Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 1-7436
HSBC USA Inc.
(Exact name of registrant as specified in its charter)
452 Fifth Avenue
New York, New York 10018
(Address of principal executive offices)
Telephone (212) 525-6100
IRS Employer Identification No. 13-2764867. State of Incorporation: Maryland
Securities registered on the New York Stock Exchange pursuant to Section 12(b)
of the Act:
Depositary Shares, each representing a one-fourth interest in a share of
Adjustable Rate Cumulative Preferred Stock, Series D
$1.8125 Cumulative Preferred Stock
$2.8575 Cumulative Preferred Stock
7% Subordinated Notes due 2006
8.375% Debentures due 2007
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) had filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to
this Form 10-K. [X]
All voting stock (704 shares of Common Stock $5 par value) is owned by HSBC
North America Inc., an indirect wholly owned subsidiary of HSBC Holdings plc.
Documents incorporated by reference: None
1
This page is intentionally left blank.
2
T A B L E O F C O N T E N T S
Page
Part I
1. Business 4
2. Properties 6
3. Legal Proceedings 6
4. Submission of Matters to a Vote of
Security Holders 6
Part II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters 6
6. Selected Financial Data 7
7. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 10
7A. Quantitative and Qualitative Disclosures
About Market Risk 32
8. Financial Statements and
Supplementary Data 35
9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 77
Part III
10. Directors and Executive Officers
of the Registrant 77
11. Executive Compensation 81
12. Security Ownership of Certain Beneficial
Owners and Management 82
13. Certain Relationships and Related
Transactions 83
Part IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 83
3
P A R T I
Item 1. Business
HSBC USA Inc. (the Company), formerly HSBC Americas, Inc., is a New York State
based bank holding company registered under the Bank Holding Company Act of
1956, as amended. All of the Company's common stock is owned by HSBC North
America Inc., an indirect wholly owned subsidiary of HSBC Holdings plc (HSBC).
HSBC, the ultimate parent company of HSBC Bank plc, formerly Midland Bank plc,
and The Hongkong and Shanghai Banking Corporation Limited (HongkongBank), is
an international banking and financial services organization with major
commercial and investment banking franchises operating in the Asia-Pacific
region, Europe, the Americas, the Middle East and Africa. The principal
executive offices of HSBC are located in London, England. HSBC, with assets
of $569 billion at December 31, 1999, is one of the world's largest banking
and financial services organizations.
HSBC completed the purchase of Republic New York Corporation (Republic), a
bank holding company with consolidated total assets of $46.9 billion, on
December 31, 1999. Also on December 31, 1999, following the purchase,
Republic merged with the Company. At December 31, 1999, the combined Company
had assets of $90.2 billion and employed approximately 15,100 full and part
time employees.
The Company's principal subsidiary HSBC Bank USA (the Bank), formerly Marine
Midland Bank, merged with Republic National Bank of New York (Republic Bank)
on December 31, 1999. After the merger, on a combined basis, the Bank had
assets of $79.6 billion and deposits of $58.5 billion at December 31, 1999.
The Company also is a participant in a joint venture, Wells Fargo HSBC Trade
Bank. The Company has a factoring and asset-based lending subsidiary and a
commercial bank in California acquired with the Republic merger.
The Bank's domestic operations encompass the entire State of New York as well
as two branches in Pennsylvania and seven branches in Florida. Selected
commercial and consumer banking products are offered on a national basis. The
Bank is engaged in a general commercial banking business, offering a full
range of banking products and services to individuals including high-net-worth
individuals, corporations, institutions and governments. Through its
affiliation with HSBC, the Bank offers its customers access to global markets
and services. In turn, the Bank plays a role in the delivery and processing
of other HSBC products. As a result of the merger with Republic, in addition
to its domestic offices, the Bank now maintains foreign branch offices,
subsidiaries and/or representative offices in the Caribbean, Canada, Europe,
Asia and Latin America.
As a result of the merger with Republic, the Bank has a 49% investment in HSBC
Republic Holdings (Luxembourg) S.A. (HSBC Republic), formerly Safra Republic
Holdings S.A., a holding company, principally engaged in international private
banking and commercial banking with assets of $24.4 billion at December 31,
1999. HSBC, in a transaction separate from the acquisition of Republic, also
acquired the remaining 51% ownership interest in HSBC Republic on December 31,
1999.
4
P A R T I Continued
Item 1. Business Continued
The Bank is supervised and routinely examined by the State of New York Banking
Department and the Board of Governors of the Federal Reserve System (the
Federal Reserve), and it is subject to banking laws and regulations which
place various restrictions on and requirements regarding its operations and
administration, including the establishment and maintenance of branch offices,
capital and reserve requirements, deposits and borrowings, investment and
lending activities, payment of dividends and numerous other matters. The
Federal Reserve Act restricts certain transactions between banks and their
nonbank affiliates. The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation (FDIC) and subject to relevant FDIC regulations.
The Company has been prohibited, with certain exceptions, from engaging,
directly or indirectly, in activities which are not closely related to
banking. The enactment of the Gramm-Leach-Bliley Act of 1999 (GLB Act),
effective March 11, 2000, provides expanded opportunities for banks, other
depository institutions, insurance companies and securities firms to enter
into combinations that permit a single financial services organization to
offer a more complete line of financial products and services. Further
competitive pressures are anticipated from industry consolidations in the wake
of the passage of the GLB Act.
The Company and the Bank are subject to risk-based capital and leverage
guidelines issued by the Federal Reserve. The Federal Reserve is required by
law to take specific prompt actions with respect to financial institutions
that do not meet minimum capital standards. Five capital standards have been
identified, the highest of which is well-capitalized. A well-capitalized bank
must have a Tier 1 risk-based capital ratio of at least 6%, a total risk-based
capital ratio of at least 10% and a leverage ratio of at least 5% and not be
subject to a capital directive order. The leverage ratio measures Tier 1
capital against total non-risk weighted assets. The Bank's ratios at
December 31, 1999 exceeded all ratios required for the well-capitalized
category.
The Company and its subsidiaries face competition in all the markets they
serve, competing with other financial institutions, including commercial
banks, investment banks, savings and loan associations, credit unions,
consumer finance companies, money market funds and other non-banking
institutions such as insurance companies, major retailers, brokerage firms and
investment companies. Many of these institutions are not subject to the same
laws and regulations imposed on the Company and its subsidiaries.
5
Item 2. Properties
The principal executive offices of the Company are located at 452 Fifth
Avenue, New York, New York 10018, which is owned by the Bank. The principal
executive offices of the Bank are located at One HSBC Center, Buffalo, New
York 14203, in a building under a long-term lease. The Bank has more than 450
other banking offices in New York State located in 49 counties, two branches
in Pennsylvania and seven branches in Florida. Approximately 38% of these
offices are located in buildings owned by the Bank and the remaining are
located in leased quarters. In addition, there are branch offices and
locations for other activities occupied under various types of ownership and
leaseholds in states other than New York, none of which is materially
important to the respective activities. The Bank owns properties in: Miami,
Florida; Buenos Aires, Argentina; Santiago, Chile; Montevideo, Uruguay; Mexico
City, Mexico; Milan, Italy and London, England.
Item 3. Legal Proceedings
The information contained in Note 27 to the Financial Statements on page 67 of
this report is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
Reference is made to Item 5.
P A R T II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Since all common stock of the Company is owned by HSBC North America Inc.,
shares of the Company's common stock are not listed or traded on a securities
exchange.
6
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
- -----------------------------------------------------------------------------------------------------
HSBC acquired Republic New York Corporation (Republic) and merged it with the Company on December 31,
1999. The acquisition was accounted for as a purchase by the Company so that the fair value of the
assets and liabilities of Republic are included in balances at year end 1999, whereas results of
operations for all periods presented exclude those of Republic.
Year Ended December 31, 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
Net interest income $1,225.9 $1,165.3 $1,173.4 $ 961.8 $ 892.2
- ----------------------------------------------------------------------------------------------------
Securities transactions 10.1 13.8 17.4 7.9 12.3
Interest on Brazilian tax settlement 13.1 32.7 - - -
Other operating income 440.8 413.6 342.0 303.0 302.5
- ----------------------------------------------------------------------------------------------------
Total other operating income 464.0 460.1 359.4 310.9 314.8
- ----------------------------------------------------------------------------------------------------
Other operating expenses 827.9 780.2 781.4 656.8 695.8
Provision for credit losses 90.0 80.0 87.4 64.7 175.3
- ----------------------------------------------------------------------------------------------------
Income before taxes 772.0 765.2 664.0 551.2 335.9
Applicable income tax expense 308.3 238.1 193.0 171.0 52.3
- ----------------------------------------------------------------------------------------------------
Net income $ 463.7 $ 527.1 $ 471.0 $ 380.2 $ 283.6
- ----------------------------------------------------------------------------------------------------
Balances at year end
Total assets $ 90,240 $ 33,944 $31,518 $23,630 $20,553
Goodwill and other acquisition intangibles 3,307 335 370 158 35
Long-term debt 5,885 1,748 1,708 1,080 710
Common shareholder's equity 9,541 2,228 2,039 1,875 1,599
Total shareholders' equity 10,041 2,228 2,039 1,973 1,697
Ratio of shareholders' equity to total assets 11.13% 6.56% 6.47% 8.35% 8.26%
- ----------------------------------------------------------------------------------------------------
Selected financial data (1)
Rate of return on
Total assets 1.35% 1.60% 1.62% 1.83% 1.50%
Total common shareholder's equity 20.24 24.93 22.93 21.33 16.53
Total shareholders' equity to total assets 6.70 6.44 7.14 8.90 9.37
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarterly Results of Operations
1999 1998
- ----------------------------------------------------------------------------------------------------
4th Q 3rd Q 2nd Q 1st Q 4th Q 3rd Q 2nd Q 1stQ
- ----------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income $302.2 $305.5 $306.9 $311.3 $295.3 $287.8 $293.8 $288.4
- ----------------------------------------------------------------------------------------------------
Securities transactions 2.9 (0.1) 4.9 2.4 3.3 4.4 1.5 4.6
Interest on Brazilian
tax settlement 13.1 - - - 32.7 - - -
Other operating income 109.4 108.2 104.0 119.2 94.0 97.7 113.2 108.7
- ----------------------------------------------------------------------------------------------------
Total other operating
income 125.4 108.1 108.9 121.6 130.0 102.1 114.7 113.3
- ----------------------------------------------------------------------------------------------------
Other operating expenses 217.2 200.3 203.8 206.6 200.2 192.7 194.6 192.7
Provision for credit
losses 22.5 22.5 22.5 22.5 21.0 20.0 19.5 19.5
- ----------------------------------------------------------------------------------------------------
Income before taxes 187.9 190.8 189.5 203.8 204.1 177.2 194.4 189.5
Applicable income tax
expense 74.0 75.9 76.0 82.4 45.5 58.1 68.2 66.3
- ----------------------------------------------------------------------------------------------------
Net income $113.9 $114.9 $113.5 $121.4 $158.6 $119.1 $126.2 $123.2
====================================================================================================
(1) Based on average daily balances.
</TABLE>
7
<TABLE>
<CAPTION>
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES - THREE YEARS
The following table shows the average balances of the principal components
of assets, liabilities and shareholders' equity, together with their
respective interest amounts and rates earned or paid on a taxable
equivalent basis.
1999
---------------------------
Balance Interest Rate
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Interest bearing deposits with banks $ 1,795 $ 97.0 5.40%
Federal funds sold and securities purchased
under resale agreements 2,238 116.5 5.21
Trading assets 919 50.8 5.52
Securities 3,658 214.7 5.87
Loans
Domestic
Commercial 10,500 825.3 7.86
Consumer
Residential mortgages 9,388 656.9 7.00
Other consumer 2,430 285.6 11.75
- ------------------------------------------------------------------------------
Total domestic 22,318 1,767.8 7.92
International 1,066 75.4 7.07
- ------------------------------------------------------------------------------
Total loans 23,384 1,843.2 7.88
- ------------------------------------------------------------------------------
Total earning assets 31,994 $2,322.2 7.26%
- ------------------------------------------------------------------------------
Allowance for credit losses (379)
Cash and due from banks 1,046
Other assets 1,577
- ------------------------------------------------------------------------------
Total assets $34,238
==============================================================================
Liabilities and Shareholders' Equity
Interest bearing demand deposits $ 2,236 $ 20.3 0.91%
Consumer savings deposits 5,672 142.9 2.52
Other consumer time deposits 6,884 321.4 4.67
Commercial, public savings and other time deposits 4,149 152.3 3.67
Deposits in foreign offices, primarily banks 4,584 216.0 4.71
- ------------------------------------------------------------------------------
Total interest bearing deposits 23,525 852.9 3.63
- ------------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchase agreements 951 45.2 4.75
Other short-term borrowings and trading liabilities 1,627 84.4 5.19
Long-term debt 1,867 111.7 5.98
- ------------------------------------------------------------------------------
Total interest bearing liabilities 27,970 $1,094.2 3.91%
- ------------------------------------------------------------------------------
Interest rate spread 3.35%
- ------------------------------------------------------------------------------
Noninterest bearing deposits 3,112
Other liabilities 864
Total shareholders' equity 2,292
- ------------------------------------------------------------------------------
Total liabilities and shareholders' equity $34,238
==============================================================================
Net yield on average earning assets 3.84%
Net yield on average total assets 3.59
==============================================================================
Total weighted average rate earned on earning assets is interest and fee
earnings divided by daily average amounts of total interest earning assets,
including the daily average amount on nonperforming loans. Loan fees
included were $36 million for 1999, $28 million for 1998, $20 million for 1997.
</TABLE>
8
<TABLE>
<CAPTION>
1998 1997
------------------------------ ------------------------------
Balance Interest Rate Balance Interest Rate
----------------------------------------------------------------------
in millions
<C> <C> <C> <C> <C> <C>
$ 2,377 $ 136.6 5.75% $ 1,698 $ 98.7 5.82%
2,299 128.0 5.57 977 51.8 5.30
851 51.0 5.99 980 58.9 6.01
3,930 232.6 5.92 3,567 219.2 6.14
8,569 738.3 8.62 7,457 666.9 8.94
9,531 684.7 7.18 8,829 652.8 7.39
2,652 319.8 12.06 3,083 369.8 12.00
----------------------------------------------------------------------
20,752 1,742.8 8.40 19,369 1,689.5 8.72
640 44.6 6.96 680 45.9 6.76
----------------------------------------------------------------------
21,392 1,787.4 8.36 20,049 1,735.4 8.66
----------------------------------------------------------------------
30,849 $2,335.6 7.57% 27,271 $2,164.0 7.94%
----------------------------------------------------------------------
(404) (426)
1,128 1,010
1,274 1,171
----------------------------------------------------------------------
$32,847 $29,026
======================================================================
$ 2,097 $ 22.9 1.09% $ 1,974 $ 22.7 1.15%
5,527 148.3 2.68 5,369 156.9 2.92
6,452 352.2 5.46 5,971 317.4 5.32
3,132 133.0 4.25 2,105 86.9 4.13
4,074 211.0 5.18 1,846 95.2 5.15
----------------------------------------------------------------------
21,282 867.4 4.08 17,265 679.1 3.93
----------------------------------------------------------------------
917 48.1 5.24 1,977 108.3 5.48
2,717 156.1 5.74 1,588 88.4 5.57
1,469 96.1 6.54 1,755 111.8 6.37
----------------------------------------------------------------------
26,385 $1,167.7 4.45% 22,585 $ 987.6 4.42%
----------------------------------------------------------------------
3.11% 3.53%
----------------------------------------------------------------------
3,665 3,891
683 478
2,114 2,072
----------------------------------------------------------------------
$32,847 $29,026
======================================================================
3.79% 4.31%
3.56 4.05
======================================================================
</TABLE>
9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company reported pretax income of $772.0 million for 1999 compared with
$765.2 million in 1998. For the year 1999 net income was $463.7 million
compared with $527.1 million in 1998. Return on average common shareholder's
equity was 20.24% in 1999 and 24.93% in 1998. Business growth and expense
discipline helped spur growth in income in 1999 as well as did certain one-
time items. Results for 1999 and 1998 included the settlement with the U.S.
Internal Revenue Service on Brazilian tax credits disallowed in the 1980's.
The settlement contributed $13.1 million of interest to pretax income in 1999
and $32.7 million of interest to pretax income in 1998 and also reduced taxes
by a net amount of $10.2 million in 1998.
HSBC acquired Republic New York Corporation (Republic) and merged it with the
Company on December 31, 1999. The acquisition was accounted for as a purchase
by the Company. The fair value of the assets and liabilities of Republic are
included in the financial statements of the Company as of December 31, 1999.
The Company's 1999 results of operations were not affected by the Republic
merger transaction.
Republic engaged in five principal lines of business: private banking;
consumer financial services; lending; treasury; and markets. Republic
National Bank of New York (Republic Bank) had 83 branches in the greater New
York metropolitan area, where it was the third-largest deposit taking
institution, and 7 branches in Florida, as well as 36 branches, representative
offices or wholly-owned subsidiaries in Latin America, the Caribbean, Europe
and Asia. Republic was a world leader in banknotes and bullion trading and
provided the fifth-largest factoring service in the United States. In
addition, it had significant international private banking operations in New
York, Miami, Los Angeles and in Asia. At December 31, 1999 Republic had total
assets of $46.9 billion, deposits of $29.9 billion and common shareholders'
equity of $2.9 billion. Republic's net income for 1999 was $418 million. See
page 30 for additional analysis of Republic.
This report includes forward-looking statements that involve inherent risks
and uncertainties. Statements that are not historical facts, including
statements about management's beliefs and expectations, are forward-looking
statements. A number of important factors could cause actual results to
differ materially from those contained in any forward-looking statements.
Such factors include, but are not limited to: sharp and/or rapid changes in
interest rates; significant changes in the economic conditions which could
materially change anticipated credit quality trends and the ability to
generate loans; cost savings and revenue enhancements as well as the nature,
costs and timing of integration of businesses relating to the acquisition;
technology changes; significant changes in accounting, tax or regulatory
requirements; and competition in the geographic and business areas in which
the Company conducts its operations.
A detailed review comparing 1999 operations with 1998 and 1997 follows. It
should be read in conjunction with the consolidated financial statements of
the Company which begin on page 38.
10
E A R N I N G S P E R F O R M A N C E R E V I E W
<TABLE>
<CAPTION>
Net Interest Income
Net interest income is the total interest income on earning assets less the
interest expense on deposits and borrowed funds. In the discussion that
follows, interest income and rates are presented and analyzed on a taxable
equivalent basis, in order to permit comparisons of yields on tax-exempt and
taxable assets.
- ------------------------------------------------------------------------------------------------
Increase(Decrease) Increase(Decrease)
1999 Amount % 1998 Amount % 1997
- ------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $2,322.2 $(13.4) (.6) $2,335.6 $171.6 7.9 $2,164.0
Interest expense 1,094.2 (73.5) (6.3) 1,167.7 180.1 18.2 987.6
- ------------------------------------------------------------------------------------------------
Net interest income -
taxable equivalent basis 1,228.0 60.1 5.1 1,167.9 (8.5) (.7) 1,176.4
Taxable equivalent
adjustment 2.1 (.5) (17.5) 2.6 (.4) (15.1) 3.0
- ------------------------------------------------------------------------------------------------
Net interest income $1,225.9 $ 60.6 5.2 $1,165.3 $ (8.1) (.7) $1,173.4
- ------------------------------------------------------------------------------------------------
Average earning assets $ 31,994 $1,145 3.7 $ 30,849 $3,578 13.1 $ 27,271
Average nonearning assets 2,244 246 12.3 1,998 243 13.8 1,755
- ------------------------------------------------------------------------------------------------
Average total assets $ 34,238 $1,391 4.2 $ 32,847 $3,821 13.2 $ 29,026
- ------------------------------------------------------------------------------------------------
Net yield on:
Average earning assets 3.84% .05% 1.3 3.79% (.52)% (12.1) 4.31%
Average total assets 3.59 .03 .8 3.56 (.49) (12.1) 4.05
================================================================================================
</TABLE>
Net interest income was $1,228.0 million in 1999 compared with $1,167.9
million in 1998. The increase in net yield in 1999 from 1998 was primarily
due to commercial loan growth and deposit repricing, partially offset by lower
loan rates.
The following table presents net interest income components on a taxable
equivalent basis, using marginal tax rates of 35%, and quantifies the changes
in the components according to "volume and rate".
11
<TABLE>
<CAPTION>
Net Interest Income Components Including Volume/Rate Analysis
- -------------------------------------------------------------------------------------------------------------
1999 Compared to 1998 1998 Compared to 1997
Increase(Decrease) Increase(Decrease)
1999 Volume Rate 1998 Volume Rate 1997
- -------------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest bearing deposits with banks $ 97.0 $(31.8) $ (7.8) $ 136.6 $ 39.1 $ (1.2) $ 98.7
Federal funds sold and securities
purchased under resale agreements 116.5 (3.3) (8.2) 128.0 73.4 2.8 51.8
Trading assets 50.8 3.9 (4.1) 51.0 (7.7) (.2) 58.9
Securities 214.7 (16.0) (1.9) 232.6 21.6 (8.2) 219.2
Loans:
Domestic:
Commercial 825.3 155.9 (68.9) 738.3 96.5 (25.1) 666.9
Consumer
Residential mortgages 656.9 (10.2) (17.6) 684.7 50.8 (18.9) 652.8
Credit card receivables 186.9 (21.0) (4.2) 212.1 (52.9) 10.8 254.2
Other consumer 98.7 (6.8) (2.2) 107.7 (6.8) (1.1) 115.6
International 75.4 30.1 .7 44.6 (2.7) 1.4 45.9
- -------------------------------------------------------------------------------------------------------------
Total interest income 2,322.2 100.8 (114.2) 2,335.6 211.3 (39.7) 2,164.0
- -------------------------------------------------------------------------------------------------------------
Interest expense:
Interest bearing demand deposits 20.3 1.4 (4.0) 22.9 1.4 (1.2) 22.7
Consumer savings and
other time deposits 464.3 23.3 (59.5) 500.5 26.7 (.5) 474.3
Commercial and public savings
and other time deposits 152.3 39.1 (19.8) 133.0 43.5 2.6 86.9
Deposits in foreign offices 216.0 25.0 (20.0) 211.0 115.4 .4 95.2
Short-term borrowings 129.6 (54.8) (19.8) 204.2 3.9 3.6 196.7
Long-term debt 111.7 24.3 (8.7) 96.1 (18.6) 2.9 111.8
- -------------------------------------------------------------------------------------------------------------
Total interest expense 1,094.2 58.3 (131.8) 1,167.7 172.3 7.8 987.6
- -------------------------------------------------------------------------------------------------------------
Net interest income -
taxable equivalent basis $1,228.0 $ 42.5 $ 17.6 $1,167.9 $ 39.0 $(47.5) $1,176.4
=============================================================================================================
</TABLE>
The changes in interest income and interest expense due to both rate and
volume have been allocated in proportion to the absolute amounts of the change
in each.
Average Balances and Interest Rates
Average balances and interest rates earned or paid for the past three years
are reported on pages 8 and 9. Average earning assets increased to $31,994
million in 1999 from $30,849 million in 1998 resulting in increased interest
income even though rates earned declined to 7.26% in 1999 from 7.57% in 1998.
The increase in net interest income is primarily attributable to commercial
loan growth described in the following paragraph and deposit repricing
partially offset by lower loan rates.
Average commercial loans were $10,500 million in 1999, compared with $8,569
million in 1998. The growth in average commercial loans included the
acquisition of commercial loans from the U.S. branches of The Hongkong and
Shanghai Banking Corporation Limited (HongkongBank) in late 1998. Yields on
commercial loans were 7.86% in 1999 compared with 8.62% in 1998. Average
residential mortgages were $9,388 million in 1999 compared with $9,531 million
in 1998. The yield on residential mortgages was 7.00% in 1999 compared with
7.18% in 1998.
12
Interest bearing deposits averaged $23,525 million during 1999 compared with
$21,282 million in 1998. A significant part of this increase was attributable
to higher levels of deposits placed by institutional and public customers and
other members of the HSBC Group.
<TABLE>
<CAPTION>
Other Operating Income
Other operating income was $464.0 million in 1999 compared with $460.1 million
in 1998 and $359.4 million in 1997.
- -----------------------------------------------------------------------------------------------
Increase(Decrease) Increase(Decrease)
1999 Amount % 1998 Amount % 1997
- -----------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Trust income $ 52.2 $ 4.9 10.4 $ 47.3 $ 4.3 10.0 $ 43.0
Service charges 128.6 13.2 11.5 115.4 11.4 11.0 104.0
Mortgage servicing revenue 30.5 (12.6) (29.4) 43.1 13.4 45.4 29.7
Letter of credit fees 32.5 6.6 25.5 25.9 4.4 20.4 21.5
Credit card fees 44.5 3.0 7.4 41.5 (9.4) (18.6) 50.9
Other fee-based income 90.5 12.4 15.9 78.1 15.8 25.3 62.3
Investment and insurance
product fees 32.4 5.7 21.3 26.7 6.5 32.6 20.2
Interest on Brazilian
tax settlement 13.1 (19.6) (59.8) 32.7 32.7 - -
Other income 19.7 (12.2) (38.4) 31.9 27.6 649.1 4.3
- -----------------------------------------------------------------------------------------------
Nontrading income 444.0 1.4 .3 442.6 106.7 31.8 335.9
- -----------------------------------------------------------------------------------------------
Trading asset revenue (loss) 3.9 5.6 320.8 (1.7) (3.4) (200.9) 1.7
Foreign exchange revenue 6.0 .6 11.3 5.4 1.0 21.2 4.4
- -----------------------------------------------------------------------------------------------
Trading revenues 9.9 6.2 170.6 3.7 (2.4) (39.2) 6.1
- -----------------------------------------------------------------------------------------------
Securities transactions 10.1 (3.7) (27.1) 13.8 (3.6) (20.6) 17.4
- -----------------------------------------------------------------------------------------------
Total other operating income $464.0 $ 3.9 .8 $460.1 $100.7 28.0 $359.4
===============================================================================================
</TABLE>
Nontrading Income
Nontrading income was $444.0 million in 1999 compared with $442.6 million in
1998. The Company received interest of $13.1 million and $32.7 million in
1999 and 1998, respectively, as a result of the settlement of previously
disallowed income tax credits on Brazilian debt. Other income in 1999
included a gain on the sale of a student loan business of $15.0 million and in
1998 included gains of $28.1 million on the sales of selected credit card
portfolios. Excluding these items, nontrading income was up from 1998 as a
result of increases in deposit service charges, fees from the sale of
investment and insurance products and commercial loan fees. Partially
offsetting these was a decrease in mortgage servicing revenue including lower
gains on sales of residential mortgages compared with 1998.
13
Trading Asset Revenues
Trading revenues include securities trading gains and losses, commissions
earned from distributing municipal obligations, and foreign exchange revenue
from transactions with corporate clients and correspondent banks. It does not
include interest income from these activities (included as a component of net
interest income), which is usually substantial. The following is an analysis
of the average balance outstanding, interest income (on a taxable equivalent
basis) and trading revenue related to trading assets. This analysis excludes
foreign exchange revenue which is separately disclosed in the table of other
operating income.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Mortgage
and Other
U.S. Asset-Backed Other Precious
Government Securities Securities Metals Derivatives Total
- --------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C>
1999
Average balance $172 $ 729 $ 8 $2 $ 8 $ 919
Interest income 8.7 41.7 .4 - - 50.8
Trading asset revenue (loss) 2.9 (1.4) 1.6 - .8 3.9
1998
Average balance 9 834 6 - 2 851
Interest income .5 50.0 .5 - - 51.0
Trading asset revenue (loss) .7 (2.6) 1.5 - (1.3) (1.7)
1997
Average balance 2 972 5 - 1 980
Interest income .2 58.3 .4 - - 58.9
Trading asset revenue (loss) .3 .4 1.3 - (.3) 1.7
========================================================================================================
The balance in precious metals relates to the Republic acquisition at year end
which included a precious metal inventory of $567 million.
</TABLE>
Securities Transactions
Securities transactions during 1999 resulted in net gains of $10.1 million
compared with net gains of $13.8 million in 1998. These gains resulted from
the sale of investments classified as available for sale, primarily highly
leveraged partnership interests.
<TABLE>
<CAPTION>
Other Operating Expenses
- -----------------------------------------------------------------------------------------------
Increase(Decrease) Increase(Decrease)
1999 Amount % 1998 Amount % 1997
- -----------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $421.3 $11.0 2.7 $410.3 $ 12.3 3.1 $398.0
Net occupancy 89.0 (.4) (.5) 89.4 (1.6) (1.7) 91.0
Equipment 53.7 2.3 4.4 51.4 6.3 13.9 45.1
Amortization of intangibles 33.3 (4.4) (11.7) 37.7 3.3 9.7 34.4
FDIC assessment 4.6 .1 2.5 4.5 .3 6.6 4.2
Marketing 24.4 3.0 13.7 21.4 (5.6) (20.6) 27.0
Outside services 39.5 (.8) (2.0) 40.3 1.4 3.7 38.9
Professional fees 22.1 2.4 12.5 19.7 (3.1) (13.9) 22.8
Other real estate and
owned asset expense (13.9) 3.2 19.1 (17.1) (19.6) (775.3) 2.5
Other 153.9 31.3 25.5 122.6 5.1 4.3 117.5
- -----------------------------------------------------------------------------------------------
Total other operating expenses $827.9 $47.7 6.1 $780.2 $ (1.2) (.2) $781.4
- -----------------------------------------------------------------------------------------------
Personnel - average number 8,906 (32) (.4) 8,938 (72) (.8) 9,010
===============================================================================================
</TABLE>
14
Other operating expenses were $827.9 million in 1999 compared with $780.2
million in 1998. The increase over 1998 was due in part to restructuring
charges included in other operating expenses of $26.7 million recognized in
1999 for the estimated cost of severing employees and vacating space of the
Company stemming from the Republic acquisition. See Note 1, Acquisitions, to
the financial statements for further discussion. Without this expense, the
cost:income ratio for 1999 was 47.4% compared with 48.0% in 1998. Personnel
expense increased to $421.3 million in 1999 from $410.3 million in 1998
principally due to normal merit increases. Average staffing levels (full time
equivalents) were 8,906 in 1999 compared with 8,938 in 1998. Other real
estate and owned asset expense in 1999 and 1998 benefited from gains on
disposals of properties.
Year 2000 Readiness Disclosure
The Company recognized that with the approach of the new millennium the
inability of systems around the world to recognize the date change from
December 31, 1999 to January 1, 2000 could pose significant issues. The
Company assessed the impact of Year 2000. The relevant systems were
remediated and tested and as a result the Company did not experience
significant disruptions from its systems not being Year 2000 compliant.
The Company estimated the total cost of the project to be $59.3 million
including $10 million relating to other than information technology (IT)
projects. Approximately $57 million had been incurred as of December 31, 1999
for the total project, including $13.4 million in 1999. These costs include
capitalizable costs of $15.2 million for upgrading personal computers and
replacing software, of which $5.7 million was incurred in 1999. No material
incremental costs were incurred in any single period as generally the costs
represented the redeployment of existing IT resources. Although the
redeployment has resulted in deferral of some IT projects and the acceleration
of others, the Company does not expect the deferrals to have a material effect
on its financial position or results of operations.
Provision for Credit Losses
Provision for credit losses was $90.0 million in 1999 compared with $80.0
million in 1998. Net charge offs in the credit card portfolio were $74.9
million and $90.1 million in 1999 and 1998, respectively. The delinquency
rate for the credit card portfolio was 3.41% at December 31, 1999 compared
with 3.91% at December 31, 1998. Commercial loan credit quality resulted in
net charge offs of $8.7 million in 1999 compared with $5.0 million in 1998.
An analysis of the allowance for credit losses and the provision for credit
losses begins on page 26.
15
Income Taxes
The Company recognized income tax expense of $308.3 million and $238.1 million
in 1999 and 1998, respectively. The 1998 amount includes a credit of $10.2
million relating to the income tax refund received from the U.S. Internal
Revenue Service on the Brazilian tax credits, net of additional taxes due on
the interest income received on the tax settlement.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss carryforwards. The Company has a valuation
allowance for the portion of the Company's net deductible temporary
differences which are not expected to be realized. Income tax expense was
reduced in 1998 through reductions in the valuation allowance of $45.0
million. At December 31, 1999, the Company had a net deferred tax asset of
$120.7 million, as compared with a net deferred tax asset of $59.3 million at
December 31, 1998.
Business Segments
The Company has four distinct business segments for purposes of management
reporting: commercial banking, mortgage banking, personal banking and
treasury. A description of each segment and the methodologies used to measure
financial performance are included in Note 25, Business Segments, to the
financial statements. The following summarizes the results for each segment.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Average Liabilities/
Average Assets Equity Pretax Income
--------------------------- -------------------------- ------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Segments:
Commercial Banking $11,797 $ 9,202 $ 7,683 $ 7,033 $ 5,873 $5,272 $273 $235 $259
Mortgage Banking 8,438 8,489 7,792 326 327 296 69 87 55
Personal Banking 4,014 4,346 4,691 15,038 14,731 14,037 256 254 178
Treasury 4,921 5,279 3,677 6,312 6,720 3,683 17 13 8
Other 5,068 5,531 5,183 5,529 5,196 5,738 157 176 164
- --------------------------------------------------------------------------------------------------------
Total $34,238 $32,847 $29,026 $34,238 $32,847 $29,026 $772 $765 $664
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
The following summarizes the results for the commercial banking segment.
- --------------------------------------------------------------------------------------------------------
Average Assets Average Liabilities Pretax Income
-------------------------- ------------------------- -------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $10,162 $7,662 $6,258 $ 7 $ 4 $ 4 $ 99 $ 92 $116
Deposits 559 649 567 5,464 4,817 3,960 105 88 83
Payment processing 441 471 499 1,208 928 1,193 38 33 40
Other 635 420 359 354 124 115 31 22 20
- --------------------------------------------------------------------------------------------------------
Total $11,797 $9,202 $7,683 $7,033 $5,873 $5,272 $273 $235 $259
- --------------------------------------------------------------------------------------------------------
</TABLE>
Commercial banking segment's pretax income increased in 1999 from 1998. A
major factor contributing to the increased financial results in commercial
banking over 1998 was the acquisition of commercial loans from HongkongBank
late in 1998, partially offset by expenses to service the portfolio and higher
credit quality expenses. Deposits' pretax income increased in 1999 from 1998
16
due to growth in outstanding balances partially offset by the general
tightening of spreads resulting from declining interest rates. Payment
processing pretax income increased in 1999 from 1998. Other pretax income,
which includes trade services, standby credit facilities and corporate trust
activities, increased as a result of the Company's efforts to grow fee-based
businesses.
<TABLE>
<CAPTION>
The following summarizes the results for the mortgage banking segment.
- ----------------------------------------------------------------------------------------------
Average Assets Average Liabilities Pretax Income
------------------------ -------------------- ------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgages held $7,885 $7,994 $7,535 $ - $ - $ - $48 $55 $36
Mortgages serviced * 553 495 257 326 327 296 21 32 19
- ----------------------------------------------------------------------------------------------
Total $8,438 $8,489 $7,792 $326 $327 $296 $69 $87 $55
- ----------------------------------------------------------------------------------------------
* Represents on-balance sheet assets. The principal amount of off-balance sheet mortgage
loans held by others and serviced on their behalf was $13.1 billion (before Republic
acquisition at year end), $12.1 billion and $11.8 billion at year ends 1999, 1998 and 1997,
respectively.
</TABLE>
The mortgage banking segment's pretax income decreased in 1999 because of
lower gains on the sales of residential mortgages compared with 1998. Smaller
portfolio sales occurred as a result of competitive pricing pressures. Lower
provisions for credit losses in 1998 also contributed to the reduced pretax
income.
<TABLE>
<CAPTION>
The following summarizes the results for the personal banking segment.
- ------------------------------------------------------------------------------------------------------
Average Assets Average Liabilities Pretax Income
------------------------ ------------------------ -------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revolving credit $1,287 $1,410 $1,738 $ 4 $ 3 $ 4 $ 18 $ 40 $(18)
Installment loans 2,329 2,500 2,543 4 4 4 55 44 36
Deposits 115 152 151 14,777 14,507 13,826 178 168 164
Other 283 284 259 253 217 203 5 2 (4)
- ------------------------------------------------------------------------------------------------------
Total $4,014 $4,346 $4,691 $15,038 $14,731 $14,037 $256 $254 $178
- ------------------------------------------------------------------------------------------------------
</TABLE>
During 1999, pretax income for the personal banking segment remained at the
same level as 1998. Pretax income on revolving credit products included gains
of $28.1 million from the sale of certain credit card portfolios in 1998.
Pretax income on installment loans included a gain of $15.0 million on the
sale of a student loan business in 1999. Pretax income on personal deposits
increased as a result of an increase in deposit balances, partially offset by
higher operating costs.
During 1999, pretax income in the treasury segment increased primarily as a
result of more favorable trading conditions compared with 1998. The treasury
segment results do not significantly impact the financial results of the
Company. See Note 25 for further discussion.
Pretax income in the other segment declined as 1998 reflected significantly
higher one time gains, primarily in a $32.7 million Brazilian tax settlement.
Changes are currently being considered to management reporting due to the
Republic acquisition that could alter the business segments the Company uses
to manage operations in the year 2000.
17
B A L A N C E S H E E T R E V I E W
Risk Management
The Company's organizational structure includes a Risk Management Committee
comprised of senior officers to oversee the risk management process. This
committee is charged with the review of the internal control framework which
identifies, measures, monitors and controls the risks undertaken by the
various business and support units and the Company as a whole. It is
responsible for the review of all risks associated with significant new
products and activities and their primary internal controls prior to
implementation. The spectrum of risks includes, but is not limited to,
liquidity, market, credit, operational, legal and reputational risk. The
Asset and Liability Policy Committee manages the details of liquidity and
interest rate risk. The management of credit risk is further discussed on
page 22.
Asset/Liability Management
The principal objectives of asset/liability management are to ensure adequate
liquidity and to manage exposure to interest rate, currency and other market
risks. In managing these risks, the Company seeks to protect both its income
stream and the value of its assets.
Liquidity management requires maintaining funds to meet customers' borrowing
and deposit withdrawal requirements as well as funding anticipated growth.
Interest rate exposure management seeks to control both the near term and
longer term effects of interest rate movements on net interest income and
other correlated income.
The Company has a variety of available techniques for implementing asset/
liability management decisions. Overall balance sheet strategy is centralized
under the Asset and Liability Policy Committee, comprised of senior officers.
Authority and responsibility for implementation of the Committee's broad
strategy is controlled under a framework of defined balance sheet position
limits.
The Company employs a combination of interest rate risk assessment techniques,
principally dynamic simulation modeling, capital at risk analysis and gap
analysis to assess the sensitivity of its earnings and capital positions to
changes in interest rates. In addition, increasing reliance will be placed on
Value at Risk (VaR) analysis prospectively as a result of the significant
increase in the volume and scope of trading activities resulting from the
Republic acquisition. These techniques take into consideration all on-balance
sheet and off-balance sheet items. In dynamic simulation modeling, the
primary technique currently used, reactions to a range of possible future
positive and negative interest rate movements are projected with consideration
given to known activities and to the behavioral patterns of specific pools of
assets and liabilities in the corresponding rate environments. The
optionality of some instruments such as mortgage backed securities and the
mortgage loan portfolio is taken into consideration. In VaR, the potential
dollar loss is calculated if historical movements repeat themselves. VaR is
18
calculated for movements during a given time period (for example, ten days)
that have occurred over a given historical period (usually two years). A
confidence level (99% of the time) is statistically established.
The Company maintains a strong liquidity position which was further enhanced
by the Republic acquisition. The size and stability of the deposit base are
complemented by the maintenance of a surplus borrowing capacity in the money
markets, including the ability to issue additional commercial paper and access
unused lines of credit of $600 million at December 31, 1999. Wholesale
liabilities increased to $26,857 million at December 31, 1999 from $7,960
million a year ago. The Company also has strong liquidity as a result of a
high level of assets available for immediate sale or pledge including
securities available for sale, trading assets, mortgages and other assets.
Diversification is also a principle employed in asset/liability management.
As a result of the Republic acquisition, the Company is now an active
participant in international banking markets. Managing this activity requires
diversification of the risks among many countries and counterparties
throughout the world. Liabilities, which are primarily interest bearing
deposits and other purchased funds, are obtained from both domestic and
international sources. These sources of funds represent a wide range of
depositors, mostly individuals, and product types. The stability of the
funding base is enhanced by the diversification of the funding sources.
The Company is subject to interest rate risk associated with the repricing
characteristics of its balance sheet assets and liabilities. Specifically,
as interest rates change, interest earning assets reprice at intervals that
do not correspond to the maturities or repricing patterns of interest bearing
liabilities. This mismatch between assets and liabilities in repricing
sensitivity results in shifts in net interest income as interest rates move.
To help manage the risks associated with changes in interest rates, and to
optimize net interest income within the ranges of interest rate risk that
management considers acceptable, the Company uses off-balance sheet derivative
instruments such as interest rate swaps, caps, options and forwards as hedges
to modify the repricing characteristics of specific on-balance sheet assets or
liabilities. Certain changes in authoritative accounting literature required
to be adopted in 2001 may alter the Company's use of these instruments in the
management of balance sheet risk. For additional information, see discussion
in Note 20 to the financial statements.
19
Interest Rate Sensitivity
The following table shows the repricing structure of assets and liabilities as
of December 31, 1999. For assets and liabilities whose cash flows are subject
to change due to movements in interest rates, such as the sensitivity of
mortgage loans to prepayments, data is reported based on the earlier of
expected repricing or maturity. The resulting "gaps" are reviewed to assess
the potential sensitivity to earnings with respect to the direction, magnitude
and timing of changes in market interest rates. Data shown is as of one day,
and one day figures can be distorted by temporary swings in assets or
liabilities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Interest Bearing Funds
Noninterest ---------------------------------------
Bearing 0-90 91-180 181-365 Over 1
December 31, 1999 Funds Days Days Days Year Total
- --------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C>
Assets $ 10,465 $39,394 $4,671 $ 4,324 $31,386 $90,240
Liabilities and shareholders'
equity 29,079 35,306 4,399 5,500 15,956 90,240
- --------------------------------------------------------------------------------------------------
(18,614) 4,088 272 (1,176) 15,430
Effect of derivative contracts - 3,311 1,783 (2,544) (2,550)
- --------------------------------------------------------------------------------------------------
Gap position $(18,614) $ 7,399 $2,055 $(3,720) $12,880
==================================================================================================
</TABLE>
Liabilities and shareholders' equity at year-end 1999 include time deposits of
$100,000 or more with maturity dates as follows: $3,703 million, 0-90 days;
$519 million, 91-180 days; $418 million, 181-365 days, and $192 million over 1
year.
The Company does not use the static "gap" measurement of interest rate risk
reflected in the table above as a primary management tool. See pages 32
through 34 for further description of earnings at risk measurements and
dynamic simulation modeling employed by the Company to manage interest rate
risk.
<TABLE>
<CAPTION>
Commercial Loan Maturities and Sensitivity to Changes in Interest Rates
- --------------------------------------------------------------------------- One
One Over One Over
Year Through Five
December 31, 1999 or Less Five Years Years
- ---------------------------------------------------------------------------
in millions
<S> <C> <C> <C>
Domestic:
Construction and mortgage loans $ 904 $2,626 $2,118
Other business and financial 7,082 4,201 253
International 3,963 623 312
- ---------------------------------------------------------------------------
Total $11,949 $7,450 $2,683
===========================================================================
Loans with fixed interest rates $ 2,859 $2,691 $2,146
Loans having variable interest rates 9,090 4,759 537
- ---------------------------------------------------------------------------
Total $11,949 $7,450 $2,683
===========================================================================
The table presents the contractual maturity and interest sensitivity of
domestic commercial and international loans at year-end 1999.
</TABLE>
20
Securities Portfolios
Debt securities that the Company has the ability and intent to hold to
maturity are reported at amortized cost. Securities acquired principally for
the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings. All other securities are classified as available for
sale and carried at fair value, with unrealized gains and losses included in
other comprehensive income and reported as a separate component of
shareholders' equity.
<TABLE>
<CAPTION>
The following table is an analysis of the carrying values of the securities
portfolios at the end of each of the last three years. The Company did not
hold any securities in the held to maturity category prior to December 31,
1999.
- ----------------------------------------------------------------------------------------
Held to
Available for Sale Maturity
--------------------------- --------
December 31, 1999 1998 1997 1999
- ----------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C>
U.S. Treasury $ 1,522 $1,580 $2,433 $ -
U.S. Government agency obligations 16,396 1,913 1,099 4,122
Obligations of U.S. states and
political subdivisions 8 - - 678
Other domestic debt securities 4,484 569 295 12
Foreign debt securities 3,092 - - -
Equity securities 472 176 172 -
- ----------------------------------------------------------------------------------------
Total $25,974 $4,238 $3,999 $4,812
========================================================================================
</TABLE>
Equity securities in the table above include Federal Reserve Bank and Federal
Home Loan Bank stock totaling $238 million at December 31, 1999, $156 million
at December 31, 1998 and $147 million at December 31, 1997.
The following table reflects the distribution of maturities of debt securities
held at year-end 1999 together with the approximate taxable equivalent yield
of the portfolio. The yields shown are calculated by dividing annual interest
income, including the accretion of discounts and the amortization of premiums,
by the fair value of securities outstanding at December 31, 1999. Yields on
tax-exempt obligations have been computed on a taxable equivalent basis using
applicable statutory tax rates.
21
<TABLE>
<CAPTION>
Securities - Contractual Final Maturities and Yield
- -------------------------------------------------------------------------------------------------------
Within After One After Five After
Taxable One but Within but Within Ten
equivalent Year Five Years Ten Years Years
basis Amount Yield Amount Yield Amount Yield Amount Yield
- -------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C>
Available for sale:
U.S. Treasury $ 50 4.96% $1,311 5.57% $ 160 3.83% $ 1 6.73%
U.S. Gov't agency 6,727 5.53 543 7.02 475 7.01 8,651 6.73
Other debt securities 1,033 10.13 1,668 6.79 1,551 7.47 3,332 6.83
- -------------------------------------------------------------------------------------------------------
Total fair value $7,810 6.13% $3,522 6.37% $2,186 7.11% $11,984 6.76%
- -------------------------------------------------------------------------------------------------------
Total amortized cost $7,812 $3,564 $2,193 $12,016
=======================================================================================================
Held to maturity:
U.S. Gov't agency $ - * 9.69% $ 51 7.62% $ 455 6.90% $ 3,616 7.44%
Other debt securities 2 13.28 48 10.24 98 8.75 542 7.27
- -------------------------------------------------------------------------------------------------------
Total amortized cost $ 2 13.09% $ 99 8.91% $ 553 7.21% $ 4,158 7.42%
=======================================================================================================
* Less than $500,000
</TABLE>
The maturity distribution of U.S. Government agency obligations and other
securities which include asset-backed securities, primarily mortgages, are
based on the contractual due date of the final payment. These securities have
an anticipated cash flow that includes contractual principal payments and
estimated prepayments generally resulting in shorter average lives than those
based on contractual maturities.
Credit Risk Management
The credit approval and policy function is centralized under the control of
the Chief Credit Officer. The structure is designed to emphasize credit
decision accountability, optimize credit quality, facilitate control of credit
policies and procedures and encourage consistency in the approach to, and
management of, the credit process throughout the Company.
The Risk Management Committee is responsible for oversight of credit policy
and the credit risk profile of the loan portfolio. The Chief Credit Officer
is responsible for the design and management of the credit function including
monitoring and making changes, where appropriate, to written credit policies.
In addition to active supervision and evaluation by lending officers, periodic
reviews of the loan portfolio are made by internal auditors, independent
auditors, the Board of Directors and regulatory agency examiners. These
reviews cover selected borrowers' current financial position, past and
prospective earnings and cash flow, and realizable value of collateral and
guarantees. These reviews also serve as an early identification of problem
credits.
22
Loans Outstanding
As a result of the Republic acquisition, loans increased approximately $14
billion at December 31, 1999 comprised of $6 billion commercial loans, $4
billion residential mortgages and $4 billion international loans. In 1998 the
Company acquired $1.7 billion of commercial loans from the U.S. corporate
banking unit of the HongkongBank completing the consolidation of HSBC's
commercial banking activities in the U.S. Credit card portfolios of
approximately $370 million were sold in 1998. Acquisitions in 1997 included a
commercial mortgage portfolio of approximately $400 million and a residential
mortgage portfolio of $5.1 billion.
International loans to banks and other financial institutions included $107
million and $609 million at year ends 1999 and 1998, respectively, to the HSBC
Group. With respect to other business and financial commercial loans, no
single industry group's aggregate borrowings from the Company exceeded 10% of
the total loan portfolio at December 31, 1999. The following table provides a
breakdown of major loan categories as of year end for the past five years.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
Domestic:
Commercial:
Construction and mortgage loans $ 5,648 $ 3,096 $ 2,235 $ 2,085 $ 1,427
Other business and financial 11,536 7,803 5,811 5,094 5,208
Consumer:
Residential mortgages 13,241 9,467 10,008 3,632 3,080
Credit card receivables 1,290 1,291 1,780 1,939 1,844
Other consumer loans 1,231 1,319 1,179 1,433 1,472
- ----------------------------------------------------------------------------------------------
32,946 22,976 21,013 14,183 13,031
- ----------------------------------------------------------------------------------------------
International:
Government and official institutions 444 331 345 359 373
Banks and other financial institutions 727 622 65 95 284
Commercial and industrial 3,792 120 199 55 84
- ----------------------------------------------------------------------------------------------
4,963 1,073 609 509 741
- ----------------------------------------------------------------------------------------------
Total loans $37,909 $24,049 $21,622 $14,692 $13,772
==============================================================================================
</TABLE>
Problem Loan Management
Borrowers who experience difficulties in meeting the contractual payment terms
of their loans receive special attention. Depending on circumstances,
decisions may be made to cease accruing interest on such loans.
The Company complies with regulatory requirements which mandate that interest
not be accrued on commercial loans with principal or interest past due for a
period of ninety days unless the loan is both adequately secured and in
process of collection. In addition, commercial loans are designated as
nonaccruing when, in the opinion of management, reasonable doubt exists with
respect to collectibility of all interest and principal based on certain
factors, including adequacy of collateral.
Interest that has been recorded but unpaid on loans placed on nonaccruing
status generally is reversed and reduces current income at the time loans are
so categorized. Interest income on these loans may be recognized to the
extent of cash payments received. In those instances where there is doubt as
23
to collectibility of principal, any cash interest payments received are
applied as principal reductions. Loans are not reclassified as accruing until
interest and principal payments are brought current and future payments are
reasonably assured.
<TABLE>
<CAPTION>
Risk Elements in the Loan Portfolio at Year End
- -----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
Nonaccruing loans:
Domestic:
Construction and other commercial
real estate $ 83 $ 104 $ 129 $ 176 $ 170
Other domestic loans 255 233 181 181 298
- -----------------------------------------------------------------------------------
Subtotal 338 337 310 357 468
International 6 - 1 - -
- -----------------------------------------------------------------------------------
Total nonaccruing loans 344 337 311 357 468
Other real estate and owned assets 14 9 12 14 110
- -----------------------------------------------------------------------------------
Total nonaccruing loans, other real estate
and owned assets $358 $ 346 $ 323 $ 371 $ 578
===================================================================================
Ratios:
Nonaccruing loans to total loans .91% 1.40% 1.44% 2.43% 3.40%
Nonaccruing loans, other real estate
and owned assets to total assets .40 1.02 1.02 1.57 2.81
- -----------------------------------------------------------------------------------
Accruing loans contractually past due
90 days or more as to principal or
interest (all domestic):
Residential real estate mortgages $ 13 $ 2 $ 1 $ 12 $ 15
Credit card receivables 1 5 33 35 22
Other consumer loans 3 10 10 12 14
All other 23 13 13 16 9
- -----------------------------------------------------------------------------------
Total accruing loans contractually past
due 90 days or more $ 40 $ 30 $ 57 $ 75 $ 60
===================================================================================
</TABLE>
In certain situations where the borrower is experiencing temporary cash flow
problems, and after careful examination by management, the interest rate and
payment terms may be adjusted from the original contractual agreement. When
this occurs and the revised terms at the time of renegotiation are less than
the Company would be willing to accept for a new loan with comparable risk,
the loan is separately identified as restructured.
Nonaccruing loans at December 31, 1999 totaled $344 million compared with $337
million a year ago. Nonaccruing loans that have been restructured but remain
in nonaccruing status amounted to $32 million, $21 million and $34 million at
December 31, 1999, 1998 and 1997, respectively. Cash payments received on
loans on nonaccruing status during 1999, or since loans were placed on
nonaccruing status, whichever was later, totaled $53 million, $29 million of
which was recorded as interest income and $24 million as reduction of loan
principal.
Residential mortgages are generally designated as nonaccruing when delinquent
for more than ninety days. Loans to credit card customers that are past due
more than ninety days are designated as nonaccruing if the customer has agreed
to credit counseling. Other consumer loans are generally not designated as
nonaccruing and are charged off against the allowance for credit losses
according to an established delinquency schedule.
24
The Company identified impaired loans totaling $216 million at December 31,
1999 of which $110 million had an allocation from the allowance of $64
million. At December 31, 1998, identified impaired loans were $183 million,
of which $81 million had an allocation from the allowance of $32 million.
Cross-Border Net Outstandings
The following table presents total cross-border net outstandings in accordance
with Federal Financial Institutions Examination Council (FFIEC) guidelines.
Cross-border net outstandings are amounts payable to the Company by residents
of foreign countries regardless of the currency of claim and local country
claims in excess of local country obligations. Excluded from cross-border
outstandings are, among other things, the following: local country claims
funded by non-local country obligations (U.S. dollar or other non-local
currencies), principally certificates of deposits issued by a foreign branch,
where the providers of funds agree that, in the event of the occurrence of a
sovereign default or the imposition of currency exchange restrictions in a
given country, they will not be paid until such default is cured or currency
restrictions lifted or, in certain circumstances, they may accept payment in
local currency or assets denominated in local currency (hereinafter referred
to as constraint certificates of deposits); and cross-border claims that are
guaranteed by cash or other external liquid collateral. At December 31, 1999,
the Company's cross-border net outstandings excluded $545 million of Brazilian
assets funded by constraint certificates of deposits.
Cross-border net outstandings include deposits in other banks, loans,
acceptances, securities available for sale, trading securities, revaluation
gains on foreign exchange and derivative contracts and accrued interest
receivable.
