e) of Section 5.01, not including periods of grace, if any, provided
for therein); provided, that, except in the case of default in the payment of
--------
the principal of, premium, if any, or interest on any of the Debt Securities,
the Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the withholding
of such notice is in the interests of the Securityholders.
SECTION 5.09. Undertaking to Pay Costs.
------------------------
All parties to this Indenture agree, and each holder of any Debt
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 and expenses, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.09 shall not apply to any suit instituted
by the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in principal amount of
the Debt Securities outstanding, or to any suit instituted by any Securityholder
for the enforcement of the payment of the principal of (or premium, if any) or
interest on any Debt Security against the Company on or after the same shall
have become due and payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
--------------------------------------
With respect to the holders of Debt Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default with respect to the Debt
Securities and after the curing or waiving of all Events of Default which may
have occurred, with respect to the Debt Securities, undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture. In
case an Event of Default with respect to the Debt Securities has occurred (which
has not been cured or waived) the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
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:
29
<PAGE>
(a) prior to the occurrence of an Event of Default with respect to
Debt Securities and after the curing or waiving of all Events of Default which
may have occurred
(1) the duties and obligations of the Trustee with respect to
Debt Securities shall be determined solely by the express provisions of
this Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations with respect to the Debt
Securities 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 the part of the Trustee, the
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 Trustee and conforming to the requirements of
this Indenture; but, in the case of any such certificates or opinions which
by any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent facts;
and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with the direction of
the Securityholders pursuant to Section 5.07, relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers.
SECTION 6.02. Reliance on Documents, Opinions, etc.
------------------------------------
Except as otherwise provided in 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, consent, order, bond, note,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any
30
<PAGE>
action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default with respect to the Debt Securities (that has not been cured or
waived) to exercise with respect to Debt Securities such of the rights and
powers vested in it by this Indenture, and to use the same degree of care and
skill in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(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, consent, order, approval, bond, debenture,
coupon or other paper or document, unless requested in writing to do so by the
holders of not less than a majority in principal amount of the outstanding Debt
Securities affected thereby; provided, however, that if the payment within a
-------- -------
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
against such expense or liability as a condition to so proceeding;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents (including
any Authenticating Agent) or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed by it with due care; and
(h) the Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Debt Securities unless either (1) a
Responsible Officer shall have actual knowledge of such Default or Event of
Default or (2) written notice of such Default or Event of Default shall have
been given to the Trustee by the Company or any other obligor on the Debt
Securities or by any holder of the Debt Securities.
SECTION 6.03. No Responsibility for Recitals, etc.
-----------------------------------
The recitals contained herein and in the Debt Securities (except in
the certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the same.
The Trustee and the Authenticating Agent make no representations as to the
validity or sufficiency of this Indenture or of the Debt Securities. The
Trustee and the Authenticating Agent shall not be accountable for the use or
application by the Company of any
31
<PAGE>
Debt Securities or the proceeds of any Debt Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
------------------------------------------------------
Agents or Registrar May Own Debt Securities.
- -------------------------------------------
The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Debt Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Debt Securities with the same
rights it would have if it were not Trustee, Authenticating Agent, paying agent,
transfer agent or Debt Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
--------------------------
Subject to the provisions of Section 12.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys shall be paid from time to time upon the
written order of the Company, signed by the Chairman of the Board of Directors,
the President, the Chief Operating Officer, a Managing Director, a Vice
President, the Treasurer or an Assistant Treasurer of the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
------------------------------------
The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation as shall be agreed
to in writing between the Company and the Trustee (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Indenture (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith. The
Company also covenants to indemnify each of the Trustee or any predecessor
Trustee (and its officers, agents, directors and employees) for, and to hold it
harmless against, any and all loss, damage, claim, liability or expense
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or bad faith on the part of the Trustee and arising out of or
in connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim of liability in the
premises. The obligations of the Company under this Section 6.06 to compensate
and indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Debt Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the benefit of the holders of particular
Debt Securities.
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Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in subsections (c), (d) or (e) of
Section 5.01, the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the resignation or
removal of the Trustee and the defeasance or other termination of this
Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
---------------------------------
Except as otherwise provided in Sections 6.01 and 6.02, whenever in
the administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08. Eligibility of Trustee.
----------------------
The Trustee hereunder shall at all times be a corporation organized
and doing business under the laws of the United States of America or any state
or territory thereof or of the District of Columbia or a corporation or other
Person authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000)
and subject to supervision or examination by federal, state, territorial, or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 6.08 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
records of condition so published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee; provided, that such corporation shall be otherwise eligible and
--------
qualified under this Article.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.08, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.09.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of (S) 310(b) of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to this Indenture.
SECTION 6.09. Resignation or Removal of Trustee.
---------------------------------
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(a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of such resignation to the Company
and by mailing notice thereof, at the Company's expense, to the holders of the
Debt Securities at their addresses as they shall appear on the Debt Security
Register. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor trustee or trustees by written instrument, in duplicate,
executed by order of its Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee, or any Securityholder
who has been a bona fide holder of a Debt Security or Debt Securities for at
least six months may, subject to the provisions of Section 5.09, on behalf of
himself and all others similarly situated, petition any such court for the
appointment of a successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
Trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 6.08 after written request therefor by the Company or by any
Securityholder who has been a bona fide holder of a Debt Security or Debt
Securities for at least six months,
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 6.08 and shall fail to resign after written request
therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor Trustee, or, subject to the
provisions of Section 5.09, any Securityholder who has been a bona fide holder
of a Debt Security or Debt Securities 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. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint successor Trustee.
(c) Upon prior written notice to the Company and the Trustee, the
holders of a majority in aggregate principal amount of the Debt Securities at
the time outstanding may at any time remove the Trustee and nominate a successor
Trustee, which shall be deemed appointed as successor Trustee unless within ten
Business Days after such nomination the Company objects thereto, in which case
or in the case of a failure by such holders to nominate a successor Trustee, the
Trustee so removed or any Securityholder, upon the terms and conditions and
otherwise as in
34
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subsection (a) of this Section 6.09 provided, may petition any court of
competent jurisdiction for an appointment of a successor.
(d) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 6.09 shall
become effective upon acceptance of appointment by the successor Trustee as
provided in Section 6.10.
SECTION 6.10. Acceptance by Successor Trustee.
-------------------------------
Any successor Trustee appointed as provided in Section 6.09 shall
execute, acknowledge and deliver to the Company and to its predecessor Trustee
an instrument accepting such appointment hereunder, 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, duties and obligations with respect to the
Debt Securities of its predecessor hereunder, with like effect as if originally
named as Trustee herein; but, nevertheless, on the written request of the
Company or of the successor Trustee, the Trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of Section 6.06,
execute and deliver an instrument transferring to such successor Trustee all the
rights and powers of the Trustee so ceasing to act and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee thereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor Trustee all such rights
and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon
all property or funds held or collected by such Trustee to secure any amounts
then due it pursuant to the provisions of Section 6.06.
If a successor Trustee is appointed, the Company, the retiring Trustee
and the successor Trustee shall execute and deliver an indenture supplemental
hereto which 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 Debt Securities as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and 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 Trust hereunder
by more than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee.
No successor Trustee shall accept appointment as provided in this
Section 6.10 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 6.08.
In no event shall a retiring Trustee be liable for the acts or
omissions of any successor Trustee hereunder.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 6.10, the Company shall mail notice of the succession of such
Trustee hereunder to the
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<PAGE>
holders of Debt Securities at their addresses as they shall appear on the Debt
Security Register. If the Company fails to mail such notice within ten Business
Days after the acceptance of appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of the Company.
SECTION 6.11. Succession by Merger, etc.