<TABLE>
<CAPTION>
Cross-Border Net Outstandings Which Exceed .75% of Total Assets at Year End
- -----------------------------------------------------------------------------
Banks and Other Government and Commercial
Financial Official and
Institutions Institutions Industrial(1) Total
- -----------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C>
December 31, 1999:
Germany $888 $15 $ 114 $1,017
Luxembourg (2) 18 2 2,595 2,615
United Kingdom 523 1 265 789
December 31, 1998:
France 345 - - 345
United Kingdom 52 - 641 693
December 31, 1997:
Canada 198 - 55 253
France 267 - - 267
Japan 268 - - 268
Netherlands 232 - 27 259
United Kingdom 57 - 183 240
=============================================================================
(1) Includes excess of local country claims over local country obligations.
(2) Included in commercial and industrial in 1999 is $2,493 million which
represents the Company's investment in HSBC Republic, formerly Safra
Republic Holdings S.A.
</TABLE>
25
Allowance for Credit Losses and Charge Offs
At year-end 1999, the allowance was $660 million, or 1.74% of total loans,
compared with $380 million, or 1.58% of total loans, a year ago. The Republic
acquisition added $289 million to the allowance at December 31, 1999. The
ratio of the allowance to nonaccruing loans was 192.01% at December 31, 1999
compared with 112.74% a year earlier.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
Total loans at year end $37,909 $24,049 $21,622 $14,692 $13,772
Average total loans 23,384 21,392 20,049 13,905 13,200
Allowance for credit losses:
Balance at beginning of year $ 379.7 $ 409.4 $ 418.2 $ 477.5 $ 531.5
Allowance related to acquired
businesses 290.2 - 40.3 3.4 .4
Charge offs:
Commercial:
Construction and mortgage loans - - - - 44.9
Other business and financial 27.0 27.9 28.3 69.8 174.8
Consumer:
Residential mortgages 12.1 10.2 7.7 2.6 2.0
Credit card receivables 86.5 105.0 137.2 97.9 57.8
Other consumer loans 9.5 9.5 13.5 11.2 6.3
- --------------------------------------------------------------------------------------------
Total charge offs 135.1 152.6 186.7 181.5 285.8
- --------------------------------------------------------------------------------------------
Recoveries on loans charged off:
Commercial:
Construction and mortgage loans - - - 1.1 11.9
Other business and financial 18.3 22.9 31.3 38.3 29.8
Consumer:
Residential mortgages 1.0 .8 1.0 .5 -
Credit card receivables 11.6 14.9 14.1 10.2 9.2
Other consumer loans 3.9 4.3 3.8 4.0 5.2
- --------------------------------------------------------------------------------------------
Total recoveries 34.8 42.9 50.2 54.1 56.1
- --------------------------------------------------------------------------------------------
Total net charge offs 100.3 109.7 136.5 127.4 229.7
- --------------------------------------------------------------------------------------------
Provision charged to income 90.0 80.0 87.4 64.7 175.3
- --------------------------------------------------------------------------------------------
Balance at end of year $ 659.6 $ 379.7 $ 409.4 $ 418.2 $ 477.5
- --------------------------------------------------------------------------------------------
Allowance ratios:
Total net charge offs to
average loans .43% .51% .68% .92% 1.74%
Year-end allowance to:
Year-end total loans 1.74 1.58 1.89 2.85 3.47
Year-end total nonaccruing loans 192.01 112.74 131.62 116.98 101.95
============================================================================================
</TABLE>
Charge offs of individual commercial loans and residential mortgages reflect
management's judgment with respect to the ultimate collectibility of all or
part of the specific loan. Charge offs of consumer loans, excluding
residential mortgages, occur according to an established delinquency schedule.
The allowance for credit losses is evaluated based on an assessment of the
losses inherent in the loan portfolio. This assessment results in an
allowance consisting of allocated and unallocated components.
The allocated component of the allowance includes specific reserves resulting
from the analysis of individual loans and formula-based reserves assigned to
pools of similar loans based on historical loss experience for each loan
category. The specific reserves are based on a regular analysis of all
26
significant commercial credits where the internal credit rating is at or below
a predetermined classification. All other commercial loans are grouped into
pools by credit facility grade. Formula reserves are established based on
historical one year default rates for each pool using data from the last eight
quarters, adjusted for known changes in the economic environment and
management judgment. The allocated portion of the allowance also includes
management's determination of the amounts necessary for loan concentrations.
Residential mortgage loans which are more than 90 days past due are
individually analyzed and appropriate specific reserves are assigned. Other
residential mortgages are grouped into pools based on delinquency status and
formula reserves are established to cover, at a minimum, twelve months of
historical net charge offs using data from the past twelve months' pool loss
rates.
Other consumer loans, including credit card receivables, are grouped into
pools based on product and delinquency status. Formula reserves are
established to cover, at a minimum, six months of historical charge offs using
data from the past twelve months' pool loss rates.
The unallocated portion of the allowance is determined based on management's
assessment of general economic conditions as well as specific economic factors
in the individual markets in which the Company operates. This determination
inherently involves a higher degree of uncertainty and considers current risk
factors that may not have yet manifested themselves in the Company's
historical loss factors used to determine the allocated component of the
allowance, and it recognizes that knowledge of the portfolio may be
incomplete.
An allocation of the allowance by major loan categories follows.
<TABLE>
<CAPTION>
Allocation of Allowance for Credit Losses
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
% of % of % of % of % of
Loans Loans Loans Loans Loans
to to to to to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- ------------------------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic:
Commercial:
Construction and
mortgage loans $ 45 14.9 $ 23 12.8 $ 31 10.4 $ 21 14.2 $ 13 10.4
Other business 173 30.4 62 32.4 53 26.9 75 34.7 149 37.8
Consumer:
Residential mortgages 43 34.9 12 39.4 30 46.3 7 24.7 6 22.3
Credit card receivables 40 3.4 45 5.4 60 8.2 55 13.2 40 13.4
Other consumer 17 3.3 12 5.5 17 5.4 9 9.8 8 10.7
International 128 13.1 31 4.5 26 2.8 26 3.4 28 5.4
Unallocated 214 - 195 - 192 - 225 - 234 -
- ------------------------------------------------------------------------------------------------------------------------
Total $660 100.0 $380 100.0 $409 100.0 $418 100.0 $478 100.0
========================================================================================================================
</TABLE>
Changes in the allocated reserves from 1998 are due principally to the
Republic acquisition.
27
The allocations in the table are based on management's current allocation
methodologies. The use of other methods to allocate the allowance would
change the assigned allocation. For instance, increasing the loss coverage of
consumer loans from six months of historical charge offs to twelve months,
would increase the allocated allowance by $38 million at year-end 1999.
Management concludes that the allowance for credit losses, including the
unallocated component, is appropriately stated at December 31, 1999. The U.S.
banking industry continues to carefully assess credit risk considering, among
other things, (1) credit issues still remaining in U.S. consumer banking
businesses, (2) the effect that increasing energy prices will have on bank
customers, and (3) the likelihood of continued economic expansion and the
effect on loan portfolios.
Capital Resources
Total common shareholders' equity at year-end 1999 was $9,541 million,
compared with $2,228 million at year-end 1998. The equity base increased by
$7,088 million in capital contributed by HSBC in connection with the Republic
acquisition and $8 million relating to the merger of an affiliated company.
See Note 1 to the financial statements for a description of these
transactions. The equity base was further increased by $464 million from net
income and reduced by $155 million for common shareholder dividends paid to
HSBC and $95 million from the change in net unrealized losses on securities
available for sale. The other capital contribution from the parent of $3
million relates to an HSBC stock option plan in which almost all of the
Company's employees are eligible to participate.
The ratio of common shareholders' equity to total year-end assets was 10.58%
at December 31, 1999 compared with 6.56% at December 31, 1998. Although
the acquisition of Republic was effective December 31, 1999, payment to
Republic shareholders of $7,091 million was delayed, as agreed by the parties
to the transaction in advance, until January 7, 2000 in order to avoid
settlement crossing Year 2000. Had the payment been made at December 31,
1999, the ratio of common shareholders' equity to total year-end assets would
have been 11.48%.
Capital Adequacy
The Federal Reserve Board (FRB) has Risk-Based Capital Guidelines for
assessing the capital adequacy of U.S. banking organizations. The guidelines
place balance sheet assets into four categories of risk weights, primarily
based on the relative credit risk of the counterparty. Some off-balance sheet
items such as letters of credit and loan commitments are taken into account by
applying different categories of "credit conversion factors" to arrive at
credit-equivalent amounts, which are then weighted in the same manner as
balance sheet assets involving similar counterparties. For off-balance sheet
items relating to interest rate and foreign exchange rate contracts, the
credit-equivalent amounts are arrived at by estimating both the current
exposure, mark to market value, and the potential exposure over the remaining
life of each contract. The credit-equivalent amount is similarly assigned to
the risk weight category appropriate to the counterparty.
28
The guidelines include a measure for market risk inherent in the trading
portfolio. Under the market risk requirements, capital is allocated to
support the amount of market risk that relates to the Company's trading
activities including off-balance sheet derivative contracts associated with
trading activities.
The guidelines include the concept of Tier 1 capital and total capital. The
guidelines establish a minimum standard risk-based target ratio of 8%, of
which at least 4% must be in the form of Tier 1 capital. Effective with the
acquisition of Republic at year-end 1999, the Company includes an adjustment
for its investment in HSBC Republic in the calculation of its total capital
ratio in accordance with requirements of the FRB specifically applied to the
Company. The following table shows the components of the Company's risk-based
capital.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31, 1999 1998
- ------------------------------------------------------------------------------
in millions
<S> <C> <C>
Common shareholder's equity $ 9,541 $2,228
Preferred stock 375 -
Guaranteed mandatorily redeemable
preferred securities of subsidiaries 710 400
Less: Goodwill (3,307) (335)
Other additions (deductions)* 51 (45)
- ------------------------------------------------------------------------------
Tier 1 capital 7,370 2,248
- ------------------------------------------------------------------------------
Long-term debt qualifying as risk-
based capital 2,605 562
Qualifying aggregate allowance for
credit losses 660 327
45% of unrealized gain on available
for sale equity securities 1 3
- ------------------------------------------------------------------------------
Tier 2 capital 3,266 892
Less: Investment in HSBC Republic (2,493) -
- ------------------------------------------------------------------------------
Total capital $ 8,143 $3,140
- ------------------------------------------------------------------------------
* Other additions (deductions) include the unrealized net (gain) loss on
available for sale securities carried at fair value.
</TABLE>
The capital adequacy guidelines establish a limit on the amount of certain
deferred tax assets that may be included in (that is, not deducted from) Tier
1 capital for risk-based and leverage capital purposes. The deferred tax
asset recognized by the Company meets the criteria for capital recognition and
has been included in the calculation of the Company's capital ratios.
The Company's total risk adjusted assets and off-balance sheet items were
approximately $54.9 billion and $26.1 billion at year ends 1999 and 1998,
respectively. Risk adjusted capital ratios were 13.42% at the Tier 1 level
and 15.53% at the total capital level. These ratios compared with 8.62% at
the Tier 1 level and 12.04% at the total capital level at December 31, 1998.
Banking industry regulators also have guidelines that set forth the leverage
ratios to be applied to banking organizations in conjunction with the
risk-based capital framework. Under these guidelines, strong bank holding
companies must maintain a minimum leverage ratio of Tier 1 capital to
quarterly average total assets of 3%. At December 31, 1999, the Company had a
23.41% leverage ratio compared with 6.76% at December 31, 1998 based on
quarterly averages. Based on period end assets, the ratio was 8.48% at
December 31, 1999.
29
From time to time, the bank regulators propose amendments to or issue
interpretations of risk-based capital guidelines. Such proposals or
interpretations could, upon implementation, affect reported capital ratios and
net risk adjusted assets.
Republic Acquisition
As mentioned, the Company acquired Republic on December 31, 1999. Republic's
businesses are briefly described on page 10. The following schedule reports
the historical separate condensed balance sheets of the Company and Republic
and the resulting combined condensed balance sheet at December 31, 1999, after
purchase accounting entries including fair value adjustments.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Historical
---------------------
HSBC USA Republic
December 31, 1999 Inc. NY Corp. Adjustments Combined
- -------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $ 1,140 $ 845 $ (7) (2) $ 1,978
Interest bearing deposits with banks 1,744 2,488 3 (1)(2) 4,235
Federal funds sold and securities
purchased under resale agreements 2,658 1,660 (2,000) (3) 2,318
Trading assets 1,014 3,516 (3) (2) 4,527
Securities 3,336 21,111 6,339 (1) 30,786
Loans 23,472 14,471 (34) (2) 37,909
Less - allowance for credit losses 371 289 - 660
- -------------------------------------------------------------------------------------------------
Loans, net 23,101 14,182 (34) 37,249
Goodwill and other acquisition
intangibles 325 236 2,746 (2) 3,307
Equity investments 29 884 1,628 (2) 2,541
Other assets 1,239 2,027 33 (2) 3,299
- -------------------------------------------------------------------------------------------------
Total assets $34,586 $46,949 $ 8,705 $90,240
=================================================================================================
Liabilities
Deposits in domestic offices $22,092 $13,331 $ (25) (2) $35,398
Deposits in foreign offices 5,218 16,576 (742) (2) 21,052
Trading account liabilities 57 2,390 (6) (2) 2,441
Short-term borrowings 2,207 5,065 (2,000) (3) 5,272
Payable to shareholders of Republic - - 7,091 (2) 7,091
Interest, taxes and other liabilities 822 1,955 283 (2) 3,060
Long-term debt 1,737 4,240 (92) (2) 5,885
- -------------------------------------------------------------------------------------------------
Total liabilities 32,133 43,557 4,509 80,199
- -------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred stock - 500 - 500
Common shareholders' equity
Common stock - 524 (524) (2) -
Capital surplus 1,832 56 7,032 (1)(2) 8,920
Retained earnings 672 2,657 (2,657) (2) 672
Accumulated other comprehensive loss (51) (345) 345 (2) (51)
- -------------------------------------------------------------------------------------------------
Total common shareholders' equity 2,453 2,892 4,196 9,541
- -------------------------------------------------------------------------------------------------
Total shareholders' equity 2,453 3,392 4,196 10,041
- -------------------------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $34,586 $46,949 $ 8,705 $90,240
===================================================================================================
(1) Contribution from HSBC.
(2) Purchase of Republic less fair value adjustments including elimination of Republic's common
shareholders' equity.
(3) Elimination of intercompany receivable/payable.
</TABLE>
30
<TABLE>
<CAPTION>
The pro forma combined income statement for the year ended December 31, 1999
reflects the combination of historical operating results of the Company and
Republic and includes the amortization of necessary acquisition adjustments as
if the combination had taken place at the beginning of 1999.
- -----------------------------------------------------------------------------------
Historical Amortization
------------------- of
HSBC Republic Acquisition Pro Forma
Year Ended December 31, 1999 USA Inc. NY Corp. Adjustments Combined
- -----------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C>
Interest income $2,320 $2,793 $ 30 $5,143
Interest expense 1,094 1,749 46 2,889
- -----------------------------------------------------------------------------------
Net interest income 1,226 1,044 (16) 2,254
Provision for credit losses 90 12 - 102
- -----------------------------------------------------------------------------------
Net interest income after
provision for credit losses 1,136 1,032 (16) 2,152
Other operating income 464 628 (84) 1,008
- -----------------------------------------------------------------------------------
1,600 1,660 (100) 3,160
Operating expenses 828 1,086 131 2,045
- -----------------------------------------------------------------------------------
Income before taxes 772 574 (231) 1,115
Income tax expense (benefit) 308 156 (11) 453
- -----------------------------------------------------------------------------------
Net income $ 464 $ 418 $(220) $ 662
===================================================================================
</TABLE>
This pro forma information may not be indicative of the results that actually
would have occurred if the purchase had been consummated on January 1, 1999 or
which may be obtained in the future. While the Company expects to achieve
certain operating cost savings as a result of the combination, no adjustment
has been included in the pro forma amounts for anticipated operating cost
savings or revenue enhancements. Operating results may also be impacted by
the nature, costs and timing of the integration of businesses. Certain
foreign operations may be integrated into the respective foreign operations of
other HSBC group entities.
The following table sets forth the projected effect of purchase accounting
adjustments relating to the acquisition on the operating results of future
periods. The annual amortization of goodwill of $149 million (incremental
$120 million) as well as the amortization of the premium associated with the
equity investment in affiliate of $80 million, is not subject to deduction for
Federal and state taxes. The projected amortization and accretion is subject
to change if such assets and liabilities are subsequently sold and variations
between future prepayments assumed in the preparation of the table and those
which may actually occur.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
2000 2001 2002 2003 2004
- -----------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
Amortization of premium/discount on:
Equity investment in affiliate $ (80) $ (80) $ (80) $ (80) $ (80)
Other fair value adjustments (31) 16 42 42 42
Goodwill (120) (120) (120) (120) (120)
- -----------------------------------------------------------------------------------
Charge to operations $(231) $(184) $(158) $(158) $(158)
===================================================================================
</TABLE>
Further, both the Company and Republic recognized certain one-time items in
their 1999 operating results. Pre-tax results for the Company included
settlement with the U.S. Internal Revenue Service on Brazilian tax credits of
$13.1 million and a gain on the sale of a student loan business of $15.0
million partially offset by an acquisition related restructuring charge of
31
$26.7 million. Republic's 1999 pre-tax operating results included
restructuring charges of $97.0 million (unrelated to the acquisition by the
Company) partially offset by a gain of $69.8 million relating to a real estate
investment.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In consideration of the degree of interest rate risk inherent in the banking
industry, the Company has interest rate risk management policies designed to
meet performance objectives within defined risk/safety parameters. In the
course of managing interest rate risk, a combination of risk assessment
techniques, including dynamic simulation modeling, gap analysis, and capital
at risk analysis are employed. The combination of these tools enables
management to identify and assess the potential impact of interest rate
movements and take appropriate action.
Certain limits and benchmarks that serve as guidelines in determining the
appropriate levels of interest rate risk for the institution have been
established. One such limit is expressed in terms of the Present Value of a
Basis Point (PVBP), which reflects the change in value of the balance sheet
for a one basis point movement in all interest rates. The institutional PVBP
limit is plus or minus $3.6 million, which includes distinct limits associated
with trading portfolio activities and off-balance sheet instruments. Thus,
for a one basis point change in interest rates, the policy dictates that the
value of the balance sheet shall not change by more than $3.6 million. As of
December 31, 1999, the Company had a position of $(3.5) million PVBP.
Mortgage servicing rights are excluded from the PVBP determination as their
interest rate risk is significantly different from other balance sheet items.
The mortgage servicing rights risk is to lower interest rates, which is
managed through the purchase of interest rate floors.
The Company also monitors changes in value of the balance sheet for large
movements in interest rates with an overall limit of +/- 10%, after tax,
change from the base case for a 200 basis point gradual rate movement. As of
December 31, 1999, for a gradual 200 basis point increase in rates, the value
was projected to drop by 7% and for a 200 basis point gradual decrease in
rates, value was projected to drop by 1% were no management actions ever taken
to manage exposures to the changing environment.
In addition to the above mentioned limits, the Company's Asset and Liability
Policy Committee monitors, on a monthly basis, the impact of a number of
interest rate scenarios on net interest income. These scenarios include both
rate shock scenarios which assume immediate market rate movements of +/- 10%
and 200 basis points, as well as rate change scenarios in which rates rise or
fall by 200 basis points over a twelve month period. The individual limit for
such gradual 200 basis point movement is currently +/- 10%, pretax, of base
case earnings over a twelve month period. Simulations are also performed for
other relevant interest rate scenarios including immediate rate movements and
changes in the shape of the yield curve or in competitive pricing policies.
Net interest income under the various scenarios is reviewed over a twelve
month period, as well as over a three year period. The simulations capture
the effects of the timing of the repricing of all on-balance sheet assets and
liabilities, as well as all off-balance sheet positions such as interest rate
32
swaps, futures and option contracts. Additionally, the simulations
incorporate any behavioral aspects such as prepayment sensitivity under
various scenarios.
For purposes of simulation modeling, base case earnings reflect the existing
balance sheet composition, with balances generally maintained at current
levels by the anticipated reinvestment of expected runoff. These balance
sheet levels will however, factor in specific known or likely changes
including material increases, decreases or anticipated shifts in balances due
to management actions. Current rates and spreads are then applied to produce
base case earnings estimates on both a twelve month and three year time
horizon. Rate shocks are then modeled and compared to base earnings (earnings
at risk), and include behavioral assumptions as dictated by specific scenarios
relating to such factors as prepayment sensitivity and the tendency of
balances to shift among various products in different rate environments. It
is assumed that no management actions are taken to manage exposures to the
changing environment being simulated.
Utilizing these modeling techniques, a gradual 200 basis point parallel rise
and fall in the yield curve on January 1, 2000 would cause projected 2000 net
interest income to decrease by $37 million and increase by $42 million,
respectively. This +/- 2% change is well within the Company's +/- 10% limit.
An immediate 100 basis point parallel rise and fall in the yield curve on
January 1, 2000, would cause projected 2000 net interest income to decrease by
$43 million and increase by $43 million, respectively. A 200 basis point
parallel rise and fall would decrease projected net interest income by $80
million and $52 million, respectively.
The projections noted above do not take into consideration possible
complicating factors such as the effect of changes in interest rates on the
credit quality, size and composition of the balance sheet. Therefore,
although this provides a reasonable estimate of interest rate sensitivity,
actual results will vary from these estimates, possibly by significant
amounts.
Management of Primary Market Risk Exposures
The primary market risk to the Company's earnings associated with its
investing, lending and borrowing activities historically lies in exposure to
sudden and drastic shifts in interest rates. Management of these risks is
undertaken with the overall objective of meeting the Company's overall
performance objectives within defined risk and safety parameters. The
strategies employed reflect the goal of minimizing exposure to sudden and
drastic upward and downward movements in rates. These strategies entail the
use of both on- and off-balance sheet instruments to effectively mitigate the
risk inherent in the balance sheet.
In addition to interest rate risk, in conjunction with the Republic
acquisition the Company has increased its exposure to certain other market
risks including fluctuations in foreign currency exchange rates and changes in
global commodity and precious metals prices. Risk management policies and
practices have been revised and expanded to accommodate changes in on- and
off-balance sheet positions that the Company has assumed.
33
Trading Activities
As a result of the Republic acquisition, the Company significantly increased
its trading activities and exposure to the associated market risks. The
trading portfolios have distinct limits pertaining to items such as
permissible investments, risk exposures, stop loss, balance sheet size and
product concentrations. "Stop loss" refers to the maximum amount of loss that
may be incurred before sale of items causing the loss is required.
The Company intends to increase reliance upon Value at Risk (VaR) analysis as
a basis for quantifying and managing risks associated with the trading
portfolio. Such analysis is based upon the following two general principles:
(i) VaR applies to all trading positions across all risk classes including
interest rate, equity, optionality and global/foreign exchange risks
associated with assets obtained in conjunction with the acquisition; and
(ii) VaR is based on the concept of independent valuations, with all
transactions being repriced by an independent risk management function using
separate models prior to being stressed against VaR parameters.
VaR attempts to capture the potential loss resulting from unfavorable market
developments within a given time horizon (typically ten days) and given a
certain confidence level (99%). It involves historical simulation of the
changes in value of the portfolios based upon scenarios that reflect movements
in various market variables covering each risk asset class dating back more
than two years. The correlation between different markets and risk factors is
implicitly captured in historical scenarios.
A VaR report broken down by trading business and on a consolidated basis is
distributed daily to management. To measure the accuracy of the VaR model
output, the daily VaR will be compared to the actual result from trading
activities.
The VaR model incorporates estimates of the specific risk associated with
certain securities traded by the Company. This includes elements such as
spread risk on sovereign or corporate debt attributable to instruments held in
the trading portfolio acquired from Republic, which is modeled through
historical simulation of the relevant portfolio to past changes on spreads of
U.S. treasury securities. Specific risk models are continually tested to
alert risk management immediately to any shift in their relevance.
As a result of the acquired global markets risk, a three, four and five
standard deviation stress test with a one-day time horizon will be performed
biweekly. Each variable is to be stressed up and down, leaving the others
unchanged. A partial profit and loss resulting from the worst of two runs is
generated for each variable. The results are summed across all variables
yielding the stress exposure. The stressing process illustrates unusually
large movements occurring simultaneously, without the benefit of combining the
parameters. The diversification of the Company's trading portfolios serves to
reduce the impact, if any, of any such large market movements.
34
Item 8. Financial Statements and Supplementary Data
Page
Report of Management 36
Report of Independent Auditors 37
HSBC USA Inc.:
Consolidated Balance Sheet 38
Consolidated Statement of Income 39
Consolidated Statement of Changes in
Shareholders' Equity 40
Consolidated Statement of Cash Flows 41
HSBC Bank USA:
Consolidated Balance Sheet 42
Summary of Significant Accounting Policies 43
Notes to Financial Statements 47
35
R E P O R T O F M A N A G E M E N T
Management of HSBC USA Inc. is responsible for the integrity of the financial
information presented in this annual report. Management has prepared the
financial statements in conformity with generally accepted accounting
principles. In preparing the financial statements, management makes judgments
and estimates of the expected effect of unsettled transactions and events that
are accounted for or disclosed.
The Company's systems of internal accounting control are designed to provide
reasonable but not absolute assurance that assets are safeguarded against loss
from unauthorized acquisition, use or disposition and that the financial
records are reliable for preparing financial statements. The selection and
training of qualified personnel and the establishment and communication of
accounting and administrative policies and procedures are elements of these
control systems. Management believes that the system of internal control,
which is subject to close scrutiny by management and by internal auditors,
supports the integrity and reliability of the financial statements.
The Board of Directors or their committees meet regularly with management,
internal auditors and the independent auditors to discuss internal control,
internal auditing and financial reporting matters, and also the scope of the
annual audit and interim reviews. Both the internal auditors and the
independent auditors have direct access to the Board of Directors.
36
R E P O R T O F I N D E P E N D E N T A U D I T O R S
The Board of Directors and Shareholders of
HSBC USA Inc.
We have audited the accompanying consolidated balance sheets of HSBC USA Inc.
and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the years in the three year period ended December 31, 1999,
and the accompanying consolidated balance sheets of HSBC Bank USA and
subsidiaries as of December 31, 1999 and 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HSBC USA
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three year
period ended December 31, 1999, and the financial position of HSBC Bank USA
and subsidiaries as of December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Buffalo, New York
February 9, 2000, except
as to Note 27, which is
as of February 28, 2000
37
<TABLE>
<CAPTION>
HSBC USA Inc.
- --------------------------------------------------------------------------------
C O N S O L I D A T E D B A L A N C E S H E E T
December 31, 1999 1998
- --------------------------------------------------------------------------------
in thousands
<S> <C> <C>
Assets
Cash and due from banks $ 1,977,756 $ 1,262,423
Interest bearing deposits with banks 4,234,668 2,373,550
Federal funds sold and securities
purchased under resale agreements 2,318,361 86,919
Trading assets 4,526,988 826,019
Securities available for sale 25,973,805 4,237,679
Securities held to maturity
(fair value $4,811,695 in 1999) 4,811,695 -
Loans 37,909,143 24,049,499
Less - allowance for credit losses 659,603 379,652
- --------------------------------------------------------------------------------
Loans, net 37,249,540 23,669,847
Premises and equipment 745,910 207,685
Accrued interest receivable 778,363 238,790
Equity investments 2,540,927 25,261
Goodwill and other acquisition intangibles 3,307,147 335,390
Other assets 1,774,459 680,523
- --------------------------------------------------------------------------------
Total assets $ 90,239,619 $ 33,944,086
================================================================================
Liabilities
Deposits in domestic offices
Noninterest bearing $ 6,003,813 $ 3,552,303
Interest bearing 29,393,957 18,168,438
Deposits in foreign offices
Noninterest bearing 187,099 -
Interest bearing 20,865,022 4,545,069
- --------------------------------------------------------------------------------
Total deposits 56,449,891 26,265,810
Trading account liabilities 2,440,729 76,766
Short-term borrowings 5,271,597 2,886,009
Interest, taxes and other liabilities 3,059,993 739,557
Payable to shareholders of acquired company 7,091,209 -
Subordinated long-term debt and perpetual
capital notes 3,427,649 722,346
Guaranteed mandatorily redeemable securities 710,259 400,000
Other long-term debt 1,747,131 625,345
- --------------------------------------------------------------------------------
Total liabilities 80,198,458 31,715,833
- --------------------------------------------------------------------------------
Shareholders' equity
Preferred stock 500,000 -
Common shareholder's equity
Common stock, $5 par; Authorized -1,100 shares
Issued - 704 and 1,001 shares 4 5
Capital surplus 8,920,113 1,806,563
Retained earnings 671,578 377,179
Accumulated other comprehensive income (loss) (50,534) 44,506
- --------------------------------------------------------------------------------
Total common shareholder's equity 9,541,161 2,228,253
- --------------------------------------------------------------------------------
Total shareholders' equity 10,041,161 2,228,253
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 90,239,619 $ 33,944,086
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
38
<TABLE>
<CAPTION>
HSBC USA Inc. 1999
- --------------------------------------------------------------------------------
C O N S O L I D A T E D S T A T E M E N T O F I N C O M E
Year Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Interest income
Loans $ 1,841,396 $ 1,785,122 $ 1,732,705
Securities 214,480 232,440 218,977
Trading assets 50,627 50,843 58,796
Deposits with banks 97,012 136,594 98,750
Federal funds sold and securities
purchased under resale agreements 116,524 127,982 51,786
- --------------------------------------------------------------------------------
Total interest income 2,320,039 2,332,981 2,161,014
- --------------------------------------------------------------------------------
Interest expense
Deposits
In domestic offices 636,858 656,361 583,904
In foreign offices 216,017 211,030 95,150
Short-term borrowings 129,604 204,171 196,727
Long-term debt 111,654 96,079 111,848
- --------------------------------------------------------------------------------
Total interest expense 1,094,133 1,167,641 987,629
- --------------------------------------------------------------------------------
Net interest income 1,225,906 1,165,340 1,173,385
Provision for credit losses 90,000 80,000 87,400
- --------------------------------------------------------------------------------
Net interest income, after
provision for credit losses 1,135,906 1,085,340 1,085,985
- --------------------------------------------------------------------------------
Other operating income
Trust income 52,212 47,290 42,995
Service charges 128,598 115,382 103,975
Mortgage servicing revenue 30,455 43,153 29,671
Other fees and commissions 167,595 145,505 134,828
Trading revenues 10,014 3,700 6,089
Interest on Brazilian tax
settlement 13,143 32,700 -
Other income 61,952 72,367 41,867
- --------------------------------------------------------------------------------
Total other operating income 463,969 460,097 359,425
- --------------------------------------------------------------------------------
1,599,875 1,545,437 1,445,410
- --------------------------------------------------------------------------------
Other operating expenses
Salaries and employee benefits 421,334 410,323 397,966
Net occupancy expense 88,950 89,423 90,989
Other expenses 317,579 280,524 292,505
- --------------------------------------------------------------------------------
Total other operating expenses 827,863 780,270 781,460
- --------------------------------------------------------------------------------
Income before taxes 772,012 765,167 663,950
Applicable income tax expense 308,300 238,100 193,000
- --------------------------------------------------------------------------------
Net income $ 463,712 $ 527,067 $ 470,950
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
39
<TABLE>
<CAPTION>
HSBC USA Inc. 1999
- ---------------------------------------------------------------------------------------------------------
C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S
I N S H A R E H O L D E R S' E Q U I T Y
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
Share- Compre- Share- Compre- Share- Compre-
holders' hensive holders' hensive holders' hensive
Equity Income Equity Income Equity Income
- ---------------------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C> <C> <C> <C>
Preferred stock
Balance, January 1, $ - * $ - $ 98,063
Redemption of stock - - (98,063)
Stock assumed in acquisition 500,000 - -
- ----------------------------------- --------- --------- ---------
Balance, December 31, 500,000 - -
- ----------------------------------- --------- --------- ---------
Common stock
Balance, January 1, 5 5 5
Redemption of stock (1) - -
- ----------------------------------- ---------- --------- ---------
Balance, December 31, 4 5 5
- ----------------------------------- ---------- --------- ---------
Capital surplus
Balance, January 1, 1,806,563 1,804,527 1,803,427
Capital contribution from
parent
Related to Republic acquisition 7,088,108 - -
Related to other merger 22,145 - -
Other 3,297 2,036 1,100
- ----------------------------------- ---------- --------- ----------
Balance, December 31, 8,920,113 1,806,563 1,804,527
- ----------------------------------- ---------- --------- ----------
Retained earnings
Balance, January 1, 377,179 205,112 60,630
Net income 463,712 $463,712 527,067 $527,067 470,950 $470,950
Accumulated deficit assumed in
other merger (14,313) - -
Cash dividends declared:
Preferred stock - - (1,468)
Common stock (155,000) (355,000) (325,000)
- ----------------------------------- ---------- --------- ----------
Balance, December 31, 671,578 377,179 205,112
- ----------------------------------- ---------- --------- ----------
Accumulated other comprehensive
income
Net unrealized gains on securities
available for sale, net of taxes
Balance, January 1, 44,506 29,309 10,852
Net unrealized gains (losses)
arising during the period less
taxes of ($48,012), $13,275 and
$16,289 in 1999, 1998 and 1997,
respectively (88,476) 24,203 29,799
Reclassification adjustment for
net gains included in net income,
less taxes of $3,534, $4,849 and
$6,107 in 1999, 1998 and 1997,
respectively (6,564) (9,006) (11,342)
---------- --------- ----------
Change in net unrealized gains
(losses) on securities available
for sale, net of taxes (95,040) 15,197 18,457
---------- --------- -------
Comprehensive income $368,672 $542,264 $489,407
- ----------------------------------- ---------- ======= --------- ======= ---------- =======
Balance, December 31, (50,534) 44,506 29,309
- ----------------------------------- ---------- --------- ----------
Total shareholders' equity,
December 31, $10,041,161 $2,228,253 $ 2,038,953
=================================== ========== ========= ==========
The accompanying notes are an integral part of the consolidated financial statements.
* $100 aggregate par value.
</TABLE>
40
<TABLE>
<CAPTION>
HSBC USA Inc. 1999
------------------------------------------------------------------------------------------
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
Year Ended December 31, 1999 1998 1997
------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 463,712 $ 527,067 $ 470,950
Adjustments to reconcile net income to net cash
provided (used) by operating activities
Depreciation, amortization and deferred taxes 68,063 85,752 109,988
Provision for credit losses 90,000 80,000 87,400
Net change in other accrual accounts 118,406 (60,602) 124,273
Net change in loans originated for sale 698,978 (789,258) (16,797)
Net change in trading assets and liabilities (193,731) 10,663 (112,349)
Other, net (95,990) (109,811) (45,028)
------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,149,438 (256,189) 618,437
------------------------------------------------------------------------------------------
Cash flows from investing activities
Net change in interest bearing deposits with banks 653,135 269,460 (709,974)
Net change in short-term investments (2,571,317) 411,073 1,371,872
Purchases of securities (2,437,512) (2,423,032) (2,193,729)
Sales of securities 2,061,740 1,421,318 1,364,331
Maturities of securities 1,160,406 803,463 579,710
Sales of credit card portfolios - 395,148 -
Other net change in credit card receivables (25,200) 37,422 (101,372)
Net change in other short-term loans 168,130 (212,732) (51,067)
Net originations and maturities of long-term loans (298,541) (253,219) (952,442)
Expenditures for premises and equipment (30,898) (21,255) (40,400)
Net cash provided (used) in acquisitions, net
of cash acquired 829,257 (1,619,278) (607,388)
Other, net (53,579) (35,359) 54,569
------------------------------------------------------------------------------------------
Net cash used by investing activities (544,379) (1,226,991) (1,285,890)
------------------------------------------------------------------------------------------
Cash flows from financing activities
Net change in deposits 964,029 3,357,242 680,151
Net change in short-term borrowings (692,644) (1,103,060) 575,686
Issuance of long-term debt 400,407 500,000 200,000
Repayment of long-term debt (409,815) (459,306) (527,043)
Capital contributions 3,297 2,036 1,101
Redemption of preferred stock - - (98,063)
Dividends paid (155,000) (480,000) (202,937)
------------------------------------------------------------------------------------------
Net cash provided by financing activities 110,274 1,816,912 628,895
------------------------------------------------------------------------------------------
Net change in cash and due from banks 715,333 333,732 (38,558)
Cash and due from banks at beginning of year 1,262,423 928,691 967,249
------------------------------------------------------------------------------------------
Cash and due from banks at end of year $ 1,977,756 $ 1,262,423 $ 928,691
==========================================================================================
Cash paid for: Interest $ 1,115,201 $ 1,136,748 $ 941,851
Income taxes 222,765 208,191 173,930
Non-cash activities : Dividends declared but unpaid - - 125,000
Fair value of assets
acquired 51,314,876 1,711,227 7,272,667
Fair value of liabilities
assumed 44,207,048 91,949 6,665,279
------------------------------------------------------------------------------------------
Net assets acquired 7,107,828 1,619,278 607,388
------------------------------------------------------------------------------------------
Note: Net assets were acquired in 1997 and 1998 for cash. Net assets acquired in 1999
relate principally to the Republic transaction. Republic shareholders were paid
$7,091,209 in cash in January 2000 which is reflected as a liability on the 1999 balance
sheet. Capital contributions from HSBC to fund the purchase of $7,088,108 were received
in 1999 in the form of treasury securities.
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
41
<TABLE>
<CAPTION>
HSBC Bank USA 1999
- --------------------------------------------------------------------------------
C O N S O L I D A T E D B A L A N C E S H E E T
December 31, 1999 1998
- --------------------------------------------------------------------------------
in thousands
<S> <C> <C>
Assets
Cash and due from banks $ 1,927,492 $ 1,262,346
Interest bearing deposits with banks 3,997,445 2,301,100
Federal funds sold and securities
purchased under resale agreements 2,318,361 86,919
Trading assets 4,204,059 826,019
Securities available for sale 18,309,649 4,213,348
Securities held to maturity
(fair value $4,535,288 in 1999) 4,535,288 -
Loans 36,623,321 24,009,332
Less - allowance for credit losses 622,000 377,667
- --------------------------------------------------------------------------------
Loans, net 36,001,321 23,631,665
Premises and equipment 727,649 207,597
Accrued interest receivable 764,783 237,527
Equity investments 2,512,034 -
Goodwill and other acquisition intangibles 2,761,339 335,389
Other assets 1,559,959 674,035
- --------------------------------------------------------------------------------
Total assets $79,619,379 $33,775,945
================================================================================
Liabilities
Deposits in domestic offices
Noninterest bearing $ 5,742,781 $ 3,398,751
Interest bearing 29,152,730 18,168,438
Deposits in foreign offices
Noninterest bearing 187,099 -
Interest bearing 23,435,278 5,724,057
- --------------------------------------------------------------------------------
Total deposits 58,517,888 27,291,246
- --------------------------------------------------------------------------------
Trading account liabilities 2,427,971 76,766
Short-term borrowings 4,136,364 1,976,747
Interest, taxes and other liabilities 1,854,970 734,292
Subordinated long-term debt and perpetual
capital notes 1,648,278 698,026
Other long-term debt 1,642,063 625,212
- --------------------------------------------------------------------------------
Total liabilities 70,227,534 31,402,289
- --------------------------------------------------------------------------------
Shareholder's equity
Common shareholder's equity
Common stock, $100 par;
Authorized - 2,250,000 shares
Issued - 2,050,001 and 2,050,000 shares 205,000 205,000
Capital surplus 9,080,868 1,986,361
Retained earnings 158,870 141,699
Accumulated other comprehensive income (loss) (52,893) 40,596
- --------------------------------------------------------------------------------
Total shareholder's equity 9,391,845 2,373,656
- --------------------------------------------------------------------------------
Total liabilities and shareholder's equity $79,619,379 $33,775,945
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
42
S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G
P O L I C I E S
HSBC USA Inc. (the Company), formerly HSBC Americas, Inc., is a New York State
based bank holding company. All of the common stock of the Company is owned
by HSBC North America Inc., an indirect wholly owned subsidiary of HSBC
Holdings plc (HSBC).
The accounting and reporting policies of the Company and its subsidiaries,
including its principal subsidiary, HSBC Bank USA (the Bank), formerly Marine
Midland Bank, conform to generally accepted accounting principles and to
predominant practice within the banking industry. The preparation of
financial statements in conformity with generally accepted accounting
principles requires the use of estimates and assumptions relating principally
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ from
estimated amounts. Prior years' financial statements have been reclassified
to conform with the current financial statement presentation.
The following is a description of the significant policies and practices.
Principles of Consolidation
The financial statements of the Company and the Bank are consolidated with
those of their respective wholly owned subsidiaries. All material
intercompany transactions and balances have been eliminated. Investments in
companies in which the percentage of ownership is at least 20%, but not more
than 50%, are accounted for under the equity method and reported as equity
investments.
Securities
Debt securities that the Company has the ability and intent to hold to
maturity are reported at cost, adjusted for amortization of premiums and
accretion of discounts. Securities acquired principally for the purpose of
selling them in the near term are classified as trading assets and reported at
fair value, with unrealized gains and losses included in earnings. All other
securities are classified as available for sale and carried at fair value,
with unrealized gains and losses, net of related income taxes, included in
other comprehensive income and reported as a separate component of
shareholders' equity.
Realized gains and losses on sales of securities are computed on a specific
identified cost basis and are reported within other income in the consolidated
statement of income. Adjustments of trading assets to fair value and gains
and losses on the sale of such securities are recorded in trading revenues.
Loans
Loans are stated at their principal amount outstanding, net of unearned
income, purchase premium, unamortized nonrefundable fees and related direct
loan origination costs. Loans held for sale are carried at the lower of
aggregate cost or market value. Interest income is recorded based on methods
that result in level rates of return over the terms of the loans.
43
Commercial loans are categorized as nonaccruing when, in the opinion of
management, reasonable doubt exists with respect to collectibility of interest
or principal based on certain factors including period of time past due
(principally ninety days) and adequacy of collateral. At the time a loan is
classified as nonaccruing, any accrued interest recorded on the loan is
generally reversed and charged against income. Interest income on these loans
is recognized only to the extent of cash received. In those instances where
there is doubt as to collectibility of principal, any interest payments
received are applied to principal. Loans are not reclassified as accruing
until interest and principal payments are brought current and future payments
are reasonably assured.
Residential mortgages are generally designated as nonaccruing when delinquent
for more than ninety days. Loans to credit card customers that are past due
more than ninety days are designated as nonaccruing if the customer has agreed
to credit counseling. Other consumer loans are generally not designated as
nonaccruing and are charged off against the allowance for credit losses
according to an established delinquency schedule.
A loan is considered impaired when, based on current information, it is
probable that the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Impaired loans are valued at
the present value of expected future cash flows, discounted at the loan's
original effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent.
Restructured loans are loans for which the original contractual terms have
been modified to provide for terms that are less than the Company would be
willing to accept for new loans with comparable risk because of a
deterioration in the borrowers' financial condition. Interest on these loans
is accrued at the renegotiated rates.
Loan Fees
Nonrefundable fees and related direct costs associated with the origination or
purchase of loans are deferred and netted against outstanding loan balances.
The amortization of net deferred fees and costs are recognized in interest
income, generally by the interest method, based on the estimated lives of the
loans. Nonrefundable fees related to lending activities other than direct
loan origination are recognized as other income over the period the related
service is provided. This includes fees associated with the issuance of loan
commitments where the likelihood of the commitment being exercised is
considered remote. In the event of the exercise of the commitment, the
remaining unamortized fee is recognized in interest income over the loan term
using the interest method. Other credit-related fees, such as standby letter
of credit fees, loan syndication and agency fees and annual credit card fees
are recognized as other operating income over the period the related service
is performed.
44
Allowance for Credit Losses
The allowance for credit losses is that amount believed adequate to absorb
estimated credit losses in the loan portfolios based on management's
evaluation of various factors including overall growth in the portfolios, an
analysis of individual credits, adverse situations that could affect a
borrower's ability to repay (including the timing of future payments), prior
and current loss experience, and current economic conditions. A provision for
credit losses is charged to operations based on management's periodic
evaluation of these and other pertinent factors.
Mortgage Servicing Rights
Mortgage servicing rights (MSRs) represent the right to service loans for
others, whether acquired directly or in conjunction with the acquisition of
mortgage loan assets. As originated or purchased loans are sold or
securitized, their total cost is allocated between MSRs and the loans, based
on relative fair values.
MSRs are amortized over the expected life of the loans serviced, including
expected prepayments, using a method that approximates the level yield method.
The carrying value of the MSRs is periodically evaluated for impairment based
on the difference between the carrying value of such rights and their current
fair value. For purposes of measuring impairment, which is recorded through
the use of a valuation reserve, MSRs are stratified based upon interest rates
and whether such rates are fixed or variable and other loan characteristics.
The evaluation of future net servicing income is based on a discounted and
disaggregated (individual portfolio) methodology.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, as well as the estimated future tax consequences attributable to net
operating loss and tax credit carryforwards. A valuation allowance is
established if, based on available evidence, it is more likely than not that
some portion or all of the deferred tax asset will not be realized.
The Company and its subsidiaries file a consolidated federal income tax
return. Taxes of each subsidiary of the Company are generally determined on
the basis of filing separate returns.
Derivative Financial Instruments
Derivatives used by the Company include futures, forwards, swaps, caps, floors
and options in the interest rate, and foreign exchange markets and, as a
result of the Republic acquisition, the precious metals markets. The Company
uses these instruments for trading purposes and as part of its asset and
liability management activities.
Derivatives that are used for trading purposes or are linked to other trading
instruments are carried on a mark to market basis with the resultant gains and
45
losses from trading and foreign exchange activities aggregated as trading
revenue. Unrealized gains and the balances of unamortized option premiums
paid are included in trading account assets while unrealized losses and the
unamortized balances of option premiums received are included in trading
account liabilities.
Foreign exchange trading positions are revalued daily by pricing spot foreign
exchange and forward contracts for foreign exchange at prevailing rates.
In conjunction with the Republic acquisition, the Company is involved in
various precious metals activities including arbitrage, purchases and sales of
precious metals for forward delivery, options on precious metals and precious
metals lending and borrowing. Precious metals inventory, outstanding open
positions in contracts for forward delivery, options contracts and precious
metals loans and borrowings will be revalued monthly at prevailing market
rates. Precious metals interest arbitrage balances are recorded at cost, with
the difference between the fixed forward contract price and cost to be
accreted into trading revenue ratably over the life of the contracts.
The Company uses a variety of derivative instruments to manage interest rate
risk in conjunction with its asset and liability management process. Risk is
managed by achieving a mix of derivative instruments and balance sheet assets
and liabilities deemed consistent with expectations of interest rate
movements, balance sheet changes and risk management strategies.
These instruments follow either the synthetic alteration or hedge model of
accounting with cash flows recognized on an accrual basis as an adjustment to
the interest income or interest expense associated with the balance sheet
items being synthetically altered or hedged. Under both the synthetic
alteration and hedge accounting models, derivative instruments are linked to
specific individual assets or liabilities or pools of similar assets or
liabilities by the notional and interest rate characteristics of the
associated instruments.
Under the hedge accounting model, it must be demonstrated that the hedged
asset, liability or event being hedged exposes the enterprise to price or
interest rate risk and that the related derivative reduces that risk.
Accordingly there must be high correlation between changes in the market value
of the derivative and the market value or cash flows associated with the
hedged items so that it is probable that the results of the derivative will
substantially offset the effects of price or interest rate movement on the
hedged item.
Derivatives that cease to qualify for synthetic alteration or hedge accounting
are marked to market prospectively through current period earnings with any
unrealized gains or losses at that time being deferred and amortized over the
life of the original hedge. When the altered or hedged position is
liquidated, any deferred amounts are immediately recognized in earnings.
Gains or losses realized on terminated derivatives that were used as hedges
are deferred and amortized over the life of the hedged item.
46
N O T E S T O F I N A N C I A L S T A T E M E N T S
Note 1. Acquisitions
On December 31, 1999 HSBC acquired Republic New York Corporation (Republic).
Also on December 31, 1999, following the acquisition, HSBC merged Republic
with the Company. The Bank and Republic National Bank of New York (Republic
Bank), the principal operating subsidiaries of the Company and Republic,
respectively, were also merged on December 31, 1999. The purchase price of
the transaction was approximately $7.1 billion and was paid to Republic's
shareholders on January 7, 2000. Republic had consolidated total assets of
$46.9 billion, deposits of $29.9 billion and common shareholders' equity of
$2.9 billion on December 31, 1999.
The merger was accounted for as a purchase transaction. Assets acquired and
liabilities assumed have been recorded at their estimated fair values. The
estimated fair value of the assets and liabilities of Republic are included in
the financial statements of the Company as of December 31, 1999. The fair
value of net identifiable assets acquired was estimated at $4.1 billion. The
purchase price allocation resulted in an excess of cost over acquired net
identifiable assets (goodwill) of approximately $3.0 billion, which will be
amortized on a straight-line basis over 20 years. Liabilities assumed
included employee termination costs of $133.9 million and other costs such as
contract termination costs of $23.7 million associated with merging Republic's
operations with those of the Company.
The following pro forma financial information presents the combined results of
the Company and Republic as if the acquisition had occurred as of the
beginning of 1999 and 1998, after giving effect to certain adjustments,
including accounting adjustments relating to fair value adjustments,
amortization of goodwill and related income tax effect. The pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the Company and Republic constituted a single
entity during such periods.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Pro forma
Year Ended December 31, 1999 1998
- -------------------------------------------------------------------------------
(unaudited)
in millions
<S> <C> <C>
Net interest income after provision for credit losses $2,152 $2,095
Net income 662 555
- -------------------------------------------------------------------------------
</TABLE>
In connection with the acquisition of Republic, restructuring costs relating
to the planned severance of employees and exiting of businesses of the Company
of $26.7 million were recognized in other operating expense in the fourth
quarter of 1999. Costs totalling $21.0 million were recognized relating to
occupancy including cancellation of lease payments for specific lease premises
that are to be vacated. Employee termination costs of $5.7 million include
severance payments, related benefits and out placement services for employees
terminated in connection with the acquisition. Additional integration costs
will be expensed when incurred as systems and operations are combined. The
future cash flows relating to these costs are not expected to have a
significant effect on the Company's liquidity, capital resources or results of
operations.
47
On December 31, 1999 HSBC Asset Management Americas, Inc. (HAMI), an indirect
wholly owned subsidiary of HSBC, was merged with the Company. HAMI's
outstanding stock was contributed to the Company. HAMI, an SEC registered
investment advisor, had assets of $11.8 million and shareholder's equity of
$7.8 million at December 31, 1999.
The Company purchased the $1.7 billion commercial loan portfolio and assumed
$91 million of deposit liabilities of the U.S. corporate banking unit of The
Hongkong and Shanghai Banking Corporation Limited (HongkongBank) in 1998.
Both the Company and HongkongBank are wholly owned subsidiaries of HSBC. The
assets and liabilities acquired were recorded at the HongkongBank's carrying
values, which approximated fair value.
The Company acquired CTUS Inc. (CTUS), a unitary thrift holding company in
1997. CTUS owned First Federal Savings and Loan Association of Rochester
(First Federal), which had $7.0 billion in assets and deposits of $4.3
billion. The transaction was accounted for as a purchase. The excess fair
value of net assets acquired was $238 million and is being amortized against
income over 15 years. See Note 16 for a description preferred stock issued in
connection with the acquisition.
Note 2. Cash and Due from Banks
The Bank is required to maintain noninterest bearing balances at Federal
Reserve Banks as part of its membership requirements in the Federal Reserve
System. These balances averaged $128.0 million in 1999 and $182.8 million in
1998.
<TABLE>
<CAPTION>
Note 3. Trading Assets
An analysis of trading assets and liabilities follows.
- -----------------------------------------------------------------------------
December 31, 1999 1998
- -----------------------------------------------------------------------------
in thousands
<S> <C> <C>
Trading assets:
U.S. Government $ 464,482 $ 5,996
Mortgage and other asset backed securities 818,376 813,234
Other securities 921,288 5,072
Unrealized gains on derivatives 1,773,350 1,717
Precious metals 566,977 -
Less: allowance for credit losses (17,485) -
- -----------------------------------------------------------------------------
$4,526,988 $826,019
- -----------------------------------------------------------------------------
Trading liabilities:
Securities sold, not yet purchased $ 213,809 $ 75,054
Payables for precious metals 407,540 -
Unrealized losses on derivatives 1,819,380 1,713
- -----------------------------------------------------------------------------
$2,440,729 $ 76,767
=============================================================================
</TABLE>
48
<TABLE>
<CAPTION>
The net gains (losses) resulting from trading activities are summarized by
categories of financial instruments in the following table.
- -----------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
U.S. Government $ 2,951 $ 720 $ 342
Mortgage and other asset backed securities (1,433) (2,627) 451
Other securities 1,570 1,430 1,272
Derivatives 786 (1,278) (327)
- -----------------------------------------------------------------------------
Trading asset revenues (loss) 3,874 (1,755) 1,738
Foreign exchange revenue 6,140 5,455 4,351
- -----------------------------------------------------------------------------
Trading revenues $10,014 $ 3,700 $6,089
- -----------------------------------------------------------------------------
</TABLE>
Note 4. Securities
At December 31, 1999, the Company held no securities of any single issuer
(excluding the U.S. Treasury and federal agencies) with a book value that
exceeded 10% of shareholders' equity.
<TABLE>
<CAPTION>
The amortized cost and fair value of securities available for sale follows.
- --------------------------------------------------------------------------------------------------------------
1999 1998
- ---------------------------------------------------------------------------------- ------------------------
Gross Gross
Amortized Unrealized Unrealized Fair Amortized Fair
December 31, Cost Gains Losses Value Cost Value
- --------------------------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 1,554,263 $1,661 $33,928 $ 1,521,996 $1,539,471 $1,580,394
U.S. Government agency 16,441,129 614 46,147 16,395,596 1,894,421 1,913,205
Domestic debt securities 4,496,765 1,428 6,149 4,492,044 565,670 568,331
Foreign debt securities 3,091,909 - - 3,091,909 - -
Equity securities 468,630 3,630 - 472,260 169,733 175,749
- --------------------------------------------------------------------------------------------------------------
$26,052,696 $7,333 $86,224 $25,973,805 $4,169,295 $4,237,679
- --------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, with regard to securities available for sale, the
Company had gross unrealized gains of $40.9 million, $20.9 million and $12.1
million and gross unrealized losses of $.0 million, $2.1 million and $3.4
million related to U.S. Treasury, U.S. Government agency and other securities,
respectively.
The Company sold securities available for sale resulting in gross realized
gains of $19.5 million, $15.9 million and $19.7 million, and gross realized
losses of $6.9 million, $1.7 million and $.4 million in the years 1999, 1998
and 1997, respectively. Substantially all interest income on securities is
taxable.
<TABLE>
<CAPTION>
The amortized cost and fair value of securities held to maturity follows. The
Company did not hold any securities in this category at December 31, 1998.
The securities were part of the assets acquired with Republic at December 31,
1999 thus cost and fair value are the same on that date.
- ------------------------------------------------------------------------------
December 31, 1999
- ------------------------------------------------------------------------------
in thousands
<S> <C>
U.S. Government agency obligations $4,121,229
Obligations of state and political
subdivisions 678,212
Other debt securities 12,254
- ------------------------------------------------------------------------------
$4,811,695
==============================================================================
</TABLE>
49
The amortized cost and fair values of debt securities at December 31, 1999, by
contractual maturity are shown in the following table. Expected maturities
differ from contractual maturities because borrowers have the right to prepay
obligations without prepayment penalties in certain cases.
<TABLE>
<CAPTION>
The following table presents the distribution of maturities of debt securities
held at year end December 31, 1999. The amounts exclude $469 million
amortized cost ($472 million fair value) of equity securities that do not have
fixed maturities.
- ------------------------------------------------------------------------------
Amortized Fair
December 31, 1999 Cost Value
- ------------------------------------------------------------------------------
in thousands
<S> <C> <C>
Within one year $ 7,814,323 $ 7,811,821
After one but within five years 3,663,051 3,621,663
After five but within ten years 2,745,406 2,739,138
After ten years 16,172,981 16,140,618
- ------------------------------------------------------------------------------
$30,395,761 $30,313,240
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Note 5. Loans
A distribution of the loan portfolio follows.
- ------------------------------------------------------------------------------
December 31, 1999 1998
- ------------------------------------------------------------------------------
in thousands
<S> <C> <C>
Domestic:
Commercial:
Construction and mortgage loans $ 5,647,703 $ 3,095,826
Other business and financial 11,536,144 7,802,733
Consumer:
Residential mortgages 13,240,843 9,466,912
Credit card receivables 1,290,339 1,291,071
Other consumer loans 1,231,443 1,319,519
International 4,962,671 1,073,438
- ------------------------------------------------------------------------------
$37,909,143 $24,049,499
- ------------------------------------------------------------------------------
</TABLE>
Residential mortgages include $504.4 million and $1,082.2 million of mortgages
held for sale at December 31, 1999 and 1998, respectively. Other consumer
loans include $380.3 million and $432.4 million of higher education loans also
held for sale at December 31, 1999 and 1998, respectively.
International loans include certain bonds issued by the governments of Mexico
and Venezuela as part of debt renegotiations (Brady bonds). These bonds had
an aggregate carrying value of $355.8 million (face value $368.3 million) and
an aggregate fair value of $271.7 million at year end 1999, similar to year
end 1998 fair value. The Company's intent is to hold these instruments until
maturity. The bonds are fully secured as to principal by zero-coupon U.S.
Treasury securities with face value equal to that of the underlying bonds.
At December 31, 1999 and 1998, the Company's nonaccruing loans were
$343.5 million and $336.8 million, respectively. At December 31, 1999 and
1998, the Company had commitments to lend additional funds of $7.6 million and
$24.9 million, respectively, to borrowers whose loans are classified as
nonaccruing. A significant portion of these commitments include clauses that
provide for cancellation in the event of a material adverse change in the
financial position of the borrower.
50
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Interest revenue on nonaccruing loans which
would have been recorded had they been
current in accordance with their original terms $22,879 $19,802 $23,922
Interest revenue recorded on nonaccruing loans 29,084 34,824 42,287
- ------------------------------------------------------------------------------
</TABLE>
Other real estate and owned assets included in other assets amounted to $14.0
million and $8.8 million at December 31, 1999 and 1998, respectively.
The Company identified impaired loans totaling $215.6 million at December 31,
1999, of which $110.2 million had an allocation from the allowance of $64.5
million. At December 31, 1998, the Company had identified impaired loans of
$182.6 million of which $81.3 million had an allocation from the allowance of
$32.2 million. The average recorded investment in such impaired loans was
$184.9 million, $169.9 million and $183.5 million in 1999, 1998 and 1997,
respectively.
The Company has loans outstanding to certain executive officers and directors.
The loans were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the same time for comparable
transactions with other persons and do not involve more than normal risk of
collectibility. The aggregate amount of such loans did not exceed 5% of
shareholders' equity at December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Note 6. Allowance for Credit Losses
An analysis of the allowance for credit losses follows.
- ------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Balance at beginning of year $ 379,652 $ 409,409 $ 418,159
Allowance related to acquired businesses 290,225 - 40,294
Provision charged to income 90,000 80,000 87,400
Recoveries on loans charged off 34,825 42,908 50,261
Loans charged off (135,099) (152,665) (186,705)
- ------------------------------------------------------------------------------
Balance at end of year $ 659,603 $ 379,652 $ 409,409
- ------------------------------------------------------------------------------
</TABLE>
Note 5 provides information on impaired loans and the related specific credit
loss allowance.
<TABLE>
<CAPTION>
Note 7. Equity Investments
The assets of Republic acquired as of December 31, 1999 included the
approximate 49% ownership interest in HSBC Republic Holdings (Luxembourg) S.A.
(HSBC Republic), a Luxembourg holding company. The investment of $2,493
million, which equals the fair value of the Company's ownership interest, is
included in equity investments. HSBC, in a transaction separate from the
acquisition of Republic, also acquired the remaining 51% ownership interest in
HSBC Republic on December 31, 1999. Summary financial information for HSBC
Republic at December 31, 1999 follows:
- ------------------------------------------------------------------------------
in millions
<S> <C>
Total assets $24,383
Total liabilities 19,078
Preferred stock 202
Common shareholders' equity 5,103
- ------------------------------------------------------------------------------
</TABLE>
51
Note 8. Mortgage Servicing Rights
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of these loans
were $19.31 billion and $12.06 billion at December 31, 1999 and 1998,
respectively. Custodial balances maintained in connection with the
foregoing loan servicing, and included in noninterest bearing deposits in
domestic offices were $282.3 million and $232.8 million at December 31, 1999
and 1998, respectively.
<TABLE>
<CAPTION>
An analysis of MSRs, reported in other assets, follows.
- ------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Balance at beginning of year $133,804 $111,501 $ 33,897
Additions 166,179 48,765 102,312
Amortization (30,209) (26,462) (24,708)
- ------------------------------------------------------------------------------
Balance at end of year $269,774 $133,804 $111,501
- ------------------------------------------------------------------------------
</TABLE>
Additions to MSRs include $115.1 million and $83.2 million obtained in the
acquisitions of Republic and First Federal in 1999 and 1997, respectively. No
valuation reserve has been established against MSRs. The fair value of MSRs
as of December 31, 1999 and 1998 was approximately $344.1 million and $198.5
million, respectively.
Note 9. Goodwill and Other Acquisition Intangibles
See Note 1 to the financial statements where the acquisition of Republic is
discussed including the preliminary allocation of the net asset value
resulting in an increase in goodwill and other acquisition intangibles of $3.0
billion.
Goodwill and other acquisition intangibles are amortized over the estimated
periods to be benefited, not exceeding 20 years. Amortization totaled $33.3
million, $37.7 million and $34.4 million during the years 1999, 1998, and
1997, respectively.
<TABLE>
<CAPTION>
Note 10. Deposits
The aggregate amount of time deposit accounts (primarily certificates of
deposits) each with a minimum of $100,000 included in domestic office deposits
were $4.83 billion and $2.99 billion at December 31, 1999 and 1998,
respectively. The scheduled maturities of all domestic time deposits at
December 31, 1999 follows.
- ------------------------------------------------------------------------------
in thousands
<S> <C>
2000 $12,655,330
2001 747,263
2002 107,349
2003 75,980
2004 27,297
Later years 30,875
- ------------------------------------------------------------------------------
$13,644,094
- ------------------------------------------------------------------------------
</TABLE>
52
<TABLE>
<CAPTION>
Note 11. Short-Term Borrowings
The following table shows detail relating to short-term borrowings in 1999,
1998 and 1997. Average interest rates during each year are computed by
dividing total interest expense by the average amount borrowed.
- -------------------------------------------------------------------------------------------------------
1999 1998 1997
------------------- -------------------- --------------------
Average Average Average
Amount Rate Amount Rate Amount Rate
- ------------------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased
(day to day):
At December 31 $ 368,089 5.08% $ 607,124 4.59% $1,389,854 5.19%
Average during year 502,595 4.87 617,542 5.20 1,266,663 5.50
Maximum month-end balance 840,849 908,542 2,164,329
Securities sold under
repurchase agreements:
At December 31 1,046,984 6.23 206,048 4.41 617,628 4.34
Average during year 448,745 4.62 299,588 5.34 710,716 5.44
Maximum month-end balance 1,046,984 832,312 2,680,576
Commercial paper:
At December 31 1,121,377 5.42 909,261 5.05 847,431 5.61
Average during year 838,739 5.18 826,650 5.49 721,995 5.53
Maximum month-end balance 1,121,377 1,002,479 896,574
Precious metals:
At December 31 1,679,118 2.45 - - - -
Average during year 4,600 - - - - -
Maximum month-end balance 1,679,118 - -
All other short-term borrowings:
At December 31 1,056,029 5.56 1,163,576 4.57 1,134,156 5.67
Average during year 718,736 5.29 1,726,174 5.86 633,446 5.52
Maximum month-end balance 1,225,000 2,826,177 1,406,915
- ------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, the Company had unused lines of credit with HSBC
aggregating $500 million and $100 million with unaffiliated banks. These
lines of credit do not require compensating balance arrangements and
commitment fees are not significant.
<TABLE>
<CAPTION>
Note 12. Income Taxes
Total income taxes were allocated as follows.
- -----------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
To income before income taxes $308,300 $238,100 $193,000
To shareholders' equity as tax charge (benefit)
relating to unrealized gains and losses on
securities available for sale (51,546) 8,426 10,182
- -----------------------------------------------------------------------------------
$256,754 $246,526 $203,182
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
The components of income tax expense follow.
- -----------------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Current:
Federal $240,180 $209,729 $109,570
State and local 59,017 56,487 67,117
- -----------------------------------------------------------------------------------
Total current 299,197 266,216 176,687
Deferred, primarily federal 9,103 (28,116) 16,313
- -----------------------------------------------------------------------------------
Total income taxes $308,300 $238,100 $193,000
- -----------------------------------------------------------------------------------
</TABLE>
53
<TABLE>
<CAPTION>
The following table is an analysis of the difference between effective rates
based on the total income tax provision attributable to pretax income and the
statutory U.S. Federal income tax rate.
- -----------------------------------------------------------------------------
Year Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
Increase (decrease) due to:
State and local income taxes 4.7 4.8 6.5
Change in valuation allowance
for deferred tax assets - (5.9) (12.2)
Tax exempt interest income (.2) (.2) (.3)
Brazilian tax credit settlement - (3.1) -
Other items .4 .5 .1
- -----------------------------------------------------------------------------
Effective income tax rate 39.9% 31.1% 29.1%
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
The components of the net deferred tax asset are summarized below.
- -----------------------------------------------------------------------------
December 31, 1999 1998
- -----------------------------------------------------------------------------
in thousands
<S> <C> <C>
Deferred tax assets:
Allowance for credit losses $219,557 $123,395
Deferred charge offs 11,305 11,305
Accrued expenses not currently deductible 145,799 55,559
Investment securities 201,315 -
Other 105,826 82,699
- -----------------------------------------------------------------------------
683,802 272,958
Less valuation allowance 28,329 28,329
- -----------------------------------------------------------------------------
Total deferred tax assets 655,473 244,629
- -----------------------------------------------------------------------------
Less deferred tax liabilities:
Lease financing income accrued 35,800 30,881
Accrued pension cost 43,704 11,294
Accrued income on foreign bonds 20,518 20,909
Deferred net operating loss recognition 90,018 90,018
Depreciation and amortization 83,320 (16,346)
Domestic tax on overseas income 135,768 -
Securities available for sale - 23,934
Interest and discount income 82,061 -
Other 43,542 24,670
- -----------------------------------------------------------------------------
Total deferred tax liabilities 534,731 185,360
- -----------------------------------------------------------------------------
Net deferred tax asset $120,742 $ 59,269
- -----------------------------------------------------------------------------
</TABLE>
Realization of deferred tax assets is contingent upon the generation of future
taxable income or the existence of sufficient taxable income within the
carryback period. A valuation allowance is provided when it is more likely
than not that some portion of the deferred tax assets will not be realized.
In assessing the need for a valuation allowance, management considers the
scheduled reversal of the deferred tax liabilities, the level of historical
taxable income, and projected future taxable income over the periods in which
the temporary differences comprising the deferred tax assets will be
deductible. Based upon the level of historical taxable income and the
scheduled reversal of the deferred tax liabilities over the periods which the
deferred tax assets are deductible, management believes it is more likely than
not the Company will realize the benefits of these deductible differences, net
of the existing valuation allowance.
54
<TABLE>
<CAPTION>
Note 13. Subordinated Long-Term Debt and Perpetual Capital Notes
The following is a summary of subordinated long-term debt and perpetual
capital notes. Interest rates shown are based on the face values of the
instruments.
- ----------------------------------------------------------------------------------------------------
Face Value Book Value
---------- -----------------------
December 31, 1999 1999 1998
- ----------------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Floating rate subordinated capital notes due 1999 $ - $ - $100,000
9.50-9.75% Subordinated notes due 2000 200,000 203,581 -
Floating rate subordinated notes due 2000 (6.25%) 200,000 200,000 200,000
7.875-8.875% Subordinated notes due 2001 350,000 355,241 -
7.25-7.75% Subordinated notes due 2002 400,000 399,866 -
Floating rate subordinated notes due 2002 (6.0844-6.1503%) 245,700 242,670 -
7% Subordinated notes due 2006 300,000 298,278 298,026
5.875% Subordinated notes due 2008 250,000 219,252 -
6.625-9.70% Subordinated notes due 2009 550,000 567,081 -
Floating rate subordinated notes due 2009 (6.375%) 124,320 124,320 124,320
7% Subordinated notes due 2011 100,000 93,451 -
9.50% Subordinated debentures due 2014 150,000 167,921 -
9.125-9.30% Subordinated notes due 2021 200,000 219,402 -
7.20% Subordinated debentures due 2097 250,000 214,075 -
Perpetual Capital Notes (5.9375%) 129,000 122,511 -
- ----------------------------------------------------------------------------------------------------
$3,449,020 $3,427,649 $722,346
- ----------------------------------------------------------------------------------------------------
</TABLE>
The above table excludes $1,650 million of debt issued by the Bank or its
subsidiaries payable to the Company. Of this amount $100 million is due in
2000 and the balance is due from 2006 through 2097.
Interest rates on floating rate notes are determined periodically by formulas
based on certain money market rates or, in certain instances, by minimum
interest rates as specified in the agreements governing the issues. Interest
rates on the floating rate notes in effect at December 31, 1999 are shown in
parentheses.
The Perpetual Capital Notes (PCNs) are a component of total qualifying capital
under applicable risk-based capital rules. The PCNs may be exchanged for
securities that constitute permanent primary capital securities for regulatory
purposes. The principal amount of each PCN will be payable as follows: (1) at
the option of the holder on the put date in each year commencing in 2012, (2)
at the option of the Company on 90 days prior notice, the PCNs may be either
(i) redeemed on the specified redemption date, in whole, for cash and at par,
but only with the proceeds of a substantially concurrent sale of capital
securities issued for the purpose of such redemption or (ii) exchanged, in
whole, for capital securities having a market value equal to the principal
amount of the PCNs, and, in each case, the payment of accrued interest in cash
or (3) in the event that the sum of the Company's retained earnings and
surplus accounts becomes less than zero, the PCNs will automatically be
exchanged, in whole, for capital securities having a market value equal to the
principal amount of the PCNs and the payment of accrued interest in cash.
Contractual scheduled maturities for the subordinated debt over the next five
years are as follows: 2000, $400 million; 2001, $350 million; 2002, $646
million; and none in 2003 and 2004.
55
<TABLE>
<CAPTION>
Note 14. Guaranteed Mandatorily Redeemable Securities
The following table presents the guaranteed mandatorily redeemable securities
outstanding. Interest rates shown are based on the face values of the
instruments.
- -------------------------------------------------------------------------------
Face Value Book Value
---------- ---------------------
December 31, 1999 1999 1998
- -------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
7.808% Capital Securities due 2026 $200,000 $200,000 $200,000
8.38% Capital Securities due 2027 200,000 200,000 200,000
7.75% Capital Securities due 2026 150,000 135,239 -
7.53% Capital Securities due 2026 200,000 175,020 -
- -------------------------------------------------------------------------------
$750,000 $710,259 $400,000
- -------------------------------------------------------------------------------
</TABLE>
The guaranteed mandatorily redeemable securities (Capital Securities) are
issued by trusts all of whose outstanding common securities are owned by the
Company. The Capital Securities represent preferred beneficial interests in
the assets of the trusts and are guaranteed by the Company. The sole assets
of the trusts consist of junior subordinated debentures of the Company. The
Capital Securities qualify as Tier 1 capital under the risk-based capital
guidelines of the Federal Reserve Board.
The Capital Securities are redeemable at the option of the Company in the case
of a tax event or regulatory capital event at the prepayment price equal to
the greater of (i) 100% of the principal amount of the Capital Securities or
(ii) the sum of the present values of the stated percentage of the principal
amount of the Capital Securities plus the remaining scheduled payments of
interest thereon from the prepayment date. Tax event refers to notice that
the interest payable on the Capital Securities would not be deductible.
Regulatory capital event refers to notice that the Capital Securities would
not qualify as Tier 1 capital.
In the absence of a tax or regulatory capital event, the Capital Securities
are redeemable at the option of the Company. The 7.808% Capital Securities
are redeemable on December 15, 2006 at a premium of 3.904% in the first twelve
months after December 15, 2006 and varying lesser amounts thereafter and
without premium if redeemed after December 15, 2016. The 8.38% Capital
Securities are redeemable on May 15, 2007 at a premium of 4.19% in the first
twelve months after May 15, 2007 and varying lesser amounts thereafter and
without premium if redeemed after May 15, 2017. The 7.75% Capital Securities
are redeemable on November 15, 2006 at a premium of 3.66% in the first twelve
months after November 15, 2006 and varying lesser amounts thereafter and
without premium if redeemed after November 15, 2016. The 7.53% Capital
Securities are redeemable on December 4, 2006 at a premium of 3.765% in the
first twelve months after December 4, 2006 and varying lesser amounts
thereafter and without premium if redeemed after December 4, 2016.
56
<TABLE>
<CAPTION>
Note 15. Other Long-Term Debt
The following table reports other long-term debt. Interest rates shown are
based on the face values of the instruments.
- -----------------------------------------------------------------------------------------
Face Value Book Value
---------- ---------------------
December 31, 1999 1999 1998
- -----------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Issued or acquired by the Company or subsidiaries
other than the Bank:
8.375% Debentures due 2007 $ 100,000 $ 104,963 $ -
Other 105 105 134
- -----------------------------------------------------------------------------------------
100,105 105,068 134
- -----------------------------------------------------------------------------------------
Issued or acquired by the Bank or its subsidiaries:
Fixed rate Federal Home Loan Bank of
New York advances 482,779 482,779 590,877
Collateralized mortgage obligations 3,322 3,322 4,562
Collateralized repurchase agreements
(3.25-7.45%) 1,113,250 1,075,506 -
Other 80,394 80,456 29,772
- -----------------------------------------------------------------------------------------
1,679,745 1,642,063 625,211
- -----------------------------------------------------------------------------------------
$1,779,850 $1,747,131 $625,345
- -----------------------------------------------------------------------------------------
</TABLE>
The fixed rate Federal Home Loan Bank of New York advances have interest rates
ranging from 2.67% to 8.61%. The mortgage bonds are collateralized by a
pledge of FHLMC mortgage-backed securities. All payments received on the
pledged mortgage-backed securities, net of certain costs, must be applied to
repay the bonds. The stated maturity and stated rate for the three bonds are:
January, 2000 at 7.33%; September, 2002 at 7.89%; and October, 2006 at 7.27%.
It is expected that the actual life of the bonds will be less than their
stated maturity.
Contractual scheduled maturities for the debt over the next five years are as
follows: 2000, $429 million; 2001, $336 million; 2002, $387 million; 2003, $16
million and $32 million in 2004.
57
<TABLE>
<CAPTION>
Note 16. Preferred Stock
The following table presents information related to the issues of preferred
stock outstanding:
- ----------------------------------------------------------------------------------------------
Amount
Shares Dividend Outstanding
Outstanding Rate ----------------
December 31, 1999 1999 1999 1998
- ----------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C> <C>
$1.8125 Cumulative Preferred Stock
($25 stated value) 3,000,000 7.25% $ 75,000 $-
6,000,000 Depositary shares each representing
a one-fourth interest in a share of Adjustable
Rate Cumulative Preferred Stock, Series D
($100 stated value) 1,500,000 4.92 150,000 -
Dutch Auction Rate Transferable Securities (TM)
Preferred Stock (DARTS)
Series A ($100,000 stated value) 625 5.00 62,500 -
Series B ($100,000 stated value) 625 5.157 62,500 -
$2.8575 Cumulative Preferred Stock
($50 stated value) 3,000,000 5.715 150,000 -
CTUS Inc. Preferred Stock 100 - - -
- ----------------------------------------------------------------------------------------------
$500,000 $-
===============================================================================================
</TABLE>
The $1.8125 Cumulative Preferred Stock may be redeemed, at the option of the
Company on or after July 1, 2000, at $25 per share plus dividends accrued and
unpaid to the redemption date.
The dividend rate on the Adjustable Rate Cumulative Preferred Stock, Series D
(Series D Stock) is determined quarterly, by reference to a formula based on
certain benchmark market interest rates, but will not be less than 4-1/2% or
more than 10-1/2% per annum for any applicable dividend period. The Series D
Stock is redeemable by the Company at $100 per share (or $25 per depositary
share), plus accrued and unpaid dividends to the redemption date.
DARTS of each series are redeemable at the option of the Company, at $100,000
per share, plus accrued and unpaid dividends to the redemption date. Dividend
rates for each dividend period are set pursuant to an auction procedure. The
maximum applicable dividend rates on the shares of DARTS range from 110% to
150% of the 60 day "AA" composite commercial paper rate. DARTS are also
redeemable, at the option of the Company, on any dividend payment date for
such series, at a redemption price of $100,000 per share plus the payment of
accrued and unpaid dividends, if the applicable rate for such series fixed
with respect to the dividend period for such series ending on such dividend
payment date equals or exceeds the 60 day "AA" composite commercial paper rate
on the date of determination of such rate.
The outstanding shares of $2.8575 Cumulative Preferred Stock (the Preferred
Stock) have an aggregate stated value of $150 million. The Preferred Stock
may be redeemed at the option of the Company on or after October 1, 2007, at
$50 per share, plus dividends accrued and unpaid to the redemption date.
The 1997 CTUS Inc. acquisition agreement (see Note 1) provided that the
Company issue preferred shares to CT Financial Services Inc. (the Seller).
The preferred shares provide for, and only for, a contingent dividend or
redemption equal to the amount of recovery, net of taxes and costs, if any,
58
by First Federal resulting from the pending action against the United States
government alleging breaches by the government of contractual obligations to
First Federal following passage of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989. The Company issued 100 preferred shares at a par
value of $1.00 per share in connection with the acquisition.
Note 17. Common Stock
All of the common stock of the Company is owned by HSBC North America Inc., an
indirect wholly owned subsidiary of HSBC. Common shares authorized are 1,100
with a par value of $5.00. Shares issued were 704 and 1,001 at December 31,
1999 and 1998, respectively.
Note 18. Retained Earnings
Bank dividends are a major source of funds for payment by the Company of
shareholder dividends and along with interest earned on investments, cover the
Company's operating expenses which consist primarily of interest on
outstanding debt. The approval of the Federal Reserve Board is required if
the total of all dividends declared by the Bank in any year exceed the net
profits for that year, combined with the retained profits for the two
preceding years. Under a separate restriction, payment of dividends is
prohibited in amounts greater than undivided profits then on hand, after
deducting actual losses and bad debts. Bad debts are debts due and unpaid for
a period of six months unless well secured, as defined, and in the process of
collection.
Under these rules the Bank can pay dividends to the Company as of December 31,
1999 of approximately $159 million, adjusted by the effect of its net income
(loss) for 2000 up to the date of such dividend declaration.
Note 19. Comprehensive Income
Comprehensive income includes net income as well as certain items that are
reported directly within a separate component of shareholders' equity.
Comprehensive income, including its components, is reported in the
consolidated statement of changes in shareholders' equity.
Note 20. Impact of Recently Issued Accounting Standards
In 1998, the FASB issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities (FAS 133). FAS
133 establishes accounting and reporting standards for derivative instruments
and for hedging activities. It requires that all derivatives be recognized as
either assets or liabilities in the balance sheet and that those instruments
be measured at fair value. The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation as described.
59
- - For a derivative designated as hedging the exposures to changes in the fair
value of a recognized asset or liability or a firm commitment, the gain or
loss is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item attributable to the risk being
hedged.
- - For a derivative designated as hedging the exposure to variable cash flows,
the derivatives gain or loss associated with the effective portion of the
hedge is initially reported as a component of other comprehensive income and
subsequently reclassified into earnings when the forecasted transaction
affects earnings. The ineffective portion is reported in earnings
immediately.
- - For a derivative not designated as a hedging instrument, the gain or loss
is recognized in earnings in the period of change in fair value.
FAS 133, as amended, is effective beginning January 1, 2001. The Company is
in the process of evaluating the potential impact of FAS 133 including
reconsidering the Company's risk management strategies.
Note 21. Regulatory Matters
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by regulators that, if undertaken, could have
a direct material effect on the financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, specific
capital guidelines must be met that involve quantitative measures of assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the maintenance of minimum amounts and ratios of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined)
of 8% and 4%, respectively. Also required are ratios of Tier 1 capital (as
defined) to average assets (as defined) of 4% at the Bank level and 3% at the
Company level as long as the Company has a strong supervisory rating.
As of December 31, 1999, the most recent notification from the Federal Reserve
Board (FRB) categorized the Company and the Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, a banking institution must have minimum total risk-based ratio of
at least 10%, Tier 1 risk-based ratio of at least 6%, and Tier 1 leverage
ratio of at least 5%. There are no conditions or events since that
notification that management believes have changed the categories.
60
<TABLE>
<CAPTION>
Effective with the acquisition of Republic at year end 1999, the Company
includes an adjustment for its investment in HSBC Republic in the calculation
of its total capital ratio in accordance with requirements of the FRB
specifically applied to the Company. The capital amounts and ratios are
presented in the table.
- -------------------------------------------------------------------------------
1999 1998
Actual Actual
December 31, Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C>
Total capital
(to risk weighted assets)
Company $8,143 15.53% $3,140 12.04%
Bank 6,361 13.00 2,941 11.33
Tier 1 capital
(to risk weighted assets)
Company 7,370 13.42 2,248 8.62
Bank 6,683 13.00 1,998 7.70
Tier 1 capital
(to average assets)
Company 7,370 23.41 2,248 6.76
Bank 6,683 21.08 1,998 6.04
- -------------------------------------------------------------------------------
</TABLE>
Note 22. Transactions with Principal Shareholder and Related Parties
The Company's common stock is owned by HSBC North America, Inc., an indirect
wholly owned subsidiary of HSBC. In the normal course of business, the
Company conducts transactions with HSBC, including its 25% or more owned
subsidiaries (HSBC Group). These transactions occur at prevailing market
rates and terms and include deposits taken and placed, short-term borrowings
and interest rate contracts.
At December 31, 1999 and 1998 assets of $481.0 million and $631.2 million,
respectively, and liabilities of $3,259.9 million and $3,066.8 million,
respectively, related to such transactions with the HSBC Group were included
in the Company's balance sheet. Income and expense associated with such
transactions was not material to the Company's financial results of operation.
Interest rate forward and futures contracts and interest rate swap contracts
entered into with the HSBC Group are used primarily as an asset and liability
management tool to manage interest rate risk. At December 31, 1999 and 1998,
the notional amounts of these contracts with members of the HSBC Group were
$10.45 billion and $9.85 billion, respectively.
Legal restrictions on extensions of credit by the Bank to the HSBC Group
require that such extensions be secured by eligible collateral. At
December 31, 1999 and 1998, outstanding extensions of credit secured by
eligible collateral were $614.1 million and $852.3 million, respectively.
See Note 1 for loans purchased and deposits assumed from HongkongBank during
1998.
61
Note 23. Stock Option Plans
Options have been granted to employees of the Company under the HSBC Holdings
Executive Share Option Scheme (the Executive Plan) and under the HSBC Savings
Related Share Option Contribution Program (the Savings Plan). Compensation
expense associated with such options is recognized over the vesting period
based on the estimated fair value of such options at grant date.
Under the Executive Plan, options have been awarded to certain officers of the
Company to acquire shares of HSBC. The exercise price of each option is equal
to the market price of the stock of HSBC on the date of grant. The maximum
term of the options is ten years and they vest at the end of three years.
Additionally, the Company adopted the Savings Plan effective July 1, 1996
whereby eligible employees can elect to participate in the Savings Plan
through the Company's 401(k) plan and acquire contributions based on HSBC
stock at 85% of market on date of grant. An employee's agreement to
participate is a five year commitment. At the end of each five year period
employees receive the appreciation of the HSBC stock over the initial exercise
price in the form of stock of HSBC.
Since the shares and contribution commitment have been granted directly by
HSBC, the offset to compensation cost was a credit to capital surplus
representing a contribution of capital from HSBC. The options granted
resulted in compensation cost of $3.3 million in 1999.
Republic had benefit plans including: (1) Long Term Incentive Stock Plan which
provided for the award of incentive stock options, non-qualified stock
options, stock appreciation rights, restricted stock and other stock-based
awards; (2) the Restricted Stock Election Plan which allowed certain officers
who had earned deferred compensation to elect to receive payment in the form
of restricted stock; (3) the Performance Based Incentive Compensation Plan
which was designed to provide an incentive to officers who served on the
Management Executive Committee and were in a position to make a material
contribution to Republic for which certain awards were paid out in the form of
restricted stock under the Long Term Incentive Plan; and (4) the Long Term
Incentive Compensation Plan which granted deferred restricted cash awards to
certain employees. Employees vested in the assets awarded under the Plans
based on the terms of each Plan. Employees will continue to vest in these
plans under the original terms of the Plans unless they are terminated, at
which time they will become fully vested. As part of the acquisition,
liabilities of $240.3 million were assumed in connection with the Plans. As a
result of the Company's purchase of 100% of Republic's outstanding common
stock, amounts earned under these various plans will be satisfied through
future payments of cash rather than the issuance of shares of Republic common
stock.
62
Note 24. Postretirement Benefits
The Company, the Bank and certain other subsidiaries maintain noncontributory
pension plans covering substantially all of their employees hired prior to
January 1, 1997 and those who joined the Company through acquisitions.
Certain other HSBC subsidiaries participate in this plan.
The Company also maintains unfunded noncontributory health and life insurance
coverage for all employees who retired from the Company and were eligible for
immediate pension benefits from the Company's retirement plan. Employees
retiring after 1992 will absorb a portion of the cost of these benefits.
Employees hired after that same date are not eligible for these benefits. A
premium cap has been established for the Company's share of retiree medical
cost.
<TABLE>
<CAPTION>
The following table provides data concerning the Company's benefit plans.
- --------------------------------------------------------------------------------------------
Other
Pension Benefits Postretirement Benefits
--------------------- -----------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <c. <C>
Change in benefit obligation
Benefit obligation, January 1 $ 452,105 $420,600 $ 77,970 $ 75,217
Service cost 17,900 17,512 2,060 1,959
Interest cost 31,080 29,014 5,479 5,064
Participant contributions - - 234 279
Actuarial (gain) loss (62,079) (482) 2,380 1,629
Republic acquisition 263,400 - 26,800 -
Benefits paid (14,675) (14,539) (7,709) (6,178)
- --------------------------------------------------------------------------------------------
Benefit obligation, December 31 $ 687,731 $452,105 $ 107,214 $ 77,970
============================================================================================
Change in plan assets
Fair value of plan assets, January 1 $ 520,389 $424,530 $ - $ -
Actual return on plan assets 60,311 80,398 - -
Company contribution - 30,000 7,475 5,899
Participant contributions - - 234 279
Republic acquisition 350,445 - - -
Benefits paid (14,675) (14,539) (7,709) (6,178)
- --------------------------------------------------------------------------------------------
Fair value of plan assets, December 31 $ 916,470 $520,389 $ - $ -
============================================================================================
Funded status of plan
Funded status, December 31 $ 228,739 $ 68,284 $(107,214) $(77,970)
Unrecognized actuarial gain (116,161) (42,519) (3,587) (5,967)
Unrecognized prior service cost 5,947 6,906 - -
Unrecognized net transition obligation - - 42,212 45,459
- --------------------------------------------------------------------------------------------
Recognized amount $ 118,525 $ 32,671 $ (68,589) $(38,478)
============================================================================================
Amount recognized in the consolidated
balance sheet
Prepaid benefit cost $ 118,525 $ 32,671 $ - $ -
Accrued benefit liability - - (68,589) (38,478)
- --------------------------------------------------------------------------------------------
Recognized amount $ 118,525 $ 32,671 $ (68,589) $(38,478)
============================================================================================
</TABLE>
63
<TABLE>
<CAPTION>
Operating expenses for 1999, 1998 and 1997 included the following components.
- -------------------------------------------------------------------------------------------------------------------
Other
Pension Benefits Postretirement Benefits
-------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net periodic benefit cost
Service cost $ 17,900 $ 17,512 $ 17,220 $ 2,060 $ 1,959 $1,890
Interest cost 31,080 29,014 27,751 5,479 5,064 4,871
Expected return on plan assets (48,748) (40,631) (34,395) - - -
Prior service cost amortization 959 961 954 - - -
Actuarial gain - - - - - (486)
Transition amount amortization - (1,340) (1,341) 3,247 3,247 3,247
- -------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 1,191 $ 5,516 $ 10,189 $10,786 $10,270 $9,522
===================================================================================================================
Weighted-average assumptions
as of December 31
Discount rate 8.00% 7.00% 7.25% 7.75% 6.25% 6.75%
Expected return on plan assets 9.50 9.50 9.50 - - -
Rate of compensation increase 5.15 4.65 4.90 5.15 (1) 4.65 (1) 4.90 (1)
- -------------------------------------------------------------------------------------------------------------------
(1) Applicable to life insurance only.
</TABLE>
Net periodic pension cost includes $1.7 million, $1.9 million and $2.0 million
for 1999, 1998 and 1997, respectively, recognized in the financial statements
of other HSBC subsidiaries participating in the Company's pension plan.
The Company has assumed a health care cost trend rate of 9% for 2000,
decreasing 1% per year to an ultimate rate of 7% in the year 2002. The
assumed health care cost trend rate has an effect on the amounts reported.
For example, increasing the assumed health care cost trend by 1% would
increase the aggregate service and interest cost component by $.1 million and
the accumulated postretirement benefit obligation by $1.2 million. Decreasing
the health care cost trend rate by 1% would decrease the aggregate service and
interest cost components by $.1 million and the accumulated post retirement
benefit obligation by $1.4 million.
Employees hired after January 1, 1997 become participants in a defined
contribution plan after one year of service. The Company also maintains a
401(k) plan covering substantially all employees. Contributions to these
defined contribution plans are based on a percentage of employees'
compensation or their own contributions in the case of the 401(k) plan.
Pension expenses recognized for defined contribution plans totaled $10.2
million in 1999, $8.9 million in 1998 and $8.3 million in 1997.
64
<TABLE>
<CAPTION>
Note 25. Business Segments
- -------------------------------------------------------------------------------------------------------
Segments
--------------------------------------------------
Commercial Mortgage Personal
Banking Banking Banking Treasury Other Total
- -------------------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C> <C>
1999
- ----
Net interest income (1) $ 412 $ 87 $ 556 $ 23 $ 148 $ 1,226
Other operating income 166 39 225 2 32 464
Total income 578 126 781 25 180 1,690
Provision for credit losses (2) 57 (1) 78 - (44) 90
Other expenses (3) 248 58 447 8 67 828
Pretax income 273 69 256 17 157 772
Average assets 11,797 8,438 4,014 4,921 5,068 34,238
Average liabilities/equity (4) 7,033 326 15,038 6,312 5,529 34,238
1998
- ----
Net interest income (1) $ 352 $ 76 $ 567 $ 22 $ 148 $ 1,165
Other operating income 133 53 209 - 65 460
Total income 485 129 776 22 213 1,625
Provision for credit losses (2) 30 (11) 79 - (18) 80
Other expenses (3) 220 53 443 9 55 780
Pretax income 235 87 254 13 176 765
Average assets 9,202 8,489 4,346 5,279 5,531 32,847
Average liabilities/equity (4) 5,873 327 14,731 6,720 5,196 32,847
1997
- ----
Net interest income (1) $ 365 $ 83 $ 578 $ 14 $ 134 $ 1,174
Other operating income 117 37 168 1 36 359
Total income 482 120 746 15 170 1,533
Provision for credit losses (2) 8 6 144 - (70) 88
Other expenses (3) 215 59 424 7 76 781
Pretax income 259 55 178 8 164 664
Average assets 7,683 7,792 4,691 3,677 5,183 29,026
Average liabilities/equity (4) 5,272 296 14,037 3,683 5,738 29,026
- -------------------------------------------------------------------------------------------------------
(1) Net interest income of each segment represents the difference between actual interest earned
on assets and interest paid on liabilities of the segment adjusted for a funding charge or
credit. Segments are charged a cost to fund assets (e.g. customer loans) and receive a
funding credit for funds provided (e.g. customer deposits) based on equivalent market rates.
(2) The provision apportioned to the segments is based on the segments net charge offs and the
change in allowance for credit losses. Credit loss reserves are established at a level
sufficient to absorb the losses considered to be inherent in the portfolio. The difference
between segment provisions and the Company provision is included in other.
(3) Expenses for the segments include fully apportioned corporate overhead expenses with the
exception of non-recurring corporate expenses.
(4) Equity is not allocated to segments; it is included in other.
</TABLE>
The Company has four distinct segments that it utilizes for management
reporting and analysis purposes. These segments are based upon products and
services offered and are identified in a manner consistent with the
requirements outlined in Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information. The
segment results show the financial performance of the major business units.
These results are determined based on the Company's management accounting
process, which assigns balance sheet, revenue and expense items to each
reportable business unit on a systematic basis. Management does not analyze
depreciation and amortization expense or expenditures for additions to long-
lived assets which are not considered significant. As such, these amounts are
included in other expenses and average assets, respectively, in the table.
The following describes the four reportable segments.
65
The Commercial Banking Segment provides a diversified range of wholesale
financial products and services. This segment provides loan and deposit
products to small, middle market and large corporations including specialized
products such as highly leveraged financings, equipment financing and real
estate financing. These products and services are offered through multiple
delivery systems, including the branch banking network. In addition various
credit and trade related products are offered such as standby facilities,
performance guarantees, acceptances and document handling. U.S. dollar
clearings services are offered for domestic and international wire transfer
transactions. Corporate trust provides various trustee, agency and custody
products and services for both corporate and municipal customers.
The Mortgage Banking Segment provides residential mortgage loan financing
through direct retail and wholesale origination channels. This segment
originates loans through a network of brokers, wholesale agents and retail
origination offices. It also manages the held portfolio, consisting of
investments in various mortgage loan products originated by the Bank.
Originations provides services ranging from application taking to loan
closing. Servicing provides loan servicing functions on a contractual basis
for mortgage loans owned by third parties.
The Personal Banking Segment provides an extensive variety of products and
services including various loans, deposits, mutual funds, sales, investment
management services and estate planning in addition to a wide array of branch
services. This segment provides revolving cards and installment loan products
marketed to individuals through the branch banking network.
The Treasury Segment maintains overall responsibility for the investment and
borrowing of funds to ensure liquidity, maximize return and manage interest
rate risk exposure. This segment is primarily responsible for trading
activities for the purpose of generating profits by selling securities in the
near term and for various wholesale funding of assets and liabilities.
Other consists primarily of available for sale securities, held for investment
purposes and earnings on capital which are not allocated to the business
segments. Other also includes certain non-recurring expenses and the
provision for credit losses not assigned to business units.
Note 26. Commitments and Contingent Liabilities
At December 31, 1999 securities, loans and other assets carried in the
consolidated balance sheet at $10.4 billion were pledged as collateral for
borrowings, to secure governmental and trust deposits and for other purposes.
The Company and its subsidiaries are obligated under a number of
noncancellable leases for premises and equipment. Certain leases contain
renewal options and escalation clauses. Rental expense under all operating
leases, net of sublease rentals, was $43.5 million, $43.2 million and $42.1
million in 1999, 1998 and 1997, respectively. Minimum future rental
commitments on operating leases in effect at December 3l, l999 were as
follows: 2000, $72 million; 2001, $64 million; 2002, $53 million; 2003, $46
million; 2004, $40 million and $128 million thereafter.
66
Note 27. Litigation
The Company is named in and is defending legal actions in various
jurisdictions arising from its normal business. None of these proceedings is
regarded as material litigation. In addition, there are certain proceedings
relating to the Princeton Note Matter that are described below.
On September 1, 1999, Republic announced that, as a result of an inquiry
received from the Financial Supervisory Agency of Japan, it had commenced an
internal investigation of the Futures Division of its wholly owned subsidiary,
Republic New York Securities Corporation (RNYSC). The investigation focused
on the involvement of the Futures Division of RNYSC with its customers
Princeton Global Management Ltd. and affiliated entities (Princeton) and their
Chairman, Martin Armstrong (the Princeton Note Matter).
A number of regulatory and law enforcement agencies also have commenced
investigations of Princeton and Mr. Armstrong. Republic and RNYSC have been
cooperating fully with those investigations, including by responding to
various subpoenas and requests for information. The Securities and Exchange
Commission and the Commodity Futures Trading Commission have commenced civil
actions against Princeton and Mr. Armstrong. Additionally, Mr. Armstrong has
been indicted by the U.S. Attorney for the Southern District of New York on
charges of fraud and conspiracy.
At the core of these proceedings against Princeton and Mr. Armstrong are
allegations that Mr. Armstrong and Princeton perpetrated a fraud in selling $3
billion (face value) of promissory notes to certain Japanese entities,
approximately $1 billion (face value) of which allegedly remain outstanding.
Since 1995, Princeton had maintained accounts at the Futures Division of RNYSC
through which funds, allegedly including proceeds from the sale in Japan of
such promissory notes, were invested and traded by Princeton. Mr. Armstrong
is alleged to have caused employees of the Futures Division of RNYSC to issue
letters containing inflated balances of the net asset values in the accounts
of Princeton, some of which letters allegedly were provided by Mr. Armstrong
and Princeton to at least some of its noteholders.
RNYSC has terminated the employment of its president and the president of the
Futures Division of RNYSC.
Eleven civil actions have been brought to date against RNYSC by Japanese
entities in connection with the Princeton Note Matter; ten of the eleven
actions also assert claims against RNYC and Republic National Bank or HSBC USA
Inc. and HSBC Bank USA as their respective successors (together with RNYSC,
the Republic Parties). All eleven complaints are pending in the United States
District Court for the Southern District of New York, and allege that
Armstrong and Princeton perpetrated a fraud on the plaintiffs by selling them
notes that remain unpaid. The eleven complaints allege that employees of
RNYSC issued letters concerning the Princeton accounts that contained material
misstatements.
The eleven civil proceedings commenced to date against one or more of the
Republic Parties are Amada Co. v. Republic New York Securities Corporation,
Gun-ei Chemical Industry Co., Ltd. v. Princeton Economics International Ltd.
67
et al., Chudenko Corp., v. Republic New York Securities Corporation, et al.,
and Alps Electric Co., Ltd. v. Republic New York Securities Corporation,
et al., filed November 29, 1999, December 22, 1999, January 20, 2000 and
February 7, 2000, respectively, Itoki Crebio Corp. v. HSBC USA Inc., et al.,
Kissei Pharmaceutical Co., Ltd. v. HSBC USA Inc., et al., Maruzen Company,
Ltd., v. HSBC USA Inc., et al., SMC Corporation v. HSBC USA Inc., et al.,
and Asatsu-DK Inc. v. HSBC USA Inc., filed on February 14, 2000, Starzen
Co., Ltd. v. Republic New York Securities Corporation, et al., filed on
February 23, 2000, and Yakult Honsha Co., Ltd. v. Republic New York Securities
Corp., filed on February 25, 2000. The Amada action alleges unpaid notes in
the amount of Yen 12.5 billion (approximately $123 million), the Gun-ei action
alleges unpaid notes in the amount of Yen 11.8 billion (approximately $114
million), the Chudenko action, which is brought by 22 separate Japanese
entities, alleges unpaid notes totalling approximately $360 million, the Alps
action alleges unpaid notes in the amount of approximately $212 million, the
Itoki action alleges unpaid notes in the amount of approximately $4.4 million,
the Kissei action alleges unpaid notes of approximately $24.8 million, the
Maruzen action alleges unpaid notes of approximately $50 million, the SMC
action alleges unpaid notes of approximately $19.5 million, the Asatsu-DK
action alleges unpaid notes of approximately $24.6 million, the Starzen action
alleges an unpaid note of $28.6 million, and the Yakult action alleges an
outstanding note of $120 million of which approximately $25 million remains
unpaid, and an unpaid note of approximately $50 million. All of the actions
assert common law claims and claims under either the federal securities laws
or the Racketeer Influenced and Corrupt Organization Act (RICO), or both. All
the actions seek punitive damages, and all but the Gun-ei and Amada actions
seek treble damages under the RICO statute. The Republic Parties filed a
motion to dismiss the Amada complaint on February 4, 2000; their time to
respond to the other actions has not yet occurred. In February 2000, RNYSC
received notice that World Nichei Securities Co., Ltd., the defendant in an
action relating to the Princeton Note Matter brought in Japan by Hamaya-gurni
Co., Ltd., will seek to hold RNYSC and its affiliates liable for any losses it
incurs in that action.
In addition, on October 7, 1999, a purported class action entitled Ravens v.
Republic New York Corporation, et al., was filed in the United States District
Court for the Eastern District of Pennsylvania on behalf of investors who
acquired common stock of Republic between May 14, 1999 and September 15, 1999.
The complaint alleges that the defendants violated the federal securities laws
in the merger transaction between Republic and HSBC by failing to disclose
facts relating to potential liabilities with respect to the Princeton Note
Matter. The complaint seeks unspecified damages on behalf of the class.
It is not possible to assess the outcome of these proceedings at present. The
Republic Parties intend to defend vigorously against the claims arising from
the Princeton Note Matter.
68
Note 28. Financial Instruments With Off-Balance Sheet Risk
The Company is party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers, to
reduce its own exposure to fluctuations in interest rates and to realize
profits. These financial instruments involve, to varying degrees, elements of
credit and market risk in excess of the amount recognized in the consolidated
balance sheet. Credit risk represents the possibility of loss resulting from
the failure of another party to perform in accordance with the terms of a
contract. The Company uses the same credit policies in making commitments and
conditional obligations as it does for balance sheet instruments.
Market risk represents the exposure to future loss resulting from the decrease
in value of an on- or off-balance sheet financial instrument caused by changes
in interest rates. Market risk is a function of the type of financial
instrument involved, transaction volume, tenor and terms of the agreement and
the overall interest rate environment. The Company controls market risk by
managing the mix of the aggregate financial instrument portfolio and by
entering into offsetting positions.
<TABLE>
<CAPTION>
A summary of financial instruments with off-balance sheet risk follows.
- ----------------------------------------------------------------------------------------------------
December 31, 1999 1998
- ----------------------------------------------------------------------------------------------------
in millions
<S> <S> <S>
Financial instruments whose contractual amounts represent the associated risk:
Standby letters of credit and financial guarantees (net of risk
participations of $223 and $16) $ 3,477 $ 1,687
Other letters of credit 838 490
Commitments to extend credit 23,236 15,460
Commitments to deliver mortgaged-backed securities 210 850
Financial instruments whose notional or contractual amounts do not represent
the associated risk:
Interest rate contracts 116,008 12,409
Foreign exchange contracts 103,071 159
Commodity, equity and other contracts 42,025 272
- ----------------------------------------------------------------------------------------------------
</TABLE>
For commitments to extend credit, standby letters of credit and guarantees,
the Company's exposure to credit loss in the event of non-performance by the
counterparty to the financial instrument, is represented by the contractual
amount of those instruments. Although management does not anticipate any
significant loss as a result of these transactions, an allowance for credit
loss related to these instruments of $19.7 million is included in interest,
taxes and other liabilities on the consolidated balance sheet at December 31,
1999.
For those financial instruments whose contractual or notional amount does not
represent the amount exposed to credit loss, risk at any point in time
represents the cost, on a present value basis, of replacing these existing
instruments at current interest and exchange rates. Based on this
measurement, $2,750 million was at risk at December 31, 1999. See Note 29 for
further discussion of activities in derivative financial instruments. The
Company controls the credit risk associated with off-balance sheet derivative
financial instruments established for each counterparty through the normal
credit approval process. See Note 22 for contracts entered into with the HSBC
Group. Collateral is maintained on these positions, the amount of which is
consistent with the measurement of exposure used in the risk-based capital
ratio calculations under the banking regulators' guidelines.
69
Foreign exchange contracts represent the gross amount of contracts to purchase
and sell foreign currencies. The extent to which offsets may exist are not
considered.
Note 29. Derivative Financial Instruments
The Company is party to various derivative financial instruments as an end
user to manage its overall interest rate risk within the context of a
comprehensive asset and liability management strategy, to offset the risk
associated with changes in value of various assets and liabilities accounted
for on a mark to market basis including its trading account and available for
sale investment securities portfolio, to protect against impairment in value
of its mortgage servicing rights portfolio, and for trading in its own
account. The Company is also an international dealer in derivative instruments
denominated in U.S. dollars and other currencies which include futures,
forwards, swaps and options related to interest rates, foreign exchange rates,
equity indices and commodity prices, focusing on structuring of customized
transactions to meet clients' needs. Counterparties generally include
financial institutions including banks, central banks, other government
agencies, both foreign and domestic, and insurance companies.
Derivative instruments are contracts whose value is derived from that of an
underlying financial instrument, physical commodity or market index and
generally do not involve the exchange of principal but may involve the payment
of a fee or receipt of a premium at inception of a contract. Certain
instruments, such as futures and forward contracts, commit the Company to buy
or sell a specified financial instrument, currency, precious metals or other
commodities at a future date. Futures contracts are exchange traded
instruments that settle through an independent clearing house and require
daily cash settlement. Forward contracts are customized transactions that
require no cash settlement until the end of the contract.
Other contracts, such as interest rate swaps involve commitments to make
periodic cash settlements based upon the differentials between specified rates
or indices applied to a stated notional amount. Purchased option contracts
give the right, but do not obligate the holder, to acquire or sell for a
limited time a financial instrument, precious metal or commodity at a
designated price upon payment of an up front fee. The writer of an option
receives an up front premium as payment for assuming the risk of unfavorable
changes in the price of the underlying instrument, or index.
The derivative instrument portfolios are actively managed in response to
changes in overall and specific balance sheet positions, cash requirements,
and expectations of future interest rates, market environments and business
strategies. Market risk associated with derivatives arises principally from
the potential for future changes in the prices of underlying securities,
commodities or indices, or the volatility of such prices or rates. The credit
risk with derivatives arises principally from the potential of the
counterparty to fail to meet its obligation to settle the contract on a timely
basis. The Company controls these risks through the establishment and
monitoring of approved limits and by dealing with investment grade
counterparties including other members of the HSBC Group, obtaining collateral
where appropriate and by using master netting agreements where available.
70
Pursuant to an overall balance sheet risk management strategy, derivative
instruments are used to alter the cash flows and maturity characteristics of
certain of these assets and liabilities and hedge anticipated repricing in
order to maintain net interest margin within a range that management considers
acceptable given assumptions as to changes in interest rates. In addition,
the Company utilizes derivative instruments to mitigate the effects of changes
in interest rates on the market valuation of its available for sale investment
securities portfolio and to protect against the erosion in value of mortgage
servicing rights in declining rate environments. Derivatives used for these
purposes are collectively referred to as asset and liability management
positions.
The Company deploys a portion of its excess liquidity by maintaining active
positions in a variety of debt instruments in its trading portfolio.
Derivative instruments are utilized to hedge market and interest rate risk
associated with the on-balance sheet instruments held in this portfolio. The
Company also holds derivative instruments for speculative purposes, as hedges
in conjunction with the acquired precious metals businesses, foreign exchange
trading activities and to facilitate customer transactions. Derivatives used
for this purpose are collectively referred to as trading positions.
The following table summarizes the notional or contractual amounts of
derivative instruments used for both trading and asset and liability
management purposes. These amounts serve as volume indicators to denote the
level of activity by instrument class and include contracts that have both
favorable and unfavorable value to the Company. These notional amounts do not
represent the amounts to be exchanged by the Company, nor do they measure the
exposure to credit or market risk. Asset and liability management positions
include intercompany transactions that are established between independent
trading departments of the Company that act as counterparties. The exposure
may be limited by offsetting asset or liability positions held by the Company
or by the use of master netting agreements.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Contractual/Notional Amounts
1999 1998
---------------------------- ---------------------------
Asset/Liability Asset/Liability
December 31, Trading Management Trading Management
- -----------------------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C>
Interest rate:
Futures and forwards $ 27,545 $ 6,954 $300 $ 4,115
Swaps 38,220 20,291 - 5,671
Options written 7,232 150 - 150
Options purchased 6,564 8,182 - 2,173
Other - 870 - -
- -----------------------------------------------------------------------------------------------
$ 79,561 $36,447 $300 $12,109
===============================================================================================
Foreign exchange:
Swaps, futures and forwards $ 58,321 $ 1,957 $159 $ -
Options written 21,057 - - -
Options purchased 20,957 - - -
Spot 772 7 - -
- -----------------------------------------------------------------------------------------------
$101,107 $ 1,964 $159 $ -
===============================================================================================
Other:
Swaps, futures and forwards $ 27,527 $ 1,242 $ - $ -
Options written 5,969 682 - -
Options purchased 6,047 537 - 272
Other 21 - - -
- -----------------------------------------------------------------------------------------------
$ 39,564 $ 2,461 $ - $ 272
===============================================================================================
</TABLE>
71
The fair value of derivative financial instruments held for asset and
liability management purposes was $759 million and $165 million at
December 31, 1999 and 1998, respectively. The fair value of derivative
financial instruments held for trading purposes was $182 million and $4
million at December 31, 1999 and 1998, respectively.