-------------------------
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 without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, that such corporation shall be otherwise eligible
--------
and qualified under this Article.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debt Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee, and deliver such Debt
Securities so authenticated; and in case at that time any of the Debt Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Debt Securities either in the name of any predecessor hereunder or in the
name of the successor Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Debt Securities or in this
Indenture provided that the certificate of the Trustee shall have; provided,
--------
however, that the right to adopt the certificate of authentication of any
- -------
predecessor Trustee or authenticate Debt Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
36
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SECTION 6.12. Authenticating Agents.
---------------------
There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Debt Securities
issued upon exchange or registration of transfer thereof as fully to all intents
and purposes as though any such Authenticating Agent had been expressly
authorized to authenticate and deliver Debt Securities; provided, that the
--------
Trustee shall have no liability to the Company for any acts or omissions of the
Authenticating Agent with respect to the authentication and delivery of Debt
Securities. Any such Authenticating Agent shall at all times be a corporation
organized and doing business under the laws of the United States or of any state
or territory thereof or of the District of Columbia authorized under such laws
to act as Authenticating Agent, having a combined capital and surplus of at
least $5,000,000 and being subject to supervision or examination by federal,
state, territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually pursuant to law or the
requirements of such authority, then for the purposes of this Section 6.12 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 an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of any Authenticating Agent, shall be the successor
of such Authenticating Agent hereunder, if such successor corporation is
otherwise eligible under this Section 6.12 without the execution or filing of
any paper or any further act on the part of the parties hereto or such
Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent with respect to the Debt
Securities by giving written notice of termination 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 any Authenticating Agent shall cease to be
eligible under this Section 6.12, the Trustee may, and upon the request of the
Company shall, promptly appoint a successor Authenticating Agent eligible under
this Section 6.12, shall give written notice of such appointment to the Company
and shall mail notice of such appointment to all holders of Debt Securities as
the names and addresses of such holders appear on the Debt Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all rights, powers, duties and responsibilities with
respect to the Debt Securities of its predecessor hereunder, with like effect as
if originally named as Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from time to
time reasonable compensation for its services. Any Authenticating Agent shall
have no responsibility or liability for any action taken by it as such in
accordance with the directions of the Trustee.
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ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
-------------------------
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Debt Securities may
take any action (including the making of any demand or request, the giving of
any notice, consent or waiver or the taking of any other action) the fact that
at the time of taking any such action the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, (b) by the record of such holders of Debt
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article VIII, (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders or (d) by any other method the Trustee deems
satisfactory.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action or
revocation of the same, the Company may, at its option, as evidenced by an
Officers' Certificate, fix in advance a record date for such Debt Securities for
the determination of Securityholders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action or revocation
of the same, but the Company shall have no obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other action or revocation of the same may be given before or
after the record date, but only the Securityholders of record at the close of
business on the record date shall be deemed to be Securityholders for the
purposes of determining whether Securityholders of the requisite proportion of
outstanding Debt Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other
action or revocation of the same, and for that purpose the outstanding Debt
Securities shall be computed as of the record date; provided, however, that no
-------- -------
such authorization, agreement or consent by such Securityholders on the record
date shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
-------------------------------------
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of
the execution of any instrument by a Securityholder or his agent or proxy shall
be sufficient if made in accordance with such reasonable rules and regulations
as may be prescribed by the Trustee or in such manner as shall be satisfactory
to the Trustee. The ownership of Debt Securities shall be proved by the Debt
Security Register or by a certificate of the Debt Security registrar. The
Trustee may require such additional proof of any matter referred to in this
Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.
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SECTION 7.03. Who Are Deemed Absolute Owners.
------------------------------
Prior to due presentment for registration of transfer of any Debt
Security, the Company, the Trustee, any Authenticating Agent, any paying agent,
any transfer agent and any Debt Security registrar may deem the Person in whose
name such Debt Security shall be registered upon the Debt Security Register to
be, and may treat him as, the absolute owner of such Debt Security (whether or
not such Debt Security shall be overdue) for the purpose of receiving payment of
or on account of the principal of, premium, if any, and interest on such Debt
Security and for all other purposes; and neither the Company nor the Trustee nor
any Authenticating Agent nor any paying agent nor any transfer agent nor any
Debt Security registrar shall be affected by any notice to the contrary. All
such payments so made to any holder for the time being or upon his order shall
be valid, and, to the extent of the sum or sums so paid, effectual to satisfy
and discharge the liability for moneys payable upon any such Debt Security.
SECTION 7.04. Debt Securities Owned by Company Deemed Not
-------------------------------------------
Outstanding.
- -----------
In determining whether the holders of the requisite aggregate
principal amount of Debt Securities have concurred in any direction, consent or
waiver under this Indenture, Debt Securities which are owned by the Company or
any other obligor on the Debt Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Debt Securities shall be disregarded and
deemed not to be outstanding for the purpose of any such determination;
provided, that for the purposes of determining whether the Trustee shall be
- --------
protected in relying on any such direction, consent or waiver, only Debt
Securities which a Responsible Officer of the Trustee actually knows are so
owned shall be so disregarded. Debt Securities so owned which have been pledged
in good faith may be regarded as outstanding for the purposes of this Section
7.04 if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right to vote such Debt Securities and that the pledgee is not the
Company or any such other obligor or Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company or
any such other obligor. In the case of a dispute as to such right, any decision
by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
--------------------------------------------
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Debt Securities specified in
this Indenture in connection with such action, any holder (in cases where no
record date has been set pursuant to Section 7.01) or any holder as of an
applicable record date (in cases where a record date has been set pursuant to
Section 7.01) of a Debt Security (or any Debt Security issued in whole or in
part in exchange or substitution therefor) the serial number of which is shown
by the evidence to be included in the Debt Securities the holders of which have
consented to such action may, by filing written notice with the Trustee at the
Principal Office of the Trustee and upon proof of holding as provided in Section
7.02, revoke such action so far as concerns such Debt Security (or so far as
concerns the principal amount represented by any exchanged or substituted Debt
Security). Except as aforesaid any such action taken by the holder of any Debt
Security shall be conclusive and binding upon such holder and upon all future
holders and owners of such Debt Security, and of
39
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any Debt Security issued in exchange or substitution therefor or on registration
of transfer thereof, irrespective of whether or not any notation in regard
thereto is made upon such Debt Security or any Debt Security issued in exchange
or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.
--------------------
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant to
the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of such Debt Securities
under any other provision of this Indenture or under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
---------------------------
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in Palo Alto, Menlo Park or San Francisco, as the Trustee shall determine.
Notice of every meeting of the Securityholders, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be mailed to holders of Debt Securities affected at their
addresses as they shall appear on the Debt Securities Register. Such notice
shall be mailed not less than 20 nor more than 180 days prior to the date fixed
for the meeting.
SECTION 8.03. Call of Meetings by Company or Securityholders.
----------------------------------------------
In case at any time the Company pursuant to a Board Resolution, or the
holders of at least 10% in aggregate principal amount of the Debt Securities, as
the case may be, then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall not
have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Securityholders may determine the time and the
place in Palo Alto, Menlo Park or San Francisco for such meeting and may call
such meeting to take any action authorized in Section 8.01, by mailing notice
thereof as provided in Section 8.02.
40
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SECTION 8.04. Qualifications for Voting.
-------------------------
To be entitled to vote at any meeting of Securityholders a Person
shall (a) be a holder of one or more Debt Securities with respect to which the
meeting is being held or (b) a Person appointed by an instrument in writing as
proxy by a holder of one or more such Debt Securities. The only Persons who
shall be entitled to be present or to speak at any meeting of Securityholders
shall be the Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 8.05. Regulations.
-----------
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Debt Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 7.04, at any meeting each holder
of Debt Securities with respect to which such meeting is being held or proxy
therefor shall be entitled to one vote for each $1,000 principal amount of Debt
Securities held or represented by him; provided, however, that no vote shall be
-------- -------
cast or counted at any meeting in respect of any Debt Security challenged as not
outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of Debt
Securities held by him or instruments in writing as aforesaid duly designating
him as the Person to vote on behalf of other Securityholders. Any meeting of
Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03
may be adjourned from time to time by a majority of those present, whether or
not constituting a quorum, and the meeting may be held as so adjourned without
further notice.