Note 30. Concentrations of Credit Risk
The Company enters into a variety of transactions in the normal course of
business that involve both on- and off-balance sheet credit risk. Principal
among these activities is lending to various commercial, institutional,
governmental and individual customers. Prior to the Republic acquisition, the
Company participated in lending activity throughout the United States and on a
limited basis abroad with credit risk concentrated in the Northeastern United
States. The acquisition included a real estate portfolio, concentrated in the
New York metropolitan area, secured by multi-family, commercial and
residential properties. The acquisition also included an international
portfolio. See Note 31 for a geographic distribution of year end assets.
The ability of individual borrowers to repay is generally linked to the
economic stability of the regions from where the loans originate, as well as
the creditworthiness of the borrower. With emphasis on the Western, Central
and Metropolitan regions of New York State, the Company maintains a
diversified portfolio of loan assets. At December 31, 1999 58% of residential
mortgages and 73% of commercial construction and mortgage loans were located
within the Northeastern United States.
In general, the Company controls the varying degrees of credit risk involved
in on- and off-balance sheet transactions through specific credit policies.
These policies and procedures provide for a strict approval, monitoring and
reporting process. It is the Company's policy to require collateral when it
is deemed appropriate. Varying degrees and types of collateral are secured
depending upon management's credit evaluation.
<TABLE>
<CAPTION>
Note 31. Geographic Distribution of Revenues and Assets
The following table summarizes the Company's activities by geographic areas.
- --------------------------------------------------------------------------------
Period End
Assets Total Revenue (1)
----------------- ------------------------
1999 1998 1999 1998 1997
- --------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C> <C>
United States $81,834 $32,207 $1,597 $1,553 $1,438
Europe/Middle East/Africa 5,299 1,367 35 8 38
Asia/Pacific 1,249 278 42 46 36
Other Western Hemisphere 2,518 472 16 18 21
Less allowance for credit losses (660) (380) - - -
- --------------------------------------------------------------------------------
Total $90,240 $33,944 $1,690 $1,625 $1,533
- --------------------------------------------------------------------------------
(1) Includes net interest income and other operating income.
</TABLE>
Loans are distributed geographically primarily on the basis of the location of
the head office or residence of the borrowers or, in the case of certain
guaranteed loans, the guarantors. Interest bearing deposits with banks are
grouped by the location of the head office of the bank. Investments and
acceptances are distributed on the basis of the location of the issuers or
borrowers.
72
Interest and fee related income is distributed geographically on the same
basis as the related asset. A charge or credit is made at market rates for
use of funds after consideration has been given for the use of capital. Other
operating income is distributed to the geographic area where the service or
operation is performed.
Note 32. Fair Value of Financial Instruments
The following disclosures represent the Company's best estimate of the fair
value of on- and off-balance sheet financial instruments. The following
methods and assumptions have been used to estimate the fair value of each
class of financial instrument for which it is practicable to do so.
Financial instruments with carrying value equal to fair value - The carrying
value of certain financial assets including cash and due from banks, interest
bearing deposits with banks, federal funds sold and securities purchased under
resale agreements, accrued interest receivable, and customers' acceptance
liability and certain financial liabilities including short-term borrowings,
interest, taxes and other liabilities and acceptances outstanding, as a result
of their short-term nature, are considered to be equal to fair value.
Securities and trading assets and liabilities - Fair value has been based upon
current market quotations, where available. If quoted market prices are not
available, fair value has been estimated based upon the quoted price of
similar instruments.
Loans - The fair value of the performing loan portfolio has been determined
principally based upon a discounted analysis of the anticipated cash flows,
adjusted for expected credit losses. The loans have been grouped to the
extent possible, into homogeneous pools, segregated by maturity and the
weighted average maturity and average coupon rate of the loans within each
pool. Depending upon the type of loan involved, maturity assumptions have
been based on either contractual or expected maturity.
Credit risk has been factored into the present value analysis of cash flows
associated with each loan type, by allocating the allowance for credit losses.
The allocated portion of the allowance, adjusted by a present value factor
based upon the timing of expected losses, has been deducted from the gross
cash flows prior to calculating the present value.
As a result of the allocation of the allowance to adjust the anticipated cash
flows for credit risk, a published interest rate that equates as closely as
possible to a "risk-free" or "low-risk" loan has been selected for the purpose
of discounting the commercial loan portfolio, adjusted for a liquidity factor
where appropriate.
Consumer loans have been discounted at the estimated rate of return an
investor would demand for the product, without regard to credit risk. This
rate has been formulated based upon reference to current market rates. The
fair value of the residential mortgage portfolio has been determined by
reference to quoted market prices for loans with similar characteristics and
maturities.
Intangible assets - The Company has elected not to specifically disclose the
fair value of certain intangible assets. In addition, the Company has not
73
estimated the fair value of unrecorded intangible assets associated with its
own portfolio such as core deposits. The fair value of the Company's
intangibles is believed to be significant.
Deposits - The fair value of demand, savings and certain money market deposits
is equal to the amount payable on demand at the reporting date. For deposits
with fixed maturities, fair value has been estimated based upon interest rates
currently being offered on deposits with similar characteristics and
maturities.
Long-term debt - Fair value has been estimated based upon interest rates
currently available to the Company for borrowings with similar characteristics
and maturities.
The following, which is provided for disclosure purposes only, provides a
comparison of the carrying value and fair value of the Company's financial
instruments. Fair values have been determined based on applicable
requirements and do not necessarily represent the amount that would be
realized upon their liquidation.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1999 1998
------------------- -------------------
Carrying Fair Carrying Fair
December 31, Value Value Value Value
- -----------------------------------------------------------------------------------
in millions
<S> <C> <C> <C> <C>
Financial assets:
Instruments with carrying value
equal to fair value $ 9,873 $ 9,845 $ 4,223 $ 4,169
Related derivatives 24 (4) 55 1
Trading assets 4,527 4,527 826 826
Related derivatives 1,773 1,773 - -
Securities available for sale 25,974 25,974 4,238 4,238
Securities held to maturity 4,812 4,812 - -
Loans, net of allowance 37,285 37,106 23,716 23,787
Related derivatives 36 5 46 66
Financial liabilities:
Instruments with carrying value
equal to fair value 14,559 14,550 3,625 3,625
Related derivatives 8 (1) - -
Deposits:
Without fixed maturities 45,629 45,629 18,211 18,211
Fixed maturities 10,818 10,857 8,046 8,076
Related derivatives (3) 5 (8) (1)
Trading account liabilities 2,441 2,441 77 77
Related derivatives 1,817 1,817 - -
Long-term debt 5,881 5,880 1,744 1,814
Related derivatives (4) 27 (4) (68)
- ------------------------------------------------------------------------------------
</TABLE>
Excluded from the above is the $169 million mark-to-market and the $175
million of accrued receivables recorded on the December 31, 1999 balance sheet
associated with derivative contracts acquired from Republic that are held for
asset and liability management purposes.
The fair value of commitments to extend credit, standby letters of credit and
financial guarantees, is not included in the previous table. These
instruments generate fees which approximate those currently charged to
originate similar commitments. Further detail with respect to off-balance
sheet financial instruments is provided in Note 28, Financial Instruments With
Off-Balance Sheet Risk.
74
<TABLE>
<CAPTION>
Note 33. Financial Statements of HSBC USA Inc. (parent)
Condensed parent company financial statements follow.
- --------------------------------------------------------------------------------------
Balance Sheet
December 31, 1999 1998
- --------------------------------------------------------------------------------------
in thousands
<S> <C> <C>
Assets:
Cash and due from banks $ 315 $ -
Interest bearing deposits with banks (including
$2,306,481 and $1,012,800 in banking subsidiary) 2,371,481 1,077,800
Trading assets 213,398 -
Securities available for sale 6,821,320 24,330
Securities held to maturity (fair value $135,212
in 1999) 135,212 -
Loans (net of allowance for credit losses of
$13,208 and $1,284) 82,903 37,694
Receivable from subsidiaries 1,852,461 702,759
Investment in subsidiaries at amount of their
net assets
Banking 9,391,845 2,373,656
Other 1,276,828 23,892
Goodwill and other acquisition intangibles 545,808 -
Other assets 382,772 47,324
- --------------------------------------------------------------------------------------
Total assets $23,074,343 $4,287,455
- --------------------------------------------------------------------------------------
Liabilities:
Interest, taxes and other liabilities $ 7,589,186 $ 14,027
Short-term borrowings 1,135,821 910,457
Long-term debt 3,552,261 722,346
Long-term debt due to subsidiary 755,914 412,372
- --------------------------------------------------------------------------------------
Total liabilities 13,033,182 2,059,202
Shareholders' equity * 10,041,161 2,228,253
- --------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $23,074,343 $4,287,455
- --------------------------------------------------------------------------------------
* See Consolidated Statement of Shareholders' Equity, page 40.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Statement of Income
Year Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Income:
Dividends from banking subsidiaries $450,000 $405,000 $275,000
Dividends from other subsidiaries 1,001 7,001 804
Interest from banking subsidiaries 96,836 91,405 84,599
Other interest income 15,469 7,641 12,290
Securities transactions 7,800 7,529 12,650
Other income 4,014 2,467 2,492
- --------------------------------------------------------------------------------------
Total income 575,120 521,043 387,835
- --------------------------------------------------------------------------------------
Expenses:
Interest (including $33,378, $33,382,
and $26,813 paid to subsidiaries) 123,920 123,053 114,294
Other expenses 13,831 6,504 7,535
- --------------------------------------------------------------------------------------
Total expenses 137,751 129,557 121,829
- --------------------------------------------------------------------------------------
Income before taxes and equity in undistributed
income of subsidiaries 437,369 391,486 266,006
Income tax benefit (4,360) (5,962) (2,527)
- --------------------------------------------------------------------------------------
Income before equity in undistributed income
of subsidiaries 441,729 397,448 268,533
Equity in undistributed income of subsidiaries 21,983 129,619 202,417
- --------------------------------------------------------------------------------------
Net income $463,712 $527,067 $470,950
- --------------------------------------------------------------------------------------
</TABLE>
75
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Statement of Cash Flows
Year Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------
in thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 463,712 $ 527,067 $ 470,950
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 853 3,128 3,693
Net change in other accrued accounts 33,788 (4,294) 49,380
Undistributed income of subsidiaries (21,983) (129,619) (202,417)
Other, net (12,879) 116,636 (149,056)
- --------------------------------------------------------------------------------------
Net cash provided by operating
activities 463,491 512,918 172,550
- --------------------------------------------------------------------------------------
Cash flows from investing activities:
Net change in interest bearing
deposits with banks (298,400) 57,600 81,700
Purchases of securities - - (5,000)
Sale of securities 13,198 12,366 20,785
Principal collected on long-term loans (35,279) 19,934 55,658
Long-term loans advanced (3,633) (200,000) (100,000)
Investment in banking subsidiary - - (95,298)
Other, net (19,937) 14,156 229
- --------------------------------------------------------------------------------------
Net cash used by investing
activities (344,051) (95,944) (41,926)
- --------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in short-term borrowings (64,125) 63,026 90,798
Issuance of long-term debt 200,000 - 200,000
Repayment of long-term debt (100,000) - (125,000)
Redemption of preferred stock - - (98,063)
Dividends paid (155,000) (480,000) (202,937)
- --------------------------------------------------------------------------------------
Net cash used by financing
activities (119,125) (416,974) (135,202)
- --------------------------------------------------------------------------------------
Net change in cash and due from banks 315 - (4,578)
Cash and due from banks at beginning of year - - 4,578
- --------------------------------------------------------------------------------------
Cash and due from banks at end of year $ 315 $ - $ -
- --------------------------------------------------------------------------------------
Cash paid for:
Interest paid $ 120,963 $ 121,889 $ 120,840
Non-cash activities related to acquisitions:
Preferred stock assumed 500,000 - -
Capital contributed principally in the form
of treasury securities 7,095,940 - -
- --------------------------------------------------------------------------------------
</TABLE>
The Bank is subject to legal restrictions on certain transactions with its
nonbank affiliates in addition to the restrictions on the payment of dividends
to the Company (see Note 18).
76
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting and financial disclosure matters
between the Company and its independent accountants during 1999.
P A R T III
Item 10. Directors and Executive Officers of the Registrant
Directors
Set forth below is certain biographical information relating to the members of
the Company's Board of Directors. Each director is elected annually. There
are no family relationships among the directors.
Sal H. Alfiero, age 62, Founder, Chairman and Chief Executive Officer, Mark IV
Industries, Inc. Mr. Alfiero has been a director of the Bank since 1996. He
is also a director of Phoenix Home Life Mutual Insurance Company, Southwire
Company, Niagara Mohawk Power Corp., National Health Care Affiliates, Inc.,
Kaleida Health System and a trustee for the University of Buffalo Foundation.
Elected January, 2000.
Sir John R. H. Bond, age 58, Chairman of the Company and the Bank since 1997
and Group Chairman of HSBC since 1998. Formerly President and Chief Executive
Officer of the Company and the Bank from 1991 through 1992. Previously
Executive Director Banking, The Hongkong and Shanghai Banking Corporation
Limited from 1990 to 1991 and Executive Director Americas from 1988 to 1990.
Sir John is director and Chairman of HSBC Finance (Netherlands), Chairman of
HSBC Bank plc, Chairman of HSBC Bank Middle East and a director of The
Hongkong and Shanghai Banking Corporation Ltd. and Saudi British Bank. Elected
in 1987.
James H. Cleave, age 57, formerly President and Chief Executive Officer of
the Company and the Bank from 1993 through 1997 and formerly Executive
Director from June 1992 through December 1992. Previously Director, President
and Chief Executive Officer of HSBC Bank Canada since 1987. Mr. Cleave is
also Chairman of HSBC Bank Canada and a director of that Bank. Elected in
1991.
Frances D. Fergusson, age 55, President, Vassar College since 1986.
Formerly Provost and Vice President for Academic Affairs, Bucknell University.
Dr. Fergusson is a member of the Board of Trustees of the Ford Foundation and
Chair of the Board of the Mayo Foundation, and is a director of C H Energy
Group. She was a director of the Company from 1990 through 1994 and has been
a director of the Bank since 1990. Reelected January, 2000.
Douglas J. Flint, age 44, Group Finance Director, HSBC and an Executive
Director of HSBC since 1995. A director of HSBC Investment Bank Holdings plc,
HSBC Bank Malaysia Berhad, HSBC Argentina Holdings S.A., and a director of the
Bank since 1998. Mr. Flint is a member of the Urgent Issues Task Force of the
Accounting Standards Board and a former partner in KPMG. Elected January,
2000.
77
Martin J. G. Glynn, age 48, Director, President and Chief Executive Officer,
HSBC Bank Canada. He joined HSBC Bank Canada in 1982. He is also a director
of the Bank and First Vice Chair of the Canadian Chamber of Commerce. Elected
January, 2000.
Stephen K. Green, age 51, Executive Director Investment Banking and Markets,
HSBC and an Executive Director of HSBC since 1998. Joined The Hongkong and
Shanghai Banking Corporation Limited in 1982. Group Treasurer from 1992 to
February, 1998. Mr. Green is Chairman of HSBC Investment Bank Holdings plc
and a director of HSBC Bank plc and Guyerzeller Bank AG. A director of the
Bank and the Company since January, 2000.
Ulric Haynes, Jr., age 68, Executive Dean for International Relations, Hofstra
University. Formerly Dean, School of Business, Hofstra University and a
consultant on international business. Mr. Haynes was American Ambassador to
Algeria from 1977 to 1981 and is a director of Pall Corporation, Reliastar
Life of New York and INNCOM International, Inc. He was a director of the
Company from 1981 through 1994 and has been a director of the Bank since 1981.
Reelected January, 2000.
Richard A. Jalkut, age 55, President and Chief Executive of Pathnet. Formerly
President and Group Executive, NYNEX Telecommunications and Executive Vice
President and Chief Operating Officer of New England Telephone and New York
Telephone. He was a director of the Company from 1992 through 1994 and has
been a director of the Bank since 1992. He is a director of Digex Corp. and
IKON Office Solution. Reelected January, 2000.
Bernard J. Kennedy, age 68, Chairman and Chief Executive Officer of National
Fuel Gas Company. Also Chairman of National Fuel Gas Distribution
Corporation, National Fuel Gas Supply Corporation and Seneca Resources
Corporation. He is a director of American Precision Industries, Merchants
Mutual Insurance Co., AEGIS Insurance Services Inc., Niagara Independence
Marketing Company and Seneca Independence Pipeline Company. Mr. Kennedy was a
director of the Company from 1991 through 1994 and has been a director of the
Bank since 1991. Reelected January, 2000.
Peter Kimmelman, age 55, Private Investor. Formerly a director of Republic
and Republic Bank since 1979. A director of the Bank and the Company since
January, 2000.
Charles G. Meyer, Jr., age 62, President of Cord Meyer Development Company.
Formerly a director of Republic Bank. A director of the Bank and the Company
since January, 2000.
James L. Morice, age 62, Founding Partner of Mirtz Morice, Inc., a management
consulting firm. Formerly a director of Republic and Republic Bank since
1987. A director of the Bank and the Company since January, 2000.
Youssef A. Nasr, age 45, President and Chief Executive Officer of the Company
and the Bank since January, 2000 and a director of the Company and the Bank
since 1998. Mr. Nasr is a director of HSBC Bank Canada and was President and
Chief Executive Officer of HSBC Bank Canada from 1998 through 1999. He has
been a member of the HSBC Group since 1976 and was appointed a Group General
Manager in 1998. Elected in 1998.
78
Jonathan Newcomb, age 53, Chairman & CEO, Simon & Schuster, Inc. Prior to
that he held the office of President and Chief Operating Officer. He was
previously President of McGraw Hill Financial & Economic Information Group
which included the business units of Standard & Poor's and Data Resources Inc.
He is a director of the Bank, Primark Corporation and LearnX.com. He is
also a member of the Board of Trustees of Dartmouth College and the Board of
Overseers for Dartmouth's Amos Tuck School of Business Administration.
Elected January, 2000.
Henry J. Nowak, age 64, Attorney, Consultant and a member of the U.S. House
of Representatives from 1974 through 1992. Mr. Nowak is a director of A&G
Resources Corporation and Gulf Canada Resources, Ltd. and is a member of the
New York State and Erie County Bar Associations. He was a director of the
Company from 1993 through 1994 and has been a director of the Bank since 1993.
Reelected January, 2000.
Keith R. Whitson, age 56, Group Chief Executive Officer of HSBC since 1998
and a director of HSBC since 1994. Formerly Chief Executive Officer of HSBC
Bank plc from 1992 through 1998. Prior to that he was Executive Director of
the Company from 1990 through 1992. He has been with HSBC since 1961.
Elected in 1998.
Directors' Compensation
For their services as directors of both the Company and the Bank, all
nonemployee directors receive an annual retainer of $30,000, plus a fee of
$1,000 for each Board meeting attended. Directors who are employees of HSBC
or other Group affiliates do not receive annual retainers or fees. In
addition, nonemployee directors who are members of any committee of the Board
of Directors other than the Audit and Examining Committee also receive a fee
of $1,000 for attendance at committee meetings except, when a meeting is held
on the same day as a Board meeting or if participation is by conference
telephone, the fee is $500. Additionally, committee chairmen receive annual
fees of $2,500 for acting in that capacity. Members of the Audit and
Examining Committee receive an annual fee which is $9,000 for the chairman and
$6,000 for the other members and $500 per meeting for special meetings.
Directors are reimbursed for their expenses incurred in attending meetings.
The Company and the Bank have standard arrangements pursuant to which
directors may defer all or part of their fees.
The Directors' Retirement Plan covers nonemployee directors elected prior to
1998 and excludes those serving as directors at the request of HSBC. Eligible
directors with at least five years of service will receive quarterly
retirement benefit payments commencing at the later of age 65 or retirement
from the Board, and continuing for ten years. The annual amount of the
retirement benefit is a percent of the annual retainer in effect at the time
of the last Board meeting the director attended. The percentage is 50 percent
after five years of service and increases by five percent for each additional
year of service to 100 percent upon completion of 15 years of service. If a
director who has at least five years of service dies before his retirement
benefit has commenced, his beneficiary will receive a death benefit calculated
as if the director had retired on the date of his death. If a retired
director dies before receiving retirement benefit payments for the ten year
79
period, the balance of the payments will be continued to his beneficiary. The
Plan is unfunded and payment will be made out of the general funds of the
Company or the Bank.
<TABLE>
<CAPTION>
Executive Officers
The table below shows the names and ages of all executive officers of the
Company and the positions held by them as of March 1, 2000 and the dates when
elected an executive officer of the Company or the Bank.
- ------------------------------------------------------------------------------------
Year
Name Age Elected Present Position with the Company
- ------------------------------------------------------------------------------------
<S> <C> <C> <S>
Youssef A. Nasr 45 2000 President and Chief Executive Officer
Leslie E. Bains 56 2000 Senior Executive Vice President
Robert M. Butcher 56 1988 Senior Executive Vice President
and Chief Financial Officer
Alexander A. Flockhart 48 1999 Senior Executive Vice President
Paul L. Lee 53 2000 Senior Executive Vice President
and General Counsel
Vincent J. Mancuso 53 1996 Senior Executive Vice President
and Group Audit Executive, USA
Robert H. Muth 47 1993 Senior Executive Vice President
Vito S. Portera 57 2000 Senior Executive Vice President
Gerald A. Ronning 52 1991 Executive Vice President and Controller
Elias Saal 47 2000 Senior Executive Vice President
Iain A. Stewart 41 2000 Senior Executive Vice President
Philip S. Toohey 56 1990 Senior Executive Vice President
and Secretary
George T. Wendler 55 2000 Senior Executive Vice President
- ------------------------------------------------------------------------------------
</TABLE>
Youssef A. Nasr had been a Director of the Company since 1998. From 1998
through 1999, he had been President and Chief Executive Officer of HSBC Bank
Canada. He has been a member of the HSBC Group since 1976.
Leslie E. Bains had headed domestic private banking and investments at
Republic. Ms. Baines joined Republic in 1993.
Alexander A. Flockhart previously was HSBC's Managing Director of the Saudi
British Bank. From 1992 to 1994, he served as the Chief Executive Officer of
HSBC Thailand. He joined HSBC in 1974.
Iain A. Stewart is an HSBC International officer who was Group Treasurer in
London from 1994 to 1999 and formerly manager of Group Market Risk. He joined
HSBC in 1981 and was Treasurer USA from 1989 to 1993.
Messrs. Lee, Portera, Saal and Wendler each served Republic or Republic Bank
in executive capacities for more than five years. Messrs. Butcher, Mancuso,
Muth, Ronning and Toohey each served the Company or the Bank in executive
capacities for more than five years. There are no family relationships among
the above officers.
80
Item 11. Executive Compensation
The following table sets forth information as to the compensation earned
through December 31, 1999 by the President and Chief Executive Officer and by
the four most highly compensated officers of the Company and the Bank.
Principal position indicates capacity served in 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
- --------------------------------------------------------------------------------------
Annual Compensation All
Name and Other
Principal Position Year Salary Bonus Other Compensation
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I. Malcolm Burnett 1999 $637,648 $117,945 $369,959 $ -
President and 1998 618,736 55,500 393,025 -
Chief Executive Officer 1997 474,793 44,938 258,851 -
John A. D. Hamilton 1999 583,052 74,795 210,793 -
Executive Vice President 1998 527,256 48,622 230,586 -
Information Technology 1997 452,932 41,312 275,198 -
Robert H. Muth 1999 296,596 275,000 1,469 110,175
Chief Administrative Officer 1998 299,593 211,825 5,093 10,400
1997 231,985 135,025 4,588 9,194
Robert B. Engel 1999 305,192 229,800 2,495 12,208
Chief Banking Officer 1998 300,565 211,825 7,475 12,223
1997 204,385 122,875 5,783 7,440
Robert M. Butcher 1999 319,846 188,025 6,724 6,400
Executive Vice President and 1998 313,358 173,000 12,721 6,400
Chief Financial Officer 1997 307,015 184,250 9,315 6,844
- --------------------------------------------------------------------------------------
</TABLE>
Mr. Burnett and Mr. Hamilton have been seconded to the Bank by HSBC which
pays their salary and other benefits pursuant to arrangements applicable to
international HSBC officers. Other Annual Compensation for Mr. Burnett
includes $282,446, $274,164 and $147,093 for 1999, 1998 and 1997,
respectively, received for housing allowance. Mr. Hamilton's Other Annual
Compensation includes a housing allowance of $73,561, $70,562 and $69,768 for
1999, 1998 and 1997, respectively. It also includes an education allowance of
$118,987, $105,860 and $81,987 for 1999, 1998 and 1997, respectively, and an
executive travel allowance of $56,472 in 1999. Other Annual Compensation for
the other named executives includes health and insurance benefits.
Amounts reported as All Other Compensation include the Company's contributions
to its 401(k) plan and a four percent credit on salary deferred under the
Company's deferred salary plan. Since deferred salary is not eligible for the
company matching contributions under the 401(k) plan, salary deferrals are
increased by four percent, which is the maximum matching contribution
available under the 401(k) plan. HSBC secondees to the Company do not
participate in these benefit plans. All Other Compensation for Mr. Muth in
1999 also includes reimbursement of moving expenses.
HSBC has granted options on HSBC common stock to the named executives.
Options were granted on March 19, 1999, exercisable beginning March 29, 2002
conditional upon the growth in earnings per share of HSBC over the three year
period and expiring March 19, 2009.
The following table shows the estimated annual retirement benefit payable upon
normal retirement on a straight life annuity basis to participating employees,
including officers, in the compensation and years of service classifications
indicated under the Company's retirement plans which cover most officers and
81
employees on a non-contributory basis. The amounts shown are before
application of social security reductions. Years of service credited for
benefit purposes is limited to 30 years in the aggregate.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Estimated Annual Retirement Benefits for
Five Year Average Representative Years of Credited Service
Compensation 15 20 25 30 35
- -----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$125,000 $ 36,813 $ 49,313 $ 61,813 $ 74,313 $ 74,625
150,000 44,175 59,175 74,175 89,175 89,550
175,000 51,538 69,038 86,538 104,038 104,475
200,000 58,900 78,900 98,900 118,900 119,400
225,000 66,263 88,763 111,263 133,763 134,325
250,000 73,625 98,625 123,625 148,625 149,250
300,000 88,350 118,350 148,350 178,350 179,100
350,000 103,075 138,075 173,075 208,075 208,950
400,000 117,800 157,800 197,800 237,800 238,800
450,000 132,525 177,525 222,525 267,525 268,650
- -----------------------------------------------------------------------------
</TABLE>
The Pension Plan is a non-contributory defined benefit pension plan under
which the Bank and other participating subsidiaries of the Company make
contributions in actuarially determined amounts. Compensation covered by the
Pension Plan includes regular basic earnings (including salary reduction
contributions to the 401(k) plan), but not incentive awards, bonuses, special
payments or deferred salary. The Company maintains supplemental benefit plans
which provide for the difference between the benefits actually payable under
the Pension Plan and those that would have been payable if certain other
awards, special payments and deferred salaries were taken into account and if
compensation in excess of the limitations set by the Internal Revenue Code
could be counted. Payments under these plans are unfunded and will be made
out of the general funds of the Bank or other participating subsidiaries. The
calculation of retirement benefits is based on the highest five-consecutive
year compensation.
Members of the Senior Management Committee of the Bank receive two times their
normal credited service for each year and fraction thereof served as a
committee member in determining pension and severance benefits to a maximum of
30 years of credited service in total. This additional service accrual is
unfunded and payments will be made from the general funds of the Bank or other
subsidiaries. As of December 31, 1999, the individuals listed in the Summary
Compensation Table, have total years of credited service in determining
benefits payable under the plans as follows: Mr. Engel, 19.4; Mr. Muth, 13.5;
and Mr. Butcher, 21.7. HSBC secondees to the Company do not participate in
the retirement plans.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Holder of Securities
The Company is 100 percent owned by HSBC North America Inc. HSBC North
America Inc., is an indirect wholly owned subsidiary of HSBC Holdings plc.
Messrs. Bond, Flint, Green and Whitson are officers and directors of HSBC.
None of the directors or executive officers owned any of the Company's common
stock at December 31, 1999.
82
Item 13. Certain Relationships and Related Transactions
Directors and officers of the Company, members of their immediate families and
HSBC and its affiliates were customers of, and had transactions with, the
Company, the Bank and other subsidiaries of the Company in the ordinary course
of business during 1999. Similar transactions in the ordinary course of
business may be expected to take place in the future.
All loans to executive officers and directors and members of their immediate
families and to HSBC and its affiliates were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not involve more
than normal risk of collectibility or present other unfavorable features.
During 1999, James H. Cleave, director, served as consultant in connection
with the transaction between HSBC and Republic and the integration of the
operations of Republic and the Company. For these services he received
compensation of approximately $619,000 from the Company in 1999.
P A R T I V
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A
1. and 2. Financial Statements and Schedules
The following financial statements and schedules of the Company and its
subsidiaries are included in Item 8:
Report of Independent Auditors
HSBC USA Inc.:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Changes in Shareholders' Equity
Consolidated Statement of Cash Flows
HSBC Bank USA:
Consolidated Balance Sheet
Summary of Significant Accounting Policies
Notes to Financial Statements
3. Exhibits
3 a Registrant's Restated Certificate of Incorporation and Amendments
Thereto
b Registrant's By-Laws, as Amended to Date
4 Instruments Defining the Rights of Security Holders, Including
Indentures
Registrant has previously filed with the Commission as Exhibits to
various registration statements and periodic reports Indentures
and other Instruments Defining the Rights of Security Holders
12.01 Computation of Ratio of Earnings to Fixed Charges (filed herewith)
12.02 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends (filed herewith)
22 Subsidiaries of the Registrant
The Company's only significant subsidiary, as defined, is HSBC Bank
USA, a state bank organized under the laws of New York State.
23 Consent of independent accountants
83
B
Reports on Form 8-K
1. On October 1, 1999 a report on Form 8-K was filed submitting Republic's
press release dated September 30, 1999 announcing the intended further
adjournment of the special meeting of shareholders.
2. On October 22, 1999 a report on Form 8-K was filed submitting
Republic's press release dated October 22, 1999 with attached financial
statements announcing the results for the third quarter and nine
months ended September 30, 1999.
3. On November 8, 1999 a report on Form 8-K was filed submitting
amendments to the Transaction Agreement between Republic and HSBC and
the Republic press release dated November 8, 1999 announcing the
agreement to proceed with the acquisition of Republic by HSBC.
4. On January 10, 2000 a report on Form 8-K was filed announcing the
completion of the transaction, the merger of the Company with Republic
and the change in name to HSBC USA Inc.
5. On January 10, 2000 a report on Form 8-K was filed announcing that
holders of the Company's 7% Subordinated Notes due 2006 should refer to
the periodic reports filed with the Securities and Exchange Commission
by Republic New York Corporation (File No. 1-7436), which changed its
name to "HSBC USA Inc." effective on January 3, 2000.
6. On March 8, 2000 a report on Form 8-K was filed providing pro forma
financial statements relating to the merger of the Company and
Republic.
84
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HSBC USA Inc.
Registrant
/s/ Philip S. Toohey
Philip S. Toohey
Senior Executive Vice President
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 1, 2000 by the following persons on behalf of
the Registrant and in the capacities indicated:
/s/ Robert M. Butcher
Robert M. Butcher
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/ Gerald A. Ronning
Gerald A. Ronning
Executive Vice President
and Controller
(Principal Accounting Officer)
Sal H. Alfiero* Director
John R. H. Bond*
Chairman of the Board
James H. Cleave* Director
Frances D. Fergusson* Director
Douglas J. Flint* Director
Martin J. G. Glynn* Director
Stephen K. Green* Director
Ulric Haynes, Jr.* Director
Richard A. Jalkut* Director
Bernard J. Kennedy* Director
Peter Kimmelman* Director
Charles G. Meyer, Jr.* Director
James L. Morice* Director
Youssef A. Nasr*
Director, President
and Chief Executive Officer
Jonathan Newcomb* Director
Keith R. Whitson* Director
*
/s/ Philip S. Toohey
Philip S. Toohey
Attorney-in-fact
85
CONFORMED COPY 9.26.73
REPUBLIC NEW YORK CORPORATION
ARTICLES OF INCORPORATION
FIRST: THE UNDERSIGNED, STEPHEN E. GILHULEY, whose post office address is 53
Wall Street, New York, New York 10005, being at least eighteen years of age,
does under and by virtue of the General Laws of the State of Maryland
authorizing the formation of corporations, as an incorporator, hereby form a
corporation.
SECOND: The name of the Corporation is:
REPUBLIC NEW YORK CORPORATION
THIRD: The Corporation shall have the following purposes and powers:
(1) To acquire by purchase, subscription or otherwise, and to
receive, hold, own, guarantee, sell, assign, exchange, transfer,
mortgage, pledge or otherwise dispose of or deal in and with any and all
securities; as such term is hereinafter defined, issued or created by
any corporation, firm, organization, association or other entity, public
or private, whether formed under the laws of the United States of
America or of any state, commonwealth, territory, dependency or
possession thereof, or of any foreign country or of any political
subdivision, territory, dependency, possession or municipality thereof,
or issued or created by the United States of America or any state or
commonwealth thereof or any foreign country, or by any agency,
subdivision, territory, dependency, possession or municipality of any of
the foregoing, and as owner thereof to possess and exercise all the
rights, powers and privileges of ownership, including the right to
execute consents and vote thereon, and to do any and all acts and things
necessary or advisable for the preservation, protection, improvement and
enhancement in value thereof.
The term "securities" as used in these Articles of Incorporation
shall mean any and all notes, stocks, treasury stocks, bonds,
debentures, evidences of indebtedness, certificates of interest or
participation in any profit-sharing agreement, collateral-trust
certificates, preorganization certificates or subscriptions,
transferable shares, investment contracts, voting trust certificates,
certificates of deposit for a security, fractional undivided interests
in oil, gas, or other mineral rights, or, in general, any interests or
instruments commonly known as "securities", or any and all certificates
of interest or participation in, temporary or interim certificates for,
receipts for, guaranties of, or warrants or rights to subscribe to or
purchase, any of the foregoing.
(2) To make, establish and maintain investments in securities, real
estate and other property, and to supervise, manage and do any and all
other acts and things to enhance, protect or preserve such investments.
(3) To engage in and carry on the business of traders, brokers and
dealers in commodities (which term as used in these Articles of
Incorporation includes contracts for the future delivery thereof) of
every kind, character or description whatsoever, and, whether or not in
connection therewith, to purchase, borrow, acquire, hold, exchange,
sell, distribute, lend, mortgage, pledge, or otherwise dispose of, or
import or export or turn to account in any manner and generally to deal
in or otherwise effect any and all transactions of every kind, character
or description whatsoever in or with respect to commodities and
products, merchandise, articles of commerce, materials, personal
property, of every kind, character or description whatsoever and any
interest therein, and instruments evidencing rights to acquire such
interests, to guarantee any and all obligations relating to transactions
made on any board of trade, commodities exchange, or similar
institution, and to do any and all things which may be useful in
connection with or incidental to the conduct of such business.
(4) To cause to be organized under the laws of the United States of
America or of any state, commonwealth, territory, dependency or
possession thereof, or of any foreign country or of any political
subdivision, territory, dependency, possession or municipality thereof,
one or more corporations, firms, organizations, associations or other
entities and to cause the same to be dissolved, wound up, liquidated,
merged or consolidated.
(5) To create, purchase or otherwise acquire (in whole or in part),
own, and in any manner sell, transfer or otherwise dispose of
businesses, corporations, enterprises and other entities, and to act as
a parent company or holding company in relation to such entities.
(6) To acquire by purchase or exchange, or by transfer to or by
merger or consolidation with the Corporation or any corporation, firm,
organization, association or other entity directly or indirectly owned
or controlled by, or under common ownership or control with, the
Corporation, or to otherwise acquire, the whole or any part of the
business, good will, rights, or other assets of any corporation, firm,
organization, association or other entity, and to undertake or assume in
connection therewith the whole or any part of the liabilities and
obligations thereof, to effect any such acquisition in whole or in part
by delivery of cash or other property, including securities issued by
the Corporation, or by any other lawful means.
(7) To make loans and give other forms of credit, with or without
security, and to negotiate and make contracts and agreements in
connection therewith.
(8) To aid by loan, subsidy, guaranty or in any other lawful manner
any corporation directly or indirectly owning or controlling the
Corporation or any corporation, firm, organization, association or other
entity of which any securities are in any manner directly or indirectly
held by the Corporation or by any such owning or controlling corporation
or in which the Corporation, any such owning or controlling corporation,
or any such
-1-
86
CONFORMED COPY 9.26.73
corporation, firm, organization, association or entity may be or become
otherwise interested; to guarantee the payment of dividends on any
stock issued by any such owning or controlling corporation or any such
corporation, firm, organization, association or entity; to guarantee
or, with or without recourse against any such owning or controlling
corporation or any such corporation, firm, organization, association or
entity, to assume the payment of the principal of, or the interest on,
any obligations issued or incurred by such owning or controlling
corporation or such corporation, firm, organization, association or
entity; to do any and all other acts and things for the enhancement,
protection or preservation of any securities which are in any manner,
directly or indirectly, held, guaranteed or assumed by the Corporation
or by any such owning or controlling corporation, and to do any and all
acts and things designed to accomplish any such purpose.
(9) To borrow money for any business, object or purpose of the
Corporation from time to time, without limit as to amount; to issue any
kind of indebtedness, whether or not in connection with borrowing money,
including evidences of indebtedness convertible into stock of the
Corporation or of any other corporation directly or indirectly owning or
controlling the Corporation, to secure the payment of any evidence of
indebtedness by the creation of any interest in any of the property or
rights of the Corporation, whether at that time owned or thereafter
acquired.
(10) To the extent permitted by law, to render service, assistance,
counsel and advice to, and to act as representative or agent in any
capacity (whether managing, operating, financial, purchasing, selling,
advertising or otherwise) of, any individual, corporation, firm,
organization, association or other entity; as such representative or
agent, to develop, exploit, promote, conduct, manage, operate, improve,
extend or liquidate any business or property, real or personal; and to
aid, conduct, manage or operate any lawful enterprise in connection
therewith.
(11) To engage in any commercial, financial, mercantile,
industrial, manufacturing, marine, exploration, mining, agricultural,
research, licensing, servicing, or agency business not prohibited by
law, and any, some or all of the foregoing.
The purposes and powers specified in the foregoing paragraphs shall,
except where otherwise expressed, be in no wise limited or restricted by
reference to , or inference from, the terms of any other paragraph of this or
any other Article of these Articles of Incorporation, but the purposes and
powers specified in each of the foregoing paragraphs of this Article shall be
regarded as independent, and construed as powers as well as objects and
purposes.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations of a
similar character by the General Laws of the State of Maryland now or
hereafter in force, and the enumeration herein of any specific purposes or
powers shall not be held to limit or restrict in any manner the exercise by
the Corporation of any powers, rights or privileges so granted or conferred
and shall be in addition to the general powers of corporations under the
General Laws of the State of Maryland.
FOURTH: The post office address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, First Maryland Building, 25
South Charles Street, Baltimore, Maryland 21201. The name of the registered
agent of the Corporation in Maryland is The Corporation Trust Incorporated, a
corporation of the State of Maryland, and the post office address of the
resident agent is First Maryland Building, 25 South Charles Street, Baltimore,
Maryland 21201.
FIFTH: The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is TWO THOUSAND (2,000) shares, of
which ONE THOUSAND (1,000) shares shall be shares of Preferred Stock without par
value (hereinafter called "Preferred Stock"), and ONE THOUSAND (1,000) shares
shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per
share (hereinafter called "Common Stock") having an aggregate par value of FIVE
THOUSAND DOLLARS ($5,000).
Each share of Common Stock shall be equal to every other share of Common
Stock in every respect. Subject to any exclusive voting rights which may vest
in holders of Preferred Stock under the provisions of any series of the
Preferred Stock fixed by the Board of Directors pursuant to authority herein
provided, the shares of Common Stock shall entitle the holders thereof to one
vote for each share upon all matters upon which stockholders have the right
to vote.
The following is a description of the preferences, rights, voting powers,
restrictions and qualifications of the Preferred Stock of the Corporation:
(1) The Board of Directors shall have authority to classify and
reclassify any unissued shares of the Preferred Stock, by fixing or
altering in any one or more respects from time to time before issuance,
the preferences, rights, voting powers, restrictions and qualifications
of, the dividends on, the times and prices of redemption of, and the
conversion rights of, such shares; provided, that the Board of Directors
shall not classify or reclassify any of such shares into shares of the
Common Stock.
Subject to the foregoing, the power of the Board of Directors to classify
and reclassify any of the shares of Preferred Stock shall include, without
limitation, subject to the provisions of the charter, authority to
classify or reclassify any unissued shares of such stock into a class or
classes of preferred stock, preference stock, special stock or other
stock, and to divide and classify shares of any class into one or more
series of such class, by determining, fixing or altering one or more of
the following:
(a) The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that,
unless otherwise prohibited by the terms of such or any other class
or series, the number of shares of any class or series may be
decreased by the Board of Directors in connection with any
classification or reclassification of unissued shares and the number
of shares of such class or series
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87
CONFORMED COPY 9.26.73
may be increased by the Board of Directors in connection with any
such classification or reclassification, and any shares of any class
or series which have been redeemed, purchased, otherwise acquired or
converted into shares of Common Stock or any other class or series
shall remain part of the authorized Preferred Stock and be subject to
classification and reclassification as provided in this Article
FIFTH;
(b) whether or not and, if so, the rates and times at which, and
the conditions under which, dividends shall be payable on shares of
such class or series, whether any such dividends shall rank senior or
junior to or on a parity with the dividends payable on any other
class or series of Preferred Stock, and the status of any such
dividends as cumulative or non-cumulative and as participating or
non-participating;
(c) whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by law and,
if so, the terms of such voting rights;
(d) whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and
conditions thereof, including provision for adjustment of the
conversion or exchange rate in such events or at such times as the
Board of Directors shall determine;
(e) whether or not the shares of such class or series shall be
subject to redemption and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates; and whether or not there shall be any
sinking fund or purchase account in respect thereof, and if so, the
terms thereof;
(f) the rights of the holders of shares of such class or series
upon the liquidation, dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the Corporation, which rights
may vary depending upon whether such liquidation, dissolution or
winding up is voluntary or involuntary and, if voluntary, may vary at
different dates, and whether such rights shall rank senior or junior
to or on a parity with such rights of any other class or series of
Preferred Stock;
(g) whether or not there shall be any limitations applicable,
while shares of such class or series are outstanding, upon the
payment of dividends or making of distributions on, or the
acquisition of, or the use of moneys for purchase or redemption of,
any stock of the Corporation, or upon any other action of the
Corporation, including action under this paragraph, and, if so, the
terms and conditions thereof;
(h) any other preferences, rights, restrictions and
qualifications of shares of such class or series, not inconsistent
with law and these Articles of Incorporation.
SIXTH. The Board of Directors is hereby empowered to authorize the issuance
from time to time of shares of the Corporation's stock of any class, whether
now or hereafter authorized, and securities convertible into shares of its
stock of any class or classes, whether now or hereafter authorized, for such
considerations as the Board of Directors may deem advisable and without any
action by the stockholders.
SEVENTH. The number of Directors shall be four, which number may be increased
or decreased pursuant to the By-Laws of the Corporation but shall never be less
than three. The names of the persons who are to serve as Directors until the
first annual meeting of the stockholders or until their successors are duly
chosen and qualify are as follows: Rene Cohen, Ernest Ginsberg, John R. Lytle
and Peter White.
EIGHTH. The By-Laws of the Corporation may be made, altered, amended or
repealed by the Board of Directors. The books of the Corporation (subject to
the provisions of the laws of the State of Maryland) may be kept outside of
the State of Maryland at such places as from time to time may be designated by
the Board of Directors.
NINTH. (1) The Corporation shall indemnify any 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 Corporation)
by reason of the fact that he is or was a director or officer of the
Corporation, against expenses (including attorneys' fees), 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 Corporation, 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 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 Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The Corporation shall indemnify any 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 Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of
the Corporation, against expenses (including attorneys' fees) 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 Corporation;
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation,
unless and only to the extent that the court in which such action or suit was
brought, or a court of equity in the county in which the Corporation has its
principal office, 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
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CONFORMED COPY 9.26.73
shall deem proper.
(3) The Corporation may indemnify any person who is or was an employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise to the extent and under the
circumstances provided by paragraphs 1 and 2 of this Article NINTH with respect
to a person who is or was a director or officer of the Corporation.
(4) Any indemnification under paragraph 1, 2 or 3 of this Article NINTH
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth therein. Such determination shall be
made (a) by the Board of Directors by a majority vote of a quorum (as defined
in the by-laws of the Corporation) consisting of directors who were not parties
to such action, suit or proceeding, or (b) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by the stockholders.
(5) Expenses (including attorneys' fees) incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding if authorized in the
specific case by a preliminary determination following one of the procedures set
forth in the next preceding paragraph that there is a reasonable basis for a
belief that the director, officer, employee or agent met the applicable standard
of conduct set forth in paragraph 1 or 2 of this Article NINTH upon receipt of
an undertaking by or on behalf of the director, officer, employee or agent
reasonably assuring that such amount will be repaid unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article NINTH.
(6) The indemnification provided by this Article NINTH shall not be deemed
exlusive of any other rights to which those seeking indemnification may be
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(7) By action of its Board of Directors, notwithstanding any interest of
the directors in the action, the Corporation may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate, on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or of any corporation a majority of the voting stock of which
is owned by the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, 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 Corporation would have the power or
would be required to indemnify him against such liability under the provisions
of this Article NINTH or of the General Corporation Law of the State of
Maryland.
TENTH. No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association or other organization of which one or more of its
directors or officers are directors, officers or employees or in which one or
more of its directors or officers have a financial interest, as the holder of
anyamount of its capital stock or otherwise, shall be void or voidable or
otherwise affected for this reason or because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction or solely because his or
their votes are counted for such purpose; provided, however, that in any such
case the facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee thereof and the Board of Directors or committee in good faith
specifically authorizes the contract or transaction, or the facts as to his
relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon and the contract
or transaction is specifically approved in good faith by vote of the
stockholders.
ELEVENTH. No holder of shares of stock of any class or any other securities,
whether now or hereafter authorized, shall be entitled as a matter of right to
subscribe for or purchase or receive any stock of any class or any securities
convertible into shares of stock of any class, or to any right of subscription
to, or to any warrant or option for the purchase of, any thereof other than such
(if any) as the Board of Directors, in its discretion, may determine from time
to time; and any stock or other securities which the Board of Directors may
determine to offer for subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any class, series or
type of stock or other securities at the time outstanding to the exclusion of
the holders of any or all other classes, series or types of stock or other
securities at the time outstanding.
TWELFTH. Notwithstanding any provision of law requiring a greater proportion
than a majority of the votes of all classes or of any class of stock entitled to
be cast to take or authorize any action, the Corporation may take or authorize
such action upon the concurrence of a majority of the aggregate number of the
votes entitled to be cast thereon.
THIRTEENTH. The Corporation reserves the right from time to time to amend,
alter, change or repeal any provision contained in these Articles of
Incorporation, including any provision setting forth the terms or rights of any
of its capital stock, in the manner now or hereafter authorized by statute, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the undersigned incorporator of REPUBLIC NEW YORK
CORPORATION has signed these Articles of Incorporation this 20th day of
September, 1973.
/s/ Stephen E. Gilhuley
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ARTICLES OF MERGER
MERGING
KINGS LAFAYETTE CORPORATION
(a Corporation of the State of New York)
INTO
REPUBLIC NEW YORK CORPORATION
(a Corporation of the State of Maryland)
FIRST. Kings Lafayette Corporation, a corporation organized and existing
under the laws of the State of New York ("KLC") , and Republic New York
Corporation, a corporation organized and existing under the laws of the State
of Maryland ("RNYC") , agree that KLC shall be merged into RNYC. The terms
and conditions of the merger and the mode of carrying the same into effect are
as herein set forth in these Articles of Merger.
SECOND. RNYC, a corporation organized and existing under the laws of the
State of Maryland, shall survive the merger and shall continue under the name
Republic New York Corporation.
THIRD. The parties to these Articles of Merger are RNYC, a corporation
organized and existing under the laws of the State of Maryland, and KLC, a
corporation incorporated on the 13th day of August, 1968, under the Business
Corporation Law of the State of New York.
FOURTH. The Articles of Incorporation of RNYC as in effect immediately prior
to the merger shall be the Articles of Incorporation of the surviving
corporation.
FIFTH. The total number of shares of stock of all classes which KLC has
authority to issue is Two Million (2,000,000) shares of common stock of the
par value of $1.00 per share, of the aggregate par value of Two Million
Dollars ($2,000,000).
The total number of shares of stock of all classes which RNYC has
authority to issue is Twelve Million (12,000,000) shares divided into Two
Million (2,000,000) shares of preferred stock without par value and Ten
Million (10,000,000) shares of common stock of the par value of $5.00 per
share, of the aggregate par value of Fifty Million Dollars ($50,000,000).
SIXTH. The manner and basis of converting and exchanging the issued stock of
the merged corporations into stock of the surviving corporation shall be as
follows:
(a) Each outstanding share of common stock of the par value of $5.00
per share of RNYC shall continue to be one (1) share of common stock of the
surviving corporation.
(b) Each outstanding share of common stock of the par value of $1.00
per share of KLC shall be converted into one and one-tenth (1.1) shares of
common stock of the surviving corporation.
(c) After the effective date of the merger, outstanding certificates
evidencing shares of common stock of the par value of $1.00 per share of KLC
(herein sometimes referred to as the "old certificates") shall evidence only
the right of the holder thereof either (i) to receive certificates for
shares of common stock of the surviving corporation at the applicable rate
aforesaid upon surrender of the old certificates as hereinafter provided, or
(ii) to pursue his remedies as a dissenting shareholder as provided in the
Business Corporation Law of the State of New York. Upon the merger becoming
effective, the surviving corporation will deliver to Manufacturers Hanover
Trust Company, as Exchange Agent, a certificate or certificates for the
aggregate number of shares of common stock of the surviving corporation to
which the shareholders of KLC shall be entitled determined as provided herein.
Each shareholder of KLC, other than a dissenting shareholder who exercises his
rights as such, upon surrender of his old certificates to, and acceptance
thereof by, the Exchange Agent on behalf of the surviving corporation, will
promptly receive in exchange therefor a certificate or certificates for the
number of whole shares of common stock of the surviving corporation to which
he is entitled pursuant hereto. No fractional shares of common stock of the
surviving corporation and no scrip or fractional share certificate therefor
shall be required to be issued or delivered hereunder, and no right to vote or
to receive any dividend or other distribution or any other right of a
stockholder shall attach to any fractional interest in a share of common stock
of the surviving corporation to which any shareholder of KLC is entitled
hereunder. In lieu thereof, there shall be paid to each shareholder of KLC
who would otherwise be entitled to a fractional share of common stock of the
surviving corporation, upon surrender and acceptance of his old certificates,
a cash adjustment in respect of his fractional interest on the basis of the
closing price regular way of common stock of the surviving corporation on the
New York or American Stock Exchange on the first trading day on such exchange
after the effective date of the merger. Upon such surrender and acceptance,
each shareholder of KLC will promptly receive payment of any cash dividend on,
and delivery of a certificate or certificates evidencing any shares issuable
as a result of any stock dividend or split in respect of, the common stock of
the surviving corporation into which his KLC shares were converted by virtue
of the merger to the extent that such dividend or stock split was payable or
issuable to stockholders of record of the surviving corporation on a date on
or after the merger became effective. The Exchange Agent shall not be
entitled to vote or exercise any other rights of ownership with respect to the
shares of common stock of the surviving
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corporation held by it from time to time, except that it shall receive and
hold all dividends and other distributions paid or distributed with respect to
such shares for the account of the persons entitled to receive the same.
SEVENTH. The principal office of RNYC in the State of Maryland is located in
the city of Baltimore, State of Maryland. KLC does not own property in any
county of the State of Maryland title to which could be affected by the
recording of an instrument among The Land Records.
EIGHTH. These Articles of Merger were duly advised by the Board of Directors
of RNYC by the adoption on October 16, 1973 of a resolution declaring that the
merger herein proposed was advisable substantially on the terms and conditions
set forth in these Articles of Merger subject to approval by the stockholders
of RNYC and were duly approved by the holders of all the issued and
outstanding shares of common stock of RNYC, the only class of stock of RNYC
outstanding and entitled to vote thereon, in the manner and by the vote
required by the Articles of Incorporation of RNYC by a written consent given
in accordance with the provisions of Section 47 of Article 23 of the Annotated
Code of Maryland, and filed with RNYC.
NINTH. The merger to be effected by these Articles of Merger was duly
advised and authorized and approved by KLC in the manner and by the vote
required by the laws of the State of New York and by the charter of KLC.
TENTH. The following other provisions are deemed necessary to effect the
merger:
(a) Upon the effective date of the merger, the By-Laws of the surviving
corporation shall be the By-Laws of RNYC as in effect on such date until the
same shall thereafter be altered, amended or repealed in accordance with law,
its Articles of Incorporation and such By-Laws.
(b) The directors of the surviving corporation upon the merger becoming
effective shall be the following persons:
Albert S. Corwen Theodore W. Kheel
John T. DePalma William C. MacMillen, Jr.
Cyril S. Dwek Wilbur M. Rabinowitz
Morris N. Hirsch Albert Rubenstein
Ronald O. Gilbert Peter White
(c) All of the obligations of RNYC under these Articles of Merger are
subject to the fulfillment, prior to or on the effective date of the merger,
of each of the conditions set forth in Section 12 of the Bank Merger Agreement
dated as of October 16, 1973 between Republic National Bank of New York
("RNB") , Kings Lafayette Bank and Republic Bank, National Association, joined
in by KLC and RNYC (the "Bank Merger Agreement").
(d) All of the obligations of KLC under these Articles of Merger are
subject to the fulfillment, prior to or on the effective date of the merger,
of each of the conditions set forth in Section 13 of the Bank Merger
Agreement.
(e) If the Agreement dated as of October 16, 1973 between RNB and KLC
(the "Agreement") shall have been terminated pursuant to Section 7 thereof,
these Articles of Merger may be terminated at any time before the merger
becomes effective by written notice by RNYC or KLC to the other, authorized
and approved by a resolution adopted by a majority of the entire Board of
Directors of the party giving such notice. Upon termination as provided in
this Article, these Articles of Merger shall be void and of no further effect
and there shall be no liability by reason of these Articles of Merger or the
termination thereof on the part of either RNYC, KLC or the directors,
officers, employees, agents or stockholders or shareholders of either of them,
except as provided in Section 1(f) of the Agreement.
(f) Prior to the effective date of the merger, KLC will arrange with
RNYC for an escrow account to be established with RNYC, such account to
consist of cash or property of KLC and to be used by RNYC as escrow agent to
pay dissenting shareholders of KLC and all other expenses and liabilities of
KLC as of the effective date of the merger. Any balance remaining in such
account after payment of such expenses and payment to dissenting shareholders
of KLC shall be paid to RNYC.
IN WITNESS WHEREOF, Republic New York Corporation and Kings Lafayette
Corporation, the corporations parties to the merger, have caused these
Articles of Merger to be signed in their respective corporate names and on
their behalf by their respective Presidents and the respective corporate seals
to be hereunto affixed and attested by their respective Secretaries as of 16th
day of May, l974.
REPUBLIC NEW YORK CORPORATION
[CORPORATE SEAL] By: /s/ Peter White
(President)
Attest:
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CONFORMED COPY 1.7.74
/s/ Ernest Ginsberg
(Secretary)
KINGS LAFAYETTE CORPORATION
[CORPORATE SEAL] By: /s/ John T. DePalma
(President)
Attest:
/s/ Margaret B. Bowes
(Assistant Secretary)
THE UNDERSIGNED, President of Republic New York Corporation, who executed on
behalf of said corporation the foregoing Articles of Merger, of which this
Certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Merger to be the corporate act of
said corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
/s/ Peter White
THE UNDERSIGNED,President of Kings Lafayette Corporation, who executed on
behalf of said corporation the foregoing Articles of Merger, of which this
Certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles of Merger to be the corporate act of
said corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
/s/ John T. DePalma
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REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation") , hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out the
first paragraph of Article FIFTH of the Articles of Incorporation and
inserting in lieu thereof the following:
"FIFTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is TWELVE MILLION
(12,000,000) shares, of which TWO MILLION (2,000,000) shares shall be
shares of Preferred Stock without par value (hereinafter called
"Preferred Stock") , and TEN MILLION (10,000,000) shares shall be
shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per
share (hereinafter called "Common Stock") having an aggregate par value
of FIFTY MILLION DOLLARS ($50,000,000)."
SECOND: By unanimous written consent pursuant to Section 58 of Article 23 of
the Annotated Code of Maryland, the Board of Directors of the Corporation on
April 2, 1974, duly adopted a resolution in which was set forth the foregoing
amendment to the charter, declaring that said amendment of the charter as
proposed was advisable and directing that it be submitted for action thereon
by the Stockholders of the Corporation at a Special Meeting of Stockholders.
THIRD: Notice setting forth the said amendment of the charter and stating
that a purpose of the meeting of the Stockholders would be to take action
thereon, was duly waived pursuant to Section 46 of Article 23 of the Annotated
Code of Maryland by all Stockholders entitled to vote thereon. The amendment
of the charter of the Corporation as hereinabove set forth was approved by the
Stockholders of the Corporation at a Special Meeting held on April 4, 1974, by
affirmative vote of two-thirds of all the votes entitled to be cast thereon.
FOURTH: The amendment of the charter of the Corporation as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
Stockholders of the Corporation.
FIFTH: (a) The total number of shares of all classes of stock which the
Corporation was heretofore authorized to issue is Two Thousand (2,000)
shares, divided into One Thousand (1,000) shares of Preferred Stock without
par value and One Thousand (1,000) shares of Common Stock with the par
value of Five Dollars ($5.00) per share having an aggregate par value of
Five Thousand Dollars ($5,000) .
(b) The total number of shares of all classes of stock is increased by
this amendment to Twelve Million (12,000,000) shares, divided into Two
Million (2,000,000) shares of Preferred Stock without par value and Ten
Million (10,000,000) shares of Common Stock of the par value of Five Dollars
($5.00) per share having an aggregate par value of Fifty Million Dollars
($50,000,000).
(c) A description of each class of stock of the Corporation with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, and qualifications, of each class of the
authorized capital stock as increased, is set forth in the charter of the
Corporation.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its President and by its Secretary
on April 4, 1974.
REPUBLIC NEW YORK CORPORATION
By: /s/ Peter White
(President)
Attest:
/s/ Ernest Ginsberg
(Secretary)
THE UNDERSIGNED, President of REPUBLIC NEW YORK CORPORATION, who executed on
behalf of said Corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles of Amendment to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
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CONFORMED COPY 4.4.74
/s/ Peter White
(President)
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the charter of the Corporation, the Board
of Directors has duly divided and classified 2,000,000 shares of the Preferred
Stock of the Corporation into a series designated $2.125 Cumulative Preferred
Stock and has provided for the issuance of such series.
SECOND: The terms of the $2.125 Cumulative Preferred Stock as set by the
Board of Directors are as follows:
1. $2.125 Cumulative Preferred Stock: 2,000,000 shares of Preferred
Stock of the Corporation, without par value, are hereby constituted as the
original number of shares of a series of Preferred Stock designated as $2.125
Cumulative Preferred Stock (hereinafter sometimes called the "Series A
Stock"). The term "Articles of Incorporation" when used herein shall include
all articles or certificates filed pursuant to law with respect to any series
of the Preferred Stock.
2. Dividends: The holders of the Series A Stock shall be entitled to
receive, but only when and as declared by the Board of Directors out of funds
legally available for the purpose, cash dividends at the rate of $2.125 per
share per annum, and no more, payable quarterly on the first day of January,
April, July and October of each year. Such dividends shall be payable from,
and shall be cumulative from, the date of original issue of each share, so
that if in any quarterly dividend period (being the period between such
dividend payment dates) dividends at the rate of $2.125 per share per annum
shall not have been declared and paid or set apart for payment on all
outstanding shares of Series A Stock for such quarterly dividend period and
all preceding quarterly dividend periods from and after the first day from
which dividends are cumulative, then the aggregate deficiency shall be
declared and fully paid or set apart for payment, but without interest, before
(i) any dividends or other distributions (excluding dividends paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Common Stock of the Corporation) shall be declared and paid or set apart for
payment on the Common Stock or on any other capital stock of the Corporation
ranking junior to the Series A Stock with respect to the payment of dividends,
or (ii) the Corporation shall purchase, redeem or otherwise acquire any
shares of Preferred Stock or any shares of capital stock of the Corporation
ranking on a parity with or junior to the Series A Stock with respect to the
payment of dividends.
3. Voting Rights: (i) The holders of the Series A Stock shall have
the voting power and rights set forth and referred to in this paragraph 3 and
in paragraph 7, and shall have no other voting power or rights except as
otherwise from time to time required by law.
(ii) Whenever dividends on the Series A Stock shall be unpaid as a
whole or in part for six consecutive dividend periods, then at the annual
meeting of stockholders next following omission of the sixth successive
dividend or any part thereof and at any annual meeting thereafter and at any
meeting called for the election of Directors, until all dividends accumulated
on the Series A Stock have been paid or declared and a sum sufficient for
payment has been set aside, the holders of the Series A Stock, either alone or
together with the holders of one or more other cumulative series of the
Preferred Stock at the time outstanding which are granted such voting right,
voting as a class, shall be entitled, to the exclusion of the holders of one
or more other series or classes of stock, to vote for and elect two members of
the Board of Directors of the Corporation, and the holders of Common Stock
together with the holders of any series or class or classes of stock of the
Corporation having general voting rights and not then entitled to elect two
members of the Board of Directors pursuant to this paragraph 3 to the
exclusion of the holders of all series then so entitled, shall be entitled to
vote and elect the balance of the Board of Directors. In such case the Board
of Directors of the Corporation shall, as of the date of the annual meeting
of stockholders aforesaid, be increased by two Directors. The rights of the
Series A Stock to participate (either alone or together with the holders of
one or more other cumulative series of Preferred Stock at the time outstanding
which are granted such voting right) in the exclusive election of two members
of the Board of Directors of the Corporation pursuant to this paragraph 3
shall continue in effect until cumulative dividends have been paid in full or
declared and set apart for payment on the Series A Stock. At elections for
such Directors, each holder of Series A Stock shall be entitled to one vote
for each share held. The holders of Series A Stock shall have no right to
cumulate such shares in voting for the election of Directors. At the annual
meeting of stockholders, next following the termination (by reason of the
payment of all accumulated and defaulted dividends on such stock or provision
for the payment thereof by declaration and setting apart thereof) of the
exclusive voting power pursuant to this paragraph 3 of the holders of Series A
Stock and the holders of all other cumulative series which shall have been
entitled to vote for and elect such two members of the Board of Directors of
the Corporation, the terms of office of all persons who may have been elected
Directors of the Corporation by vote of such holders shall terminate and the
two vacancies created pursuant to this paragraph 3 to accommodate the
exclusive right of election conferred hereunder shall thereupon be eliminated
and the Board of Directors shall be decreased by two Directors.
(iii) So long as any shares of Series A Stock remain outstanding,
the consent of the holders of at least two-thirds of the shares of the Series
A Stock outstanding at the time given in person or by proxy, either in writing
or at any special or annual meeting called for the purpose, shall be necessary
to permit, effect or validate any one or more of the following:
(a) The authorization, creation or issuance, or any
increase in the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as that term
is defined in paragraph 5) to the Series A Stock, or
(b) The authorization , creation or issuance of any class
or series of stock (including any class or series of Preferred Stock) which
ranks on a parity with the Series A Stock unless the Articles Supplementary or
other provisions of the charter creating or authorizing such class or series
shall provide that if in any case the stated dividends or amounts payable on
liquidation are not paid in full on the Series A Stock and all outstanding
shares of stock ranking on a parity (as that term is defined in paragraph 5)
with the Series A Stock (the Series A Stock and all such other stock being
herein called "Parity Stock"), the shares of all Parity Stock shall share
ratably in the payment of dividends, including accumulations (if any) in
accordance with the sums which would be payable on all Parity Stock if all
dividends in respect of all shares of Parity Stock were paid in full, and on
any distribution of assets upon liquidation ratably in accordance with the
sums which would be payable in respect of all shares of Parity Stock if all
sums payable were discharged in full, or
(c) The amendment, alteration or repeal, whether by
merger, consolidation or otherwise, of any of the provisions of the charter of
the Corporation including these Articles Supplementary which would materially
and adversely affect any right, preference, privilege or voting power of the
Series A Stock or of the holders thereof; provided, however, that any increase
in the amount of authorized Preferred Stock or Series A Stock or the creation
and issuance of other series of Preferred Stock, in each case ranking on a
parity with or junior to the Series A Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, shall not be deemed
to materially and adversely affect such rights, preferences, privileges or
voting powers.
The foregoing voting provision shall not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of the Series A Stock
shall have been redeemed or sufficient funds shall have been deposited in
trust in accordance with paragraph 5 to effect such redemption.
4. Liquidation: Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Series A
Stock shall have preference and priority over the Common Stock for payment out
of the assets of the Corporation or proceeds thereof, whether from capital or
surplus, of $25 per share (the "liquidation value") together with the amount
of any dividends accrued and unpaid thereon, and after such payment the holders
of Series A Stock shall be entitled to no other payments. If, in such case, the
assets of the Corporation or proceeds thereof shall
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be insufficient to make the full liquidating payment of $25 per share and
accrued and unpaid dividends on the Series A Stock and liquidating payments on
any other outstanding series of Parity Stock (including accrued and unpaid
dividends, if any), then such assets and proceeds shall be distributed among
the holders of the Series A Stock and any other outstanding series of Parity
Stock ratably in accordance with the respective amounts which would be payable
on all series of Parity Stock (including accrued and unpaid dividends, if any)
if all such liquidating amounts payable were paid in full. A consolidation or
merger of the Corporation with or into any other corporation or corporations
or a sale, whether for cash, shares of stock, securities or properties, of all
or substantially all or any part of the assets of the Corporation shall not be
deemed or construed to be a liquidation, dissolution or winding up of the
Corporation.
5. Redemption: Subject to the restriction set forth in the next
paragraph, the Series A Stock may be redeemed, at the option of the
Corporation, as a whole or in part, at any time or from time to time, at the
following optional redemption prices (but not less than $25 per share) during
the 12 months' period ending September 30 of the years indicated below, in
each case plus accrued and unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C>
1978 .. $27.125 1983 .. $26.594 1988 .. $26.063 1993 .. $25.531
1979 .. 27.019 1984 .. 26.488 1989 .. 25.956 1994 .. 25.425
1980 .. 26.913 1985 .. 26.381 1990 .. 25.850 1995 .. 25.319
1981 .. 26.806 1986 .. 26.275 1991 .. 25.744 1996 .. 25.213
1982 .. 26.700 1987 .. 26.169 1992 .. 25.638 1997 .. 25.106
and thereafter
at $25.00
</TABLE>
The Corporation, however, shall not have the right under this paragraph 5
to redeem any of the Series A Stock as part of a refunding operation prior to
October 1, 1982 by the application of moneys borrowed or from proceeds from
the sale of stock ranking prior to or on a parity with, as to dividends or the
distribution of assets upon liquidation, the Series A Stock, if such moneys
borrowed have an annual interest cost to the Corporation (calculated without
any consideration of income tax effect), or such stock has a dividend cost to
the Corporation (so calculated), less than the annual dividend rate of the
Series A Stock. Any class or classes of stock of the Corporation shall be
deemed to rank
(i) prior to the Series A Stock as to dividends or as to
distribution of assets if the holders of such class shall be entitled to
the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority
to the holders of the Series A Stock; and
(ii) on a parity with the Series A Stock as to dividends or as to
distribution of assets, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof be
different from those of the Series A Stock, if the holders of such class
of stock and the Series A Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority one
over the other.
The Series A Stock is also subject to redemption and may be redeemed
on and after October 1, 1988, through the operation of the Sinking Fund as
hereinafter provided in paragraph 6.
At the option of the Corporation, shares of Series A Stock redeemed
or otherwise acquired (including sinking fund acquisitions) may be restored to
the status of authorized but unissued shares of Preferred Stock.
In the case of any redemption, the Corporation shall give notice of
such redemption to the holders of the Series A Stock to be redeemed in the
following manner: a notice specifying the shares to be redeemed and the time
and place of redemption (and, if less than the total outstanding shares are to
be redeemed, specifying the certificate numbers and number of shares to be
redeemed) shall be mailed by first class mail, addressed to the holders of
record of the Series A Stock to be redeemed at their respective addresses as
the same shall appear upon the books of the Corporation, not more than 60 days
and not less than 30 days previous to the date fixed for redemption. In the
event such notice is not given to any stockholder such failure to give notice
shall not affect the notice given to other stockholders. If less than the
whole amount of outstanding Series A Stock is to be redeemed, the shares to be
redeemed shall be selected by lot or pro rata in any manner determined by
resolution of the Board of Directors to be fair and proper. From and after
the date fixed in any such notice as the date of redemption (unless default
shall be made by the Corporation in providing moneys at the time and place of
redemption for the payment of the redemption price) all dividends upon the
Series A Stock so called for redemption shall cease to accrue, and all rights
of the holders of said Series A Stock as stockholders in the Corporation,
except the right to receive the redemption price plus dividends accrued and
unpaid to the date of redemption (without interest) upon surrender of the
certificate representing the Series A Stock so called for redemption, duly
endorsed for transfer, if required, shall cease and terminate. The
Corporation's obligation to provide moneys in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the redemption date, the
Corporation shall deposit with a bank or trust company (which may be an
affiliate of the Corporation) having an office in the Borough of Manhattan,
City of New York, having a capital and surplus of at least $50,000,000, funds
necessary for such redemption, in trust, with irrevocable instructions that
such funds be applied to the redemption of the shares of Series A Stock so
called for redemption. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any funds so deposited and unclaimed at
the end of 6 years from such redemption date shall be released or repaid to
the Corporation, after which the holders of such shares of Series A Stock so
called for redemption shall look only to the Corporation for payment of the
redemption price.
6. Sinking Fund: As and for a sinking fund for the redemption of the
Series A Stock, the Corporation shall set aside in trust, when and as
appropriated by the Board of Directors out of funds legally available for the
purpose, on or before the next business day preceding October 1 in each of the
years 1988 to 2007, inclusive, as a sinking fund payment, an amount in cash
sufficient to redeem on each such October 1, 100,000 shares of Series A
Stock; each such sinking fund payment shall (and, at the Corporation's option,
each additional sinking fund payment provided for by the second succeeding
sentence may) be applied on October 1 to the redemption of Series A Stock at
the redemption price of $25 per share, plus an amount equal to the dividends
accrued and unpaid on such shares to the date of redemption. The sinking fund
payments provided for in the preceding sentence shall be cumulative.
Concurrently with the making of each annual sinking fund payment provided for
in the next preceding sentence, the Corporation may, at its option, make an
additional payment in cash (the "Additional Payment") sufficient to redeem up
to an additional 100,000 shares of Series A Stock at the redemption price of
$25 per share plus accrued and unpaid dividends to the date of redemption; the
right of the Corporation to make such an Additional Payment in each year shall
be non-cumulative and to the extent not exercised in any year shall terminate.
Any sinking fund payments required by the first sentence of this paragraph 6
shall be subject to decrease, at the election of the Corporation, by the
application in satisfaction of all or part of such sinking fund payment of
shares of Series A Stock theretofore redeemed either pursuant to paragraph 5
or pursuant to any Additional Payment or otherwise acquired by the
Corporation, provided such shares have not been applied in reduction of any
prior sinking fund payment.
Notice of redemption, the manner of selection of shares to be redeemed
and the effect of depositing in trust funds for the redemption of such shares
shall be as set forth in paragraph 5.
If the Board of Directors should for any reason fail to appropriate
sinking fund payments for 100,000 shares in each year starting in 1988 (or
otherwise redeem 100,000 shares annually by crediting shares voluntarily
redeemed or otherwise acquired) then the Board of Directors may not thereafter
(i) pay any dividends or make any other distribution (excluding dividends
paid in shares of, or options, warrants or rights to subscribe for or purchase
shares of, Common Stock of the Corporation) on the Common Stock or any other
capital stock of the Corporation ranking on a parity with or junior to the
Series A Stock with respect to the payment of dividends or the distribution of
assets on liquidation or (ii) purchase, redeem or otherwise acquire any
shares of capital stock of the Corporation ranking junior to the Series A
Stock with respect to the payment of dividends or the distribution of assets
on liquidation.
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CONFORMED COPY 10.11.77
7. Limitation on Merger and Sale of Assets and on Disposition of the
Voting Stock of the Bank: So long as any shares of Series A Stock remain
outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least a majority of the votes of all Parity Stock
entitled to vote outstanding at the time, given in person or by proxy, either
in writing or by resolution adopted at a meeting at which the holders of
Series A Stock (alone or together with the holders of one or more other series
of Parity Stock at the time outstanding and entitled to vote) vote separately
as a class, (a) directly or indirectly, sell, transfer or otherwise dispose
of, or permit Republic National Bank of New York (the "Bank") or any other
subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose
of any shares of voting stock of the Bank, or securities convertible into or
options, warrants or rights to acquire voting stock of the Bank, unless after
giving effect to any such transaction the Bank remains a Controlled Subsidiary
(as hereinafter defined) of the Corporation or of a Qualified Successor
Company (as hereinafter defined); (b) merge or consolidate with, or convey
substantially all of its assets to any person or corporation unless the entity
surviving such merger or consolidation is the Corporation or a Qualified
Successor Company or the transferee of such assets is a Qualified Successor
Company; or (c) permit the Bank to merge, consolidate with, or convey
substantially all of its assets to any person or corporation unless the entity
surviving such merger or consolidation or the transferee of such assets is a
Controlled Subsidiary of the Corporation or of a Qualified Successor Company,
except in each case as may be required to comply with applicable law,
including without limitation any court or regulatory order. The term
"Qualified Successor Company" shall mean a corporation (or other similar
organization or entity whether organized under or pursuant to the laws of the
United States or any state thereof or of another jurisdiction) which (i) is
or is required to be a registered bank holding company under the United States
Bank Holding Company Act of 1956, as amended, or any successor legislation,
(ii) issues to the holders of the Series A Stock in exchange for the Series A
Stock shares of preferred stock having at least the same relative rights and
preferences as the Series A Stock (the "Exchanged Stock"), (iii) immediately
after such transaction has not outstanding or authorized any class of stock or
equity securities ranking prior to the Exchanged Stock with respect to the
payment of dividends or the distribution of assets upon liquidation, and (iv)
holds, as a Controlled Subsidiary or Subsidiaries either the Bank or one or
more other banking corporations which, collectively, immediately after such
transaction hold substantially all of the assets and liabilities which the
Bank held immediately prior to such transaction (which may be in addition to
other assets and liabilities acquired in such transaction). "Controlled
Subsidiary" shall mean any corporation at least 80% of the outstanding shares
of voting stock of which shall at the time be owned directly or indirectly by
the Corporation or a Qualified Successor Company. In connection with the
exercise of the voting rights contained in this paragraph 7, holders of all
series of Parity Stock which are granted such voting rights (of which the
Series A Stock is the initial series) shall vote as a class, and each holder
of Series A Stock shall have one vote for each share of stock held and each
other series shall have such number of votes, if any, for each share of stock
held as may be granted to them.
The foregoing voting provisions will not apply if, in connection with the
matter specified, provision is made for the redemption or retirement of all
outstanding Series
A Stock.
8. Parity Stock: So long as any shares of Series A Stock shall remain
outstanding, in case the stated dividends or amounts payable on liquidation
are not paid in full with respect to all outstanding shares of Parity Stock,
all such shares shall share ratably in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be payable in
respect of all outstanding shares of Parity Stock if all dividends were paid
in full, and in any distribution of assets upon liquidation, ratably in
accordance with the sums which would be payable in respect of all outstanding
Parity Stock if all sums payable were discharged in full.
9. For the Purposes Hereof:
(i) The term "outstanding", when used in reference to shares of stock,
shall mean issued shares, excluding shares held by the Corporation and shares
called for redemption pursuant to either paragraph 5 or paragraph 6, funds for
the redemption of which shall have been deposited in trust pursuant to either
paragraph 5 or paragraph 6.
(ii) The amount of dividends "accrued" on any share of Series A Stock as
at any quarterly dividend payment date shall be deemed to be the amount of any
unpaid dividends accumulated thereon to and including the end of the day
preceding such quarterly dividend date, whether or not earned or declared; and
the amount of dividends "accrued" on any share of Series A Stock as at any
date other than a quarterly dividend payment date shall be calculated as the
amount of any unpaid dividends accumulated thereon to and including the end of
the day preceding the last preceding quarterly dividend payment date, whether
or not earned or declared, plus an amount equivalent to dividends on the
liquidation value of such share at the annual dividend rate fixed for such
share for the period after the end of the day preceding such last preceding
quarterly dividend payment date to and including the date as of which the
calculation is made.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary, and the
said officers of the Corporation further acknowledged said instrument to be
the corporate act of the Corporation and stated under the penalties of perjury
that to the best of their knowledge, information and belief the matters and
facts therein set forth with respect to approval are true in all material
respects, all on October 6, 1977.
REPUBLIC NEW YORK CORPORATION
By: /s/ Peter White
Attest: (President)
/s/ Ernest Ginsberg
(Secretary)
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CONFORMED COPY 4.24.78
REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out the
first paragraph of Article FIFTH of the Articles of Incorporation and
inserting in lieu there of the following:
"FIFTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is SEVENTEEN MILLION
(17,000,000) shares of which SEVEN MILLION (7,000,000) shares shall be
shares of Preferred Stock without par value (hereinafter called
"Preferred Stock") , and TEN MILLION (10,000,000) shares shall be
shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per
share (hereinafter called "Common Stock") having an aggregate par value
of FIFTY MILLION DOLLARS ($50,000,000)."
SECOND: The Board of Directors of the Corporation on January 17, 1978 at a
duly convened meeting thereof duly adopted a resolution in which was set forth
the foregoing amendment to the charter, declaring that said amendment of the
charter as proposed was advisable and directing that it be submitted for
action thereon by the Stockholders of the Corporation at the Annual Meeting
thereof to be held on April 20, 1978.
THIRD: Notice setting forth the said amendment of the charter and stating
that a purpose of the Annual Meeting of the Stockholders would be to take
action thereon, was duly given pursuant to Section 2-504 of the Corporations
and Associations Article of the Annotated Code of Maryland to all Stockholders
entitled to vote thereon. The amendment of the charter of the Corporation as
hereinabove set forth was approved by the Stockholders of the Corporation at
the Annual Meeting held on April 20, 1978, by affirmative vote of two-thirds
of all the votes entitled to be cast thereon.
FOURTH: The amendment of the charter of the Corporation as hereinabove set
forth has been duly advised by the Board of Directors and approved by the
Stockholders of the Corporation.
FIFTH: (a) As of immediately before this amendment, the total number of
shares of all classes of stock which the Corporation was authorized to issue
is Twelve Million (12,000,000) shares, divided into Two Million (2,000,000)
shares of Preferred Stock without par value and Ten Million (10,000,000)
shares of Common Stock with the par value of Five Dollars ($5.00) per share
having an aggregate par value of Fifty Million Dollars ($50,000,000).
(b) As amended, the total number of shares of all classes of stock
which the Corporation has authority to issue is Seventeen Million (17,000,000)
shares, divided into Seven Million (7,000,000) shares of Preferred Stock
without par value and Ten Million (10,000,000) shares of Common Stock of the
par value of Five Dollars ($5.00) per share having an aggregate par value of
Fifty Million Dollars ($50,000,000).
(c) A description of each class of stock of the Corporation with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualification and terms and conditions of
redemption, of each class of the authorized capital stock as increased, is set
forth in the charter of the Corporation, and such description has not been
changed by the amendment of the charter of the Corporation herein set forth.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to
be signed in its name and on its behalf by its President and witnessed by its
Secretary on April 20, 1978.
REPUBLIC NEW YORK CORPORATION
By: /s/ Peter White
(President)
Witnessed:
/s/ Ernest Ginsberg
(Secretary)
THE UNDERSIGNED, President of REPUBLIC NEW YORK CORPORATION, who executed on
behalf of said Corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles of Amendment to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
/s/ Peter White
(President)
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CONFORMED COPY 8.1.80
REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out the
first paragraph of Article FIFTH of the Articles of Incorporation and
inserting in lieu thereof the following
"FIFTH. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is FIFTY-SEVEN MILLION
(57,000,000) shares, of which SEVEN MILLION (7,000,000) shares shall be
shares of Preferred Stock without par value (hereinafter called
"Preferred Stock") , and FIFTY MILLION (50,000,000) shares shall be
shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share
(hereinafter called "Common Stock") having an aggregate par value of TWO
HUNDRED FIFTY MILLION DOLLARS ($250,000,000)".
SECOND: The Board of Directors of the Corporation, by unanimous written
consent dated July 10, 1980, duly adopted a resolution in which was set forth
the foregoing amendment to the charter, declaring that said amendment of the
charter as proposed was advisable and directing that it be submitted for
action thereon by the Stockholders of the Corporation at a Special Meeting
thereof to be held on August 1, 1980.
THIRD: Notice, setting forth the said amendment of the charter and stating
that the purpose of the Special Meeting of the Stockholders, called thereby,
would be to take action thereon, was duly given pursuant to Section 2-504 of
the Corporation and Associations Articles of the Annotated Code of Maryland to
all Stockholders entitled to vote thereon. The amendment of the charter of
the Corporation as hereinabove set forth was approved by the Stockholders of
the Corporation at a Special Meeting held on August 1, 1980, by affirmative
vote of a majority of all the votes entitled to be cast thereon as permitted
by the charter of the Corporation.
FOURTH: (a) As of immediately before this amendment, the total shares of all
classes of stock which the Corporation was authorized to issue is Seventeen
Million (17,000,000) shares, divided into Seven Million (7,000,000) shares of
Preferred Stock without par value and Ten Million (10,000,000) shares of
Common Stock with the par value of Five Dollars ($5.00) per share having an
aggregate par value of Fifty Million Dollars ($50,000,000).
(b) As amended, the total number of shares of all classes of stock
which the Corporation has authority to issue is Fifty-seven Million
(57,000,000) shares, divided into Seven Million (7,000,000) shares of
Preferred Stock without par value and Fifty Million (50,000,000) shares of
Common Stock of the par value of Five Dollars ($5.00) per share having an
aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000).
(c) A description of each class of stock of the Corporation with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualification and terms and conditions of
redemption, of each class of the authorized capital stock as increased, is set
forth in the charter of the Corporation, and such description has not been
changed by the amendment of the charter of the Corporation herein set forth.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to
be signed in its name and on its behalf by a Senior Vice President and
witnessed by an Assistant Secretary on August 1, 1980.
REPUBLIC NEW YORK CORPORATION
By: /s/ Ernest Ginsberg
(Senior Vice President)
Witnessed:
/s/ William F. Rosenblum Jr.
(Assistant Secretary)
THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who
executed on behalf of said Corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
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CONFORMED COPY 8.1.80
/s/ Ernest Ginsberg
(Senior Vice President)
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CONFORMED COPY 9.9.80
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the charter of the Corporation, the Board
of Directors has duly divided and classified 1,000,000 shares of the Preferred
Stock of the Corporation into a series designated $3.125 Cumulative Preferred
Stock and has provided for the issuance of such series.
SECOND: The terms of the $3.125 Cumulative Preferred Stock as set by the
Finance Committee of the Board of Directors pursuant to authority duly
delegated by the Board of Directors are as follows:
1. $3.125 Cumulative Preferred Stock: 1,000,000 shares of Preferred
Stock of the Corporation, without par value, are hereby constituted as the
original number of shares of a series of Preferred Stock designated as $3.125
Cumulative Preferred Stock (hereinafter sometimes called the "Series B
Stock"). The term "Articles of Incorporation" when used herein shall include
all articles or certificates filed pursuant to law with respect to any series
of the Preferred Stock.
2. Dividends: The holders of the Series B Stock shall be entitled to
receive, but only when and as declared by the Board of Directors out of funds
legally available for the purpose, cash dividends at the rate of $3.125 per
share per annum, and no more, payable quarterly on the first day of January,
April, July and October of each year, with the first such dividend being
payable January 1, 1981. Such dividends shall be payable from, and shall be
cumulative from, the date of original issue of each share, so that if in any
quarterly dividend period (being the period between such dividend payment
dates or, in the case of the first such period, from the date of original
issue to January 1, 1981) dividends at the rate of $3.125 per share per annum
shall not have been paid or declared and set apart for payment on all
outstanding shares of Series B Stock for such quarterly dividend period and
all preceding quarterly dividend periods from and after the first day from
which dividends are cumulative, then the aggregate deficiency shall be
declared and fully paid or set apart for payment, but without interest, before
(i) any dividends or other distributions (excluding dividends paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Common Stock of the Corporation) shall be declared and paid or set apart for
payment on the Common Stock or on any other capital stock of the Corporation
ranking junior to the Series B Stock with respect to the payment of dividends,
or (ii) the Corporation shall purchase, redeem or otherwise acquire any
shares of Preferred Stock or any shares of capital stock of the Corporation
ranking on a parity with or junior to the Series B Stock with respect to the
payment of dividends; provided , however, that any moneys set aside in trust
as a sinking fund payment for any series of Preferred Stock pursuant to the
resolutions providing for the issue of shares of such series may thereafter be
applied to the purchase or redemption of Preferred Stock of such series
whether or not at the time of such application full cumulative dividends upon
the outstanding Series B Stock shall have been paid or declared and set apart
for payment.
3. Voting Rights: (i) The holders of the Series B Stock shall have
the voting power and rights set forth and referred to in this paragraph 3 and
in paragraph 6, and shall have no other voting power or rights except as
otherwise from time to time required by law.
(ii) Whenever dividends on the Series B Stock shall be unpaid as a
whole or in part for six consecutive quarterly dividend periods, then at the
annual meeting of stockholders next following omission of the sixth successive
quarterly dividend or any part thereof and at any annual meeting thereafter
and at any meeting called for the election of Directors, until all dividends
accumulated on the Series B Stock have been paid or declared and a sum
sufficient for payment has been set aside, the holders of the Series B Stock,
either alone or together with the holders of one or more other cumulative
series of the Preferred Stock at the time outstanding which are granted such
voting rights, voting as a class, shall be entitled, to the exclusion of the
holders of one or more other series or classes of stock having general voting
rights, to vote for and elect two members of the Board of Directors of the
Corporation, and the holders of Common Stock together with the holders of any
series or class or classes of stock of the Corporation having general voting
rights and not then entitled to elect two members of the Board of Directors
pursuant to this paragraph 3 to the exclusion of the holders of all series
then so entitled, shall be entitled to vote and elect the balance of the Board
of Directors. In such case the Board of Directors of the Corporation shall,
as of the date of the annual meeting of stockholders aforesaid, be increased
by two Directors. The rights of the Series B Stock to participate (either
alone or together with the holders of one or more other cumulative series of
Preferred Stock at the time outstanding which are granted such voting rights)
in the exclusive election of two members of the Board of Directors of the
Corporation pursuant to this paragraph 3 shall continue in effect until
cumulative dividends have been paid in full or declared and set apart for
payment on the Series B Stock. At elections for such Directors, each holder
of Series B Stock shall be entitled to one vote for each share held. The
holders of Series B Stock shall have no right to cumulate such shares in
voting for the election of Directors. At the annual meeting of stockholders,
next following the termination (by reason of the payment of all accumulated
and defaulted dividends on such stock or provision for the payment thereof by
declaration and setting apart thereof) of the exclusive voting power pursuant
to this paragraph 3 of the holders of Series B Stock and the holders of all
other cumulative series which shall have been entitled to vote for and elect
such two members of the Board of Directors of the Corporation, the terms of
office of all persons who may have been elected Directors of the Corporation
by vote of such holders shall terminate and the two vacancies created pursuant
to this paragraph 3 to accommodate the exclusive right of election conferred
hereunder shall thereupon be eliminated and the Board of Directors shall be
decreased by two Directors.
(iii) So long as any shares of Series B Stock remain outstanding,
the affirmative vote or consent of the holders of at least two-thirds of the
shares of the Series B Stock outstanding at the time given in person or by
proxy, either in writing or at any special or annual meeting called for the
purpose, shall be necessary to permit, effect or validate any one or more of
the following:
(a) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) ranking prior (as that term is defined
in paragraph 5) to the Series B Stock, or
(b) The authorization , creation or issuance of any class or
series of stock (including any class or series of Preferred Stock) which ranks
on a parity with the Series B Stock unless the Articles Supplementary or other
provisions of the charter creating or authorizing such class or series shall
provide that if in any case the stated dividends or amounts payable on
liquidation are not paid in full on the Series B Stock and all outstanding
shares of stock ranking on a parity (as that term is defined in paragraph 5)
with the Series B Stock (the Series B Stock and all such other stock being
herein called "Parity Stock"), the shares of all Parity Stock shall share
ratably in the payment of dividends, including accumulations (if any) in
accordance with the sums which would be payable on all Parity Stock if all
dividends in respect of all shares of Parity Stock were paid in full, and on
any distribution of assets upon liquidation ratably in accordance with the
sums which would be payable in respect of all shares of Parity Stock if all
sums payable were discharged in full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the charter of the
Corporation including these Articles Supplementary which would materially and
adversely affect any right, preference, privilege or voting power of the
Series B Stock or of the holders thereof; provided, however, that any increase
in the amount of authorized Preferred Stock, the Corporation's $2.125
Cumulative Preferred Stock or the Series B Stock or the creation and issuance
of other series of Preferred Stock, in each case ranking on a parity with or
junior to the Series B Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, shall not be deemed to affect
materially and adversely such rights, preferences, privileges or voting
powers.
The foregoing voting provisions shall not apply if, at or prior
to the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of the Series B Stock shall
have been redeemed or sufficient funds shall have been deposited in trust in
accordance with paragraph 5 to effect such redemption.
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CONFORMED COPY 9.9.80
4. Liquidation: Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Series B
Stock shall have preference and priority over the Common Stock for payment out
of the assets of the Corporation or proceeds thereof, whether from capital or
surplus, of $25 per share (the "liquidation value") together with the amount
of any dividends accrued and unpaid thereon, and after such payment the
holders of Series B Stock shall be entitled to no other payments. If, in such
case, the assets of the Corporation or proceeds thereof shall be insufficient
to make the full liquidating payment of $25 per share and accrued and unpaid
dividends on the Series B Stock and liquidating payments on any other
outstanding series of Parity Stock (including accrued and unpaid dividends, if
any), then such assets and proceeds shall be distributed among the holders of
the Series B Stock and any other outstanding series of Parity Stock ratably in
accordance with the respective amounts which would be payable on all series of
Parity Stock (including accrued and unpaid dividends, if any) if all such
liquidating amounts payable were paid in full. A consolidation or merger of
the Corporation with or into any other corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the Corporation shall not be
deemed or construed to be a liquidation, dissolution or winding up of the
Corporation.
5. Redemption: Subject to the restriction set forth in the next
paragraph, the Series B Stock may be redeemed, at the option of the
Corporation, as a whole or in part, at any time or from time to time, at the
following optional redemption prices (but not less than $25 per share) during
the 12 month period ending September 30 in the years indicated below, in each
case plus accrued and unpaid dividends to the date of redemption:
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C> <C>
1981 .. $28.13 1986 .. $27.34 1991 .. $26.56 1996 .. $25.78
1982 .. 27.97 1987 .. 27.19 1992 .. 26.41 1997 .. 25.63
1983 .. 27.81 1988 .. 27.03 1993 .. 26.25 1998 .. 25.47
1984 .. 27.66 1989 .. 26.88 1994 .. 26.09 1999 .. 25.31
1985 .. 27.50 1990 .. 26.72 1995 .. 25.94 2000 .. 25.16
and thereafter
at $25.00
</TABLE>
The Corporation, however, shall not have the right under this
paragraph 5 to redeem any of the Series B Stock as part of a refunding
operation prior to October 1, 1985 by the application of moneys borrowed or
from proceeds from the sale of stock ranking prior to or on a parity with, as
to dividends or the distribution of assets upon liquidation, the Series B
Stock, if such moneys borrowed have an annual interest cost to the Corporation
(calculated without any consideration of income tax effect), or such stock has
a dividend cost to the Corporation (so calculated), less than the annual
dividend rate of the Series B Stock. Any class or classes of stock of the
Corporation shall be deemed to rank
(i) prior to the Series B Stock as to dividends or as to
distribution of assets if the holders of such class shall be
entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of the Series B Stock; and
(ii) on a parity with the Series B Stock as to dividends
or as to distribution of assets, whether or not the dividend rates,
dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of the Series B Stock, if the
holders of such class of stock and the Series B Stock shall be
entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation
prices, without preference or priority one over the other.
At the option of the Corporation, shares of Series B Stock redeemed
or otherwise acquired may be restored to the status of authorized but unissued
shares of Preferred Stock.
In the case of any redemption, the Corporation shall give notice of
such redemption to the holders of Series B Stock to be redeemed in the
following manner: a notice specifying the shares to be redeemed and the time
and place of redemption (and, if less than the total outstanding shares to be
redeemed, specifying the certificate numbers and number of shares to be
redeemed) shall be mailed by first class mail, addressed to the holders of
record of the Series B Stock to be redeemed at their respective addresses as
the same shall appear upon the books of the Corporation, not more than 60 days
and not less than 30 days previous to the date fixed for redemption. In the
event such notice is not given to any stockholder such failure to give notice
shall not affect the notice given to other stockholders. If less than the
whole amount of outstanding Series B Stock is to be redeemed, the shares to be
redeemed shall be selected by lot or pro rata in any manner determined by
resolution of the Board of Directors to be fair and proper. From and after
the date fixed in any such notice as the date of redemption (unless default
shall be made by the Corporation in providing moneys at the time and place of
redemption for the payment of the redemption price), all dividends upon the
Series B Stock so called for redemption shall cease to accrue, and all rights
of the holders of said Series B Stock as stockholders in the Corporation,
except the right to receive the redemption price plus dividends accrued and
unpaid to the date of redemption (without interest) upon surrender of the
certificate representing the Series B Stock so called for redemption, duly
endorsed for transfer, if required, shall cease and terminate. The
Corporation's obligation to provide moneys in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the redemption date, the
Corporation shall deposit with a bank or trust company (which may be an
affiliate of the Corporation) having an office in the Borough of Manhattan,
City of New York, having a capital and surplus of at least $50,000,000, funds
necessary for such redemption, in trust, with irrevocable instructions that
such funds be applied to the redemption of the shares of Series B Stock so
called for redemption. Any interest accrued on such funds shall be paid to
the Corporation from time to time. Any funds so deposited and unclaimed at
the end of 6 years from such redemption date shall be released or repaid to
the Corporation, after which the holders of such shares of Series B Stock so
called for redemption shall look only to the Corporation for payment of the
redemption price.
6. Limitation on Merger and Sale of Assets and on Disposition of the
Voting Stock of the Bank: So long as any shares of Series B Stock remain
outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least a majority of the votes of all Parity Stock
entitled to vote outstanding at the time, given in person or by proxy, either
in writing or by resolution adopted at a meeting at which the holders of
series B Stock (alone or together with the holders of one or more other series
of Parity Stock at the time outstanding and entitled to vote) vote separately
as a class, (a) directly or indirectly, sell, transfer or otherwise dispose
of, or permit Republic National Bank of New York (the "Bank") or any other
subsidiary of the Corporation, to issue, sell, transfer or otherwise dispose
of any shares of voting stock of the Bank, or securities convertible into or
options, warrants or rights to acquire voting stock of the Bank, unless after
giving effect to any such transaction the Bank remains a Controlled Subsidiary
(as hereinafter defined) of the Corporation or of a Qualified Successor
Company (as hereinafter defined); (b) merge or consolidate with, or convey
substantially all of its assets to any person or corporation unless the entity
surviving such merger or consolidation is the Corporation or a Qualified
Successor Company; or (c) permit the Bank to merge, consolidate with, or
convey substantially all of its assets to any person or corporation unless the
entity surviving such merger or consolidation or the transferee of such assets
is a Controlled Subsidiary of the Corporation or of a Qualified Successor
Company, except in any of the foregoing cases as required to comply with
applicable law, including, without limitation, any court or regulatory order.
The term "Qualified Successor Company" shall mean a corporation (or other
similar organization or entity whether organized under or pursuant to the laws
of the United States or any state thereof or of another jurisdiction) which
(i) is or is required to be a registered bank holding company under the
United States Bank Holding Company Act of 1956, as amended, or any successor
legislation, (ii) issues to the holders of the Series B Stock in exchange
for the Series B Stock shares of preferred stock having at least the same
relative rights and preferences as the Series B Stock (the "Exchanged Stock"),
(iii) immediately after such transaction has not outstanding or authorized
any class of stock or equity securities ranking prior to the Exchanged Stock
with respect to the payment of dividends or the distribution of assets upon
liquidation, and (iv) holds, as a Controlled Subsidiary or Subsidiaries,
either the Bank or one or more other banking corporations which, collectively,
immediately after such transaction hold substantially all of the assets and
liabilities which the Bank held immediately prior to such transaction (which
may be in addition to other assets and liabilities acquired in such
transaction). "Controlled Subsidiary" shall mean any corporation at least 80%
of the outstanding shares of voting stock of which shall at the time be owned
directly or indirectly by the Corporation or a Qualified Successor Company.
In connection with the exercise of the voting rights contained in this
paragraph 6, holders of all series of Parity Stock which are granted such
voting rights (of which the
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Series B Stock is the second series) shall vote as a class, and each holder
of Series B Stock shall have one vote for each share of stock held and each
other series shall have such number of votes, if any, for each share of stock
held as may be granted them.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of the Series B Stock shall have
been redeemed or sufficient funds shall have been deposited in trust in
accordance with paragraph 5 to effect such redemption.
7. Parity Stock: So long as any shares of Series B Stock shall remain
outstanding, in case the stated dividends or amounts payable on liquidation
are not paid in full with respect to all outstanding shares of Parity Stock,
all such shares shall share ratably in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be payable in
respect of all outstanding shares of Parity Stock if all dividends were paid
in full, and in any distribution of assets upon liquidation, ratably in
accordance with the sums which would be payable in respect of all outstanding
Parity Stock if all sums payable were discharged in full.
8. For the Purposes Hereof:
(i) The term "outstanding", when used in reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation and
shares called for redemption pursuant to paragraph 5, funds for redemption of
which shall have been deposited in trust pursuant to paragraph 5.
(ii) The amount of dividends "accrued" on any share of Series B
Stock as at any quarterly dividend payment date shall be deemed to be the
amount of any unpaid dividends accumulated thereon to and including the end
of the day preceding such quarterly dividend date, whether or not earned or
declared; and the amount of dividends "accrued" on any share of Series B Stock
as at any date other than a quarterly dividend payment date shall be
calculated as the amount of any unpaid dividends accumulated thereon to and
including the end of the day preceding the last preceding quarterly dividend
payment date, whether or not earned or declared, plus an amount equivalent to
dividends on the liquidation value of such share at the annual dividend rate
fixed for such share for the period after the end of the day preceding such
last preceding quarterly dividend payment date to and including the date as of
which the calculation is made.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary, and the
said officers of the Corporation further acknowledge said instrument to be the
corporate act of the Corporation and state under the penalties of perjury that
to the best of their knowledge, information and belief the matters and facts
therein set forth with respect to approval are true in all material respects,
all on September 5,1980.
REPUBLIC NEW YORK CORPORATION
By: /s/ Walter H. Weiner
Attest: (President)
/s/ Ernest Ginsberg
(Secretary)
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REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out the
first paragraph of Article FIFTH of the Articles of Incorporation and
inserting in lieu thereof the following:
"FIFTH. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is SIXTY-FIVE MILLION
(65,000,000) shares, of which FIFTEEN MILLION (15,000,000) shares shall
be shares of Preferred Stock without par value (hereinafter called
"Preferred Stock") , and FIFTY MILLION (50,000,000) shares shall be
shares of Common Stock of the par value of FIVE DOLLARS ($5.00) per share
(hereinafter called "Common Stock") having an aggregate par value of TWO
HUNDRED FIFTY MILLION DOLLARS ($250,000,000)".
SECOND: The Board of Directors of the Corporation, at a meeting held on
January 21, 1981, duly adopted a resolution in which was set forth the
foregoing amendment to the charter, declaring that said amendment of the
charter as proposed was advisable and directing that it be submitted for
action thereon by the Stockholders of the Corporation at the Annual Meeting
thereof to be held on April 22, 1981.
THIRD: Notice, setting forth the said amendment of the charter and stating
that the purpose of the Annual Meeting of the Stockholders, called thereby,
would be to take action thereon, was duly given pursuant to Section 2-504 of
the Corporation and Associations Articles of the Annotated Code of Maryland to
all Stockholders entitled to vote thereon. The amendment of the charter of
the Corporation as hereinabove set forth was approved by the Stockholders of
the Corporation at the Annual Meeting held on April 22, 1981, by affirmative
vote of a majority of all the votes entitled to be cast thereon as permitted
by the charter of the Corporation.
FOURTH: (a) As of immediately before this amendment, the total shares of all
classes of stock which the Corporation was authorized to issue is Fifty-Seven
Million (57,000,000) shares, divided into Seven Million (7,000,000) shares of
Preferred Stock without par value and Fifty Million (50,000,000) shares of
Common Stock with the par value of Five Dollars ($5.00) per share having an
aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000).
(b) As amended, the total number of shares of all classes of stock
which the Corporation has authority to issue is Sixty-Five Million
(65,000,000) shares, divided into Fifteen Million (15,000,000) shares of
Preferred Stock without par value and Fifty Million (50,000,000) shares of
Common Stock of the par value of Five Dollars ($5.00) per share having an
aggregate par value of Two Hundred Fifty Million Dollars ($250,000,000).
(c) A description of each class of stock of the Corporation with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualification and terms and conditions of
redemption, of each class of the authorized capital stock as increased, is set
forth in the charter of the Corporation, and such description has not been
changed by the amendment of the charter of the Corporation herein set forth.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to
be signed in its name and on its behalf by a Senior Vice President and
witnessed by an Assistant Secretary on April 22, 1981.
REPUBLIC NEW YORK CORPORATION
By: /s/ Ernest Ginsberg
(Senior Vice President)
Witnessed:
/s/ Laurence R. Stern
(Assistant Secretary)
THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who
executed on behalf of said Corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
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/s/ Ernest Ginsberg
(Senior Vice President)
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CONFORMED COPY 5.19.82
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the charter of the Corporation, the Board
of Directors has duly divided and classified 1,500,000 shares of the Preferred
Stock of the Corporation into a series designated Cumulative Preferred Stock,
Floating Rate Series A, and has provided for the issuance of such series.
SECOND: The terms of the Cumulative Preferred Stock, Floating Rate Series A,
as set by the Finance Committee of the Board of Directors pursuant to
authority duly delegated by the Board of Directors are as follows:
1. Cumulative Preferred Stock Floating Rate Series A: 1,500,000 shares
of Preferred Stock of the Corporation, without par value, are hereby
constituted as the original number of shares of a series of Preferred Stock
designated as Cumulative Preferred Stock,Floating Rate Series A (hereinafter
sometimes called the "Floating Rate Series A Stock"). The Floating Rate Series
A Stock shall be of a stated value of $50 per share (the "stated value"). The
term "Articles of Incorporation" when used herein shall include all articles
or certificates filed pursuant to law with respect to any series of the
Preferred Stock.
2. Dividends: Dividend rates on the shares of Floating Rate Series A
Stock shall be: (i) for the period (the "Initial Dividend Period") from the
date of their original issue to and including June 30, 1982, at a rate per
annum of the stated value thereof equal to 14 1/2%, and (ii) for each
quarterly dividend period (hereinafter referred to as a "Quarterly Dividend
Period"; and the Initial Dividend Period or any Quarterly Dividend Period
being hereinafter individually referred to as a "Dividend Period" and
collectively referred to as "Dividend Periods") thereafter, which quarterly
dividend periods shall commence on January 1, April 1, July 1 and October 1 in
each year and shall end on and include the day next preceding the first day of
the next quarterly dividend period, at a rate per annum of the stated value
thereof equal to .75% above the Applicable Rate (as defined in paragraph 3) in
respect of such quarterly dividend period; provided, however, that the
dividend rate per annum on the shares of Floating Rate Series A Stock for any
Quarterly Dividend Period shall in no event be less than 8% per annum or
greater than 16 1/2% per annum. Such dividends shall be cumulative from the
date of original issue of such shares and shall be payable, when and as
declared by the Board of Directors, on the first day of January, April, July
and October of each year, commencing July 1, 1982. If in any Dividend Period
dividends shall not have been paid or declared and set apart for payment on
all outstanding shares of Floating Rate Series A Stock for such Dividend
Period and for all preceding Dividend Periods from and after the first day
from which dividends are cumulative at the respective rates per annum
specified for such Dividend Periods in the second preceding sentence, then the
aggregate deficiency shall be declared and fully paid or set apart for
payment, but without interest, before (i) any dividends or other
distributions (excluding dividends paid in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the
Corporation) shall be declared and paid or set apart for payment on the Common
Stock or on any other capital stock of the Corporation ranking junior to the
Floating Rate Series A Stock with respect to the payment of dividends, or (ii)
the Corporation shall purchase, redeem or otherwise acquire any shares of
Preferred Stock or any shares of capital stock of the Corporation ranking on a
parity with or junior to the Floating Rate Series A Stock with respect to the
payment of dividends; provided , however, that any moneys set aside in trust
as a sinking fund payment for any series of Preferred Stock pursuant to the
resolutions providing for the issue of shares of such series may thereafter be
applied to the purchase or redemption of Preferred Stock of such series
whether or not at the time of such application full cumulative dividends upon
the outstanding Floating Rate Series A Stock shall have been paid or declared
and set apart for payment.
3. Definition of Applicable Rate, etc.: The "Applicable Rate" for any
Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason
(i) any one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Twenty Year Constant Maturity Rate cannot be determined
for any Quarterly Dividend Period, then the Applicable Rate for such Dividend
Period shall be the higher of whichever two of such Rates can be so
determined;
(ii) either only the Treasury Bill Rate or only the Ten Year
Constant Maturity Rate or only the Twenty Year Constant Maturity Rate can be
determined for any Quarterly Dividend Period, then the Applicable Rate for
such Dividend Period shall be whichever such Rate can be so determined; or
(iii) neither the Treasury Bill Rate nor the Ten Year Constant
Maturity Rate nor the Twenty Year Constant Maturity Rate can be determined for
any Quarterly Dividend Period, then the Applicable Rate in effect for the
preceding Dividend Period shall be continued for such Dividend Period.
Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period as defined below) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board during the Calendar
Period immediately prior to the last ten calendar days of March, June,
September or December, as the case may be, prior to the Quarterly Dividend
Period for which the dividend rate on the Floating Rate Series A Stock is
being determined. In the event that the Federal Reserve Board does not
publish such a weekly per annum market discount rate during such Calendar
Period, then the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if only one such rate
shall be published during the relevant Calendar Period) for three-month U.S.
Treasury bills, as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum market discount rate for three-
month U.S. Treasury bills shall not be published by the Federal Reserve Board
or by any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during the relevant Calendar Period) for
all of the U.S. Treasury bills then having maturities of not less that 80 nor
more than 100 days, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such rates,
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that the Corporation determines in
good faith that for any reason no such U.S. Treasury bill rates are published
as provided above during such Calendar Period, then the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business day in New York City
(or less frequently if daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as provided above in
this paragraph, the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a maturity of not less than 80
nor more than 100 days from the date of each such quotation, as quoted daily
for each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the Corporation by at least three
recognized U.S. Government securities dealers selected by the Corporation.
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Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately prior to the last
ten calendar days of March, June, September or December, as the case may be,
prior to the Quarterly Dividend Period for which the dividend rate on the
Floating rate Series A Stock is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten Year Constant Maturity
Rate for such Dividend period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields, (or the one weekly per annum
Ten Year Average Yield, if only one such Yield shall be published during the
relevant Calendar Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that a per annum Ten Year Average
Yield shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during the relevant Calendar Period)
for all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities (as defined below)) then having
maturities of not less than eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Corporation. In the
event that the Corporation determines in good faith that for any reason the
Corporation cannot determine the Ten Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph, then the Ten
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall
not be generally available) to the Corporation by at least three recognized
U.S. Government securities dealers selected by the Corporation.
Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield
shall be published during the relevant Calendar Period), as published weekly
by the Federal Reserve Board during the Calendar Period immediately prior to
the last ten calendar days of March, June, September or December, as the case
may be, prior to the Quarterly Dividend Period for which the dividend rate on
the Floating Rate Series A Stock is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Twenty Year
Average Yield during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum Twenty Year Average Yields (or the one weekly
per annum Twenty Year Average Yield, if only one such Yield shall be published
during the relevant Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that a per annum Twenty Year
Average Yield shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during
such Calendar Period, then the Twenty Year Constant Maturity Rate for such
Dividend Period shall be the arithmetic average of the two most recent weekly
per annum average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having
maturities of not less than eighteen nor more than twenty-two years, as
published during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the Corporation cannot determine the Twenty Year Constant
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than eighteen nor more than twenty-two years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
The amount of dividends payable for each Quarterly Dividend Period shall
be computed by annualizing the dividend rate for such Dividend Period and
dividing by four. The amount of dividends payable for the Initial Dividend
Period or any Dividend Period shorter than a full Quarterly Dividend Period
shall be computed on the basis of 30-day months, a 360-day year and the actual
number of days elapsed in such Dividend Period.
The dividend rate with respect to each Quarterly Dividend Period will be
calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of the Floating Rate Series A Stock.
For purposes of this Section, the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the
option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally issued at a
deep or substantial discount;
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of 20 years).
4. Voting Rights: (i) The holders of the Floating Rate Series A Stock
shall have the voting power and rights set forth and referred to in this
paragraph 4 and in paragraph 7, and shall have no other voting power or rights
except as otherwise from time to time required by law.
(ii) Whenever dividends on the Floating Rate Series A Stock shall
be unpaid as a whole or in part for six consecutive Dividend periods, then at
the annual meeting of stockholders next following omission of the sixth
successive quarterly dividend or any part thereof and at any annual meeting
thereafter and at any meeting called for the election of Directors, until all
dividends accumulated on the Floating Rate Series A Stock have been paid or
declared and a sum sufficient for payment has been set aside, the holders of
the Floating Rate Series A Stock, either alone or together with the holders of
one or more other cumulative series of the Preferred Stock at the time
outstanding which are granted such voting rights, voting as a class, shall be
entitled, to the exclusion of the holders of one or more other series or
classes of stock having general voting rights, to vote for and elect two
members of the Board of Directors of the Corporation, and the holders of
Common Stock together with the holders of any series or class or classes of
stock of the Corporation having general voting rights and not then entitled to
elect two members of the Board of Directors pursuant to this paragraph 4 to
the exclusion of the holders of all series then so entitled, shall be entitled
to vote and elect the balance of the Board of Directors. In such case the
Board of Directors of the Corporation shall, as of the date of the annual
meeting of stockholders aforesaid, be increased by two Directors. The rights
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of holders of Floating Rate Series A Stock to participate (either alone or
together with the holders of one or more other cumulative series of Preferred
Stock at the time outstanding which are granted such voting rights) in the
exclusive election of two members of the Board of Directors of the Corporation
pursuant to this paragraph 4 shall continue in effect until cumulative
dividends have been paid in full or declared and set apart for payment on the
Floating Rate Series A Stock. At elections for such Directors, each holder of
the Floating Rate Series A Stock shall be entitled to one vote for each share
held. The holders of Floating Rate Series A Stock shall have no right to
cumulate such shares in voting for the election of Directors. At the annual
meeting of stockholders, next following the termination (by reason of the
payment of all accumulated and defaulted dividends on such stock or provision
for the payment thereof by declaration and setting apart thereof) of the
exclusive voting power pursuant to this paragraph 4 of the holders of Floating
Rate Series A Stock and the holders of all other cumulative series which shall
have been entitled to vote for and elect such two members of the Board of
Directors of the Corporation, the terms of office of all persons who may have
been elected Directors of the Corporation by vote of such holders shall
terminate and the two vacancies created pursuant to this paragraph 4 to
accommodate the exclusive right of election conferred hereunder shall
thereupon be eliminated and the Board of Directors shall be decreased by two
Directors.
(iii) So long as any shares of Floating Rate Series A Stock remain
outstanding, the affirmative vote or consent of the holders of at least two-
thirds of the shares of Floating Rate Series A Stock outstanding at the time
given in person or by proxy, either in writing or at any special or annual
meeting called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(a) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) ranking prior (as that term is defined
below in this paragraph 4) to the Floating Rate Series A Stock, or
(b) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) which ranks on a parity with the
Floating Rate Series A Stock unless the Articles Supplementary or other
provisions of the charter creating or authorizing such class or series shall
provide that if in any case the stated dividends or amounts payable on
liquidation are not paid in full on the Floating Rate Series A Stock and all
outstanding shares of stock ranking on a parity (as that term is defined below
in this paragraph 4) with the Floating Rate Series A Stock (the Floating Rate
Series A Stock and all such other stock being herein called "Parity Stock"),
the shares of all Parity Stock shall share ratably in the payment of
dividends, including accumulations (if any) in accordance with the sums which
would be payable on all Parity Stock if all dividends in respect of all shares
of Parity Stock were paid in full, and on any distribution of assets upon
liquidation ratably in accordance with the sums which would be payable in
respect of all shares of Parity Stock if all sums payable were discharged in
full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the charter of the
Corporation including these Articles Supplementary which would materially and
adversely affect any right, preference, privilege or voting power of the
Floating Rate Series A Stock or of the holders thereof; provided, however,
that any increase in the amount of authorized Preferred Stock, the
Corporation's $2.125 Cumulative Preferred Stock or $3.125 Cumulative Preferred
Stock or the Floating Rate Series A Stock or the creation and issuance of
other series of Preferred Stock, in each case ranking on a parity with or
junior to the Floating Rate Series A Stock with respect to the payment of
dividends and the distribution of assets upon liquidation, shall not be deemed
to affect materially and adversely such rights, preferences, privileges or
voting powers.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of the Floating Rate Series A Stock
shall have been redeemed or sufficient funds shall have been deposited in
trust in accordance with paragraph 6 to effect such redemption.
Any class or classes of stock of the Corporation shall be deemed to rank
(i) prior to the Floating Rate Series A Stock as to dividends
or as to distribution of assets if the holders of such class shall
be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of Floating Rate Series A
Stock; and
(ii) on a parity with the Floating Rate Series A Stock as to
dividends or as to distribution of assets, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation
prices per share thereof be different from those of the Floating
Rate Series A Stock, if the holders of such class of stock and the
Floating Rate Series A stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority
one over the other.
5. Liquidation: Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Floating
Rate Series A Stock shall have preference and priority over the Common Stock
for payment out of the assets of the Corporation or proceeds thereof, whether
from capital or surplus, of $50 per share together with the amount of any
dividends accrued and unpaid thereon, and after such payment the holders of
Floating Rate Series A Stock shall be entitled to no other payments. If, in
such case, the assets of the Corporation or proceeds thereof shall be
insufficient to make the full liquidating payment of $50 per share and accrued
and unpaid dividends on the Floating Rate Series A Stock and liquidating
payments on any other outstanding series of Parity Stock (including accrued
and unpaid dividends, if any), then such assets and proceeds shall be
distributed among the holders of the Floating Rate Series A Stock and any
other outstanding series of Parity Stock ratably in accordance with the
respective amounts which would be payable on all series of Parity Stock
(including accrued and unpaid dividends, if any) if all such liquidating
amounts payable were paid in full. A consolidation or merger of the
Corporation with or into any other corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the Corporation shall not be
deemed or construed to be a liquidation, dissolution or winding up of the
Corporation.
6. Redemption: The shares of Floating Rate Series A Stock may not
be redeemed prior to May 1, 1987. From May 1, 1987 through and including
April 30, 1992, the Floating Rate Series A Stock may be redeemed, at the
option of the Corporation, as a whole or in part, at any time or from time to
time, at a redemption price equal to $51.50 per share plus accrued and unpaid
dividends to the date of redemption. After April 30, 1992, the Floating Rate
Series A Stock may be redeemed, at the option of the Corporation, as a whole
or in part, at any time or from time to time, at a redemption price equal to
the stated value per share plus accrued and unpaid dividends to the date of
redemption.
At the option of the Corporation, shares of Floating Rate Series A Stock
redeemed or otherwise acquired may be restored to the status of authorized but
unissued shares of Preferred Stock.
In the case of any redemption, the Corporation shall give notice of
such redemption to the holders of Floating Rate Series A Stock to be redeemed
in the following manner: a notice specifying the shares to be redeemed and
the time and place of redemption (and, if less than the total outstanding
shares are to be redeemed, specifying the certificate numbers and number of
shares to be redeemed) shall be mailed by first class mail, addressed to the
holders of record of the Floating Rate Series A Stock to be redeemed at their
respective addresses as the same shall appear upon the books of the
Corporation, not more than 60 days and not less than 30 days previous to the
date fixed for redemption. In the event such notice is not given to any
stockholder such failure to give notice shall not affect the notice given to
other stockholders. If less than the whole amount of outstanding Floating
Rate Series A Stock is to be redeemed, the shares to be redeemed shall be
selected by lot or pro rata in any manner determined by resolution of the
Board of Directors to be fair and proper. From and after the date fixed in
any such notice as the date of redemption (unless default shall be made by the
Corporation in providing moneys at the time and place of redemption for the
payment of the redemption price), all dividends upon the Floating Rate Series
A Stock so called for redemption shall cease to accrue, and all rights of the
holders of said Floating Rate Series A Stock as stockholders in the
Corporation, except the right to receive the redemption price plus dividends
accrued and unpaid to the date of redemption (without interest) upon
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CONFORMED COPY 5.19.82
surrender of the certificate representing the Floating Rate Series A Stock so
called for redemption, duly endorsed for transfer, if required, shall cease
and terminate. The Corporation's obligation to provide moneys in accordance
with the preceding sentence shall be deemed fulfilled if, on or before the
redemption date, the Corporation shall deposit with a bank or trust company
(which may be an affiliate of the Corporation) having an office in the Borough
of Manhattan, City of New York, having a capital and surplus of at least
$50,000,000, funds necessary for such redemption, in trust, with irrevocable
instructions that such funds be applied to the redemption of the shares of
Floating Rate Series A Stock so called for redemption. Any interest accrued
on such funds shall be paid to the Corporation from time to time. Any funds
so deposited and unclaimed at the end of 6 years from such redemption date
shall be released or repaid to the Corporation, after which the holders of
such shares of Floating Rate Series A Stock so called for redemption shall
look only to the Corporation for payment of the redemption price.
7. Limitation on Merger and Sale of Assets and on Disposition of the
Voting Stock of the Bank: So long as any shares of Floating Rate Series A
Stock remain outstanding, the Corporation shall not, without the affirmative
vote or consent of the holders of at least a majority of the votes of all
Parity Stock entitled to vote outstanding at the time, given in person or by
proxy, either in writing or by resolution adopted at a meeting at which the
holders of Floating Rate Series A Stock (alone or together with the holders of
one or more other series of Parity Stock at the time outstanding and entitled
to vote) vote separately as a class, (a) directly or indirectly, sell,
transfer or otherwise dispose of, or permit Republic National Bank of New York
(the "Bank") or any other subsidiary of the Corporation, to issue, sell,
transfer or otherwise dispose of any shares of voting stock of the Bank, or
securities convertible into or options, warrants or rights to acquire voting
stock of the Bank, unless after giving effect to any such transaction the Bank
remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or
of a Qualified Successor Company (as hereinafter defined); (b) merge or
consolidate with, or convey substantially all of its assets to any person or
corporation unless the entity surviving such merger or consolidation or the
transferee of such assets is the Corporation or a Qualified Successor Company;
or (c) permit the Bank to merge, consolidate with, or convey substantially
all of its assets to any person or corporation unless the entity surviving
such merger or consolidation or the transferee of such assets is a Controlled
Subsidiary of the Corporation or of a Qualified Successor Company, except in
any of the foregoing cases as required to comply with applicable law,
including, without limitation, any court or regulatory order. The term
"Qualified Successor Company" shall mean a corporation (or other similar
organization or entity whether organized under or pursuant to the laws of the
United States or any state thereof or of another jurisdiction) which (i) is
or is required to be a registered bank holding company under the United States
Bank Holding Company Act of 1956, as amended, or any successor legislation,
(ii) issues to the holders of the Floating Rate Series A Stock in exchange
for the Floating Rate Series A Stock shares of preferred stock having at least
the same relative rights and preferences as the Floating Rate Series A Stock
(the "Exchanged Stock"), (iii) immediately after such transaction has not
outstanding or authorized any class of stock or equity securities ranking
prior to the Exchanged Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, and (iv) holds, as a Controlled
Subsidiary or Subsidiaries, either the Bank or one or more other banking
corporations which, collectively, immediately after such transaction hold
substantially all of the assets and liabilities which the Bank held
immediately prior to such transaction (which may be in addition to other
assets and liabilities acquired in such transaction). "Controlled Subsidiary"
shall mean any corporation at least 80% of the outstanding shares of voting
stock of which shall at the time be owned directly or indirectly by the
Corporation or a Qualified Successor Company. In connection with the exercise
of the voting rights contained in this paragraph 7, holders of all series of
Parity Stock which are granted such voting rights (of which the Floating Rate
Series A Stock is the third series) shall vote as a class, and each holder of
Floating Rate Series A Stock shall have one vote for each share of stock held
and each other series shall have such number of votes, if any, for each share
of stock held as may be granted them.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of the Floating Rate Series A Stock
shall have been redeemed or sufficient funds shall have been deposited in
trust in accordance with paragraph 6 to effect such redemption.
8. Parity Stock: So long as any shares of Floating Rate Series A Stock
shall remain outstanding, in case the stated dividends or amounts payable on
liquidation are not paid in full with respect to all outstanding shares of
Parity Stock, all such shares shall share ratably in the payment of dividends,
including accumulations (if any) in accordance with the sums which would be
payable in respect of all outstanding shares of Parity Stock if all dividends
in respect of all such shares of Parity Stock were paid in full, and on any
distribution of assets upon liquidation, ratably in accordance with the sums
which would be payable in respect of all outstanding Parity Stock if all sums
payable were discharged in full.
9. For the Purposes Hereof:
(i) The term "outstanding", when used in reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation and
shares called for redemption pursuant to paragraph 6, funds for redemption of
which shall have been deposited in trust pursuant to paragraph 6.
(ii) The amount of dividends "accrued" on any share of Floating
Rate Series A Stock as at any quarterly dividend payment date shall be deemed
to be the amount of any unpaid dividends accumulated thereon to and including
the end of the day preceding such quarterly dividend date, whether or not
earned or declared; and the amount of dividends "accrued" on any share of
Floating Rate Series A Stock as at any date other than a quarterly dividend
payment date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the end of the day preceding the last
preceding quarterly dividend payment date, whether or not earned or declared,
plus an amount equivalent to dividends on the stated value of such share at
the dividend rate fixed for such share for the period after the end of the day
preceding such last preceding quarterly dividend payment date to and including
the date as of which the calculation is made.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary, and the
said officers of the Corporation further acknowledged said instrument to be
the corporate act of the Corporation and stated under the penalties of perjury
that to the best of their knowledge, information and belief the matters and
facts therein set forth with respect to approval are true in all material
respects, all on May 14, 1982.
REPUBLIC NEW YORK CORPORATION
By: /s/ Walter H. Weiner
Attest: (President)
/s/ Ernest Ginsberg
(Secretary)
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CONFORMED COPY 4.21.83
REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out in
its entirety Article NINTH of the Articles of Incorporation and inserting in
lieu thereof the following:
"NINTH: The Corporation shall indemnify (a) its directors to the full
extent provided by the general laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the
procedures provided by such laws; (b) its officers to the same extent
it shall indemnify its directors; and (c) its officers who are not
directors to such further extent as shall be authorized by the Board of
Directors and be consistent with law. The foregoing shall not limit the
authority of the corporation to indemnify other employees and agents
consistent with law."
SECOND: The Board of Directors of the Corporation, at a meeting held on
January 19, 1983, duly adopted a resolution in which was set forth the
foregoing amendment to the charter, declaring that said amendment of the
charter as proposed was advisable and directing that it be submitted for
action thereon by the Stockholders of the Corporation at the Annual Meeting
thereof to be held on April 20, 1983.
THIRD: Notice, setting forth the said amendment of the charter and stating
that the purpose of the Annual Meeting of the Stockholders, called thereby,
would be to take action thereon, was duly given pursuant to Section 2-504 of
the Corporation and Associations Articles of the Annotated Code of Maryland to
all Stockholders entitled to vote thereon. The amendment of the charter of
the Corporation as hereinabove set forth was approved by the Stockholders of
the Corporation at the Annual Meeting held on April 20, 1983, by affirmative
vote of a majority of all the votes entitled to be cast thereon as permitted
by the charter of the Corporation.
FOURTH: This amendment does not increase the authorized stock of the
Corporation.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to
be signed in its name and on its behalf by a Senior Vice President and
witnessed by an Assistant Secretary on April 20, 1983.
REPUBLIC NEW YORK CORPORATION
By: /s/ Ernest Ginsberg
(Senior Vice President)
Witnessed:
/s/ William F. Rosenblum, Jr.
(Assistant Secretary)
THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who
executed on behalf of said Corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ Ernest Ginsberg
(Senior Vice President)
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CONFORMED COPY 3.09.84
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the charter of the Corporation, the Board
of Directors has duly divided and classified 1,000,000 shares of the Preferred
Stock of the Corporation into a series designated Cumulative Preferred Stock,
Floating Rate Series B, and has provided for the issuance of such series.
SECOND: The terms of the Cumulative Preferred Stock, Floating Rate Series B,
as set by the Finance Committee of the Board of Directors pursuant to
authority duly delegated by the Board of Directors are as follows:
1. Cumulative Preferred Stock Floating Rate Series B: 1,000,000 shares
of Preferred Stock of the Corporation, without par value, are hereby
constituted as the original number of shares of a series of Preferred Stock
designated as Cumulative Preferred Stock,Floating Rate Series B (hereinafter
sometimes called the "Floating Rate Series B Stock"). The Floating Rate Series
B Stock shall be of a stated value of $50 per share (the "stated value"). The
term "Articles of Incorporation" when used herein shall include all articles
or certificates filed pursuant to law with respect to any series of the
Preferred Stock.
2. Dividends: Dividend rates on the shares of Floating Rate Series B
Stock shall be: (i) for the period (the "Initial Dividend Period") from the
date of their original issue to and including July 1, 1984, at a rate per
annum of the stated value thereof equal to 10.68%, and (ii) for each
quarterly dividend period (hereinafter referred to as a "Quarterly Dividend
Period"; and the Initial Dividend Period or any Quarterly Dividend Period
being hereinafter individually referred to as a "Dividend Period" and
collectively referred to as "Dividend Periods") thereafter, which quarterly
dividend periods shall commence on January 1, April 1, July 1 and October 1 in
each year and shall end on and include the day next preceding the first day of
the next quarterly dividend period, at a rate per annum of the stated value
thereof equal to 1.60% below the Applicable Rate (as defined in paragraph 3)
in respect of such quarterly dividend period; provided, however, that the
dividend rate per annum on the shares of Floating Rate Series B Stock for any
Quarterly Dividend Period shall in no event be less than 6.50% per annum or
greater than 12.50% per annum. Such dividends shall be cumulative from the
date of original issue of such shares and shall be payable, when and as
declared by the Board of Directors, on the first day of January, April, July
and October of each year, commencing July 1, 1984. If in any Dividend Period
dividends shall not have been paid or declared and set apart for payment on
all outstanding shares of Floating Rate Series B Stock for such Dividend
Period and for all preceding Dividend Periods from and after the first day
from which dividends are cumulative at the respective rates per annum
specified for such Dividend Periods in the second preceding sentence, then the
aggregate deficiency shall be declared and fully paid or set apart for
payment, but without interest, before (i) any dividends or other
distributions (excluding dividends paid in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the
Corporation) shall be declared and paid or set apart for payment on the Common
Stock or on any other capital stock of the Corporation ranking junior to the
Floating Rate Series B Stock with respect to the payment of dividends, or
(ii) the Corporation shall purchase, redeem or otherwise acquire any shares
of Preferred Stock or any shares of capital stock of the Corporation ranking
on a parity with or junior to the Floating Rate Series B Stock with respect to
the payment of dividends; provided , however, that any moneys set aside in
trust as a sinking fund payment for any series of Preferred Stock pursuant to
the resolutions providing for the issue of shares of such series may
thereafter be applied to the purchase or redemption of Preferred Stock of such
series whether or not at the time of such application full cumulative
dividends upon the outstanding Floating Rate Series B Stock shall have been
paid or declared and set apart for payment.
3. Definition of Applicable Rate, etc.: The "Applicable Rate" for any
Quarterly Dividend Period shall be the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason
(i) any one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Twenty Year Constant Maturity Rate cannot be determined
for any Quarterly Dividend Period, then the Applicable Rate for such Dividend
Period shall be the higher of whichever two of such Rates can be so
determined;
(ii) either only the Treasury Bill Rate or only the Ten Year
Constant Maturity Rate or only the Twenty Year Constant Maturity Rate can be
determined for any Quarterly Dividend Period, then the Applicable Rate for
such Dividend Period shall be whichever such Rate can be so determined; or
(iii) neither the Treasury Bill Rate nor the Ten Year Constant
Maturity Rate nor the Twenty Year Constant Maturity Rate can be determined for
any Quarterly Dividend Period, then the Applicable Rate in effect for the
preceding Dividend Period shall be continued for such Dividend Period.
Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period as defined below) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board during the Calendar
Period immediately prior to the last ten calendar days of March, June,
September or December, as the case may be, prior to the Quarterly Dividend
Period for which the dividend rate on the Floating Rate Series B Stock is
being determined. In the event that the Federal Reserve board does not
publish such a weekly per annum market discount rate during such Calendar
Period, then the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if only one such rate
shall be published during the relevant Calendar Period) for three-month U.S.
Treasury bills, as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum market discount rate for three-
month U.S. Treasury bills shall not be published by the Federal Reserve Board
or by any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during the relevant Calendar Period) for
all of the U.S. Treasury bills then having maturities of not less that 80 nor
more than 100 days, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such rates,
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that the Corporation determines in
good faith that for any reason no such U.S. Treasury bill rates are published
as provided above during such Calendar Period, then the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business day in New York City
(or less frequently if daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as provided above in
this paragraph, the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a maturity of not less than 80
nor more than 100 days from the date of each such quotation, as quoted daily
for each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the Corporation by at least three
recognized U.S. Government securities dealers selected by the Corporation.
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CONFORMED COPY 3.09.84
Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately prior to the last
ten calendar days of March, June, September or December, as the case may be,
prior to the Quarterly Dividend Period for which the dividend rate on the
Floating Rate Series B Stock is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the one weekly per annum
Ten Year Average Yield, if only one such Yield shall be published during the
relevant Calendar Period), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that a per annum Ten Year Average
Yield shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during the relevant Calendar Period)
for all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities (as defined below)) then having
maturities of not less than eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Corporation. In the
event that the Corporation determines in good faith that for any reason the
Corporation cannot determine the Ten Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph, then the Ten
Year constant Maturity Rate for such dividend Period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall
not be generally available) to the Corporation by at least three recognized
U.S. Government securities dealers selected by the Corporation.
Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield
shall be published during the relevant Calendar Period), as published weekly
by the Federal Reserve Board during the Calendar Period immediately prior to
the last ten calendar days of March, June, September or December, as the case
may be, prior to the Quarterly Dividend Period for which the dividend rate on
the Floating Rate Series B Stock is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Twenty Year
Average Yield during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum Twenty Year Average Yields (or the one weekly
per annum Twenty Year Average Yield, if only one such Yield shall be published
during the relevant Calendar Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that a per annum Twenty Year
Average Yield shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during
such Calendar Period, then the Twenty Year Constant Maturity Rate for such
Dividend Period shall be the arithmetic average of the two most recent weekly
per annum average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having
maturities of not less than eighteen nor more than twenty-two years, as
published during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the Corporation cannot determine the Twenty Year Constant
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such dividend
Period shall be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than eighteen nor more than twenty-two years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
The amount of dividends payable for each Quarterly Dividend Period shall
be computed by annualizing the dividend rate for such Dividend Period and
dividing by four. The amount of dividends payable for the Initial Dividend
Period or any Dividend Period shorter than a full Quarterly Dividend Period
shall be computed on the basis of 30-day months, a 360-day year and the actual
number of days elapsed in such Dividend Period.
The dividend rate with respect to each Quarterly Dividend Period will be
calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of the Floating Rate Series B Stock.
For purposes of this Section, the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the
option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally issued at a
deep or substantial discount;
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of 20 years).
4. Voting Rights: (i) The holders of the Floating Rate Series B Stock
shall have the voting power and rights set forth and referred to in this
paragraph 4 and in paragraph 7, and shall have no other voting power or rights
except as otherwise from time to time required by law.
(ii) Whenever dividends on the Floating Rate Series B Stock shall
be unpaid as a whole or in part for six consecutive Dividend periods, then at
the annual meeting of stockholders next following omission of the sixth
successive quarterly dividend or any part thereof and at any annual meeting
thereafter and at any meeting called for the election of Directors, until all
dividends accumulated on the Floating Rate Series B Stock have been paid or
declared and a sum sufficient for payment has been set aside, the holders of
the Floating Rate Series B Stock, either alone or together with the holders of
one or more other cumulative series of the Preferred Stock at the time
outstanding which are granted such voting rights, voting as a class, shall be
entitled, to the exclusion of the holders of one or more other series or
classes of stock having general voting rights, to vote for and elect two
members of the Board of Directors of the Corporation, and the holders of
Common Stock together with the holders of any series or class or classes of
stock of the Corporation having general voting rights and not then entitled to
elect two members of the Board of Directors pursuant to this paragraph 4 to
the exclusion of the holders of all series then so entitled, shall be entitled
to vote and elect the balance of the Board of Directors. In such case the
Board of Directors of the Corporation shall, as of the date of the annual
meeting of stockholders aforesaid, be increased by two Directors. The rights
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of holders of Floating Rate Series B Stock to participate (either alone or
together with the holders of one or more other cumulative series of Preferred
Stock at the time outstanding which are granted such voting rights) in the
exclusive election of two members of the Board of Directors of the Corporation
pursuant to this paragraph 4 shall continue in effect until cumulative
dividends have been paid in full or declared and set apart for payment on the
Floating Rate Series B Stock. At elections for such Directors, each holder of
the Floating Rate Series B Stock shall be entitled to one vote for each share
held. The holders of Floating Rate Series B Stock shall have no right to
cumulate such shares in voting for the election of Directors. At the annual
meeting of stockholders, next following the termination (by reason of the
payment of all accumulated and defaulted dividends on such stock or provision
for the payment thereof by declaration and setting apart thereof) of the
exclusive voting power pursuant to this paragraph 4 of the holders of Floating
Rate Series B Stock and the holders of all other cumulative series which shall
have been entitled to vote for and elect such two members of the Board of
Directors of the Corporation, the terms of office of all persons who may have
been elected Directors of the Corporation by vote of such holders shall
terminate and the two vacancies created pursuant to this paragraph 4 to
accommodate the exclusive right of election conferred hereunder shall
thereupon be eliminated and the Board of Directors shall be decreased by two
Directors.
(iii) So long as any shares of Floating Rate Series B Stock remain
outstanding, the affirmative vote or consent of the holders of at least two-
thirds of the shares of Floating Rate Series B Stock outstanding at the time
given in person or by proxy, either in writing or at any special or annual
meeting called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(a) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) ranking prior (as that term is defined
below in this paragraph 4) to the Floating Rate Series B Stock, or
(b) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) which ranks on a parity with the
Floating Rate Series B Stock unless the Articles Supplementary or other
provisions of the charter creating or authorizing such class or series shall
provide that if in any case the stated dividends or amounts payable on
liquidation are not paid in full on the Floating Rate Series B Stock and all
outstanding shares of stock ranking on a parity (as that term is defined below
in this paragraph 4) with the Floating Rate Series B Stock (the Floating Rate
Series B Stock and all such other stock being herein called "Parity Stock"),
the shares of all Parity Stock shall share ratably in the payment of
dividends, including accumulations (if any) in accordance with the sums which
would be payable on all Parity Stock if all dividends in respect of all shares
of Parity Stock were paid in full, and on any distribution of assets upon
liquidation ratably in accordance with the sums which would be payable in
respect of all shares of Parity Stock if all sums payable were discharged in
full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the charter of the
Corporation including these Articles Supplementary which would materially and
adversely affect any right, preference, privilege or voting power of the
Floating Rate Series B Stock or of the holders thereof; provided, however,
that any increase in the amount of authorized Preferred Stock, the
Corporation's $2.125 Cumulative Preferred Stock or $3.125 Cumulative Preferred
Stock or Cumulative Preferred Stock, Floating Rate Series A or the Floating
Rate Series B Stock or the creation and issuance of other series of Preferred
Stock, in each case ranking on a parity with or junior to the Floating Rate
Series B Stock with respect to the payment of dividends and the distribution
of assets upon liquidation, shall not be deemed to affect materially and
adversely such rights, preferences, privileges or voting powers.
The foregoing voting provisions shall not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of the Floating Rate Series B Stock shall
have been redeemed or sufficient funds shall have been deposited in trust in
accordance with paragraph 6 to effect such redemption.
Any class or classes of stock of the Corporation shall be deemed to rank
(i) prior to the Floating Rate Series B Stock as to dividends
or as to distribution of assets if the holders of such class shall
be entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of Floating Rate Series B
Stock; and
(ii) on a parity with the Floating Rate Series B Stock as to
dividends or as to distribution of assets, whether or not the dividend
rates, dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of the Floating Rate Series B
Stock, if the holders of such class of stock and the Floating Rate
Series B stock shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority one over the other.
5. Liquidation: Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Floating
Rate Series B Stock shall have preference and priority over the Common Stock
for payment out of the assets of the Corporation or proceeds thereof, whether
from capital or surplus, of $50 per share together with the amount of any
dividends accrued and unpaid thereon, and after such payment the holders of
Floating Rate Series B Stock shall be entitled to no other payments. If, in
such case, the assets of the Corporation or proceeds thereof shall be
insufficient to make the full liquidating payment of $50 per share and accrued
and unpaid dividends on the Floating Rate Series B Stock and liquidating
payments on any other outstanding series of Parity Stock (including accrued
and unpaid dividends, if any), then such assets and proceeds shall be
distributed among the holders of the Floating Rate Series B Stock and any
other outstanding series of Parity Stock ratably in accordance with the
respective amounts which would be payable on all series of Parity Stock
(including accrued and unpaid dividends, if any) if all such liquidating
amounts payable were paid in full. A consolidation or merger of the
Corporation with or into any other corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the Corporation shall not be
deemed or construed to be a liquidation, dissolution or winding up of the
Corporation.
6. Redemption: The shares of Floating Rate Series B Stock may not be
redeemed prior to April 1, 1989. From April 1, 1989 through and including
March 31, 1994, the Floating Rate Series B Stock may be redeemed, at the
option of the Corporation, as a whole or in part, at any time or from time to
time, at a redemption price equal to $51.50 per share plus accrued and unpaid
dividends to the date of redemption. After March 31, 1994, the Floating Rate
Series B Stock may be redeemed, at the option of the Corporation, as a whole
or in part, at any time or from time to time, at a redemption price equal to
$51.50 per share plus accrued and unpaid dividends to the date of redemption.
At the option of the Corporation, shares of Floating Rate Series B Stock
redeemed or otherwise acquired may be restored to the status of authorized but
unissued shares of Preferred Stock.
In the case of any redemption, the Corporation shall give notice of
such redemption to the holders of Floating Rate Series B Stock to be redeemed
in the following manner: a notice specifying the shares to be redeemed and the
time and place of redemption (and, if less than the total outstanding shares
are to be redeemed, specifying the certificate numbers and number of shares to
be redeemed) shall be mailed by first class mail, addressed to the holders of
record of the Floating Rate Series B Stock to be redeemed at their respective
addresses as the same shall appear upon the books of the Corporation, not more
than 60 days and not less than 30 days previous to the date fixed for
redemption. In the event such notice is not given to any stockholder such
failure to give notice shall not affect the notice given to other
stockholders. If less than the whole amount of outstanding Floating Rate
Series B Stock is to be redeemed, the shares to be redeemed shall be selected
by lot or pro rata in any manner determined by resolution of the Board of
Directors to be fair and proper. From and after the date fixed in any such
notice as the date of redemption (unless default shall be made by the
Corporation in providing moneys at the time and place of redemption for the
payment of the redemption price), all dividends upon the Floating Rate Series
B Stock so called for redemption shall cease to accrue, and all rights of
the holders of said Floating Rate Series B Stock as stockholders in
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the Corporation, except the right to receive the redemption price plus
dividends accrued and unpaid to the date of redemption (without interest) upon
surrender of the certificate representing the Floating Rate Series B Stock so
called for redemption, duly endorsed for transfer, if required, shall cease
and terminate. The Corporation's obligation to provide moneys in accordance
with the preceding sentence shall be deemed fulfilled if, on or before the
redemption date, the Corporation shall deposit with a bank or trust company
(which may be an affiliate of the Corporation) having an office in the Borough
of Manhattan, City of New York, having a capital and surplus of at least
$50,000,000, funds necessary for such redemption, in trust, with irrevocable
instructions that such funds be applied to the redemption of the shares of
Floating Rate Series B Stock so called for redemption. Any interest accrued
on such funds shall be paid to the Corporation from time to time. Any funds
so deposited and unclaimed at the end of 6 years from such redemption date
shall be released or repaid to the Corporation, after which the holders of
such shares of Floating Rate Series B Stock so called for redemption shall
look only to the Corporation for payment of the redemption price.
7. Limitation on Merger and Sale of Assets and on Disposition of the
Voting Stock of the Bank: So long as any shares of Floating Rate Series B
Stock remain outstanding, the Corporation shall not, without the affirmative
vote or consent of the holders of at least a majority of the votes of all
Parity Stock entitled to vote outstanding at the time, given in person or by
proxy, either in writing or by resolution adopted at a meeting at which the
holders of Floating Rate Series B Stock (alone or together with the holders of
one or more other series of Parity Stock at the time outstanding and entitled
to vote) vote separately as a class, (a) directly or indirectly, sell,
transfer or otherwise dispose of, or permit Republic National Bank of New York
(the "Bank") or any other subsidiary of the Corporation, to issue, sell,
transfer or otherwise dispose of any shares of voting stock of the Bank, or
securities convertible into or options, warrants or rights to acquire voting
stock of the Bank, unless after giving effect to any such transaction the Bank
remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or
of a Qualified Successor Company (as hereinafter defined); (b) merge or
consolidate with, or convey substantially all of its assets to any person or
corporation unless the entity surviving such merger or consolidation or the
transferee of such assets is the Corporation or a Qualified Successor Company;
or (c) permit the Bank to merge, consolidate with, or convey substantially
all of its assets to any person or corporation unless the entity surviving
such merger or consolidation or the transferee of such assets is a Controlled
Subsidiary of the Corporation or of a Qualified Successor Company, except in
any of the foregoing cases as required to comply with applicable law,
including, without limitation, any court or regulatory order. The term
"Qualified Successor Company" shall mean a corporation (or other similar
organization or entity whether organized under or pursuant to the laws of the
United States or any state thereof or of another jurisdiction) which (i) is
or is required to be a registered bank holding company under the United States
Bank Holding Company Act of 1956, as amended, or any successor legislation,
(ii) issues to the holders of the Floating Rate Series B Stock in exchange
for the Floating Rate Series B Stock shares of preferred stock having at least
the same relative rights and preferences as the Floating Rate Series B Stock
(the "Exchanged Stock"), (iii) immediately after such transaction has not
outstanding or authorized any class of stock or equity securities ranking
prior to the Exchanged Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, and (iv) holds, as a Controlled
Subsidiary or Subsidiaries, either the Bank or one or more other banking
corporations which, collectively, immediately after such transaction hold
substantially all of the assets and liabilities which the Bank held
immediately prior to such transaction (which may be in addition to other
assets and liabilities acquired in such transaction). "Controlled Subsidiary"
shall mean any corporation at least 80% of the outstanding shares of voting
stock of which shall at the time be owned directly or indirectly by the
Corporation or a Qualified Successor Company. In connection with the exercise
of the voting rights contained in this paragraph 7, holders of all series of
Parity Stock which are granted such voting rights (of which the Floating Rate
Series B Stock is the fourth series) shall vote as a class, and each holder of
Floating Rate Series B Stock shall have one vote for each share of stock held
and each other series shall have such number of votes, if any, for each share
of stock held as may be granted them.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of the Floating Rate Series B Stock
shall have been redeemed or sufficient funds shall have been deposited in
trust in accordance with paragraph 6 to effect such redemption.
8. Parity Stock: So long as any shares of Floating Rate Series B Stock
shall remain outstanding, in case the stated dividends or amounts payable on
liquidation are not paid in full with respect to all outstanding shares of
Parity Stock, all such shares shall share ratably in the payment of dividends,
including accumulations (if any) in accordance with the sums which would be
payable in respect of all outstanding shares of Parity Stock if all dividends
in respect of all such shares of Parity Stock were paid in full, and on any
distribution of assets upon liquidation, ratably in accordance with the sums
which would be payable in respect of all outstanding Parity Stock if all sums
payable were discharged in full.
9. For the Purposes Hereof:
(i) The term "outstanding", when used in reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation and
shares called for redemption pursuant to paragraph 6, funds for redemption of
which shall have been deposited in trust pursuant to paragraph 6.
(ii) The amount of dividends "accrued" on any share of Floating
Rate Series B Stock as at any quarterly dividend payment date shall be deemed
to be the amount of any unpaid dividends accumulated thereon to and including
the end of the day preceding such quarterly dividend date, whether or not
earned or declared; and the amount of dividends "accrued" on any share of
Floating Rate Series B Stock as at any date other than a quarterly dividend
payment date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the end of the day preceding the last
preceding quarterly dividend payment date, whether or not earned or declared,
plus an amount equivalent to dividends on the stated value of such share at
the dividend rate fixed for such share for the period after the end of the day
preceding such last preceding quarterly dividend payment date to and including
the date as of which the calculation is made.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary, and the
said officers of the Corporation further acknowledged said instrument to be
the corporate act of the Corporation and stated under the penalties of perjury
that to the best of their knowledge, information and belief the matters and
facts therein set forth with respect to approval are true in all material
respects, all on March 7, 1984.
REPUBLIC NEW YORK CORPORATION
By: /s/ Jeffrey C. Keil
Attest: (President)
/s/ Ernest Ginsberg
(Secretary)
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CONFORMED COPY 3.27.86
REPUBLIC NEW YORK CORPORATION
Certificate of Correction
Republic New York Corporation, a Maryland corporation having its principal
office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The first paragraph of Section 6 of Article Second of the Articles
Supplementary of the Corporation which was executed on behalf of the
Corporation by its President, Jeffrey C. Keil and witnessed by its Secretary,
Ernest Ginsberg, and which was filed with the State Department of Assessments
and Taxation of Maryland on March 9, 1984 at 11:51 a.m. is hereby corrected to
read as follows:
6. Redemption: The shares of Floating Rate Series B Stock may
not be redeemed prior to April 1, 1989. From April 1, 1989 through and
including March 31, 1994, the Floating Rate Series B Stock may be
redeemed, at the option of the Corporation, as a whole or in part, at
any time or from time to time, at a redemption price equal to $51.50 per
share plus accrued and unpaid dividends to the date of redemption.
After March 31, 1994, the Floating Rate Series B Stock may be redeemed,
at the option of the Corporation, as a whole or in part, at any time or
from time to time, at a redemption price equal to the stated value per
share plus accrued and unpaid dividends to the date of redemption.
SECOND: The first paragraph of Section 6 of Article Second of
the Articles Supplementary of the Corporation as filed with the State
Department of Assessments and Taxation of Maryland prior to this Certificate
of Correction read as follows:
6. Redemption: The shares of Floating Rate Series B Stock may
not be redeemed prior to April 1, 1989. From April 1, 1989 through and
including March 31, 1994, the Floating Rate Series B Stock may be
redeemed, at the option of the Corporation, as a whole or in part, at
any time or from time to time at a redemption price equal to $51.50 per
share plus accrued and unpaid dividends to the date of redemption.
After March 31, 1994, the Floating Rate Series B stock may be redeemed,
at the option of the Corporation, as a whole or in part, at any time or
from time to time, at a redemption price equal to $51.50 per share plus
accrued and unpaid dividends to the date of redemption.
IN WITNESS WHEREOF, Republic New York Corporation, has caused these
presents to be signed in its name and on its behalf by its Senior Vice
President and witnessed by its Secretary on March 27, 1986.
WITNESS: REPUBLIC NEW YORK CORPORATION
/s/ William F. Rosenblum, Jr. /s/ Thomas F. Robards
Secretary Senior Vice President
THE UNDERSIGNED, Senior Vice President, Republic New York Corporation,
who executed on behalf of the Corporation the foregoing Certificate of
Correction of which this Certificate is made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Certificate of
Correction to be the corporate act of said Corporation and hereby certifies to
the best of his knowledge, information and belief the matters and facts set
forth herein are true in all material respects under the penalties of perjury.
REPUBLIC NEW YORK CORPORATION
/s/ Thomas F. Robards
Senior Vice President
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CONFORMED COPY 3.31.86
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has duly divided and classified 1,250 shares of the Preferred
Stock of the Corporation into two series of designated Dutch Auction Rate
Transferable SecuritiesTM Preferred Stock, Series A and B, and has provided
for the issuance of each such series.
SECOND: The terms of the Dutch Auction Rate Transferable SecuritiesTM
Preferred Stock, Series A and B, as set by the Finance Committee of the Board
of Directors pursuant to authority duly delegated by the Board of Directors
are as follows:
625 shares of Preferred Stock of the Corporation, without par
value, shall constitute a series of Preferred Stock designated as "Dutch
Auction Rate Transferable Securities Preferred Stock, Series A",
hereinafter referred to as the "Series A DARTS". 625 shares of
Preferred Stock of the Corporation, without par value, shall constitute a
series of Preferred Stock designated as "Dutch Auction Rate Transferable
Securities Preferred Stock, Series B", hereinafter referred to as the
"Series B DARTS". The Series A DARTS and the Series B DARTS are herein
referred to collectively as the "DARTS". All shares of each series of
DARTS shall be identical with each other in all respects. The DARTS
shall be of a stated value of $100,000 per share (the "stated value").
1. Definitions. Unless the context or use indicates another or
different meaning or intent, the following terms shall have the following
meanings, whether used in the singular or plural:
(a) "60-day 'AA' Composite Commercial Paper Rate", on any date,
means (i) the interest equivalent of the 60-day rate on commercial
paper placed on behalf of issuers whose corporate bonds are rated "AA" by
Standard & Poor's Corporation ("S&P"), or the equivalent of such rating
by S&P or another rating agency, as such 60-day rate is made available on
a discount basis or otherwise by the Federal Reserve Bank of New York for
the Business Day immediately preceding such date, or (ii) in the event
that the Federal Reserve Bank of New York does not make available such a
rate, then the arithmetic average of the interest equivalent of the 60-
day rate on commercial paper placed on behalf of such issuers, as quoted
on a discount basis or otherwise by the Commercial Paper Dealers to the
Trust Company for the close of business on the Business Day immediately
preceding such date. If any Commercial Paper Dealer does not quote a
rate required to determine the 60-day "AA" Composite Commercial Paper
Rate, the 60-day "AA" Composite Commercial Paper Rate shall be determined
on the basis of the quotation or quotations furnished by the remaining
Commercial Paper Dealer or Commercial Paper Dealers and any Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers selected
by the Corporation to provide such rate or rates not being supplied by
any Commercial Paper Dealer or Commercial Paper Dealers, as the case may
be, or, if the Corporation does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, by the remaining
Commercial Paper Dealer or Commercial Paper Dealers. If the Board of
Directors of the Corporation shall make the adjustment referred to in the
third sentence of paragraph 2(b)(i), then (i) if the Dividend Period
Days shall be fewer than 70 days, such rate shall be the interest
equivalent of the 60-day rate on such commercial paper; (ii) if the
Dividend Period Days shall be 70 or more days but fewer than 85 days,
such rate shall be the arithmetic average of the interest equivalent of
the 60-day and 90-day rates on such commercial paper; and (iii) if the
Dividend Period Days shall be 85 or more days but fewer than 98 days,
such rate shall be the interest equivalent of the 90-day rate on such
commercial paper. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for
commercial paper of a given day's maturity shall be equal to the quotient
of (A) the discount rate divided by (B) the difference between (x) 1.00
and (y) a fraction the numerator of which shall be the product of the
discount rate times the number of days in which such commercial paper
matures and the denominator of which shall be 360. If the rate obtained
by the Trust Company is quoted on another basis, the Trust Company shall
convert the quoted rate to its interest equivalent after consultation
with the Corporation as to the method of such conversion.
(b) "Applicable Rate" means the rate per annum at which dividends
are payable on the shares of a particular series of DARTS for any
Dividend Period.
(c) "Auction" means each periodic operation of the Auction
Procedures.
(d) "Auction Procedures" means the procedures for conducting
Auctions set forth in paragraph 6 below.
(e) "Business Day" means a day on which the New York Stock Exchange
is open for trading and which is not a Saturday, Sunday or other day on
which banks in The City of New York are authorized by law to close.
(f) "Code" means the Internal Revenue Code of 1954, as amended.
(g) "Commercial Paper Dealers" means Salomon Brothers Inc, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Commercial Paper Incorporated and
Bear, Stearns & Co. Inc., or, in lieu of any thereof, their respective
affiliates or successors.
(h) "Date of Original Issue" means the date on which the
Corporation originally issues shares of Series A DARTS or Series B DARTS,
as the case may be.
(i) "Divided Payment Date" has the meaning set forth in paragraph
2(b)(i) below.
(j) "Dividend Period" has the meaning set forth in paragraph
2(c)(i) below.
(k) "Dividend Period Days" has the meaning set forth in paragraph
2(b)(i) below.
(l) "Holder" means the holder of shares of the Corporation's Series
A DARTS and Series B DARTS, as the case may be, as the same appears on
the Stock Books of the Corporation.
(m) "Initial Dividend Payment Date" has the meaning set forth in
paragraph 2(b)(i) below.
(n) "Initial Dividend Rate" has the meaning set forth in paragraph
2(c)(i) below.
(o) "Initial Dividend Period" has the meaning set forth in
paragraph 2(c)(i) below.
(p) "Minimum Holding Period" has the meaning set forth in paragraph
2(b)(i) below.
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(q) "Notice of Redemption" has the meaning set forth in paragraph
4(c) below.
(r) "Parity Stock" has the meaning set forth in Section 5(c)(ii)
below.
(s) "Stock Books" means the stock transfer books of the Corporation
maintained by the Trust Company.
(t) "Subsequent Dividend Period" has the meaning specified in
paragraph 2(c)(i) below.
(u) "Substitute Commercial Paper Dealer" means Goldman, Sachs & Co.
and Morgan Stanley & Co., Incorporated, or, in lieu of any thereof, their
respective affiliates or successors.
(v) "Trust Company" means Manufacturers Hanover Trust Company
unless and until another bank or trust company shall have been so
appointed by a resolution of the Board of Directors of the Corporation.
2. Dividends. (a) The Holders shall be entitled to receive, when,
as and if declared by the Board of Directors of the Corporation, out of funds
legally available therefor, cumulative cash dividends at the Applicable Rate
per annum, determined as set forth below, and no more, payable on the
respective dates set forth below.
(b) (i) Dividends on shares of DARTS, at the Applicable Rate per
annum, shall accrue from the Date of Original Issue and shall be payable
commencing as follows:
Series A DARTS May 28, 1986
Series B DARTS June 3, 1986
and on each Tuesday that is the last day of successive 49-day periods
thereafter; provided, however, that if any of such Tuesday, the Monday
preceding such Tuesday or the Wednesday following such Tuesday is not a
Business Day, then (i) the Dividend Payment Date will be the first Business
Day after such Tuesday that is immediately followed by a Business Day and is
preceded by a Business Day that is the preceding Monday or a day after such
Monday, or (ii) if the Securities Depository shall make available to its
participants and members in funds immediately available in The City of New
York on Dividend Payment Dates, the amount due as dividends on such Dividend
Payment Dates (and the Securities Depository shall have so advised the Trust
Company), then the Dividend Payment Date will be the first Business Day on or
after such Tuesday that is preceded by a Business Day that is the preceding
Monday or a day after such Monday (each date of payment of dividends being
herein referred to as a "Dividend Payment Date" and the first Dividend Payment
Date for a particular series of DARTS being herein referred to as the "Initial
Dividend Payment Date" for that series). Although any particular Dividend
Payment Date may not occur on the originally scheduled Tuesday because of the
above-mentioned provisos, the next succeeding Dividend Payment Date shall be,
subject to such provisos, the seventh Tuesday following the originally
designated Tuesday for the prior Dividend Period. Notwithstanding the
foregoing, in the event of a change in law lengthening the minimum holding
period (currently found in paragraph 246(c) of the Code) (the "Minimum Holding
Period") required for taxpayers to be entitled to the dividends-received
deduction on preferred stock held by non-affiliated corporations (currently
found in paragraph 243 (a) of the Code), the Board of Directors of the
Corporation or a duly designated Committee thereof shall adjust the period of
time between Dividend Payment Dates so as to adjust uniformly the number of
days (such number of days without giving effect to the provisos in the first
sentence of this paragraph 2(b)(i) being hereinafter referred to as "Dividend
Period Days") in Dividend Periods commencing after the date of such change in
law to equal or exceed the then-current Minimum Holding Period; provided that
the number of Dividend Period Days shall not exceed by more than nine days the
length of such then-current Minimum Holding Period and shall be evenly
divisible by seven, and the maximum number of Dividend Period Days in no event
shall exceed 98 days. Upon any such change in the number of Dividend Period
Days as a result of a change in law, the Corporation shall mail notice of such
change by first-class mail, postage prepaid, to the Trust Company and to each
Holder at such Holder's address as the same appears on the Stock Books of the
Corporation.
(ii) Each dividend shall be paid to the Holder of shares of
DARTS as its name appears on the Stock Books of the Corporation at the opening
of business on the Business Day next preceding the Dividend Payment Date
thereof. Dividends in arrears for any past Dividend Period may be declared
and paid at any time, without reference to any regular Dividend Payment Date,
in the manner specified above. The persons entitled to such dividend payments
shall be the Holders whose names appear on the Stock Books of the Corporation
on a date, not exceeding 15 days preceding the payment date thereof, as may be
fixed by the Board of Directors of the Corporation.
(c) (i) The dividend rate (the "Initial Dividend Rate") on shares
of DARTS during the period from and after the Date of Original Issue to the
Initial Dividend Payment Date (the "Initial Dividend Period") shall be 4-7/8%
per annum. Commencing on the Initial Dividend Payment Date, the dividend rate
on shares of each series of DARTS for each subsequent dividend period
(hereinafter referred to as a "Subsequent Dividend Period", the Initial
Dividend Period or any Subsequent Dividend Period being hereinafter referred
to as a "Dividend Period"), which Subsequent Dividend Period shall commence on
the last day of the preceding dividend Period and shall end on the next
Dividend Payment Date, shall be equal to the rate per annum that results from
implementation of the Auction Procedures.
(ii) The amount of dividends per share of a series of DARTS
payable for any Dividend Period or part thereof shall be computed by
multiplying the Applicable Rate for such Dividend Period by a fraction the
numerator of which shall be the number of days in such Dividend Period or part
thereof (calculated by counting the first day thereof but excluding the last
day thereof) such share was outstanding and the denominator of which shall be
360 and multiplying the amount so obtained by $100,000.
(d) (i) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on the shares of any series of DARTS
for any period unless full cumulative dividends have been or contemporaneously
are declared and paid on the shares of DARTS of all series through the most
recent Dividend Payment Date. Holders of shares of a series of DARTS shall
not be entitled to any dividends, whether payable in cash, property or stock,
in excess of full cumulative dividends, as herein provided, on the shares of
that series of DARTS. No interest, or sum of money in lieu of interest, shall
be payable in respect of any dividend payment on the shares of DARTS that may
be in arrears.
(ii) If in any Dividend Period full cumulative dividends shall
not have been paid or declared and set apart for payment on all outstanding
shares of DARTS for such Dividend Period and for all preceding Dividend
Periods, then the aggregate deficiency shall be declared and fully paid or set
apart for payment, but without interest, before (i) any dividends or other
distributions (excluding dividends paid in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the
Corporation) shall be declared and paid or set apart for payment on the Common
Stock or on any other capital stock of the Corporation ranking junior to the
DARTS with respect to the payment of dividends, or (ii) the Corporation
shall purchase, redeem or otherwise acquire any shares of Preferred Stock or
any shares of capital stock of the Corporation ranking on a parity with or
junior to the DARTS with respect to the payment of dividends; provided,
however, that any moneys set aside in trust as a sinking fund payment for any
series of Preferred Stock pursuant to the Articles Supplementary providing for
the issue of shares of such series may thereafter be applied to the purchase
or redemption of Preferred Stock of such series whether or not at the time of
such application full cumulative dividends upon the outstanding DARTS shall
have been paid or declared and set apart for payment.
(iii) Any dividend payment made on shares of any Series of
DARTS shall first be credited against the earliest accrued but unpaid dividend
due with respect to shares of DARTS of that series.
3. Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
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Holders of the DARTS shall have preference and priority over the Common Stock
for payment out of the assets of the Corporation or proceeds thereof, whether
from capital or surplus, of $100,000 per share together with the amount of any
dividends accrued and unpaid thereon, and after such payment the Holders of
DARTS shall be entitled to no other payments. If, in such case, the assets of
the Corporation or proceeds thereof shall be insufficient to make the full
liquidating payment of $100,000 per share and accrued and unpaid dividends on
the DARTS and liquidating payments on any other outstanding series of Parity
Stock (including accrued and unpaid dividends, if any), then such assets and
proceeds shall be distributed among the Holders of the DARTS and the holders
of any other outstanding series of Parity Stock ratably in accordance with the
respective amounts which would be payable on all series of Parity Stock
(including accrued and unpaid dividends, if any) if all such liquidating
amounts payable were paid in full. A consolidation or merger of the
Corporation with or into any other corporation or corporations or a sale,
whether for cash, shares of stock, securities or properties, of all or
substantially all or any part of the assets of the Corporation shall not be
deemed or construed to be a liquidation, dissolution or winding up of the
Corporation.