SECTION 8.06. Voting.
------
The vote upon any resolution submitted to any meeting of holders of
Debt Securities with respect to which such meeting is being held shall be by
written ballots on which shall be subscribed the signatures of such holders or
of their representatives by proxy and the serial number or numbers of the Debt
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the
41
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secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more Persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the Debt
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 8.07. Quorum; Actions.
---------------
The Persons entitled to vote a majority in principal amount of the
Debt Securities shall constitute a quorum for a meeting of Securityholders;
provided, however, that if any action is to be taken at such meeting with
- -------- -------
respect to a consent, waiver, request, demand, notice, authorization, direction
or other action which may be given by the holders of not less than a specified
percentage in principal amount of the Debt Securities, the Persons holding or
representing such specified percentage in principal amount of the Debt
Securities will constitute a quorum. In the absence of a quorum within 30
minutes of the time appointed for any such meeting, the meeting shall, if
convened at the request of Securityholders, be dissolved. In any other case the
meeting may be adjourned for a period of not less than 10 days as determined by
the permanent chairman of the meeting prior to the adjournment of such meeting.
In the absence of a quorum at any such adjourned meeting, such adjourned meeting
may be further adjourned for a period of not less than 10 days as determined by
the permanent chairman of the meeting prior to the adjournment of such adjourned
meeting. Notice of the reconvening of any adjourned meeting shall be given as
provided in Section 8.02, except that such notice need be given only once not
less than five days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage, as provided above, of the principal amount of the Debt
Securities which shall constitute a quorum.
Except as limited by the proviso in the first paragraph of Section
9.02, any resolution presented to a meeting or adjourned meeting duly reconvened
at which a quorum is present as aforesaid may be adopted by the affirmative vote
of the holders of a majority in principal amount of the Debt Securities;
provided, however, that, except as limited by the proviso in the first paragraph
- -------- -------
of Section 9.02, any resolution with respect to any consent, waiver, request,
demand, notice, authorization, direction or other action that this Indenture
expressly provides may be given by the holders of not less than a specified
percentage in principal amount of the Debt Securities may be adopted at a
meeting or an adjourned meeting duly reconvened and at which a quorum is present
as aforesaid only by the affirmative vote of the holders of a not less than such
specified percentage in principal amount of the Debt Securities.
Any resolution passed or decision taken at any meeting of holders of
Debt Securities duly held in accordance with this Section shall be binding on
all the Securityholders, whether or not present or represented at the meeting.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of
------------------------------------------
Securityholders.
- ----------------
The Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto, without the consent of the Securityholders, for one or more
of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company, pursuant to Article XI
hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of Debt Securities
as the Board of Directors shall consider to be for the protection of the holders
of such Debt Securities, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of all or
any of the several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant, restriction
- -------- -------
or condition such supplemental indenture may provide for a particular period of
grace after default (which period may be shorter or longer than that allowed in
the case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided, that any such action shall not adversely
--------
affect the interests of the holders of the Debt Securities;
(d) to add to, delete from, or revise the terms of Debt Securities,
including, without limitation, any terms relating to the issuance, exchange,
registration or transfer of Debt Securities, including to provide for transfer
procedures and restrictions substantially similar to those applicable to the
Capital Securities as required by Section 2.05 (for purposes of assuring that no
registration of Debt Securities is required under the Securities Act of 1933, as
amended); provided that any such action shall not adversely affect the interests
of the holders of the Debt Securities then outstanding (it being understood, for
purposes of this proviso, that transfer restrictions on Debt Securities
substantially similar to those that were applicable to Capital Securities shall
not be deemed to adversely affect the holders of the Debt Securities);
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debt Securities and to add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 6.10;
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<PAGE>
(f) to make any change (other than as elsewhere provided in this
paragraph) that does not adversely affect the rights of any Securityholder in
any material respect; or
(g) to provide for the issuance of and establish the form and terms
and conditions of the Debt Securities, to establish the form of any
certifications required to be furnished pursuant to the terms of this Indenture
or the Debt Securities, or to add to the rights of the holders of Debt
Securities.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Debt Securities at the time outstanding,
notwithstanding any of the provisions of Section 9.02.
SECTION 9.02. Supplemental Indentures with Consent of
---------------------------------------
Securityholders.
- ---------------
With the consent (evidenced as provided in Section 7.01) of the
holders of not less than a majority in aggregate principal amount of the Debt
Securities at the time outstanding affected by such supplemental indenture
(voting as a class), the Company, when authorized by a Board Resolution, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act, then in effect, applicable to indentures qualified
thereunder) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Debt Securities; provided, however, that no such supplemental indenture
-------- -------
shall without the consent of the holders of each Debt Security then outstanding
and affected thereby (i) extend the fixed maturity of any Debt Security, or
reduce the principal amount thereof or any premium thereon, or reduce the rate
or extend the time of payment of interest thereon, or reduce any amount payable
on redemption thereof or make the principal thereof or any interest or premium
thereon payable in any coin or currency other than that provided in the Debt
Securities, or impair or affect the right of any Securityholder to institute
suit for payment thereof or impair the right of repayment, if any, at the option
of the holder, or (ii) reduce the aforesaid percentage of Debt Securities the
holders of which are required to consent to any such supplemental indenture; and
provided, further, that if the Debt Securities are held by the Trust or a
- -------- -------
trustee of such trust, such supplemental indenture shall not be effective until
the holders of a majority in liquidation preference of Trust Securities shall
have consented to such supplemental indenture; provided further, that if the
-------- -------
consent of the Securityholder of each outstanding Debt Security is required,
such supplemental indenture shall not be effective until each holder of the
Trust Securities shall have consented to such supplemental indenture.
44
<PAGE>
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders thereby as their names and addresses appear
upon the Debt Security Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture pursuant to the
provisions of this Article IX, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holders of Debt Securities shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.04. Notation on Debt Securities.
---------------------------
Debt Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article IX may bear a
notation as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Debt Securities so modified as to
conform, in the opinion of the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared and executed by the Company, authenticated by the Trustee or the
Authenticating Agent and delivered in exchange for the Debt Securities then
outstanding.
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
------------------------------------------------------
Furnished to Trustee.
- --------------------
The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall, in addition to the documents required by Section 14.06, receive an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX. The Trustee shall receive an Opinion of
45
<PAGE>
Counsel as conclusive evidence that any supplemental indenture executed pursuant
to this Article IX is authorized or permitted by, and conforms to, the terms of
this Article IX and that it is proper for the Trustee under the provisions of
this Article IX to join in the execution thereof.
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.01. Optional Redemption.
-------------------
At any time the Company shall have the right, subject to the receipt
by the Company of prior approval from the Federal Reserve, if then required
under applicable capital guidelines or policies of the Federal Reserve, to
redeem the Debt Securities, in whole or in part, on any March 8 or September 8
on or after March 8, 2010 (the "Redemption Date"), at the Redemption Price.
SECTION 10.02. Special Event Redemption.
------------------------
If a Special Event shall occur and be continuing, the Company shall
have the right, subject to the receipt by the Company of prior approval from the
Federal Reserve if then required under applicable capital guidelines or policies
of the Federal Reserve, to redeem the Debt Securities, in whole but not in part,
at any time within 90 days following the occurrence of such Special Event (the
"Special Redemption Date"), at the Special Redemption Price.
SECTION 10.03. Notice of Redemption; Selection of Debt Securities.
--------------------------------------------------
In case the Company shall desire to exercise the right to redeem all,
or, as the case may be, any part of the Debt Securities, it shall fix a date for
redemption and shall mail a notice of such redemption at least 30 and not more
than 60 days prior to the date fixed for redemption to the holders of Debt
Securities so to be redeemed as a whole or in part at their last addresses as
the same appear on the Debt Security Register. Such mailing shall be by first
class mail. 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, failure to give such notice by mail or any
defect in the notice to the holder of any Debt Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Debt Security.
Each such notice of redemption shall specify the date fixed for
redemption, the redemption price at which Debt Securities are to be redeemed,
the place or places of payment, that payment will be made upon presentation and
surrender of such Debt Securities, that interest accrued to the date fixed for
redemption will be paid as specified in said notice, and that on and after said
date interest thereon or on the portions thereof to be redeemed will cease to
accrue. If less than all the Debt Securities are to be redeemed the notice of
redemption shall specify the numbers of the Debt Securities to be redeemed. In
case the Debt Securities are to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Debt Security, a new Debt Security or Debt Securities in
principal amount equal to the unredeemed portion thereof will be issued.
46
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Prior to 10:00 a.m. on the Redemption Date or the Special Redemption
Date specified in the notice of redemption given as provided in this Section,
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 Debt
Securities so called for redemption at the appropriate redemption price,
together with accrued interest to the date fixed for redemption.
The Company will give the Trustee notice not less than 45 nor more
than 60 days prior to the redemption date as to the aggregate principal amount
of Debt Securities to be redeemed and the Trustee shall select, in such manner
as in its sole discretion it shall deem appropriate and fair, the Debt
Securities or portions thereof (in integral multiples of $1,000) to be redeemed.
In the case of a redemption pursuant to Section 10.02 above, the Trustee shall,
promptly upon receipt of the Treasury Rate from the Quotation Agent, provide the
Treasury Rate to Chase Bank of Texas, National Association, on behalf of the
holders of the Capital Securities.
SECTION 10.04. Payment of Debt Securities Called for Redemption.
------------------------------------------------
If notice of redemption has been given as provided in Section 10.03,
the Debt Securities or portions of Debt Securities with respect to which such
notice has been given shall become due and payable on the Redemption Date or the
Special Redemption Date, as the case may be, and at the place or places stated
in such notice at the applicable redemption price, together with interest
accrued to the date fixed for redemption, and on and after said Redemption Date
or Special Redemption Date (unless the Company shall default in the payment of
such Debt Securities at the redemption price, together with interest accrued to
said date) interest on the Debt Securities or portions of Debt Securities so
called for redemption shall cease to accrue. On presentation and surrender of
such Debt Securities at a place of payment specified in said notice, such Debt
Securities or the specified portions thereof shall be paid and redeemed by the
Company at the applicable redemption price, together with interest accrued
thereon to the Redemption Date or the Special Redemption Date, as the case may
be.
Upon presentation of any Debt Security redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Debt
Security or Debt Securities of authorized denominations in principal amount
equal to the unredeemed portion of the Debt Security so presented.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01. Company May Consolidate, etc., on Certain Terms.
-----------------------------------------------
Nothing contained in this Indenture or in the Debt Securities shall
prevent any consolidation or merger of the Company with or into any other Person
(whether or not affiliated with the Company) or successive consolidations or
mergers in which the Company or its successor or successors shall be a party or
parties, or shall prevent any sale, conveyance, transfer, lease or other
disposition of the property of the Company or its successor or successors as an
entirety, or substantially as an entirety, to any other Person (whether or not
affiliated with the Company, or its successor or successors) authorized to
acquire and operate the same; provided,
--------
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however, that the Company hereby covenants and agrees that, upon any such
- -------
consolidation, merger (where the Company is not the surviving corporation),
sale, conveyance, transfer, lease or other disposition, the due and punctual
payment of the principal of (and premium, if any) and interest on all of the
Debt Securities in accordance with their terms, according to their tenor, and
the due and punctual performance and observance of all the covenants and
conditions of this Indenture to be kept or performed by the Company, shall be
expressly assumed by the surviving Person by supplemental indenture satisfactory
in form to the Trustee executed and delivered to the Trustee by the entity
formed by such consolidation, or into which the Company shall have been merged,
or by the entity which shall have acquired such property and provided that after
giving effect to such sale, conveyance, transfer, lease, no Default or Event of
Default shall have occurred and be continuing.
SECTION 11.02. Successor Entity to be Substituted.
----------------------------------
In case of any such consolidation, merger, sale, conveyance, transfer
or other disposition and upon the assumption by the successor entity, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the due and punctual payment of the principal of and
premium, if any, and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed or observed by the Company, such successor entity
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the Company, and thereupon the predecessor entity
shall be relieved of any further liability or obligation hereunder or upon the
Debt Securities. Such successor entity thereupon 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 Debt Securities issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee or the Authenticating Agent;
and, upon the order of such successor entity instead of the Company and subject
to all the terms, conditions and limitations in this Indenture prescribed, the
Trustee or the Authenticating Agent shall authenticate and deliver any Debt
Securities which previously shall have been signed and delivered by the officers
of the Company, to the Trustee or the Authenticating Agent for authentication,
and any Debt Securities which such successor entity thereafter shall cause to be
signed and delivered to the Trustee or the Authenticating Agent for that
purpose. All the Debt Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Debt Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Debt Securities had been issued at the date of the execution hereof.
SECTION 11.03. Opinion of Counsel to be Given to Trustee.
-----------------------------------------
The Trustee, subject to the provisions of Sections 6.01 and 6.02,
shall receive, in addition to the Opinion of Counsel required by Section 9.05,
an Opinion of Counsel as conclusive evidence that any consolidation, merger,
sale, conveyance, transfer or other disposition, and any assumption, permitted
or required by the terms of this Article XI complies with the provisions of this
Article XI.
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ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.01. Discharge of Indenture.
----------------------
When (a) the Company shall deliver to the Trustee for cancellation all
Debt Securities theretofore authenticated (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) and not theretofore canceled, or (b) all the
Debt Securities not theretofore canceled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds,
which shall be immediately due and payable, sufficient to pay at maturity or
upon redemption all of the Debt Securities (other than any Debt Securities which
shall have been destroyed, lost or stolen and which shall have been replaced or
paid as provided in Section 2.06) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, but excluding, however, the amount of any moneys for the payment of
principal of, and premium, if any, or interest on the Debt Securities (1)
theretofore repaid to the Company in accordance with the provisions of Section
12.04, or (2) paid to any state or to the District of Columbia pursuant to its
unclaimed property or similar laws, and if in the case of either clause (a) or
clause (b) the Company shall also pay or cause to be paid all other sums payable
hereunder by the Company, then this Indenture shall cease to be of further
effect except for the provisions of Sections 2.05, 2.06, 2.08, 3.01, 3.02, 3.04,
6.06, 6.09 and 12.04 hereof shall survive until such Debt Securities shall
mature and be paid. Thereafter, Sections 6.09 and 12.04 shall survive, and the
Trustee, on demand of the Company accompanied by 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, and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture, the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Debt Securities.
SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee.
-----------------------------------------------
Subject to the provisions of Section 12.04, all moneys deposited with
the Trustee pursuant to Section 12.01 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the holders of the particular
Debt Securities for the payment of which such moneys have been deposited with
the Trustee, of all sums due and to become due thereon for principal, and
premium, if any, and interest.
SECTION 12.03. Paying Agent to Repay Moneys Held.
---------------------------------
Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Debt Securities (other than the Trustee) shall,
upon demand of the Company,
49
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be repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such moneys.
SECTION 12.04. Return of Unclaimed Moneys.
--------------------------
Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of, and premium, if any, or interest on Debt
Securities and not applied but remaining unclaimed by the holders of Debt
Securities for two years after the date upon which the principal of, and
premium, if any, or interest on such Debt Securities, as the case may be, shall
have become due and payable, shall be repaid to the Company by the Trustee or
such paying agent on written demand; and the holder of any of the Debt
Securities shall thereafter look only to the Company for any payment which such
holder may be entitled to collect and all liability of the Trustee or such
paying agent with respect to such moneys shall thereupon cease.
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 13.01. Indenture and Debt Securities Solely Corporate
----------------------------------------------
Obligations.