4. Redemption. The DARTS shall be redeemable by the Corporation as
provided below:
(a) (i) At its option, the Board of Directors of the Corporation
or a duly designated Committee thereof may, out of funds legally available
therefor, upon at least 30 days, but not more than 60 days, Notice of
Redemption pursuant to clause (c) of this paragraph 4, redeem the shares of
any series of DARTS or of all DARTS as a whole or from time to time in part on
any Dividend Payment Date at a redemption price equal to
(A) $103,000 per share if redeemed on or before the first
anniversary of the Date of Original Issue;
(B) $102,000 per share if redeemed thereafter and on or before
the second anniversary of the Date of Original Issue;
(C) $101,000 per share if redeemed thereafter and on or before
the third anniversary of the Date of Original Issue; or
(D) $100,000 per share if redeemed thereafter;
plus, in each case, an amount equal to accrued and unpaid dividends on such
shares (whether or not earned or declared) to the redemption date
(ii) The shares of any series of DARTS may also be redeemed, at the
option of the Board of Directors of the Corporation or a duly designated
Committee thereof, as a whole but not in part, on any Dividend Payment Date,
upon at least 30 days, but not more than 60 days, Notice of Redemption
pursuant to clause (c) of this paragraph 4, at a redemption price of $100,000
per share, plus an amount equal to accrued and unpaid dividends (whether or
not earned or declared) on such shares to the redemption date, if the
Applicable Rate fixed for the Dividend Period ending on such Dividend Payment
Date shall equal or exceed the 60-day "AA" Composite Commercial Paper Rate on
the date of determination of such Applicable Rate.
(b) Notwithstanding any other provision of this paragraph 4, shares
of a particular series of DARTS may not be redeemed, other than as a whole,
unless all accrued and unpaid dividends on all outstanding shares of the
series shall have been paid or are being contemporaneously paid or set apart
for payment. In the event that less than all the outstanding shares of a
series of DARTS are to be redeemed, the shares to be redeemed shall be
selected by lot or such other method as the Corporation shall deem fair and
equitable.
(c) Whenever shares of DARTS are to be redeemed, the Corporation
shall mail a notice ("Notice of Redemption") by first-class mail, postage
prepaid, to each Holder of record of shares of DARTS to be redeemed and to the
Trust Company. A Notice of Redemption shall be addressed to the Holder at the
address of the Holder appearing on the Stock Books of the Corporation
maintained by the Trust Company. The Notice of Redemption shall also be
published in the Wall Street Journal. The Notice of Redemption shall include
a statement of (i) the redemption date, (ii) the redemption price, (iii)
the number of shares of each series of DARTS to be redeemed, (iv) the place
or places where shares of DARTS are to be surrendered for payment of the
redemption price, (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date, and (vi) the provision under which
redemption is made. No defect in the Notice of Redemption or in the mailing
or publication thereof shall affect the validity of the redemption
proceedings, except as required by law.
If Notice of Redemption shall have been given as aforesaid and the
Corporation shall have deposited a sum sufficient to redeem the shares of
DARTS as to which Notice of Redemption has been given with the Trust Company,
with irrevocable instructions and authority to pay the redemption price to the
Holders thereof, or if no such deposit is made, then upon such date fixed for
redemption (unless the Corporation shall default in making payment of the
redemption price), all rights of the Holders thereof as stockholders of the
Corporation by reason of the ownership of such shares (except their right to
receive the redemption price thereof, but without interest), shall terminate,
and such shares shall no longer be deemed outstanding. The Corporation shall
be entitled to receive, from time to time, from the Trust Company the
interest, if any, on such moneys deposited with it and the Holders of any
shares so redeemed shall have no claim to any such interest. In case the
Holder of any shares so called for redemption shall not claim the redemption
price for his shares within one year after the date of redemption, the Trust
Company shall, upon demand, pay over to the Corporation such amount remaining
on deposit and the Trust Company shall thereupon be relieved of all
responsibility to the Holder of such shares and such Holder of the shares of
DARTS so called for the redemption shall look only to the Corporation for the
payment thereof.
(d) Except in an Auction and except as set forth above with respect
to redemptions, nothing contained in these Articles Supplementary shall limit
any legal right of the Corporation to purchase or otherwise acquire any shares
of DARTS in privately negotiated transactions or in the over-the-counter
market or otherwise; provided that the Corporation is current in the payment
of dividends on all of the outstanding series of DARTS.
(e) Shares of DARTS that have been redeemed, purchased or otherwise
acquired by the Corporation are not subject to reissuance and shall be
cancelled.
5. Voting Rights. (a) Holders of DARTS shall have no voting
rights, either general or special except as expressly required by applicable
law, the Charter and as specified in this paragraph 5.
(b) Whenever dividends on any series of DARTS shall be unpaid as a
whole or in part for six consecutive dividend quarters, then at the annual
meeting of stockholders next following omission of the last successive
quarterly dividend or any part thereof in such period and at any annual
meeting thereafter and at any meeting called for the election of Directors,
until all dividends accumulated on the series of DARTS have been paid or
declared and a sum sufficient for payment has been set aside, the Holders of
the series of DARTS either alone or together with the Holders of one or more
other series of DARTS or the holders of one or more other cumulative series of
the Preferred Stock at the time outstanding which are granted such voting
rights, voting as a class, shall be entitled, to the exclusion of the holders
of one or more other series or classes of stock having general voting rights,
to vote for and elect two members of the Board of Directors of the
Corporation, and the holders of Common Stock together with the holders of any
series or class or classes of stock of the Corporation having general voting
rights and not then entitled to elect two members of the Board of Directors
pursuant to this paragraph 5 to the exclusion of the holders of all series
then so entitled, shall be entitled to vote and elect the balance of the Board
of Directors. In such case the Board of Directors of the Corporation shall,
as of the date of the annual meeting of stockholders aforesaid, be increased
by two Directors. The rights of Holders of DARTS of any series to participate
(either alone or together with the holders of one or more other cumulative
series of Preferred Stock at the time outstanding which are granted such
voting rights) in the exclusive election of two members of the Board of
Directors of the Corporation pursuant to this paragraph 5 shall continue in
effect until cumulative dividends have been paid in full or declared and set
apart for payment on the series of DARTS. At elections for such Directors,
each Holder of DARTS shall be entitled to 2,000 votes for each share held.
The Holders of DARTS shall have no right to cumulate such shares in voting
for the election of Directors. At the annual meeting of stockholders next
following the termination (by reason of the payment of all accumulated and
defaulted dividends on such stock
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or provision for the payment thereof by declaration and setting apart thereof)
of the exclusive voting power pursuant to this paragraph 5 of the Holders of
DARTS and the holders of all other cumulative series which shall have been
entitled to vote for and elect such two members of the Board of Directors of
the Corporation, the terms of office of all persons who may have been elected
Directors of the Corporation by vote of such holders shall terminate and the
two vacancies created pursuant to this paragraph 5 to accommodate the
exclusive right of election conferred hereunder shall thereupon be eliminated,
and the Board of Directors shall be decreased by two Directors.
(c) So long as any shares of DARTS remain outstanding, the
affirmative vote of the Holders of at least two-thirds of the votes of any
series of DARTS outstanding at the time given in person or by proxy, at any
special or annual meeting called for the purpose, shall be necessary to
permit, effect or validate any one or more of the following:
(i) The authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as
that term is defined below in this paragraph 5) to such series of
DARTS, or
(ii) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks on a
parity with such series of DARTS unless the Articles Supplementary
or other provisions of the charter creating or authorizing such
class or series shall provide that if in any case the stated
dividends or amounts payable on liquidation are not paid in full on
such series of DARTS and all outstanding shares of stock ranking on
a parity (as that term is defined below in this paragraph 5) with
such series of DARTS (such series of DARTS and all such other stock
being herein called "Parity Stock"), the shares of all Parity Stock
shall share ratably in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be
payable on all Parity Stock if all dividends in respect of all
shares of Parity Stock were paid in full, and on any distribution of
assets upon liquidation ratably in accordance with the sums which
would be payable in respect of all shares of Parity Stock if all
sums payable were discharged in full, or
(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the charter
of the Corporation including these Articles Supplementary which
would materially and adversely affect any right, preference,
privilege or voting power of such series of DARTS or of the Holders
thereof; provided, however, that any increase in the amount of
authorized Preferred Stock or Cumulative Preferred Stock, Floating
Rate Series A or the Floating Rate Series B Stock or DARTS or the
creation and issuance of other series of Preferred Stock including
DARTS, in each case ranking on a parity with or junior to such
series of DARTS with respect to the payment of dividends and the
distribution of assets upon liquidation, shall not be deemed to
affect materially and adversely such rights, preferences, privileges
or voting powers.
The foregoing voting provisions shall not apply as to any series of
DARTS if, at or prior to the time when the act with respect to which such vote
would otherwise be required shall be effected, all outstanding shares of such
series of DARTS shall have been redeemed or sufficient funds shall have been
deposited in trust in accordance with paragraph 4 to effect such redemption.
Any class or classes of stock of the Corporation shall be deemed to
rank
(A) prior to any series of DARTS as to dividends or as to
distribution of assets if the holders of such class shall be
entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
preference or priority to the Holders of such series of DARTS; and
(B) on a parity with any series of DARTS as to dividends or
as to distribution of assets, whether or not the dividend rates,
dividend payment dates, or redemption or liquidation prices per
share thereof be different from those of any series of DARTS, if
the holders of such class of stock and any series of DARTS shall be
entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation
prices, without preference or priority one over the other.
In connection with the exercise of the voting rights contained in
this paragraph 5(c), each Holder of DARTS shall have 2,000 votes for each
share of stock held.
(d) So long as any shares of DARTS remain outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least
a majority of the votes of all Parity Stock entitled to vote outstanding at
the time, given in person or by proxy, by resolution adopted at a meeting at
which the Holders of shares of DARTS (alone or together with the holders of
one or more other series of Parity Stock at the time outstanding and entitled
to vote) vote separately as a class, (a) directly or indirectly, sell,
transfer or otherwise dispose of, or permit Republic National Bank of New York
(the "Bank") or any other subsidiary of the Corporation, to issue, sell,
transfer or otherwise dispose of any shares of voting stock of the Bank, or
securities convertible into or options, warrants or rights to acquire voting
stock of the Bank, unless after giving effect to any such transaction the Bank
remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or
of a Qualified Successor Company (hereinafter defined); (b) merge or
consolidate with, or convey substantially all of its assets to any person or
corporation unless the entity surviving such merger or consolidation or the
transferee of such assets is the Corporation or a Qualified Successor Company;
or (c) permit the Bank to merge, consolidate with, or convey substantially
all of its assets to any person or corporation unless the entity surviving
such merger or consolidation or the transferee of such assets is a Controlled
Subsidiary of the Corporation or of a Qualified Successor Company, except in
any of the foregoing cases as required to comply with applicable law,
including, without limitation, any court or regulatory order. The term
"Qualified Successor Company" shall mean a corporation (or other similar
organization or entity whether organized under or pursuant to the laws of the
United States or any state thereof or of another jurisdiction) which (i) is
or is required to be a registered bank holding company under the United States
Bank Holding Company Act of 1956, as amended, or any successor legislation,
(ii) issues to the holders of DARTS in exchange for the DARTS shares of
preferred stock having at least the same relative rights and preferences as
the DARTS (the "Exchanged Stock"), (iii) immediately after such transaction
has not outstanding or authorized any class of stock or equity securities
ranking prior to the Exchanged Stock with respect to the payment of dividends
or the distribution of assets upon liquidation, and (iv) holds, as a
Controlled Subsidiary or Subsidiaries, either the Bank or one or more other
banking corporations which, collectively, immediately after such transaction
hold substantially all of the assets and liabilities which the Bank held
immediately prior to such transaction (which may be in addition to other
assets and liabilities acquired in such transaction). "Controlled Subsidiary"
shall mean any corporation at least 80% of the outstanding shares of voting
stock of which shall at the time be owned directly or indirectly by the
Corporation or a Qualified Successor Company. In connection with the exercise
of the voting rights contained in this paragraph 5(d), holders of all series
of Parity Stock which are granted such voting rights shall vote as a class,
and each Holder of DARTS shall have 2,000 votes for each share of stock held,
and each other series shall have such number of votes, if any, for each share
of stock held as may be granted them.
The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of the DARTS shall have
been redeemed or sufficient funds shall have been deposited in trust in
accordance with paragraph 4 to effect such redemption.
6. Auction Procedures. (a) Certain definitions. Capitalized
terms not defined in this paragraph 6 shall have the respective meanings
specified in paragraphs 1 through 5 above. As used in this paragraph 6, the
following terms shall have the following meanings, unless the context
otherwise requires:
(i) "Affiliate" shall mean any Person known to the Trust
Company to be controlled by, in control of, or under common control with
the Corporation.
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(ii) "Agent Member" shall mean the member of the Securities
Depository that will act on behalf of a Bidder and is identified as such
in such Bidder's Purchaser's Letter.
(iii) "Auction" shall mean the periodic operation of the
procedures set forth in this paragraph 6.
(iv) "Auction Date" shall mean the Business Day next preceding a
Dividend Payment Date.
(v) "Available DARTS" shall have the meaning specified in
paragraph 6(d)(i) below.
(vi) "Bid" shall have the meaning specified in paragraph 6(b)(i)
below.
(vii) "Bidder" shall have the meaning specified in paragraph
6(b)(i) below.
(viii) "Broker-Dealer" shall mean any broker-dealer, or other
entity permitted by law to perform the functions required of a
Broker-Dealer in this paragraph 6, that has been selected by the
Corporation and has entered into a Broker-Dealer Agreement with the
Trust Company that remains effective.
(ix) "Broker-Dealer Agreement" shall mean an agreement between
the Trust Company and a Broker-Dealer pursuant to which such Broker-
Dealer agrees to follow the procedures specified in this paragraph 6.
(x) "DARTS" shall mean Series A and Series B DARTS being
auctioned pursuant to this paragraph 6.
(xi) "Existing Holder", when used with respect to shares of
DARTS, shall mean a Person who has signed a Purchaser's Letter and is
listed as the beneficial owner of such shares of DARTS in the records of
the Trust Company.
(xii) "Hold Order" shall have the meaning specified in paragraph
6(b)(i) below.
(xiii) "Maximum Applicable Rate", on any Auction Date, shall mean
the percentage of the 60-day "AA" Composite Commercial Paper Rate on
such Auction Date, determined as set forth below based on the
prevailing rating of shares of DARTS in effect at the close of
business on such Auction Date:
Prevailing Rating Percentage
AA/aa or Above........................................... 110%
A/a...................................................... 120%
BBB/baa.................................................. 130%
Below BBB/baa............................................ 150%
For purposes of this definition, the "prevailing rating" of shares
of DARTS shall be (i) AA/aa or Above, if shares of DARTS have a rating
of AA- or better by Standard & Poor's Corporation or its successor
("S&P") or aa3 or better by Moody's Investors Service, Inc., or its
successor ("Moody's"), or the equivalent of either or both of such
ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if not AA/aa or Above,
then A/a if the shares of DARTS have a rating of A- or better and lower
than AA- by S&P or a3 or better and lower then aa3 by Moody's or the
equivalent of either or both of such ratings by such agencies or a
substitute rating agency or substitute rating agencies selected as
provided below, (iii) if not AA/aa or Above or A/a, then BBB/baa, if
the shares of DARTS have a rating of BBB- or better and lower than A-by
S&P or baa3 or better and lower than a3 by Moody's or the equivalent of
either or both of such ratings by such agencies or a substitute rating
agency or substitute rating agencies selected as provided below, and
(iv) if not AA/aa or Above, A/a or BBB/baa, then Below BBB/baa. The
Company shall take all reasonable action necessary to enable S&P and
Moody's to provide a rating for DARTS. If either S&P or Moody's shall
not make such a rating available, or neither S&P nor Moody's shall make
such a rating available, Salomon Brothers Inc, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Shearson Lehman Brothers Incorporated and
Bear, Stearns & Co. Inc. and/or their successors shall select a nationally
recognized securities rating agency or two nationally recognized
securities rating agencies to act as substitute rating agency or
substitute rating agencies, as the case may be.
(xiv) "Order" shall have the meaning specified in paragraph
6(b)(i) below.
(xv) "Outstanding" shall mean, as of any date, shares of DARTS
theretofore issued by the Corporation except, without duplication,
(A) any shares of DARTS theretofore cancelled or delivered to the
Trust Company for cancellation, or redeemed by the Corporation or as
to which a notice of redemption shall have been given by the
Corporation, (B) any shares of DARTS as to which the Corporation or
any Affiliate thereof shall be an Existing Holder and (C) any
shares of DARTS represented by any certificate in lieu of which a new
certificate has been executed and delivered by the Corporation.
(xvi) "Person" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a
joint venture or other entity or a government or any agency or
political subdivision thereof.
(xvii) "Potential Holder" shall mean any Person, including any
Existing Holder, (A) who shall have executed a Purchaser's Letter
and (B) who may be interested in acquiring shares of DARTS (or, in
the case of an Existing Holder, additional shares of DARTS).
(xviii) "Purchaser's Letter" shall mean a letter addressed to the
Corporation, the Trust Company and a Broker-Dealer in which a Person
agrees, among other things, to offer to purchase, purchase, offer to
sell and/or sell shares of DARTS as set forth in this paragraph 6.
(xix) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns or any other securities
depository selected by the Corporation which agrees to follow the
procedures required to be followed by such securities depository in
connection with shares of DARTS.
(xx) "Sell Order" shall have the meaning specified in paragraph
6(b)(i) below.
(xxi) "Submission Deadline" shall mean 12:30 P.M., New York City
time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Trust Company as
specified by the Trust Company from time to time.
(xxii) "Submitted Bid" shall have the meaning specified in paragraph
6(d)(i) below.
(xxiii) "Submitted Hold Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxiv) "Submitted Order" shall have the meaning specified in
paragraph 6(d)(i) below.
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(xxv) "Submitted Sell Order" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxvi) "Sufficient Clearing Bids" shall have the meaning specified in
paragraph 6(d)(i) below.
(xxvii) "Winning Bid Rate" shall have the meaning specified in
paragraph 6(d)(i) below.
(b) Orders by Existing Holders and Potential Holders.
(i) On or prior to each Auction Date:
(A) each Existing Holder may submit to a Broker-Dealer
information as to:
(1) the number of Outstanding shares, if any, of
DARTS held by such Existing Holder which such Existing Holder
desires to continue to hold without regard to the Applicable Rate
for the next succeeding Dividend Period;
(2) the number of Outstanding shares, if any, of
DARTS held by such Existing Holder which such Existing Holder
desires to continue to hold, provided that the Applicable Rate
for the next succeeding Dividend Period shall not be less than
the rate per annum specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any, of
DARTS held by such Existing Holder which such Existing Holder
offers to sell without regard to the Applicable Rate for the next
succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential
Holders that shall be maintained in good faith for the purpose of
conducting a competitive Auction, shall contact Potential
Holders, including Persons that are not Existing Holders, on such
list to determine the number of Outstanding shares, if any, of
DARTS which each such Potential Holder offers to purchase,
provided that the Applicable Rate for the next succeeding Dividend
Period shall not be less than the rate per annum specified by
such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of
information referred to in clause (A) or (B) of this paragraph 6(b)(i) is
hereinafter referred to as an "Order" and each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder";
an Order containing the information referred to in clause (A)(1) of this
paragraph 6(b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph 6(b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
6(b)(i) is hereinafter referred to as a "Sell Order."
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable
offer to sell:
(l) the number of Outstanding shares of DARTS specified in
such Bid if the Applicable Rate determined on such Auction Date
shall be less than the rate specified in such Bid; or
(2) such number or a lesser number of Outstanding shares
of DARTS to be determined as set forth in paragraph 6(e)(i)(D) if
the Applicable Rate determined on such Auction Date shall be
equal to the rate specified therein; or
(3) a lesser number of Outstanding shares of DARTS to be
determined as set forth in paragraph 6(e)(ii)(C) if such
specified rate shall be higher than the Maximum Applicable
Rate and Sufficient Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of DARTS specified in
such Sell Order; or
(2) such number or a lesser number of Outstanding shares of
DARTS to be determined as set forth in paragraph 6(e)(ii)(C) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable
offer to purchase:
(1) the number of Outstanding shares of DARTS specified in
such Bid if the Applicable Rate determined on such Auction Date
shall be higher than the rate specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of
DARTS to be determined as set forth in paragraph 6(e)(i)(E) if
the Applicable Rate determined on such Auction Date shall be
equal to the rate specified therein.
(c) Submission of Orders by Broker-Dealers to Trust Company.
(i) Each Broker-Dealer shall submit in writing to the Trust
Company prior to the Submission Deadline on each Auction Date all
Orders obtained by such Broker-Dealer and specifying with respect to
each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding shares of DARTS that are the
subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the number of Outstanding shares, if any, of DARTS subject to any
Hold Order placed by such Existing Holder;
(2) the number of Outstanding shares, if any, of DARTS subject to any
Bid placed by such Existing Holder and the rate specified in such Bid; and
(3) the number of Outstanding shares, if any, of DARTS subject to any
Sell Order placed by such Existing Holder.
(D) to the extent such Bidder is a Potential Holder, the rate specified in
such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Trust Company shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If an Order or Orders covering all of the Outstanding shares of
DARTS held by an Existing Holder is not submitted to the Trust Company
prior to the Submission Deadline, the Trust Company shall deem a Hold Order
to have been submitted on behalf of such Existing Holder covering the
number of Outstanding shares of DARTS held by such Existing Holder and not
subject to Orders submitted to the Trust Company.
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CONFORMED COPY 3.31.86
(iv) If one or more Orders covering in the aggregate more than the
number of Outstanding shares of DARTS held by an Existing Holder are
submitted to the Trust Company, such Orders shall be considered valid as
follows and in the following order of priority:
(A) any Hold Order submitted on behalf of such Existing Holder
shall be considered valid up to and including the number of
Outstanding shares of DARTS held by such Existing Holder; provided
that if more than one Hold Order is submitted on behalf of such
Existing Holder and the number of shares of DARTS subject to such
Hold Orders exceeds the number of Outstanding shares of DARTS held
by such Existing Holder, the number of shares of DARTS subject to
such Hold Orders shall be reduced pro rata so that such Hold Orders
shall cover the number of Outstanding shares of DARTS held by such
Existing Holder;
(B) (1) any Bid shall be considered valid up to and
including the excess of the number of Outstanding shares of DARTS
held by such Existing Holder over the number of shares of DARTS
subject to Hold Orders referred to in paragraph 6(c)(iv)(A);
(2) subject to clause (1) above, if more than one Bid with
the same rate is submitted on behalf of such Existing Holder and the
number of Outstanding shares of DARTS subject to such Bids is
greater than such excess, the number of Outstanding shares of DARTS
subject to such Bids shall be reduced pro rata so that such Bids
shall cover the number of Outstanding shares of DARTS equal to such
excess; and
(3) subject to clause (1) above, if more than one Bid with
different rates is submitted on behalf of such Existing Holder, such
Bids shall be considered valid in the ascending order of their
respective rates and in any such event the number, if any, of such
Outstanding shares subject to Bids not valid under this clause (B)
shall be treated as the subject of a Bid by a Potential Holder; and
(C) any Sell Order shall be considered valid up to and including
the excess of the number of Outstanding shares of DARTS held by such
Existing Holder over the number of Outstanding shares of DARTS subject
to Hold Orders referred to in paragraph 6(c)(iv)(A) and Bids referred
to in paragraph 6 (c)(iv)(B).
(v) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate and
shares of DARTS therein specified
(d) Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. (i) Not earlier than the Submission Deadline on each Auction
Date, the Trust Company shall assemble all Orders submitted to it by the Broker-
Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer
being hereinafter referred to individually as a "Submitted Hold Order", a
"Submitted Bid" or a "Submitted Sell Order", as the case may be, or as a
"Submitted Order") and shall determine:
(A) the excess of the total number of Outstanding shares of DARTS over
the number of Outstanding shares of DARTS that are the subject of
Submitted Hold Orders (such excess being hereinafter referred to as the
"Available DARTS");
(B) from the Submitted Orders whether:
(1) the number of Outstanding shares of DARTS that are the subject of
Submitted Bids by Potential Holders specifying one or more rates equal
to or lower than the Maximum Applicable Rate exceeds or is equal to the
sum of:
(2) (a) the number of Outstanding shares of DARTS that are the
subject of Submitted Bids by Existing Holders specifying one or more
rates higher than the Maximum Applicable Rate, and
(b) the number of Outstanding shares of DARTS that are subject
to Submitted Sell Orders (if such excess or such equality exists (other
than because the number of Outstanding shares of DARTS in clauses (a)
and (b) above are each zero because all the Outstanding shares of DARTS
are the subject of Submitted Hold Orders), such Submitted Bids in clause
(1) above being hereinafter referred to collectively as "Sufficient
Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate specified
in the Submitted Bids (the "Winning Bid Rate") which if:
(1) each Submitted Bid from Existing Holders specifying the Winning
Bid Rate and all other Submitted Bids from Existing Holders specifying
lower rates were rejected, thus entitling such Existing Holders to
continue to hold the shares of DARTS that are the subject of such
Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the Winning
Bid Rate and all other Submitted Bids from Potential Holders specifying
lower rates were accepted, thus entitling the Potential Holders to
purchase the shares of DARTS that are the subject of such Submitted
Bids, would result in the number of shares subject to all Submitted
Bids specifying the Winning Bid Rate or a lower rate being at least
equal to the Available DARTS.
(ii) Promptly after the Trust company has made the determinations
pursuant to paragraph 6(d)(i), the Trust Company shall advise the
Corporation of the Maximum Applicable Rate and the Minimum Applicable
Rate and, based on such determinations, the Applicable Rate for the next
succeeding Dividend Period as follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for the
next succeeding Dividend Period shall be equal to the Winning Bid Rate so
determined;
(B) if Sufficient Clearing Bids do not exist (other than because all
of the Outstanding shares of DARTS are the subject of Submitted Hold
Orders), that the Applicable Rate for the next succeeding Dividend Period
shall be equal to the Maximum Applicable Rate; or
(C) if all of the Outstanding shares of DARTS are the subject of
Submitted Hold Orders, that the Applicable Rate for the next succeeding
Dividend Period shall be 59% of the 60-day "AA" Composite Commercial
Paper Rate on the date of the Auction.
(e) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Based on the determinations made pursuant to
paragraph 6(d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Trust Company shall take such other action as set
forth below:
(i) If Sufficient Clearing Bids have been made, subject to the
provisions of paragraph 6(e)(ii) and 6(e)(iv), Submitted Bids and
Submitted Sell Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any rate
that is higher than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Holder to sell the Outstanding shares of
DARTS that are the subject of such Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying
any rate that is lower than the Winning Bid Rate shall be rejected,
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CONFORMED COPY 3.31.86
thus entitling each such Existing Holder to continue to hold the
Outstanding shares of DARTS that are the subject of such Submitted Bid;
(C) the Submitted Bid of each of the Potential Holders specifying
any rate that is lower than the Winning Bid Rate shall be accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate that is equal to the Winning Bid Rate shall be rejected, thus
entitling each such Existing Holder to continue to hold the Outstanding
shares of DARTS that are the subject of such Submitted Bid, unless the
number of Outstanding shares of DARTS subject to all such Submitted Bids
shall be greater than the number of Outstanding shares of DARTS
("remaining shares") equal to the excess of the Available DARTS over the
number of Outstanding shares of DARTS subject to Submitted Bids described
in paragraphs 6(e)(i)(B) and 6(e)(i)(C), in which event the Submitted
Bids of each such Existing Holder shall be accepted, and each such
Existing Holder shall be required to sell Outstanding shares of DARTS,
but only in an amount equal to the difference between (1) the number of
Outstanding shares of DARTS then held by such Existing Holder subject to
such Submitted Bid and (2) the number of shares of DARTS obtained by
multiplying (x) the number of remaining shares by (y) a fraction the
numerator of which shall be the number of Outstanding shares of DARTS
held by such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the sum of the number of Outstanding shares
of DARTS subject to such submitted Bids made by all such Existing Holders
that specified a rate equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate that is equal to the Winning Bid Rate shall be accepted but only in
an amount equal to the number of Outstanding shares of DARTS obtained by
multiplying (x) the difference between the Available DARTS and the number
of Outstanding shares of DARTS subject to Submitted Bids described in
paragraphs 6(e)(i)(B), 6(e)(i)(C) and 6(e)(i)(D) by (y) a fraction the
numerator of which shall be the number of Outstanding shares of DARTS
subject to such Submitted Bid and the denominator of which shall be the
sum of the number of Outstanding shares of DARTS subject to such
Submitted Bids made by all such Potential Holders that specified rates
equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of DARTS are subject to Submitted
Hold Orders), subject to the provisions of paragraphs 6(e)(iii) and
6(e)(iv), Submitted Orders shall be accepted or rejected in the following
order of priority and all other Submitted Bids shall be rejected:
(A) the Submitted bid of each Existing Holder specifying any rate that
is equal to or lower than the Maximum Applicable Rate shall be
rejected, thus entitling such Existing Holder to continue to hold the
Outstanding shares of DARTS that are the subject of such Submitted Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
that is equal to or lower than the Maximum Applicable Rate shall be
accepted, thus requiring such Potential Holder to purchase the
Outstanding shares of DARTS that are the subject of such Submitted Bid;
and
(C) the Submitted Bids of each Existing Holder specifying any rate
that is higher than the Maximum Applicable Rate shall be accepted and
the Submitted Sell Orders of each Existing Holder shall be accepted, in
both cases only in an amount equal to the difference between (1) the
number of Outstanding shares of DARTS then held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and (2) the
number of shares of DARTS obtained by multiplying (x) the difference
between the Available DARTS and the aggregate number of Outstanding
shares of DARTS subject to Submitted Bids described in paragraphs
6(e)(ii)(A) and 6(e)(ii)(B) by (y) a fraction the numerator of which
shall be the number of Outstanding shares of DARTS held by such
Existing holder subject to such Submitted Bid or Submitted Sell Order
and the denominator of which shall be the number of Outstanding shares
of DARTS subject to all such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in paragraph 6(e)(i),
any Potential Holder would be entitled or required to purchase less than a
whole share of DARTS on any Auction Date, the Trust Company shall, in such
manner as, in its sole discretion, it shall determine, allocate shares of
DARTS for purchase among Potential Holders so that only whole shares of
DARTS are purchased on such Auction Date by any Potential Holder, even if
such allocation results in one or more of such Potential Holders not
purchasing shares of DARTS on such Auction Date.
(iv) If, as a result of the procedures described in paragraph 6(e)(i)
or 6(e)(ii), any Existing Holder would be entitled or required to sell,
or any Potential Holder would be entitled or required to purchase, a
fraction of a share of DARTS on any Auction Date, the Trust Company
shall, in such manner as, in its sole discretion, it shall determine,
round up or down the number of shares of DARTS to be purchased or sold by
any Existing Holder or Potential Holder on such Auction Date so that the
number of Outstanding shares purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be whole shares of DARTS.
(v) Based on the results of each Auction, the Trust Company shall
determine the aggregate number of Outstanding shares of DARTS to be
purchased and the aggregate number of Outstanding shares of DARTS to be
sold by Potential Holders and Existing Holders on whose behalf each
Broker-Dealer submitted Bids or Sell Orders, and, with respect to each
Broker-Dealer, to the extent that such aggregate number of Outstanding
shares to be purchased and such aggregate number of Outstanding shares to
be sold differ, determine to which other Broker-Dealer or Broker-Dealers
acting for one or more purchasers such Broker-Dealer shall deliver, or
from which other Broker-Dealer or Broker-Dealers acting for one or more
sellers such Broker-Dealer shall receive, as the case may be, Outstanding
shares of DARTS.
(f) Miscellaneous. The Board of Directors may interpret the provisions of
this paragraph 6 to resolve any inconsistency or ambiguity, remedy any formal
defect or make any other change or modification which does not adversely affect
the rights of Existing Holders of DARTS. An Existing Holder (A) may sell,
transfer or otherwise dispose of shares of DARTS only pursuant to a Bid or Sell
Order in accordance with the procedures described in this paragraph 6 or to or
through a Broker-Dealer or to a Person that has delivered a signed copy of a
Purchaser's Letter to the Trust Company, provided that in the case of all
transfers other than pursuant to Auctions such Existing Holder, its Broker-
Dealer or its Agent Member advises the Trust Company of such transfer and
(B) except as otherwise provided by law, shall have the ownership of the
shares of DARTS held by it maintained in book entry form by the Securities
Depository in the account of its Agent Member, which in turn will maintain
records of such Existing Holder's beneficial ownership. Neither the
Corporation nor any Affiliate shall submit an Order in any Auction. All
of the outstanding DARTS shall be represented by a certificate registered in
the name of the nominee of the Securities Depository.
(g) Headings of Subdivisions. The headings of the various subdivisions
of this paragraph 6 are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
7. Parity Stock. So long as any shares of DARTS shall remain
outstanding, in case the stated dividends or amounts payable on liquidation
are not paid in full with respect to all outstanding shares of Parity Stock,
all such shares shall share ratably in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be payable in
respect of all outstanding shares of Parity Stock if all dividends in respect
of all such shares of Parity Stock were paid in full, and on any distribution
of assets upon liquidation, ratably in accordance with the sums which would
be payable in respect of all outstanding Parity Stock if all sums payable
were discharged in full.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
presents to be signed in its name and on its behalf by its Senior Vice President
and its corporate seal to be hereunto affixed and attested by its Corporate
Secretary, and the said officers of the Corporation further acknowledged said
instrument to be the corporate act of the Corporation and stated under the
penalties of perjury that to the best of their knowledge, information and
belief the matters and facts therein set forth with respect to approval are
true in all material respects, all on March 27, 1986.
REPUBLIC NEW YORK CORPORATION
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CONFORMED COPY 3.31.86
By: /s/ Thomas F. Robards
Attest: (Senior Vice President)
/s/ William F. Rosenblum, Jr.
(Corporate Secretary)
CONFORMED COPY 7.22.87
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has duly divided and classified 500 shares of the Preferred Stock
of the Corporation into a series designated Money Market Cumulative
PreferredTM Stock and has provided for the issuance of such series.
SECOND: The terms of the Money Market Cumulative PreferredTM Stock as set by
the Finance Committee of the Board of Directors pursuant to authority duly
delegated by the Board of Directors are as follows:
PART I
1. Designation and Number of Shares. (a) 500 shares of Preferred Stock
of the Corporation, without par value, shall constitute a series of Preferred
Stock designated as "Preferred Stock," hereinafter referred to as the "MMP."
All shares of the MMP shall be identical with each other in all respects. The
MMP shall be of a stated value of $100,000 per share (the "stated value").
(b) All shares of MMP redeemed or purchased by the Corporation
shall be retired and cancelled and shall be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, and may thereafter be issued, but not as shares of MMP.
2. Dividends. (a) The Holders (as defined in Section 7 of this Part I)
shall be entitled to receive, when, as and if declared by the Board of
Directors of the Corporation (as defined in Section 7 of this Part I), out of
funds legally available therefor, cumulative cash dividends at the Applicable
Rate (as defined in subparagraph (c)(i) of this Section 2) per annum,
determined as set forth in subparagraph (c)(i) of this Section 2, and no more,
payable on the respective dates set forth in subparagraph (b)(i) of this
Section 2.
(b) (i) Dividends on shares of MMP, at the Applicable Rate per
annum, shall accrue from the Date of Original Issue (as defined in Section 7
of this Part I) and shall be payable commencing on Monday, September 14, 1987,
and on each succeeding seventh Monday thereafter except that
(1) if the Monday that otherwise would be the Dividend Payment
Date is not a Business Day, or the Monday that otherwise would be
the Dividend Payment Date is succeeded by a Tuesday that is not a
Business Day, then the dividend Payment Date shall be the next
succeeding Business Day that is immediately succeeded by a Business
Day, provided that (2) if the Securities Depositary shall make
available to its participants and members, in funds immediately
available in the City of New York on Dividend Payment Dates, the
amount due as dividends on such Dividend Payment Dates (and the
Securities Depositary shall have so advised the Trust Company), and
if the Monday that otherwise would be the Dividend Payment Date is
not a Business Day, then the Dividend Payment Date shall be the next
succeeding Business Day, and provided, further, that (3) if the
determination of the otherwise applicable Dividend Payment Date in
the manner hereinabove provided would result in the Dividend Period
commencing on said otherwise applicable Dividend Payment Date having
less than the number of days constituting the minimum holding period
(currently found in Section 246(c) of the Code) required for
taxpayers to be entitled to the dividends received deduction on
preferred stock held by non-affiliated corporations (currently found
in Section 243(a) of the Code), then the Board of directors or a
committee thereof shall make such adjustment to the next succeeding
Dividend Payment Date as shall be necessary to result in such
Dividend Period having the minimum number of days constituting the
minimum holding period. Although any particular Dividend Payment
Date may not occur on the originally scheduled Monday because of the
exceptions discussed above, the next succeeding Dividend Payment
Date shall be, subject to such exceptions, the seventh Monday
following the originally designated Monday that would have been the
Dividend Payment Date for the prior Dividend Period.
Notwithstanding the foregoing, in the event of a change in law
lengthening the minimum holding period (currently found in Section
246(c) of the Code) required for taxpayers to be entitled to the
dividends received deduction on preferred stock held by non-
affiliated corporations (currently found in Section 243(a) of the
Code), the Board may adjust the period of time between Dividend
Payment Dates so as to adjust uniformly the number of days (such
number of days, without giving effect to the exceptions referred to
above, being hereinafter referred to as "Dividend Period Days") in
Dividend Periods commencing after the date of such change in law to
equal or exceed the then current minimum holding period; provided
that the number of Dividend Period Days shall not exceed by more
than nine days the length of such then current minimum holding
period and in no event shall exceed 98 days and that dividends shall
continue to be payable on Mondays, subject to the exceptions
discussed above. Each dividend payment date determined as provided
above is herein referred to as a "Dividend Payment Date" and the
first Dividend Payment Date is herein referred to as the "Initial
Dividend Payment Date." If the Board of Directors of the
Corporation determines to adjust the number of Dividend Period Days
in the Dividend Periods for the MMP, the Corporation will mail
notice of such change to all holders of shares of MMP so affected.
(ii) So long as no Payment Default (as defined in Section 7 of
this Part I) shall have occurred, the Corporation shall pay to the Trust
Company not later than 12:00 noon, New York City time, on the Business Day
next preceding each Dividend Payment Date an aggregate amount of funds
available on the next Business Day in The City of New York, equal to the
dividends to be paid to all Holders on such Dividend Payment Date. All such
moneys shall be held in trust for the payment of such dividends by the Trust
Company for the benefit of the Holders specified in subparagraph (b)(iii) of
this Section 2.
(iii) Each dividend shall be paid to the Holders as their
names appear on the records of the Corporation on the Business Day next
preceding the Dividend Payment Date thereof; provided, however, that if a
Payment Default shall have occurred, such dividend shall be paid to the
Holders as their names appear on the records of the Corporation on such date,
not exceeding 15 days preceding the payment date thereof, as may be fixed by
the Board of Directors of the Corporation. Dividends in arrears for any past
Dividend Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to the Holders as their names appear on the
records of the Corporation on such date, not exceeding 15 days preceding the
payment date thereof, as may be fixed by the Board of Directors of the
Corporation.
(c) (i) The dividend rate on shares of MMP during the period from
and after the Date of Original Issue to and including the Initial Dividend
Payment Date (the "Initial Dividend Period") shall be 4.625% per annum.
Commencing on the Initial Dividend Payment Date, the dividend rate on shares
of MMP for each subsequent dividend period (herein referred to as a
"Subsequent Dividend Period" and collectively as "Subsequent Dividend
Periods"; and the Initial Dividend Period or any Subsequent Dividend Period
being herein referred to as a "Dividend Period" and collectively as "Dividend
Periods") thereafter, which Subsequent Dividend Periods shall commence on the
day that is the last day of the preceding Dividend Period and shall end on and
include the next succeeding Dividend Payment Date, shall be equal to the rate
per annum that results from implementation of the Auction Procedures (as
defined in Section 7 of this Part I); provided, however, that if an Auction
with respect to any Dividend Period is not held for any reason, the dividend
rate on the shares of MMP for such Dividend Period will be the Maximum Rate on
the Auction Date with respect to such Dividend Period. Notwithstanding the
foregoing, if a Payment Default shall have occurred prior to the first day of
such Subsequent Dividend Period, the dividend rate for such Subsequent
Dividend Period shall be a rate per annum equal to 175% of the 60-day "AA"
Composite Commercial Paper Rate (as defined in Section 7 of this Part I) (the
rate per annum at which dividends are payable on shares of MMP for any
Dividend Period being herein referred to as the "Applicable Rate").
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CONFORMED COPY 7.22.87
(ii) The amount of dividends per share payable on shares of
MMP for any Dividend Period shall be computed by multiplying the Applicable
Rate for such Dividend Period by a fraction the numerator of which shall be
the number of days in such Dividend Period (calculated by counting the first
day thereof but excluding the last day thereof) and the denominator of which
shall be 360 and applying the rate obtained against $100,000 per share of MMP.
(d) So long as any shares of MMP are outstanding, the Corporation
shall not (a) declare or pay or set apart for payment any dividend or other
distribution (other than dividends or distributions payable in shares of stock
of the Corporation ranking junior to the MMP as to dividends and upon
liquidation) for any period upon any stock of the Corporation ranking on a
parity with, or any stock of the Corporation ranking junior to, such MMP as to
dividends or upon liquidation or (b) redeem, purchase or otherwise acquire for
any consideration any stock of the Corporation ranking on a parity with, or
any stock of the Corporation ranking junior to, such MMP as to dividends or
upon liquidation, unless, in either case, all dividends payable to holders of
shares of MMP and to holders of any other stock of the Corporation ranking on
a parity therewith as to dividends for its current dividend period and all
past dividend periods have been paid, are contemporaneously being paid or have
been declared and a sum sufficient for the payment thereof set aside for such
payment, except that notwithstanding clause (a) above the Corporation may pay
dividends on the shares of MMP and shares of stock of the Corporation ranking
on a parity therewith as to dividends ratably in accordance with the sums
which would be payable on such shares if all dividends, including
accumulations, if any, were declared and paid in full. Holders of shares of
MMP shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of full cumulative dividends, as herein provided, on the
MMP. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the MMP which may be in
arrears.
3. Redemption. (a)(i)(A) The shares of MMP may be redeemed, at the
option of the Corporation, as a whole or from time to time in part on the
second Business Day next preceding any Dividend Payment Date at a redemption
price of:
(i) $103,000 per share of MMP if redeemed during the twelve
months ending on July 23, 1988;
(ii) $102,000 per share of MMP if redeemed during the twelve
months ending on July 23, 1989;
(iii) $101,000 per share of MMP if redeemed during the twelve
months ending on July 23, 1990; and
(iv) $100,000 per share of MMP if redeemed thereafter
plus, in each case, an amount equal to accrued and unpaid dividends thereon
(whether or not earned or declared) to the date fixed for redemption.
(B) The shares of MMP are also redeemable at the option
of the Corporation, as a whole but not in part, on any Dividend Payment Date
at $100,000 per share of MMP, plus accrued and unpaid dividends thereon
(whether or not earned or declared) to the date of redemption if the
Applicable Rate for the Dividend Period ending on such Dividend Payment Date
equals or exceeds the 60-day "AA" Composite Commercial Paper Rate on the date
of determination of such Applicable Rate.
(ii) If fewer than all of the outstanding shares of MMP are to
be redeemed, the number of shares to be redeemed shall be determined by the
Board of Directors of the Corporation, and such shares shall be redeemed by
lot or pro rata from the Holders in proportion to the number of such shares
held by such Holders as may be determined by the Board of Directors of the
Corporation or by any other method as may be determined by the Board of
Directors of the Corporation in its sole discretion to be equitable.
(b) So long as no Payment Default shall have occurred, the
Corporation shall pay the applicable Redemption-Deposit Amount (as defined in
Section 7 of this Part I) to the Trust Company, in funds available on the next
Business Day in The City of New York on the Business Day next preceding any
redemption date for disbursement to Holders as appropriate. All such moneys
shall be held in trust by the Trust Company for the benefit of Holders of
shares so to be redeemed.
(c) In the event the Corporation shall redeem shares of MMP, notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the redemption date, to each
Holder of record of the shares to be redeemed, at such Holder's address as the
same appears on the stock register of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of MMP to be
redeemed and, if fewer than all the shares held by such Holder are to be
redeemed, the number of such shares to be redeemed from such Holder; (iii)
the redemption price, plus the amount of accrued and unpaid dividends thereon
(whether or not earned or declared) to the redemption date; (iv) the place
or places where certificates for such shares are to be surrendered for payment
of the redemption price plus such accrued and unpaid dividends; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
d) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in providing
money for the payment of the redemption price of the shares so called for
redemption, plus an amount equal to accrued and unpaid dividends thereon
(whether or not earned or declared) to the date fixed for redemption)
dividends on the shares of MMP so called for redemption shall cease to accrue,
and said shares shall no longer be deemed to be outstanding, and all rights of
the Holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price plus an amount equal to such
accrued and unpaid dividends) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the Corporation shall
so require and the notice shall so state), such shares shall be redeemed by
the Corporation at the redemption price plus an amount equal to such accrued
and unpaid dividends. In case fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares without cost to the holder thereof.
(e) Any shares of MMP which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued
shares of Preferred Stock, without designation as to series until such shares
are once more designated as part of a particular series by the Board of
Directors.
(f) Notwithstanding the foregoing provisions of this Section 3, if
any dividends on MMP are in arrears, no shares of MMP shall be redeemed, and
the Corporation shall not purchase or otherwise acquire any shares of MMP;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of MMP pursuant to a purchase or exchange offer made on
the same terms to all holders of MMP and any other shares of stock of the
Corporation ranking on a parity therewith as to dividends.
4. Conversion or Exchange. The holders of shares of MMP shall not have
any rights herein to convert such shares into or exchange such shares for
shares of any other class or classes or of any other series of any class or
classes of capital stock of the Corporation.
5. Liquidation Rights. (a) Upon the dissolution, voluntary or
involuntary liquidation or winding up of the Corporation, the Holders of the
shares of MMP shall be entitled to receive out of the assets of the
Corporation, available for distribution to stockholders before any payment or
distribution of assets shall be made on the Common Stock or on any other class
of stock of the Corporation ranking junior to the MMP upon liquidation, the
amount of $100,000 per share plus a sum equal to all dividends (whether or not
earned or declared) on such shares accrued and unpaid thereon to the date of
final distribution.
(b) For the purposes of this Section 5, a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation shall include
neither the consolidation or merger of the Corporation with or into any other
corporation, nor any sale, lease or conveyance of all or any part of the
property or business of the Corporation.
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(c) After the payment to the holders of the shares of MMP of the
full preferential amounts provided for in this Section 5, the Holders of MMP
as such shall have no right or claim to any of the remaining assets of the
Corporation.
(d) In the event the assets of the Corporation available for
distribution to the holders of shares of MMP upon any dissolution, liquidation
or winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (a) of this Section 5, no such distribution shall be
made on account of any shares of stock of the Corporation ranking on a parity
with the shares of MMP upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
MMP, ratably, in proportion to the full distributable amounts for which
holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(e) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of MMP then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders all amounts to which such holders are entitled pursuant to
paragraph (a) of this Section 5 before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to MMP.
6. Voting Rights. (a) Holders of shares of MMP shall have no voting
rights, either general or special except as expressly required by applicable
law, the Charter and as specified in this Section 6.
(b) Whenever dividends on any shares of MMP shall be unpaid as a
whole or in part for not less than 540 consecutive days, then at the annual
meeting of stockholders next following omission of the last successive
quarterly dividend or any part thereof in such period and at any annual
meeting thereafter and at any meeting called for the election of Directors,
until all dividends accumulated on the shares of MMP have been paid or
declared and a sum sufficient for payment has been set aside, the Holders of
the shares of MMP either alone or together with the holders of one or more
other cumulative series of the Preferred Stock at the time outstanding which
are granted such voting rights, voting as a class, shall be entitled, to the
exclusion of the holders of one or more other series or classes of stock
having general voting rights, to vote for and elect two members of the Board
of Directors of the Corporation, and the holders of Common Stock together with
the holders of any series or class or classes of stock of the Corporation
having general voting rights and not then entitled to elect two members of the
Board of Directors pursuant to this Section 6 to the exclusion of the holders
of all series then so entitled, shall be entitled to vote and elect the
balance of the Board of Directors. In such case the Board of Directors of
the Corporation shall, as of the date of the annual meeting of stockholders
aforesaid, be increased by two Directors. The rights of Holders of shares of
MMP to participate (either alone or together with the holders of one or more
other cumulative series of Preferred Stock at the time outstanding which are
granted such voting rights) in the exclusive election of two members of the
Board of Directors of the Corporation pursuant to this Section 6 shall
continue in effect until cumulative dividends have been paid in full or
declared and set apart for payment on the shares of MMP. At elections for
such Directors, each Holder of shares of MMP shall be entitled to 2,000 votes
for each share held. The Holders of shares of MMP shall have no right to
cumulate such shares in voting for the election of Directors. At the annual
meeting of stockholders next following the termination (by reason of the
payment of all accumulated and defaulted dividends on such stock or provision
for the payment thereof by declaration and setting apart thereof) of the
exclusive voting power pursuant to this Section 6 of the Holders of shares of
MMP and the holders of all other cumulative series which shall have been
entitled to vote for and elect such two members of the Board of Directors of
the Corporation, the terms of office of all persons who may have been elected
Directors of the Corporation by vote of such holders shall terminate and the
two vacancies created pursuant to this Section 6 to accommodate the exclusive
right of election conferred hereunder shall thereupon be eliminated, and the
Board of Directors shall be decreased by two Directors.
(c) So long as any shares of MMP remain outstanding, the
affirmative vote of the Holders of at least two-thirds of the votes of the
shares of MMP outstanding at the time given in person or by proxy, at any
special or annual meeting called for the purpose, shall be necessary to
permit, effect or validate any one or more of the following:
(i) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as
that term is defined below in this Section 6) to such shares of MMP,
or
(ii) The authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks on a
parity with the shares of MMP unless the Articles Supplementary or
other provisions of the charter creating or authorizing such class
or series shall provide that if in any case the stated dividends or
amounts payable on liquidation are not paid in full on such series
of MMP and all outstanding shares of stock ranking on a parity (as
that term is defined below in this Section 6) with such shares of
MMP (such shares of MMP and all such other stock being herein called
"Parity Stock"), the shares of all Parity Stock shall share ratably
in the payment of dividends, including accumulations (if any) in
accordance with the sums which would be payable on all Parity Stock
if all dividends in respect of all shares of Parity Stock were paid
in full, and on any distribution of assets upon liquidation ratably
in accordance with the sums which would be payable in respect of all
shares of Parity Stock if all sums payable were discharged in full,
or
(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the charter
of the Corporation including these Articles Supplementary which
would materially and adversely affect any right, preference,
privilege or voting power of such shares of MMP or of the Holders
thereof; provided, however, that any increase or decrease in the
amount of authorized Preferred Stock or Cumulative Preferred Stock,
the Floating Rate Series B Stock, the Series A and Series B Dutch
Auction Rate Transferable SecuritiesTM Preferred Stock, the
Remarketed Preferred Stock or the MMP or the creation and issuance
of other series of Preferred Stock including MMP, in each case
ranking on a parity with or junior to the shares of MMP with respect
to the payment of dividends and the distribution of assets upon
liquidation, shall not be deemed to affect materially and adversely
such rights, preferences, privileges or voting powers.
Any class or classes of stock of the Corporation shall be deemed to
rank
(i) prior to the shares of MMP as to dividends or as to
distribution of assets if the holders of such class shall be
entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as
the case may be, in preference or priority to the Holders of
the shares of MMP; and
(ii) on a parity with the shares of MMP as to dividends
or as to distribution of assets, whether or not the dividend
rates, dividend payment dates, or redemption or liquidation
prices per share thereof be different from the shares of MMP,
if the holders of such class of stock and the shares of MMP
shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority one
over the other.
In connection with the exercise of the voting rights contained in
this Section 6(c), each Holder of shares of MMP shall have 2,000 votes for
each share of stock held.
(d) So long as any shares of MMP remain outstanding, the
Corporation shall not, without the affirmative vote of the holders of at least
a majority of the votes of all Parity Stock entitled to vote outstanding at
the time, given in person or by proxy, by resolution adopted at a meeting at
which the Holders of shares of MMP (alone or together with the holders of one
or more other series of Parity Stock at the time outstanding and entitled to
vote) vote separately as a class, (a) directly or indirectly, sell, transfer
or otherwise dispose of, or permit Republic National Bank of New York (the
"Bank") or any other subsidiary of the Corporation, to issue, sell, transfer
or otherwise dispose of any shares of voting stock of the Bank, or securities
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convertible into or options, warrants or rights to acquire voting stock of the
Bank, unless after giving effect to any such transaction the Bank remains a
Controlled Subsidiary (as hereinafter defined) of the Corporation or of a
Qualified Successor Company (hereinafter defined); (b) merge or consolidate
with, or convey substantially all of its assets to any person or corporation
unless the entity surviving such merger or consolidation or the transferee of
such assets is the Corporation or a Qualified Successor Company; or (c)
permit the Bank to merge, consolidate with, or convey substantially all of its
assets to any person or corporation unless the entity surviving such merger or
consolidation or the transferee of such assets is a Controlled Subsidiary of
the Corporation or of a Qualified Successor Company, except in any of the
foregoing cases as required to comply with applicable law, including, without
limitation, any court or regulatory order. The term "Qualified Successor
Company" shall mean a corporation (or other similar organization or entity
whether organized under or pursuant to the laws of the United States or any
state thereof or of another jurisdiction) which (i) is or is required to be
a registered bank holding company under the United States Bank Holding Company
Act of 1956, as amended, or any successor legislation, (ii) issues to the
holders of MMP in exchange for the MMP shares of preferred stock having at
least the same relative rights and preferences as the MMP (the "Exchanged
Stock"), (iii) immediately after such transaction has not outstanding or
authorized any class of stock or equity securities ranking prior to the
Exchanged Stock with respect to the payment of dividends or the distribution
of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or
Subsidiaries, either the Bank or one or more other banking corporations which,
collectively, immediately after such transaction hold substantially all of the
assets and liabilities which the Bank held immediately prior to such
transaction (which may be in addition to other assets and liabilities acquired
in such transaction). "Controlled Subsidiary" shall mean any corporation at
least 80% of the outstanding shares of voting stock of which shall at the time
be owned directly or indirectly by the Corporation or a Qualified Successor
Company. In connection with the exercise of the voting rights contained in
this Section 6(d), holders of all series of Parity Stock which are granted
such voting rights shall vote as a class, and each Holder of MMP shall have
2,000 votes for each share of stock held, and each other series shall have
such number of votes, if any, for each share of stock held as may be granted
them.