- -----------
No recourse for the payment of the principal of or premium, if any, or
interest on any Debt Security, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company in this Indenture or in any supplemental indenture, or
in any such Debt Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or of any
successor corporation of the Company, either directly or through the Company or
any successor corporation of the Company, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Debt Securities.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.01. Successors.
----------
All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.
SECTION 14.02. Official Acts by Successor Entity.
---------------------------------
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done
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and performed with like force and effect by the like board, committee, officer
or other authorized Person of any entity that shall at the time be the lawful
successor of the Company.
SECTION 14.03. Surrender of Company Powers.
---------------------------
The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company, and as to any permitted
successor.
SECTION 14.04. Addresses for Notices, etc.
--------------------------
Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the
Securityholders on the Company may be given or served in writing by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company, with the
Trustee for the purpose) to the Company at 400 Emerson Street, Third Floor, Palo
Alto, California 94301, Attention: Linda M. Iannone.
Any notice, direction, request or demand by any Securityholder or the
Company to or upon the Trustee shall be deemed to have been sufficiently given
or made, for all purposes, if given or made in writing at the office of the
Trustee, addressed to the Trustee, 101 Barclay Street, Floor 21W, New York, NY
10286 Attention: Corporate Trust Administration.
SECTION 14.05. Governing Law.
-------------
This Indenture and each Debt Security shall be deemed to be a contract
made under the law of the State of New York, and for all purposes shall be
governed by and construed in accordance with the law of said State, without
regard to conflict of laws principles thereof.
SECTION 14.06. Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (a) a statement that the person
making such certificate or opinion has read such covenant or condition; (b) 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; (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not
51
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such covenant or condition has been complied with; and (d) a statement as to
whether or not, in the opinion of such person, such condition or covenant has
been complied with.
SECTION 14.07. Non-Business Days.
-----------------
In any case where the date of payment of interest on or principal of
the Debt Securities will be a Saturday, Sunday or a day on which banking
institutions in New York City (in the State of New York) are permitted or
required by any applicable law to close, the payment of such interest on or
principal of the Debt Securities need not be made on such date but may be made
on the next succeeding day not a Saturday, Sunday or a day on which banking
institutions in such cities are permitted or required by any applicable law to
close, with the same force and effect as if made on the date of payment and no
interest shall accrue for the period from and after such date.
SECTION 14.08. Table of Contents, Headings, etc.
--------------------------------
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SECTION 14.09. Execution in Counterparts.
-------------------------
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 14.10. Separability.
------------
In case any one or more of the provisions contained in this Indenture
or in the Debt Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of such Debt
Securities, but this Indenture and such Debt Securities shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 14.11. Assignment.
----------
The Company will have the right at all times to assign any of its
rights or obligations under this Indenture to a direct or indirect wholly owned
Subsidiary of the Company, provided that, in the event of any such assignment,
the Company will remain liable for all such obligations. Subject to the
foregoing, this Indenture is binding upon and inures to the benefit of the
parties hereto and their respective successors and assigns. This Indenture may
not otherwise be assigned by the parties thereto.
SECTION 14.12. Acknowledgment of Rights.
------------------------
The Company acknowledges that, with respect to any Debt Securities
held by the Trust or the Institutional Trustee of the Trust, if the
Institutional Trustee of the Trust fails to
52
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enforce its rights under this Indenture as the holder of Debt Securities held as
the assets of the Trust after the holders of a majority in liquidation amount of
the Capital Securities of the Trust have so directed such Institutional Trustee,
a holder of record of such Capital Securities may to the fullest extent
permitted by law institute legal proceedings directly against the Company to
enforce such Institutional Trustee's rights under this Indenture without first
instituting any legal proceedings against such Institutional Trustee or any
other Person. Notwithstanding the foregoing, if an Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest (or premium, if any) or principal on the Debt Securities on the
date such interest (or premium, if any) or principal is otherwise payable (or in
the case of redemption, on the redemption date), the Company acknowledges that a
holder of record of Capital Securities of the Trust may directly institute a
proceeding against the Company for enforcement of payment to such holder
directly of the principal of (or premium, if any) or interest on the of Debt
Securities having an aggregate principal amount equal to the aggregate
liquidation amount of the Capital Securities of such holder on or after the
respective due date specified in the Debt Securities.
ARTICLE XV
SUBORDINATION OF DEBT SECURITIES
SECTION 15.01. Agreement to Subordinate.
------------------------
The Company covenants and agrees, and each holder of Debt Securities
issued hereunder and under any supplemental indenture or by any Board Resolution
(the "Additional Provisions") by such Securityholder's acceptance thereof
likewise covenants and agrees, that all Debt Securities shall be issued subject
to the provisions of this Article XV; and each holder of a Debt Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Company of the principal of, and premium, if any,
and interest on all Debt Securities issued hereunder and under any Additional
Provisions shall, to the extent and in the manner hereinafter set forth, be
subordinated and junior in right of payment to the prior payment in full of all
Allocable Amounts payable in respect of Senior Indebtedness of the Company,
whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
------------------------------
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company following any grace period, or in the event
that the maturity of any Senior Indebtedness of the Company has been accelerated
because of a default, then, in either case, no payment shall be made by the
Company with respect to the principal (including redemption and sinking fund
payments) of, or premium, if any, or interest on the Debt Securities.
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<PAGE>
In the event of the acceleration of the maturity of the Debt
Securities, then no payment shall be made by the Company with respect to the
principal (including prepayment payments) of (or premium, if any) or interest on
the Debt Securities until the holders of all Senior Indebtedness outstanding at
the time of such acceleration shall receive payment, in full, of all Allocable
Amounts due on or in respect of such Senior Indebtedness (including any amounts
due upon acceleration).
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.02, such payment shall, subject to Section 15.06,
be held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent of the Allocable Amounts in respect of such Senior
Indebtedness and to the extent that the holders of the Senior Indebtedness (or
their representative or representatives or a trustee) notify the Trustee in
writing within 90 days of such payment of the Allocable Amounts then due and
owing on the Senior Indebtedness and only the Allocable Amounts specified in
such notice to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
------------------------------------
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Allocable Amounts due upon all Senior
Indebtedness of the Company shall first be paid in full, or payment thereof
provided for in money in accordance with its terms, before any payment is made
by the Company, on account of the principal (and premium, if any) or interest on
the Debt Securities; and upon any such dissolution or winding-up or liquidation
or reorganization, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Securityholders or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article XV, shall be paid by the
Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, or by the Securityholders
or by the Trustee under this Indenture if received by them or it, directly to
the holders of Allocable Amounts of the Company (pro rata to such holders on the
basis of the respective Allocable Amounts of Senior Indebtedness held by such
holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Allocable Amounts may have been issued, as
their respective interests may appear, to the extent necessary to pay such
Allocable Amounts in full, in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holders of such Allocable
Amounts, before any payment or distribution is made to the Securityholders or to
the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Allocable Amounts of Senior Indebtedness of the Company is
paid in full, or provision is made for such payment in
54
<PAGE>
money in accordance with its terms, such payment or distribution shall (subject
to Section 15.06) be held in trust for the benefit of and shall be paid over or
delivered to the holders of such Allocable Amounts of Senior Indebtedness or
their representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Allocable Amounts of
Senior Indebtedness may have been issued, as their respective interests may
appear, as calculated by the Company, for application to the payment of all
Senior Indebtedness of the Company, remaining unpaid to the extent necessary to
pay such Allocable Amounts of Senior Indebtedness in full in money in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Debt Securities to the payment of all Senior Indebtedness of the Company,
that may at the time be outstanding, provided that (a) such Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (b) the rights of the holders of such Senior
Indebtedness are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article IX of this Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 15.03 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article IX of this Indenture. Nothing in Section 15.02 or in this Section
15.03 shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.06 of this Indenture.
SECTION 15.04. Subrogation.
-----------
Subject to the payment in full of all Allocable Amounts of Senior
Indebtedness of the Company, the Securityholders shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company, applicable to such
Senior Indebtedness until the principal of (and premium, if any) and interest on
the Debt Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior
Indebtedness of any cash, property or securities to which the Securityholders or
the Trustee would be entitled except for the provisions of this Article XV, and
no payment over pursuant to the provisions of this Article XV to or for the
benefit of the holders of such Senior Indebtedness by Securityholders or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness of the Company, and the holders of the Debt Securities be
deemed to be a payment or distribution by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article XV
are and are intended solely for the purposes of defining the relative rights of
the holders of the Securities, on the one hand, and the holders of such Senior
Indebtedness, on the other hand.
55
<PAGE>
Nothing contained in this Article XV or elsewhere in this Indenture,
any Additional Provisions or in the Debt Securities is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness of the Company, and the holders of the Debt Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Debt Securities the principal of (and premium, if any) and
interest on the Debt Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Debt Securities and creditors of the
Company, other than the holders of Senior Indebtedness of the Company, nor shall
anything herein or therein prevent the Trustee or the holder of any Debt
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
XV of the holders of such Senior Indebtedness in respect of cash, property or
securities of the Company, received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
SECTION 15.05. Trustee to Effectuate Subordination.
-----------------------------------
Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
---------------------
The Company shall give prompt written notice to a Responsible Officer
of the Trustee at the Principal Office of the Trustee of any fact known to the
Company that would prohibit the making of any payment of monies to or by the
Trustee in respect of the Debt Securities pursuant to the provisions of this
Article XV. Notwithstanding the provisions of this Article XV or any other
provision of this Indenture or any Additional Provisions, the Trustee shall not
be charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the Debt
Securities pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee at the Principal Office of the Trustee shall
have received written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and before the receipt of any
such written notice, the Trustee, subject to the provisions of Article VI of
this Indenture, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Trustee shall not have received the notice
-------- -------
provided for in this Section 15.06 at least two Business
56
<PAGE>
Days prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest on any Debt Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purposes for which they were received, and shall not be affected by any notice
to the contrary that may be received by it within two Business Days prior to
such date.
The Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness of the Company (or a trustee or representative on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder or
holders. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of such
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article XV, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article XV, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness.
-----------------------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture or any Additional Provisions shall deprive the
Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XV, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture or any Additional Provisions against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of such Senior Indebtedness and, subject to the provisions of Article VI
of this Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Securityholders, the Company or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
---------------------------------
No right of any present or future holder of any Senior Indebtedness of
the Company 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,
57
<PAGE>
provisions and covenants of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Debt Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against the Company, and any other Person.
The Bank of New York hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions herein above set forth.
58
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written.
GREATER BAY BANCORP
By /s/ Steven C. Smith
----------------------------
Name: Steven C. Smith
Title: Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
THE BANK OF NEW YORK, as Trustee
By /s/ Annette L. Kos
----------------------------
Name: Annette L. Kos
Title: Assistant Vice President
59
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Exhibit 4.5
GUARANTEE AGREEMENT
GREATER BAY BANCORP
Dated as of March 23, 2000
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation................................... 1
ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 2.1 Powers and Duties of the Guarantee Trustee....................... 4
SECTION 2.2 Certain Rights of Guarantee Trustee.............................. 5
SECTION 2.3 Not Responsible for Recitals or Issuance of Guarantee............ 7
SECTION 2.4 Events of Default; Waiver........................................ 8
SECTION 2.5 Events of Default; Notice........................................ 8
ARTICLE III
GUARANTEE TRUSTEE
SECTION 3.1 Guarantee Trustee; Eligibility................................... 8
SECTION 3.2 Appointment, Removal and Resignation of Guarantee Trustee........ 9
ARTICLE IV
GUARANTEE
SECTION 4.1 Guarantee....................................................... 10
SECTION 4.2 Waiver of Notice and Demand..................................... 10
SECTION 4.3 Obligations Not Affected........................................ 10
SECTION 4.4 Rights of Holders............................................... 11
SECTION 4.5 Guarantee of Payment............................................ 11
SECTION 4.6 Subrogation..................................................... 12
SECTION 4.7 Independent Obligations......................................... 12
SECTION 4.8 Enforcement by a Beneficiary.................................... 12
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 5.1 Limitation of Transactions...................................... 12
SECTION 5.2 Ranking......................................................... 13
ARTICLE VI
TERMINATION
SECTION 6.1 Termination..................................................... 13
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Exculpation..................................................... 14
SECTION 7.2 Indemnification................................................. 14
SECTION 7.3 Compensation; Reimbursement of Expenses......................... 15
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Successors and Assigns.......................................... 16
SECTION 8.2 Amendments...................................................... 16
SECTION 8.3 Notices......................................................... 16
SECTION 8.4 Benefit......................................................... 17
SECTION 8.5 Governing Law................................................... 17
</TABLE>
ii
<PAGE>
GUARANTEE AGREEMENT
-------------------
This GUARANTEE AGREEMENT (the "Guarantee"), dated as of March 23,
2000, is executed and delivered by Greater Bay Bancorp, a bank holding company
incorporated in California (the "Guarantor"), and The Bank of New York, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of GBB
Capital III, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of March 23, 2000, among the trustees named therein of
the Issuer, Greater Bay Bancorp, as sponsor, and the holders from time to time
of undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof securities, having an aggregate liquidation amount of
up to $9,500,000, designated the Fixed Rate Capital Trust Pass-through
Securities/(R)/ (the "Capital Securities");
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
------------------------------
In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to this
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to Articles and Sections are to
Articles and Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as at the date of execution of
this Guarantee have the same meanings when used in this Guarantee, unless
otherwise defined in this Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
<PAGE>
"Beneficiaries" means any Person to whom the Trust is or hereafter
becomes indebted or liable.
"Corporate Trust Office" means the office of the Guarantee Trustee at
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Guarantee Agreement is located at 101 Barclay Street, Floor
21W, New York, NY 10286.
"Covered Person" means any Holder of Capital Securities.
"Debentures" means the junior subordinated debentures of Greater Bay
Bancorp, designated the 10 7/8% Junior Subordinated Deferrable Interest
Debentures due 2030, held by the Institutional Trustee (as defined in the
Declaration) of the Issuer.
"Declaration Event of Default" means an "Event of Default" as defined
in the Declaration.
"Event of Default" has the meaning set forth in Section 2.4.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) which are required to be paid on such Capital Securities to
the extent the Issuer shall have funds available therefor, (ii) the Redemption
Price (as defined in the Indenture) to the extent the Issuer has funds available
therefor, with respect to any Capital Securities called for redemption by the
Issuer, (iii) the Special Redemption Price (as defined in the Indenture) to the
extent the Issuer has funds available therefor, with respect to Capital
Securities redeemed upon the occurrence of a Special Event (as defined in the
Indenture), and (iv) upon a voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Issuer (other than in connection with the
distribution of Debentures to the Holders of the Capital Securities in exchange
therefor as provided in the Declaration), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Capital
Securities to the date of payment, to the extent the Issuer shall have funds
available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as required by applicable
law (in either case, the "Liquidation Distribution").
"Guarantee Trustee" means The Bank of New York, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Capital Securities; provided, however, that, in
-------- -------
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
2
<PAGE>
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"Indenture" means the Indenture dated as of March 23, 2000, between
the Guarantor and The Bank of New York, not in its individual capacity but
solely as trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the Institutional Trustee of the Issuer.
"Liquidation Distribution" has the meaning set forth in the definition
of "Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities" means
Holder(s) of outstanding Capital Securities, voting together as a class, but
separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Capital
Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not
including liabilities related to taxes) of the Trust, other than obligations of
the Trust to pay to holders of any Trust Securities the amounts due such holders
pursuant to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:
(a) a statement that each officer signing the Officer's 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 Officer's
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.
"Other Debentures" shall mean all junior subordinated debentures other
than the Debentures issued by the Company from time to time and sold to trusts
other than the Issuer (if any), in each case similar to the Issuer.
"Other Guarantees" shall mean all guarantees other than this Guarantee
issued by the Company with respect to preferred beneficial interests (if any)
issued to trusts other than the Issuer (if any), in each case similar to the
Issuer.
3
<PAGE>
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Redemption Price" has the meaning set forth in the definition of
"Guarantee Payments" herein.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any officer within the Corporate Trust Office of the Guarantee Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.
"Trust Securities" means the Common Securities and the Capital
Securities.
ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
SECTION 2.1 Powers and Duties of the Guarantee Trustee
------------------------------------------
(a) This Guarantee shall be held by the Guarantee Trustee for the
benefit of the Holders of the Capital Securities, and the Guarantee Trustee
shall not transfer this Guarantee to any Person except a Holder of Capital
Securities exercising his or her rights pursuant to Section 4.4(b) 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, 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 actually known to a Responsible Officer of
the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
shall enforce this Guarantee for the benefit of the Holders of the Capital
Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after curing all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth
in this Guarantee, and no implied covenants shall be read into this
Guarantee against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.4) and is
actually known to a Responsible Officer of the Guarantee Trustee, the
Guarantee Trustee shall exercise such of the rights and powers vested in it
by this Guarantee, and use the same
4
<PAGE>
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 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, 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, and no implied
covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; 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; but in the case of any such
certificates or opinions 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;
(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 such Responsible
Officer of the Guarantee Trustee or 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 Capital 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; and
(iv) no provision of this Guarantee 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 is not reasonably assured to it under the terms of this
Guarantee, or security and indemnity, reasonably satisfactory to the
Guarantee Trustee, against such risk or liability is not reasonably
assured to it.
SECTION 2.2 Certain Rights of Guarantee Trustee
-----------------------------------
5
<PAGE>
(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall
be fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document 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 shall be sufficiently evidenced by an Officer's
Certificate.
(iii) Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting 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 Officer's Certificate of the Guarantor
which, upon receipt of such request, shall be promptly delivered by
the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Guarantee Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel with respect to
legal matters shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in
good faith and in accordance with such advice or opinion. Such counsel
may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration
of this Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee 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 the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Guarantee Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Guarantee Trustee; provided, however, that nothing
-------- -------
contained in this Section 2.2(a)(vi) 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.
(vii) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument,
6
<PAGE>
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit.
(viii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder.
(ix) Any action taken by the Guarantee Trustee or its
agents hereunder shall bind the Holders of the Capital Securities, and
the signature of the Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Guarantee
Trustee to so act or as to its compliance with any of the terms and
provisions of this Guarantee, both of which shall be conclusively
evidenced by the Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Guarantee 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 of a Majority in liquidation amount of the Capital Securities,
(B) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (C) shall be
protected in conclusively relying on or acting in accordance with such
instructions.
(xi) The Guarantee Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee.
(b) No provision of this Guarantee 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.
SECTION 2.3 Not Responsible for Recitals or Issuance of Guarantee
-----------------------------------------------------
The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.
7
<PAGE>
SECTION 2.4 Events of Default; Waiver
-------------------------
(a) An Event of Default under this Guarantee will occur upon the
failure of the Guarantor to perform any of its payment or other obligations
hereunder.
(b) The Holders of a Majority in liquidation amount of Capital
Securities may, voting or consenting as a class, on behalf of the Holders of all
of the Capital Securities, waive any past Event of Default and its consequences.
Upon such waiver, any such Event of Default shall cease to exist, and shall be
deemed to have been cured, for every purpose of this Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
SECTION 2.5 Events of Default; Notice
-------------------------
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to
the Holders of the Capital Securities, notices of all Events of Default
actually known to a Responsible Officer of the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice, provided,
--------
however, that the Guarantee Trustee shall be protected in withholding such
-------
notice if and so long as a Responsible Officer of the Guarantee Trustee in
good faith determines that the withholding of such notice is in the
interests of the Holders of the Capital Securities.
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice from the Guarantor or a Holder of the Capital Securities
(except in the case of a payment default), or a Responsible Officer of the
Guarantee Trustee charged with the administration of this Guarantee shall
have obtained actual knowledge, thereof.
ARTICLE III
GUARANTEE TRUSTEE
SECTION 3.1 Guarantee Trustee; Eligibility
------------------------------
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or Person authorized under such laws
to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($50,000,000), and subject
to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then, for
the purposes of this Section 3.1(a) (ii), the combined capital and
surplus of such corporation shall
8
<PAGE>
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 3.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 3.2(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 shall either eliminate such interest or resign to the
extent and in the manner provided by, and subject to this Guarantee.
SECTION 3.2 Appointment, Removal and Resignation of Guarantee Trustee
---------------------------------------------------------
(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor except during an
Event of Default.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 3.2(a) 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 to office 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 an instrument in
writing executed by such Successor Guarantee Trustee and delivered to the
Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 3.2 within 60 days after
delivery of an instrument of removal or resignation, the Guarantee Trustee
resigning or being removed may petition 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.
(e) No Guarantee Trustee shall be liable for the acts or omissions to
act of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of
the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay
to the Guarantee Trustee all amounts owing to the Guarantee Trustee under
Sections 7.2 and 7.3 accrued to the date of such termination, removal or
resignation.
ARTICLE IV
GUARANTEE
9
<PAGE>
SECTION 4.1 Guarantee
---------
(a) The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense
(except as defense of payment by the Issuer), right of set-off or counterclaim
that the Issuer may have or assert. The Guarantor fully, knowingly and
unconditionally waives any right that the Guarantor may have to revoke this
Guarantee under Section 2815 of the California Civil Code or otherwise. 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.
(b) The Guarantor hereby also agrees to assume any and all
Obligations of the Trust and in the event any such Obligation is not so assumed,
subject to the terms and conditions hereof, the Guarantor hereby irrevocably and
unconditionally guarantees to each Beneficiary the full payment, when and as
due, of any and all obligations to such Beneficiaries. This Agreement is
intended to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received notice hereof.
SECTION 4.2 Waiver of Notice and Demand
---------------------------
The Guarantor hereby waives notice of acceptance of this Guarantee and
of any liability to which it applies or may apply, presentment, demand for
payment, any right to require a proceeding first against the 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 4.3 Obligations Not Affected
------------------------
The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital 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, Redemption Price, Special Redemption Price,
Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the Capital
Securities (other than an extension of time for payment of Distributions,
Redemption Price, Special Redemption Price, Liquidation Distribution or
other sum payable that results from the extension of any interest payment
period on the Debentures or any extension of the maturity date of the
Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders
10
<PAGE>
pursuant to the terms of the Capital 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 Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 4.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 4.4 Rights of Holders
-----------------
(a) The Holders of a Majority in liquidation amount of the Capital
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 or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under this Guarantee; provided,
--------
however, that (subject to Section 2.1) the Guarantee Trustee shall have the
-------
right to decline to follow any such direction if the Guarantee Trustee
shall determine that the actions so directed would be unjustly prejudicial
to the Holders not taking part in such direction or if the Guarantee
Trustee being advised by counsel determines that the action or proceeding
so directed may not lawfully be taken or if the Guarantor Trustee in good
faith by its board of directors or trustees, executive committees or a
trust committee of directors or trustees and/or Responsible Officers shall
determine that the action or proceedings so directed would involve the
Guarantee Trustee in personal liability.
(b) Any Holder of Capital Securities may institute a legal proceeding
directly against the Guarantor to enforce the Guarantee Trustee's rights
under this Guarantee, without first instituting a legal proceeding against
the Issuer, the Guarantee Trustee or any other Person. The Guarantor
waives any right or remedy to require that any such action be brought first
against the Issuer, the Guarantee Trustee or any other Person before so
proceeding directly against the Guarantor.
SECTION 4.5 Guarantee of Payment
--------------------
This Guarantee creates a guarantee of payment and not of collection.
11
<PAGE>
SECTION 4.6 Subrogation
-----------
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Capital Securities against the Issuer in respect of any amounts paid
to such Holders by the Guarantor under this Guarantee; provided, however, that
-------- -------
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee, if, after giving effect to any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 4.7 Independent Obligations
-----------------------
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
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
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.
SECTION 4.8 Enforcement by a Beneficiary
----------------------------
A Beneficiary may enforce the obligations of the Guarantor contained
in Section 4.1(b) directly against the Guarantor and the Guarantor waives any
right or remedy to require that any action be brought against the Trust or any
other person or entity before preceding against the Guarantor. The Guarantor
shall be subrogated to all rights (if any) of any Beneficiary against the Trust
in respect of any amounts paid to the Beneficiaries by the Guarantor under this
Agreement; provided, however, that the Guarantor shall not (except to the extent
-------- -------
required by mandatory provisions of law) be entitled to enforce or exercise any
rights that it may acquire by way of subrogation or any indemnity, reimbursement
or other agreement, in all cases as a result of payment under this Agreement,
if, after giving effect to such payment, any amounts are due and unpaid under
this Agreement.
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 5.1 Limitation of Transactions
--------------------------
So long as any Capital Securities remain outstanding, if (a) there
shall have occurred and be continuing an Event of Default or a Declaration Event
of Default or (b) the Guarantor shall have selected an Extension Period as
provided in the Declaration and such period, or any extension thereof, shall be
continuing, then the Guarantor may not (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Guarantor's capital stock or (y) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Guarantor (including Other Debentures) that rank pari
passu in all respects with or junior in interest to the Debentures or (iii) make
any guarantee payments with respect to any guarantee
12
<PAGE>
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 right of payment to the Debentures (other than (i) repurchases, redemptions
or other acquisitions of shares of capital stock of the Guarantor in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Guarantor (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to occurrence of the Event of Default
or Declaration Event of Default or the applicable Extension Period, (ii) as a
result of any exchange or conversion of any class or series of the Guarantor's
capital stock (or any capital stock of a subsidiary of the Guarantor) for any
class or series of the Guarantor's capital stock or of any class or series of
the Guarantor's indebtedness for any class or series of the Guarantor's capital
stock, (iii) 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, (iv) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (v) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock).
SECTION 5.2 Ranking
-------
This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Guarantor. By their acceptance thereof, each Holder of Capital Securities
agrees to the foregoing provisions of this Guarantee and the other terms set
forth herein, it being understood that the terms of Article XV of the Indenture
shall apply to the obligations of the Guarantor under this guarantee as if such
Article were set forth herein in full.
The right of the Guarantor to participate in any distribution of
assets of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under
this Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
that the Guarantor may enter into in the future or otherwise.
ARTICLE VI
TERMINATION
SECTION 6.1 Termination
-----------
This Guarantee shall terminate as to the Capital Securities (i) upon
full payment of the Redemption Price of all Capital Securities, (ii) upon the
distribution of the Debentures to
13
<PAGE>
the Holders of all of the Capital Securities or (iii) upon full payment of the
amounts payable in accordance with the Declaration upon dissolution, winding up
or liquidation of the Issuer. This Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any Holder of Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Guarantee.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Exculpation
-----------
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably believed
to be within the scope of the authority conferred on such Indemnified
Person by this Guarantee or by law, except that an Indemnified Person shall
be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such
acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Issuer or the Guarantor and upon such
information, opinions, reports or statements presented to the Issuer or the
Guarantor by any Person as to matters the Indemnified Person reasonably
believes are within such other Person's professional or expert competence
and who, if selected by such Indemnified Person, has been selected with
reasonable care by such Indemnified Person, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence
and amount of assets from which Distributions to Holders of Capital
Securities might properly be paid.
SECTION 7.2 Indemnification
---------------
(a) The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or willful
misconduct on the part of the Indemnified Person, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of the Indemnified Person defending itself against, or investigating,
any claim or liability in connection with the exercise or performance of any of
the Indemnified Person's powers or duties hereunder. The obligation to indemnify
as set forth in this Section 7.2 shall survive the resignation or removal of the
Guarantee Trustee and the termination of this Guarantee.
(b) Promptly after receipt by an Indemnified Person under this
Section 7.2 of notice of the commencement of any action, such Indemnified Person
will, if a claim in respect thereof is to be made against the Guarantor under
this Section 7.2, notify the Guarantor in writing of the commencement thereof;
but the failure so to notify the Guarantor (i) will not
14
<PAGE>
relieve the Guarantor from liability under paragraph (a) above unless and to the
extent that the Guarantor did not otherwise learn of such action and such
failure results in the forfeiture by the Guarantor of substantial rights and
defenses and (ii) will not, in any event, relieve the Guarantor from any
obligations to any Guarantor other than the indemnification obligation provided
in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of
the Guarantor's choice at the Guarantor's expense to represent the Indemnified
Person in any action for which indemnification is sought (in which case the
Guarantor shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the Indemnified Person or Persons except as set
forth below); provided, however, that such counsel shall be satisfactory to the
-------- -------
Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel
to represent the Guarantor in an action, the Indemnified Person shall have the
right to employ separate counsel (including local counsel), and the Guarantor
shall bear the reasonable fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by the Guarantor to represent the Indemnified
Person 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 Person and the Guarantor and the Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it and/or
other Indemnified Person which are different from or additional to those
available to the Guarantor, (iii) the Guarantor shall not have employed counsel
satisfactory to the Indemnified Person to represent the Indemnified Person
within a reasonable time after notice of the institution of such action or (iv)
the Guarantor shall authorize the Indemnified Person to employ separate counsel
at the expense of the Guarantor. The Guarantor will not, without the prior
written consent of the Indemnified Persons, 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 Persons are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Person from all
liability arising out of such claim, action, suit or proceeding.
SECTION 7.3 Compensation; Reimbursement of Expenses
---------------------------------------
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall
agree to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon request for all reasonable expenses, disbursements and
advances incurred or made by it in accordance with any provision of this
Guarantee (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.
The provisions of this Section 7.3 shall survive the resignation or
removal of the Guarantee Trustee and the termination of this Guarantee.
15
<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Successors and Assigns
----------------------
All guarantees and agreements contained in this Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, in each case, to the
extent permitted under the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Guarantee without the prior approval of the
Holders of at least a Majority in liquidation amount of the Capital Securities.
SECTION 8.2 Amendments
----------
Except with respect to any changes that do not adversely affect the
rights of Holders of the Capital Securities in any material respect (in which
case no consent of Holders will be required), this Guarantee may be amended only
with the prior approval of the Holders of not less than a Majority in
liquidation amount of the Capital Securities. The provisions of the Declaration
with respect to amendments thereof apply to the giving of such approval.
SECTION 8.3 Notices
-------
All notices provided for in this Guarantee shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's
mailing address set forth below (or such other address as the Guarantee
Trustee may give notice of to the Holders of the Capital Securities):
The Bank of New York
101 Barclay Street, Floor 21W
New York, NY 10286
Attention: Corporate Trust Administration
Telecopy: 212-815-5915
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to
the Holders of the Capital Securities and to the Guarantee Trustee):
400 Emerson Street
3rd Floor
Palo Alto, CA 94301
Attention: Linda M. Iannone
Telecopy: 650-473-9419
16
<PAGE>
(c) If given to any Holder of the Capital Securities, at the address
set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 8.4 Benefit
-------
This Guarantee is solely for the benefit of the Holders of the Capital
Securities and, subject to Section 2.1(a), is not separately transferable from
the Capital Securities.
SECTION 8.5 Governing Law
-------------
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES THEREOF.
17
<PAGE>
THIS GUARANTEE is executed as of the day and year first above
written.
GREATER BAY BANCORP,
as Guarantor
By: /s/ Steven C. Smith
--------------------------------
Name: Steven C. Smith
Title: Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
THE BANK OF NEW YORK,
as Guarantee Trustee
By: /s/ Annette L. Kos
--------------------------------
Name: Annette L. Kos
Title: Assistant Vice President
18
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