The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of the MMP shall have been
redeemed or sufficient funds shall have been deposited in trust in accordance
with Section 3 to effect such redemption.
7. Definitions. As used in Parts I and II hereof, the following terms
shall have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
(a) "Applicable Rate" shall have the meaning specified in
subparagraph (c)(i) of Section 2 of this Part I.
(b) "Auction" shall mean each periodic implementation of the
Auction Procedures.
(c) "Auction Procedures" shall mean the procedures for conducting
Auctions set forth in Part II hereof.
(d) "Board of Directors of the Corporation" shall mean the Board of
Directors of the Corporation or any duly authorized committee thereof
except with respect to the declaration of dividends on the shares of MMP
in which case the "Board of Directors" shall mean the Board of Directors
only.
(e) "Business Day" shall mean a day on which the New York Stock
Exchange, Inc. is open for trading and which is neither a Saturday,
Sunday nor any other day on which banks or trust companies in the City of
New York, New York are authorized by law to close.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) "Commercial Paper Dealers" shall mean Goldman Sachs & Co.,
Shearson Lehman Commercial Paper Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Salomon Brothers Inc, or, in lieu of any
thereof, their respective affiliates or successors provided that any such
entity is a commercial paper dealer.
(h) "Date of Original Issue" shall mean the date on which the
Corporation originally issues shares of MMP.
(i) "Divided Payment Date" shall have the meaning specified in
subparagraph (b)(i) of Section 2 of this Part I.
(j) "Dividend Period" and "Dividend Periods" shall have the
respective meanings specified in subparagraph (c)(i) of Section 2 of
this Part I.
(k) "Dividend Period Days" shall have the meaning specified in
subparagraph (b)(i) of Section 2 of this Part I.
(l) "Holder" shall mean the registered holder of shares of MMP as
the same appears on the stock books of the Corporation.
(m) "Initial Dividend Payment Date" shall have the meaning
specified in subparagraph (b)(i) of Section 2 of this Part I.
(n) "Initial Dividend Period" shall have the meaning specified in
subparagraph (c)(i) of Section 2 of this Part I.
(o) "Moody's" shall mean Moody's Investors Service, Inc., a
Delaware corporation and its successors.
(p) "Payment Default" shall mean the first failure by the
Corporation to pay to the Trust Company, not later than 12:00 noon, New
York City time, (A) on the Business Day next preceding any Dividend
Payment Date, in funds available on such Dividend Payment Date in the
City of New York, New York, the full amount of any dividend (whether or
not earned or declared) to be paid on such Dividend Payment Date on any
share of MMP or (B) on the Business Day next preceding any redemption
date in funds available on such redemption date in the City of New York,
New York, the redemption price to be paid on such redemption date, plus
an amount equal to accrued and unpaid dividends thereon (whether or not
earned or declared) to the date fixed for redemption, of any share of MMP
after notice of redemption has been given pursuant to paragraph (c) of
Section 3 of this Part I.
(q) "Redemption Deposit Amount" shall mean the product of (i) the
number of outstanding shares of MMP to be redeemed times (ii) an amount
equal to the applicable redemption price, plus an amount equal to accrued
and unpaid dividends (whether or not declared) to the date fixed for
redemption.
(r) "Reference Banks" shall mean the principal London offices of
Bankers Trust Company, The Bank of Tokyo, Ltd., Barclays Bank PLC and
National Westminster Bank PLC, or their respective successors.
(s) "S&P" shall mean Standard and Poor's Corporation, a New York
corporation and its successors.
(t) "Subsequent Dividend Period" and "Subsequent Dividend Periods"
shall have the respective meanings specified in subparagraph (c)(i) of
Section 2 of this Part I.
(u) "Substitute Commercial Paper Dealer" shall mean The First
Boston Corporation or Morgan Stanley & Co. Incorporated, or their
respective affiliates or successors, if such dealer or its affiliate or
successor is a commercial paper dealer; provided that neither such dealer
nor any of its affiliates or successors shall be a Commercial Paper
Dealer.
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(v) "Substitute Reference Bank" shall mean the principal London
offices of The Chase Manhattan Bank (National Association), Deutsche Bank
Aktiengesellschaft, Morgan Guaranty Trust Company of New York or Swiss
Bank Corporation, or their respective successors, or, if none of such
Substitute Reference Banks are engaged in dealings in United States
dollars in the London interbank market, then a bank or banks, selected by
the Corporation, engaged in dealings in United States dollars in the
London interbank market.
(w) "Trust Company" shall mean the bank or trust company or other
entity appointed as such by a resolution of the Board of Directors of the
Corporation.
PART II
1. Certain Definitions. Capitalized terms not defined in this Section 1
shall have the respective meanings specified in Part I hereof. As used in
this Part II, the following terms shall have the following meanings, unless
the context otherwise requires:
(a) "'AA' Composite Commercial Paper Rate", on any date, shall mean
(i) the interest equivalent of the 60-day rate on commercial paper
placed on behalf of issuers whose corporate bonds are rated "AA" by
S & P, or the equivalent of such rating by S&P or another rating agency,
as made available on a discount basis or otherwise by the Federal
Reserve Bank of New York for the immediately preceding Business Day
prior to such date; or (ii) in the event that the Federal Reserve Bank
of New York does not make available such a rate, then the arithmetic
average of the interest equivalent of the 60-day rate on commercial
paper placed on behalf of such issuers, as quoted on a discount basis or
otherwise by the Commercial Paper Dealers to the Trust Company for the
close of business on the immediately preceding Business Day prior to
such date. If any Commercial Paper Dealer does not quote a rate
required to determine the "AA" Composite Commercial Paper Rate, the "AA"
Composite Commercial Paper Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the
Corporation to provide such rate or rates not being supplied by any
Commercial Paper Dealer or Commercial Paper Dealers, as the case may be,
or, if the Corporation does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, by the remaining
Commercial Paper Dealer or Commercial Paper Dealers, provided that, in
the event the Corporation is unable to cause such quotations to be
furnished to the Trust Company by such sources, the Corporation may
cause the "AA" Composite Commercial Paper Rate to be furnished to the
Trust Company by such alternative source or sources as the Corporation
in good faith deems to be reliable. If the Board of Directors of the
Corporation shall make the adjustment referred to in subparagraph
(b)(i)(3) of Section 2 of Part I hereof, then (i) the number of
Dividend Period Days after such adjustment shall be fewer than 70 days,
such rate shall be the interest equivalent of the 60-day rate on such
commercial paper, (ii) if the Dividend Period Days after such
adjustment shall be 70 or more days but fewer than 85 days, such rate
shall be based on the arithmetic average of the interest equivalent of
the 60-day and 90-day rates on such commercial paper, or (iii) if the
Dividend Period Days after such adjustment shall be 85 or more days but
98 or fewer days, such rate shall be based on the interest equivalent of
the 90-day rate on such commercial paper. For purposes of this
definition, the "interest equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given days' maturity
shall be equal to the quotient (rounded upwards to the next higher one-
thousandth (.001) of 1%) of (A) the discount rate divided by (B) the
difference between (x) 1.00 and (y) a fraction the numerator of which
shall be the product of the discount rate times the number of days in
which such commercial paper matures and the denominator of which shall
be 360.
(b) "'AA' Rate Multiple", on any Auction Date, shall mean the
percentage determined as set forth below based on the prevailing rating
of MMP in effect at the close of business on the Business Day
immediately preceding such Auction Date:
<TABLE>
<CAPTION>
Prevailing Rating Percentage
<S> <C>
AA/aa or Above................ 110%
A/a........................... 120%
BBB/baa....................... 130%
Below BBB/baa (includes no rating) 175%
</TABLE>
For purposes of this definition, the "prevailing rating" of MMP shall be
(i) AA/aa or Above, if MMP has a rating of AA- or better by S&P or aa3
or better by Moody's or the equivalent of either or both of such ratings
by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, (ii) if not AA/aa or Above, then
A/a if MMP has a rating of A- or better and lower than AA- by S&P or a3
or better and lower then aa3 by Moody's or the equivalent of either or
both of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iii) if not
AA/aa or Above or A/a, then BBB/baa if MMP has a rating of BBB- or
better and lower than A- by S&P or baa3 or better and lower than a3 by
Moody's or the equivalent of either or both of such ratings by such
agencies or a substitute rating agency or substitute rating agencies
selected as provided below, and (iv) if not AA/aa or Above, A/a or
BBB/baa, then Below BBB/baa. The Corporation shall take all reasonable
action necessary to enable S&P and Moody's to provide a rating for MMP.
If either S&P or Moody's shall not make such a rating available, or
neither S&P nor Moody's shall make such a rating available, Shearson
Lehman Brothers Inc. and Salomon Brothers Inc or their successors shall
select a nationally recognized statistical rating organization (as that
term is used in the rules and regulations of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended) or two
nationally recognized statistical rating organizations to act as
substitute rating agency or substitute rating agencies, as the case may
be, and the Corporation shall take all reasonable action necessary to
enable such rating agency or rating agencies to provide a rating or
ratings for the MMP.
(c) "Affiliate" shall mean any Person known to the Trust Company
to be controlled by, in control of or under common control with the
Corporation.
(d) "Agent Member" shall mean the member of, or participant in,
the Securities Depository that will act on behalf of a Bidder and is
identified as such in such Bidder's Purchaser's Letter.
(e) "Auction Date" shall mean the Business Day next preceding the
first day of a Dividend Period.
(f) "Available MMP" shall have the meaning specified in paragraph
(a) of Section 4 of this Part II.
(g) "Bid" and "Bids" shall have the respective meanings specified
in paragraph (a) of Section 2 of this Part II.
(h) "Bidder" and "Bidders" shall have the respective meanings
specified in paragraph (a) of Section 2 of this Part II.
(i) "Broker-Dealer" shall mean any broker-dealer, or other entity
permitted by law to perform the functions required of a Broker-Dealer in
this Part II, that is a member of, or a participant in, the Securities
Depository, has been selected by the Corporation and has entered into a
Broker-Dealer Agreement with the Trust Company that remains effective.
(j) "Broker-Dealer Agreement" shall mean an agreement between the
Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer
agrees to follow the procedures specified in this Part II.
(k) "Existing Holder," when used with respect to shares of MMP,
shall mean a Person who has signed a Purchaser's Letter and is listed as
the beneficial owner of such shares of MMP in the records of the Trust
Company.
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(l) "Hold Order" and "Hold Orders" shall have the respective
meanings specified in paragraph (a) of Section 2 of this Part II.
(m) "Maximum Rate," on any Auction Date, shall mean the product of
the "AA" Composite Commercial Paper Rate times the "AA" Rate Multiple.
(n) "Order" and "Orders" shall have the respective meanings
specified in paragraph (a) of Section 2 of this Part II.
(o) "Outstanding" shall mean, as of any date, shares of MMP
theretofore issued by the Corporation except, without duplication, (i)
any shares of MMP theretofore cancelled or delivered to the Trust
Company for cancellation or redeemed by the Corporation or as to which a
notice of redemption shall have been given by the Corporation, (ii)
any shares of MMP as to which the Corporation or any Affiliate thereof
(other than a Broker-Dealer Affiliate) shall be an Existing Holder and
(iii) any shares of MMP represented by any certificate in lieu of which
a new certificate has been executed and delivered by the Corporation.
(p) "Person" shall mean and include an individual, a partnership,
a corporation, a trust, an unincorporated association, a joint venture
or other entity or a government or any agency or political subdivision
thereof.
(q) "Potential Holder" shall mean any Person, including any
Existing Holder, (i) who shall have executed a Purchaser's Letter and
(ii) who may be interested in acquiring shares of MMP (or, in the case
of an Existing Holder, additional shares of MMP).
(r) "Purchaser's Letter" shall mean a letter, the form of which is
attached hereto, addressed to the Corporation, the Trust Company, a
Broker-Dealer and an Agent Member in which a Person agrees, among other
things, to offer to purchase, to purchase, to offer to sell and/or to
sell shares of MMP as set forth in this Part II.
(s) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns or any other securities
depository selected by the Corporation which agrees to follow the
procedures required to be followed by such securities depository in
connection with shares of MMP.
(t) "Sell Order" and "Sell Orders" shall have the respective
meanings specified in paragraph (a) of Section 2 of this Part II.
(u) "Submission Deadline" shall mean 1:00 P.M., New York City
time, on any Auction Date or such other time on any Auction Date by
which Broker-Dealers are required to submit Orders to the Trust Company
as specified by the Trust Company from time to time.
(v) "Submitted Bid" and "Submitted Bids" shall have the respective
meanings specified in paragraph (a) of Section 4 of this Part II.
(w) "Submitted Hold Order" and "Submitted Hold Orders" shall have
the respective meanings specified in paragraph (a) of Section 4 of this
Part II.
(x) "Submitted Order" and "Submitted Orders" shall have the
respective meanings specified in paragraph (a) of Section 4 of this Part
II.
(y) "Submitted Sell Order" and "Submitted Sell Orders" shall have
the respective meanings specified in paragraph (a) of Section 4 of this
Part II.
(z) "Sufficient Clearing Bids" shall have the meaning specified in
paragraph (a) of Section 4 of this Part II.
(aa) "Winning Bid Rate" shall have the meaning specified in
paragraph (a) of Section 4 of this Part II.
2. Orders by Existing Holders and Potential Holders. (a) On or prior
to the Submission Deadline on each Auction Date:
(i) each Existing Holder may submit to a Broker-Dealer information
as to:
(A) the number of Outstanding shares, if any, of MMP held by such
Existing Holder which such Existing Holder desires to continue to
hold without regard to the Applicable Rate for the next succeeding
Dividend Period;
(B) the number of Outstanding shares, if any, of MMP which such
Existing Holder desires to continue to hold if the Applicable Rate
for the next succeeding Dividend Period shall not be less than the
rate per annum specified by such Existing Holder; and/or
(C) the number of Outstanding shares, if any, of MMP held by such
Existing Holder which such Existing Holder offers to sell without
regard to the Applicable Rate for the next succeeding Dividend
Period; and
(ii) one or more Broker-Dealers, using lists of Potential Holders,
shall in good faith for the purpose of conducting a competitive
Auction in a commercially reasonable manner, contact Potential
Holders, including Persons that are not Existing Holders, on such
lists to determine the number of shares, if any, of MMP which each
such Potential Holder offers to purchase if the Applicable Rate for
the next succeeding Dividend Period shall not be less than the rate
per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is
hereinafter referred to as an "Order" and collectively as "Orders" and each
Existing Holder and each Potential Holder placing an Order is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an Order containing
the information referred to in clause (i)(A) of this paragraph (a) is
hereinafter referred to as a "Hold Order" and collectively as "Hold Orders";
an Order containing the information referred to in clause (i)(B) or (ii) of
this paragraph (a) is hereinafter referred to as a "Bid" and collectively as
"Bids"; and an Order containing the information referred to in clause (i)(C)
of this paragraph (a) is hereinafter referred to as a "Sell Order" and
collectively as "Sell Orders."
(b) (i) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(A) the number of Outstanding shares of MMP specified in such
Bid if the Applicable Rate determined on such Auction Date shall
be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of MMP
to be determined as set forth in clause (iv) of paragraph (a) of
Section 5 of this Part II if the Applicable Rate determined on
such Auction Date shall be equal to the rate specified therein;
or
(C) a lesser number of Outstanding shares of MMP to be
determined as set forth in clause (iii) of paragraph (b) of
Section 5 of this Part II if the rate specified therein shall be
higher than the Maximum Rate and Sufficient Clearing Bids do not
exist.
(ii) A Sell Order by an Existing Holder shall constitute an
irrevocable offer to sell:
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(A) the number of Outstanding shares of MMP specified in
such Sell Order; or
(B) such number or a lesser number of Outstanding shares of MMP
as set forth in clause (iii) of paragraph (b) of Section 5 of
this Part II if Sufficient Clearing Bids do not exist.
(iii) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(A) the number of Outstanding shares of MMP specified in such
Bid if the Applicable Rate determined on such Auction Date shall
be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of MMP
as set forth in clause (v) of paragraph (a) of Section 5 of this
Part II if the Applicable Rate determined on such Auction Date
shall be equal to the rate specified therein.
3. Submission of Orders by Broker-Dealers to Trust Company. (a) Each
Broker-Dealer shall submit in writing to the Trust Company prior to the
Submission Deadline on each Auction Date all Orders obtained by such Broker-
Dealer and shall specify with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate number of shares of MMP that are the subject
of such Order;
(iii) to the extent that such Bidder is an Existing Holder:
(A) the number of shares, if any, of MMP subject to any
Hold Order placed by such Existing Holder;
(B) the number of shares, if any, of MMP subject to any Bid
placed by such Existing Holder and the rate specified in such
Bid; and
(C) the number of shares, if any, of MMP subject to any
Sell Order placed by such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder, the rate
and number of shares specified in such Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Trust Company shall round such
rate up to the next highest one-thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of
MMP held by any Existing Holder is not submitted to the Trust Company prior to
the Submission Deadline, the Trust Company shall deem a Hold Order to have
been submitted on behalf of such Existing Holder covering the number of
Outstanding shares of MMP held by such Existing Holder and not subject to
Orders submitted to the Trust Company.
(d) If any Existing Holder submits through a Broker-Dealer to the
Trust Company one or more Orders covering in the aggregate more than the
number of Outstanding shares of MMP held by an Existing Holder, such Orders
shall be considered valid as follows and in the following order of priority:
(i) all Hold Orders shall be considered valid, but only up to and
including in the aggregate the number of Outstanding shares of MMP
held by such Existing Holder and, solely for the purpose of
allocating compensation among the Broker-Dealers submitting Hold
Orders, if the number of shares of MMP subject to such Hold Orders
exceeds the number of Outstanding shares of MMP held by such
Existing Holder, the number of shares subject to each such Hold
Order shall be reduced pro rata to cover the number of Outstanding
shares of MMP held by such Existing Holder;
(ii) (A) any Bid shall be considered valid up to and including
the excess of the number of Outstanding shares of MMP held by such
Existing Holder over the number of shares of MMP subject to any
Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid with the same
rate is submitted on behalf of such Existing Holder and the number
of Outstanding shares of MMP subject to such Bids is greater than
such excess, such Bids shall be considered valid up to and
including the amount of such excess, and, solely for the purpose of
allocating compensation among the Broker-Dealers submitting Bids
with the same rate, the number of shares of MMP subject to each Bid
with the same rate shall be reduced pro rata to cover the number of
shares of MMP equal to such excess;
(C) subject to subclause (A), if more than one Bid with different
rates is submitted on behalf of such Existing Holder, such Bids
shall be considered valid in the ascending order of their
respective rates up to and including the amount of such excess; and
(D) in any such event, the number, if any, of such Outstanding
shares of MMP subject to Bids not valid under this clause (ii)
shall be treated as the subject of a Bid by a Potential Holder at
the rate therein specified; and
(iii) all Sell Orders shall be considered valid up to and
including the excess of the number of Outstanding shares of MMP
held by such Existing Holder over the sum of the shares of MMP
subject to valid Hold Orders referred to in clause (i) above and
valid Bids by such Existing Holder referred to in clause (ii)
above.
(e) If more than one Bid is submitted on behalf of any Potential
Holder, each Bid submitted shall be a separate Bid with the rate and
number of shares therein specified.
4. Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. (a) Not earlier than the Submission Deadline on each
Auction Date, the Trust Company shall assemble all valid Orders submitted or
deemed submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to individually
as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as
the case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or
as "Submitted Orders") and shall determine:
(i) the excess of the total number of Outstanding shares of MMP
over the number of Outstanding shares of MMP that are the subject of
Submitted Hold Orders (such excess being hereinafter referred to as
the "Available MMP");
(ii) from the Submitted Orders whether:
(A) the number of Outstanding shares of MMP that are the subject of
Submitted Bids by Potential Holders specifying one or more rates
equal to or lower than the Maximum Rate;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of MMP that are the subject of
Submitted Bids by Existing Holders specifying one or more rates
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higher than the Maximum Rate; and
(C) the number of Outstanding shares of MMP that are subject to
Submitted Sell Orders (in the event of such excess or such equality
(other than because the number of shares of MMP in subclauses (B)
and (C) above is zero because all of the Outstanding shares of MMP
are the subject of Submitted Hold Orders), such Submitted Bids in
subclause (A) above being hereinafter referred to collectively as
"Sufficient Clearing Bids"); and
(iii) if Sufficient Clearing Bids exist, the lowest rate
specified in the Submitted Bids (the "Winning Bid Rate") which
if:
(A)(I) each Submitted Bid from Existing Holders specifying such
lowest rate and (II) all other Submitted Bids from Existing
Holders specifying lower rates were rejected, thus entitling such
Existing Holders to continue to hold the shares of MMP that are the
subject of such Submitted Bids; and
(B)(I) each Submitted Bid from Potential Holders specifying such
lowest rate and (II) all other Submitted Bids from Potential
Holders specifying lower rates were accepted,
would result in such Existing Holders described in subclause (A)
above continuing to hold an aggregate number of Outstanding shares
of MMP which, when added to the number of Outstanding shares of MMP
to be purchased by such Potential Holders described in subclause (B)
above, would equal not less than the Available MMP.
(b) Promptly after the Trust Company has made the determinations
pursuant to paragraph (a) of this Section 4, the Trust Company shall
advise the Corporation of the "AA" Composite Commercial Paper Rate and
the Maximum Rate on the Auction Date and, based on such determinations,
the Applicable Rate for the next succeeding Dividend Period as follows:
(i) if Sufficient Clearing Bids exist, that the Applicable Rate for
the next succeeding Dividend Period shall be equal to the Winning
Bid Rate so determined;
(ii) if Sufficient Clearing Bids do not exist (other than because
all of the Outstanding shares of MMP are the subject of Submitted
Hold Orders), that the Applicable Rate for the next succeeding
Dividend Period shall be equal to the Maximum Rate; or
(iii) if all of the Outstanding shares of MMP are the subject of
Submitted Hold Orders, that the Applicable Rate for the next
succeeding Dividend Period shall be equal to 59% of the "AA"
Composite Commercial Paper Rate.
5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares. Existing Holders shall continue to hold the shares
of MMP that are the subject of Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph (a) of Section 4 of this Part II,
the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and
the Trust company shall take such other action as set forth below:
(a) If Sufficient Clearing Bids have been made, all Submitted Sell
Orders shall be accepted and, subject to the provisions of paragraph (d)
and (e) of this Section 5, Submitted Bids shall be accepted or rejected
as follows in the following order of priority and all other Submitted
Bids shall be rejected:
(i) the Submitted Sell Orders of Existing Holders shall be accepted
and Existing Holders' Submitted Bids specifying any rate that is
higher than the Winning Bid Rate shall be accepted, thus requiring
each such Existing Holder to sell the shares of MMP that are the
subject of such Submitted Sell Orders or Submitted Bids;
(ii) Existing Holders' Submitted Bids specifying any rate that is
lower than the Winning Bid Rate shall be rejected, thus entitling
each such Existing Holder to continue to hold the shares of MMP that
are the subject of such Submitted Bids;
(iii) Potential Holders' Submitted Bids specifying any rate that is
lower than the Winning Bid Rate shall be accepted;
(iv) each Existing Holders' Submitted Bid specifying a rate that is
equal to the Winning Bid Rate shall be rejected, thus entitling such
Existing Holder to continue to hold the shares of MMP that are the
subject of such Submitted Bid, unless the number of Outstanding
shares of MMP subject to all such Submitted Bids shall be greater
than the number of shares of MMP ("remaining shares") equal to the
excess of the Available MMP over the number of shares of MMP subject
to Submitted Bids described in clauses (ii) and (iii) of this
paragraph (a), in which event such Submitted Bid of such Existing
Holder shall be accepted in part, and such Existing Holder shall be
required to sell shares of MMP subject to such Submitted Bid, but
only in an amount equal to the difference between (A) the number
of Outstanding shares of MMP then held by such Existing Holder
subject to such Submitted Bid and (B) the number of shares of MMP
obtained by multiplying the number of remaining shares by a fraction
the numerator of which shall be the number of Outstanding shares of
MMP held by such Existing Holder subject to such Submitted Bid and
the denominator of which shall be the aggregate number of
Outstanding shares of MMP subject to such submitted Bids made by all
such Existing Holders that specified a rate equal to the Winning Bid
Rate; and
(v) each Potential Holder's Submitted Bid specifying a rate that is
equal to the Winning Bid Rate shall be accepted but only in an
amount equal to the number of shares of MMP obtained by multiplying
the difference between the Available MMP and the number of shares of
MMP subject to Submitted Bids described in clauses (ii), (iii) and
(iv) of this paragraph (a) by a fraction the numerator of which
shall be the number of Outstanding shares of MMP subject to such
Submitted Bid of such Potential Holder and the denominator of which
shall be the aggregate number of Outstanding shares of MMP subject
to such Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate.
(b) If Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of MMP are the subject of Submitted
Hold Orders), subject to the provisions of paragraph (d) of this Section
5, Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be
rejected:
(i) Existing Holders' Submitted Bids specifying any rate that is
equal to or lower than the Maximum Rate shall be rejected, thus
entitling such Existing Holders to continue to hold the shares of
MMP that are the subject of such Submitted Bids;
(ii) Potential Holders' Submitted Bids specifying any rate that is
equal to or lower than the Maximum Rate shall be accepted; and
(iii) each Existing Holder's Submitted Bid specifying any rate that
is higher than the Maximum Rate and the Submitted Sell Order of each
Existing Holder shall be accepted, but in both cases only in an
amount equal to the difference between (A) the number of
Outstanding shares of MMP then held by such Existing Holder subject
to such Submitted Bid or Submitted Sell Order and (B) the number
of shares of MMP obtained by multiplying the difference between the
Available MMP and the aggregate number of shares of MMP subject to
Submitted Bids described in clauses (i) and (ii) of this paragraph
(b) by a fraction the numerator of which shall be the number of
Outstanding shares of MMP held by such Existing Holder subject to
such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the aggregate number of Outstanding shares of MMP
subject to all such Submitted Bids and Submitted Sell Orders.
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(c) If all of the Outstanding shares of MMP are the subject of
Submitted Hold Orders, all Submitted Bids shall be rejected.
(d) If, as a result of the procedures described in paragraph (a) or
(b) of this Section 5, any Existing Holder would be entitled or required
to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of MMP on any Auction Date, the Trust
Company shall, in such manner as, in its sole discretion, it shall
determine, round up or down the number of shares of MMP to be purchased
or sold by any Existing Holder or Potential Holder on such Auction Date
so that the number of shares purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be whole shares of MMP.
(e) If, as a result of the procedures described in paragraph (a) of
this Section 5, any Potential Holder would be entitled or required to
purchase less than a whole share of MMP on any Auction Date, the Trust
Company shall, in such manner as, in its sole discretion, it shall
determine, allocate shares for purchase among Potential Holders so that
only whole shares of MMP are purchased on such Auction Date by any
Potential Holder, even if such allocation results in one or more of such
Potential Holders not purchasing shares of MMP on such Auction Date.
(f) Based on the results of each Auction, the Trust Company shall
determine the aggregate number of shares of MMP to be purchased and the
aggregate number of shares of MMP to be sold by Potential Holders and
Existing Holders on whose behalf each Broker-Dealer submitted Bids or
Sell Orders and, with respect to each Broker-Dealer, to the extent that
such aggregate number of shares to be purchased and such aggregate number
of shares to be sold differ, determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such Broker-Dealer shall
deliver, or from which other Broker-Dealer or Broker-Dealers acting for
one or more sellers such Broker-Dealer shall receive, as the case may be,
shares of MMP.
6. Miscellaneous. (a) The Board of Directors of the Corporation may
interpret the provisions of this Part II to resolve any inconsistency or
ambiguity which may arise or be revealed in connection with the Auction
Procedures provided for herein, and if such inconsistency or ambiguity
reflects an inaccurate provision hereof, the Board of Directors of the
Corporation may, in appropriate circumstances, authorize the filing of
Articles of Amendment or a Certificate of Correction.
(b) As long as no Payment Default shall have occurred, (i) an
Existing Holder may sell, transfer or otherwise dispose of shares of MMP
only pursuant to a Bid or Sell Order in accordance with the procedures
described in this Part II or to or through a Broker-Dealer or to a Person
that has delivered a signed copy of a Purchaser's Letter to the Trust
Company, provided that in the case of all transfers other than pursuant
to Auctions, such Existing Holder, its Broker-Dealer or its Agent Member
advises the Trust Company of such transfer, and (ii) such Existing
Holder shall have the ownership of the shares of MMP held by it
maintained in book entry form by the Securities Depository for the
account of its Agent Member, which in turn will maintain records of such
Existing Holder's beneficial ownership.
(c) Neither the Corporation nor any affiliate thereof may submit an
Order in any Auction except as set forth in the next sentence. Any
Broker-Dealer that is an affiliate of the Corporation may submit Orders
in Auctions but only if such Orders are not for its own account, except
that if such affiliated Broker-Dealer holds shares of MMP for its own
account, it must submit a Sell Order in the next Auction with respect to
such shares.
(d) Commencing with the first day of the first Dividend Period for
which the Applicable Rate is determined by the Default Rate, as set forth
in subparagraph (c)(i) of Section 2 of Part I hereof, the Corporation or
an Affiliate thereof, at the option of the Corporation, may perform any
of the functions to be performed by the Trust Company set forth herein.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its President and its corporate
seal to be hereunto affixed and attested by its Secretary, and the said
officers of the Corporation further acknowledged said instrument to be the
corporate act of the Corporation and stated under the penalties of perjury
that to the best of their knowledge, information and belief the matters and
facts therein set forth with respect to approval are true in all material
respects, all on July 17, 1987.
REPUBLIC NEW YORK CORPORATION
By: /s/ Jeffrey C. Keil
(President)
Attest:
/s/ William Rosenblum
(Secretary)
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has duly divided and classified 1,000 shares of the Preferred
Stock of the Corporation as Republic New York Corporation Remarketed Preferred
Stock, and has provided for the issuance of such shares.
SECOND: The terms of the Republic New York Corporation Remarketed Preferred
Stock as set by the Board of Directors are as follows:
1,000 shares of Preferred Stock of the Corporation, without par
value, shall constitute a series of Preferred Stock designated as
Republic New York Corporation Remarketed Preferred Stock, hereinafter
referred to as the "RP"TM [TM Trademark of Merrill Lynch & Co., Inc]. At
all times, other than during the Initial Dividend Period, all shares of
RP within each Dividend Period shall be identical with each other in all
respects. The RP shall have no par value with a liquidation preference
of $100,000 per share, plus an amount equal to accrued and unpaid
dividends.
PART I
1. Definitions. Unless the context or use indicates another or
different meaning or intent, the following terms shall have the following
meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate", on any date, means (i) the
Interest Equivalent of the 5-day (in the case of a 7-day Dividend Period) or
60-day (in the case of a 49-day Dividend Period) rate, as the case may be, on
commercial paper placed on behalf of issuers whose corporate bonds are rated
"AA" by S & P or "Aa" by Moody's, or the equivalent of such rating by another
rating agency, as such rate is made available by the Federal Reserve Bank of
New York on a discount basis or otherwise for the first Business Day before
such date; or (ii) if the Federal Reserve Bank of New York does not make
available such a rate, then the arithmetic average of the Interest Equivalent
of the 5-day or 60-day rate, as the case may be, on commercial paper placed on
behalf of such issuers, as quoted on a discount basis or otherwise by the
Commercial Paper Dealer to the Remarketing Agent for the close of business on
the first Business Day before such date. If the Commercial Paper Dealer does
not quote a rate required to determine the "AA" Composite Commercial Paper
Rate, the "AA" Composite Commercial Paper Rate shall be determined on the
basis of the quotations or quotation furnished by any Substitute Commercial
Paper Dealers or Dealer selected by the Corporation to provide such rates or
rate not being supplied by the Commercial Paper Dealer. However, in respect
of any Dividend Period of 98 Dividend Period Days or less (i) if the number
of Dividend Period Days shall be 8 or more but less than 20, such rate shall
be the Interest Equivalent of the 15-day rate on such commercial paper, (ii)
if the number of Dividend Period Days shall be 20 or more but less than 49,
such rate shall be the Interest Equivalent of the 30-day rate on such
commercial paper, (iii) if the number of Dividend Period Days shall be 49 or
more but less than 70, such rate shall be the Interest Equivalent of the 60-
day rate on such commercial paper, (iv) if the number of Dividend Period
Days shall be 70 or more but less than 85, such rate shall be the arithmetic
average of the Interest Equivalent of the 60-day and 90-day rates on such
commercial paper and (v) if the number of Dividend Period Days shall be 85
or more but less than 99, such rate shall be the Interest Equivalent of the
90-day rate on such commercial paper.
"Agent Member" means a designated member of the Securities
Depository which will maintain records for the Beneficial Owners of shares of
RP that have identified such Agent Member in their Purchaser's Letters and
which will be authorized and instructed to disclose information to the
Remarketing Agent and the Paying Agent with respect to such Beneficial Owners.
"Applicable Dividend Rate" means, with respect to any share of RP
for the applicable Initial Dividend Period, the applicable initial dividend
rate, and for any subsequent Dividend Period for such share the dividend rate,
as determined by the Remarketing Agent, that will be in effect for such share
for any subsequent Dividend Period. In certain circumstances, the Applicable
Dividend Rate may be the applicable Maximum Dividend Rate or the Penalty Rate.
"Authorized Newspaper" means a newspaper of general circulation in
the English language generally published on Business Days in The City of New
York.
"Beneficial Owner" shall mean a person who has signed a Purchaser's
Letter and who is listed as the beneficial owner of shares of RP in the
records of the Paying Agent provided that, as such term is used in paragraph 3
of this Part I, "Beneficial Owner" shall mean, in respect of each share of RP,
the registered holder of such share as its name appears on the stock transfer
books of the Corporation at any time the Applicable Dividend Rate for such
share shall be the Penalty Rate.
"Business Day" means a day on which the New York Stock Exchange is
open for trading, and is not a day on which banks in The city of New York are
authorized by law to close.
"Cede" means Cede & Co., the nominee of DTC in whose name the shares
of RP will be initially registered.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Dealer" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated, or in lieu thereof its affiliates or successors.
"Common Stock" means the common stock of the Corporation, $5.00 par
value.
"Corporation" means Republic New York Corporation, a Maryland
corporation, that is the issuer of the shares of RP.
"Date of Original Issue" means the date on which the Corporation
originally issues the shares of RP.
"Dividend Payment Date" means (i) with respect to any Optional
Dividend Period of more than 91 but fewer than 365 days, the 92nd day thereof,
the 183rd day thereof, if any, the 274th day thereof, if any, and the day next
succeeding the last day thereof; (ii) with respect to any Optional Dividend
Period of 365 days or more, the second Wednesday of each January, April, July
and October and the day next succeeding the last day thereof; and (iii) with
respect to any other Dividend Period, the day next succeeding the last day
thereof; provided, however, that if any such date would not be a Business Day,
the Dividend Payment Date shall be the Business Day next succeeding such date,
except for the purpose of determining the length of a Dividend Period.
"Dividend Period" means with respect to each share of RP, the
Initial Dividend Period for such share and thereafter any period
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commencing on the Dividend Payment Date (which, if the Applicable Dividend
Rate shall not be the Penalty Rate, shall be the Settlement Date) for such
share and ending on the day next preceding the next succeeding such Dividend
Payment Date for such share, which day falls in the calendar week in which
the last Dividend Period Day in respect of such period falls (unless otherwise
required by any adjustment of the remarketing schedule by the Remarketing
Agent as provided herein), provided that if in respect of such Dividend
Period, the Board of Directors of the Corporation adjusts the number of
Dividend Period Days in the event of a change in the Minimum Holding Period,
such day will be adjusted accordingly.
"Dividend Period Days" means in respect of any particular Dividend
Period applicable to a share of RP, such number of consecutive calendar days
commencing on and including the first day of such period as is specified
herein and ending with and including the day next preceding the first day of
the next succeeding Dividend Period applicable to such share of RP.
"Dividend Reset Date" means the Business Day following the Tender
Date and the Business Day next preceding a Settlement Date (normally a
Wednesday).
"Dividends-Received Deduction" means the deduction allowed to
corporate holders of preferred stock with respect to dividends received on
such stock by Section 243 of the Code, or any successor to Section 243 of the
Code.
"DTC" means The Depository Trust Company.
"Holder" shall mean, with respect to any share of RP, the person
whose name appears on the stock transfer books of the Corporation as the
registered holder of such share.
"Initial Dividend Period" means the period commencing on and
including the Date of Original Issue and ending on September 16, 1987 for 500
shares of RP and October 14, 1987 for the remaining 500 shares of RP.
"Interest Equivalent" means the equivalent yield on a 360-day basis
of a discount basis security to an interest bearing security.
"Maximum Dividend Rate" means with respect to any 7-day or 49-day
Dividend Period, the percentage set forth in the table below (the "Applicable
Percentage") of the "AA" Composite Commercial Paper Rate applicable to such
Dividend Period at the Dividend Reset Date. "Maximum Dividend Rate" means
with respect to any Optional Dividend Period at any Dividend Reset Date (i)
in the case of an Optional Dividend Period of more than 98 Dividend Period
Days, the Maximum Dividend Rate (which may be a fixed rate or a variable rate
determined from time to time by formula or other means) determined by the
Board of Directors of the Corporation in respect of such period, as provided
herein, and (ii) in the case of an Optional Dividend Period of 98 days or
less, the Applicable Percentage of the applicable "AA" Composite Commercial
Paper Rate. The Remarketing Agent shall round each applicable Maximum
Dividend Rate to the nearest one-thousandth (0.001) of one percent per annum,
with any such number ending in five ten-thousandths of one percent being
rounded upwards to the nearest one-thousandth (0.001) of one percent. The
Remarketing Agent shall not round the applicable "AA" Composite Commercial
Paper Rate as part of its calculation of the applicable Maximum Dividend Rate.
The Applicable Percentage varies with the higher of the credit rating or
ratings assigned by Moody's and S&P (or if Moody's or S&P or both shall not
make such rating available, the equivalent of either or both of such ratings
by a Substitute Rating Agency or two Substitute Rating Agencies or, in the
event that only one such rating shall be available, such rating) to the shares
of RP on each Dividend Reset Date, as follows:
<TABLE>
<CAPTION>
Credit Ratings
Applicable
Moody's S&P Percentage
- ---------------- ------------- ----------
<S> <S> <C>
"aa3" or higher AA- or higher 110%
"a3" to "a1" A- to A+ 120%
"baa3" to "baa1" BBB- to BBB+ 130%
Below "baa3" Below BBB- 175%
</TABLE>
"Minimum Holding Period" means 46 days or such other minimum holding
period required for corporate taxpayers to be entitled to the Dividends-
Received Deduction as provided in Section 246(c) of the Code or any successor
thereto.
"Moody's" means Moody's Investors Service.
"Notice of Redemption" means the notice of a redemption relating to
a redemption in part, given to the Paying Agent, the Securities Depository
(and any other registered holder) and the Remarketing Agent by the Corporation
by telephone and confirmed in writing, not later than 3:00 p.m., New York City
time, on the Settlement Date (or, if the Applicable Dividend Rate for any
shares of RP shall be the Penalty Rate, the later of the Dividend Payment Date
or the seventh day) prior to the earliest date on which any such redemption
shall occur; and the notice of a redemption relating to a redemption in whole
given to the Paying Agent, the Securities Depository (and any other registered
holder) and the Remarketing Agent by the Corporation by telephone and in
writing, not later than 3:00 p.m., New York City time, on the Tender Date (or,
if the Applicable Dividend Rate for any share of RP shall be the Penalty Rate,
the later of the Dividend Payment Date or the seventh day) prior to the
earliest date on which any such redemption shall occur.
"Optional Dividend Period" means any Dividend Period in respect of
which the Board of Directors of the Corporation designates the number of
Dividend Period Days and, if such number is greater than 98, determines the
Maximum Dividend Rate, and at least seven days prior to the day such Dividend
Period is to commence, provides written notice of such designation and, if
applicable, such Maximum Dividend Rate to the Remarketing Agent, the Paying
Agent and the Securities Depository.
"Paying Agent" means Manufacturers Hanover Trust Company or any
successor company or entity, which has entered into a Paying Agent Agreement
with the Corporation to act, among other things, as the transfer agent,
registrar, dividend and redemption price disbursing agent, settlement agent
and agent for certain notifications for the Corporation in connection with the
shares of RP in accordance with such agreement.
"Paying Agent Agreement" means an agreement to be entered into
between the Corporation and the Paying Agent.
"Penalty Rate" means 175% of the applicable "AA" Composite
Commercial Rate.
"Purchase Agreement" means the agreement between the Corporation and
the Underwriter pursuant to which the Underwriter has agreed to purchase all
the shares of RP from the Corporation.
"Purchaser's Letter" means a letter substantially in the form of
Exhibit A hereto which is required to be executed by each purchaser of shares
of RP or such other form as may be acceptable to the Paying Agent.
"Remarketing" means each periodic operation of the process for
remarketing as described in Part II of these Articles Supplementary.
"Remarketing Agent" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, or any successor company or entity which has entered into an
agreement with the Corporation to follow the remarketing procedures for the
purposes of determining the Applicable Dividend Rate or Rates.
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"RP" means Remarketed Preferred Stock of the Corporation.
"S&P" means Standard & Poor's Corporation.
"Securities Depository" means DTC or any successor securities
depository selected by the Corporation that agrees to follow the procedures
required to be followed by such securities depository in connection with the
shares of RP.
"Service" means the Internal Revenue Service.
"Settlement Date" means the first Business Day after a Dividend
Reset Date applicable to a share of RP (normally a Thursday).
"Substitute Commercial Paper Dealers" means Salomon Brothers Inc and
Goldman, Sachs & Co. or, in lieu of either thereof, their respective
affiliates or successors.
"Substitute Rating Agency" and "Substitute Rating Agencies" shall
mean a nationally recognized securities rating agency or two nationally
recognized securities rating agencies selected by the Corporation to act as
the substitute rating agency or substitute rating agencies, as the case may
be, to determine the credit ratings of the shares of RP.
"Tender and Dividend Reset" means the process pursuant to which
shares of RP may be tendered in a Remarketing or held and become subject to
the new Applicable Dividend Rate or Rates determined by the Remarketing Agent
in the Remarketing.
"Tender Date" means the Business Day preceding the Dividend Reset
Date (normally a Tuesday).
"Underwriter" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"7-day Dividend Period" means a Dividend Period designated as such
by a holder of shares of RP in respect of which the number of Dividend Period
Days is seven.
"49-day Dividend Period" means (i) an Initial Dividend Period,
(ii) a Dividend Period designated as such by a holder of shares of RP or
(iii) the Dividend Period applicable to shares of RP with respect to which
the Applicable Dividend Rate is the Penalty Rate, and, in all such cases,
generally containing forty-nine days.
2. Fractional Shares. No fractional shares of RP shall be issued.
3. Dividends. (a) The Holders as of 12:00 noon, New York City time on
the Business Day preceding the applicable Dividend Payment Date shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, out of funds legally available therefor, cumulative cash
dividends, at the Applicable Dividend Rate per annum.
(b) Dividends on shares of RP shall accrue from the Date of
Original Issue and will be payable when, as and if declared by the Board of
Directors on each Dividend Payment Date applicable to each such share of RP.
(c) Each declared dividend shall be payable to the Holder or
Holders of such shares on the applicable Dividend Payment Date with respect to
such shares of RP. Dividends in arrears for any past Dividend Payment Date
may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the Holder or Holders of such shares on a date not
exceeding five Business Days preceding the payment date thereof, as may be
fixed by the Board of Directors of the Corporation. Any dividend payment made
on shares of RP shall first be credited against the dividends accrued and
unpaid with respect to the earliest Dividend Payment Date on which dividends
were not paid.
(d) If full cumulative dividends are not paid on the shares of RP,
all dividends declared on the shares of RP shall be paid pro rata to the
Holders of outstanding shares of RP. Holders of shares of RP shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of full cumulative dividends, on the shares of RP. Except as provided
in paragraph 3(h) of this Part I, holders of shares of RP shall not be
entitled to any interest, or sum of money in lieu of interest, on any dividend
payment or payments on the shares of RP which may be in arrears.
(e) The Applicable Dividend Rate for the Initial Dividend Period
shall be 4.65 percent per annum for 500 shares of RP and 4.75 percent per
annum for the remaining 500 shares of RP. Except as otherwise provided
herein, the Applicable Dividend Rate on shares of RP for each subsequent
Dividend Period shall be equal to the rate or rates per annum that result from
implementation of the remarketing procedures described in Part II of these
Articles Supplementary. If no Applicable Dividend Rate shall have been set on
a Dividend Reset Date in a Remarketing for a 7-day Dividend Period, a 49-day
Dividend Period or any Optional Dividend Period or Periods or any or all of
the foregoing for any reason (other than because there is no Remarketing Agent
or because the Remarketing Agent is not required to conduct a Remarketing
pursuant to the terms of the Remarketing Agreement), then, unless the
Applicable Dividend Rate is the Penalty Rate pursuant to paragraph 3(h) of
this Part I, the Remarketing Agent, in its sole discretion will, after taking
into account market conditions as reflected in the prevailing yields on fixed
and variable rate taxable and tax-exempt debt securities and the prevailing
dividend yields of fixed and variable rate preferred stock, determine the
Applicable Dividend Rate or Rates, as the case may be, that would be initial
dividend rates in an offering on such Dividend Reset Date, assuming a
comparable dividend period, issuer and security. If there is no Remarketing
Agent or the Remarketing Agent is not required to conduct a Remarketing
pursuant to the terms of the Remarketing Agreement, then, unless the
Applicable Dividend Rate is the Penalty Rate pursuant to paragraph 3(h) of
this Part I of these Articles Supplementary, the Applicable Dividend Rate for
each such subsequent Dividend Period for which no Remarketing takes place
because of the foregoing shall be the Maximum Dividend Rate for a 7-day
Dividend Period and the next succeeding Dividend Period shall be a 7-day
Dividend Period.
(f) The amount of dividends per share of RP payable on each
Dividend Payment Date shall be computed by the Corporation by multiplying the
Applicable Dividend Rate in effect with respect to dividends payable on such
share on such Dividend Payment Date by a fraction the numerator of which shall
be the number of days such share was outstanding from and including the Date
of Original Issue or preceding Dividend Payment Date, as the case may be, to
and including the last day of such Dividend Period, and the denominator of
which shall be 360, and then multiplying the rate obtained by $100,000 per
share of RP. In accordance with the remarketing procedures set forth in Part
II of these Articles Supplementary, there may exist at any given time a number
of Dividend Payment Dates for all outstanding shares of RP and dividends on
any share shall be payable only on a Dividend Payment Date applicable to such
share of RP.
(g) No later than by 12:00 noon, New York City time on any
Dividend Payment Date, the Corporation shall deposit in same-day funds, with
the Paying Agent the full amount of any dividend (whether or not earned or
declared) payable on such Dividend Payment Date on any share of RP.
(h) In the event of any failure by the Corporation to (i)
declare, prior to 12:00 noon New York City time on any Dividend Payment Date,
for payment on or within three Business Days after such Dividend Payment Date
to the persons who held shares of RP as of 12:00 noon, New York City time on
the Business Day preceding such Dividend Payment Date, the full amount of any
dividend on any share of RP on such Dividend Payment Date or (ii) deposit,
irrevocably in trust, in same-day funds, with the Paying Agent by 12:00 noon,
New York City time, (A) on or within three Business Days after any Dividend
Payment Date the full amount of any dividend (whether or not earned or
declared) payable on such Dividend Payment Date or (B) on or within three
Business Days after any redemption date, the redemption price to be paid on
such redemption date of any share of RP plus an amount equal to dividends
thereon (whether or not earned or declared) accrued to and unpaid through such
redemption date after a Notice of Redemption has been given pursuant to
paragraph 4(d) or 4(j) of this Part I of these Articles Supplementary, then
the Applicable Dividend
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Rate for each Dividend Period in respect of each share of RP commencing on or
after the Dividend Payment Date first referred to in this sentence shall be
equal to the Penalty Rate (provided that any share of RP for which an Optional
Dividend Period of more than 98 Dividend Period Days would otherwise be in
effect for the Dividend Period commencing on the Dividend Payment Date first
referred to in this sentence shall, instead, have a 7-day Dividend Period),
and each Dividend Period for each share of RP commencing thereafter shall be a
49-day Dividend Period. Any amount of such dividend (if the Corporation has
declared prior to 12:00 noon New York City time on any Dividend Payment Date,
for payment on or within three Business Days after such Dividend Payment Date
to the persons entitled to receive such dividends at the opening of business
on such Dividend Payment Date, the full amount of all dividends due on all
shares of RP on such Dividend Payment Date) or redemption price not paid when
due but paid within three Business Days after such due date shall incur a late
charge to be paid therewith and calculated for such period of non-payment at
the Penalty Rate applied to the amount of such non-payment.
(i) So long as any shares of RP are outstanding, the Corporation
shall not (a) declare or pay or set apart for payment any dividend or other
distribution (other than dividends or distributions payable in shares of stock
of the Corporation ranking junior to the RP as to dividends and upon
liquidation) for any period upon any stock of the Corporation ranking on a
parity with, or any stock of the Corporation ranking junior to, such RP as to
dividends or upon liquidation or (b) redeem, purchase or otherwise acquire
for any consideration any stock of the Corporation ranking on a parity with,
or any stock of the Corporation ranking junior to, such RP as to dividends or
upon liquidation, unless, in either case, all dividends payable to holders of
shares of RP and holders of any other stock of the Corporation ranking on a
parity therewith as to dividends for its current dividend period and all past
dividend periods have been paid, are contemporaneously being paid or have been
declared and a sum sufficient for the payment thereof set aside for such
payment, except that notwithstanding clause (a) above the Corporation may pay
dividends on the shares of RP and shares of stock of the Corporation ranking
on a parity therewith as to dividends ratably in accordance with the sums
which would be payable on such shares if all dividends, including
accumulations, if any, were declared and paid in full. Holders of shares of
RP shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of full cumulative dividends, as herein provided, on the
RP. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the RP which may be in arrears.
(j) As long as no Applicable Dividend Rate applicable to any
outstanding share of RP shall be the Penalty Rate, at the end of the Initial
Dividend Period and at the end of each subsequent Dividend Period applicable
to each share of RP thereafter, (i) the Beneficial Owner of each share of RP
who is not tendering such share of RP can elect either a 7-day Dividend
Period, a 49-day Dividend Period or any available Optional Dividend Period,
except that in the event that (x) such Beneficial Owner elects an available
Optional Dividend Period of more than 98 days and (y) the Remarketing Agent is
unable to remarket on the Dividend Reset Date following such Tender Date all
shares of RP tendered to it at a price of $100,000 per share, the Dividend
Period in respect of such share will be a 7-day Dividend Period and the
Applicable Dividend Rate shall be the Maximum Dividend Rate for a 7-day
Dividend Period; (ii) the Beneficial Owner of each share of RP who fails to
tender or to make such election at the end of a Dividend Period other than an
Initial Dividend Period shall continue to hold such share at the Applicable
Dividend Rate for a Dividend Period of the same type as the prior Dividend
Period of such share except as aforesaid in respect of an Optional Dividend
Period of more than 98 days and except if the prior Dividend Period was an
Initial Dividend Period then the Beneficial Owner shall continue to hold such
shares for a 49-Day Dividend Period; (iii) the Beneficial Owner of each
share of RP which is tendered but not sold in a Remarketing shall hold such
share at the applicable Maximum Dividend Rate for a 7-day Dividend Period; and
(iv) the Beneficial Owner of each share of RP purchased in a Remarketing
shall hold such share for a Dividend Period of the type elected by the
purchaser of such share in such Remarketing at the Applicable Dividend Rate,
except that under circumstances specified in (i) above with respect to a
Dividend Period of more than 98 days no purchaser shall be permitted to
acquire shares having such an Optional Dividend Period.
(k) In the event of a change in law altering the Minimum Holding
Period, the Board of Directors of the Corporation may adjust the period of
time between Dividend Payment Dates so as to adjust uniformly the number of
Dividend Period Days in any 49-day Dividend Period, Optional Dividend Period
or Dividend Period for which the Applicable Dividend Rate for any outstanding
share of RP shall be the Penalty Rate commencing after the date of such change
in law to equal or exceed the then current Minimum Holding Period; provided
that the number of Dividend Period Days for any Dividend Period so adjusted
shall not exceed 98 and shall be evenly divisible by seven. Upon any such
adjustment in the number of Dividend Period Days, the Corporation will notify
the Remarketing Agent and the Paying Agent, and the Paying Agent will in turn
notify the Beneficial Owners of such adjustment, provided that, if the
Dividend Period whose length is being adjusted hereby is a Dividend Period for
which the Applicable Dividend Rate is the Penalty Rate, the Corporation will
notify the Holders of shares of RP directly of such adjustment.
(l) Unless the Applicable Dividend Rate applicable to any
outstanding share of RP shall be the Penalty Rate, the Board of Directors of
the Corporation may at any time and from time to time designate one or more
Optional Dividend Periods with such number of Dividend Period Days in respect
thereof as the Board of Directors of the Corporation shall determine; provided
that, in respect of any Optional Dividend Period of more than 98 Dividend
Period Days, the Board of Directors of the Corporation shall also determine a
Maximum Dividend Rate, which may be a fixed rate or a variable rate determined
from time to time by formula or other means, in respect of such period. Once
so designated, no Optional Dividend Period may be rescinded, and once so
determined, no Maximum Dividend Rate may be changed. After designation of any
type of Optional Dividend Period by the Board of Directors of the Corporation
shall have become effective, an Optional Dividend Period of such type shall
commence on each Settlement Date. Any designation of any type of Optional
Dividend Period shall be effective after seven days' written notice thereof
and, if applicable, of the Maximum Dividend Rate so determined in respect
thereof shall have been given to the Remarketing Agent, the Paying Agent and
the Securities Depository. The Corporation also shall publish notice promptly
of any such designation and Maximum Dividend Rate, if applicable, at least
once in an Authorized Newspaper, but the failure so to publish shall not
affect the validity or effectiveness of any such designation or determination.
4. Redemption. Shares of RP shall be redeemable by the Corporation as
provided below.
(a) The Corporation at its option may redeem shares of RP, in whole
or in part, on the next succeeding scheduled Dividend Payment Dates applicable
to the shares of RP called for redemption, out of funds legally available
therefor, at a redemption price per share equal to $100,000 plus an amount
equal to dividends thereon (whether or not earned or declared) accrued to and
unpaid on the date fixed for redemption. Shares of RP for which the
Corporation shall have given Notice of Redemption shall not be considered in
subsequent Remarketings and shares of RP the owners of which shall have been
given notice of redemption as set forth below shall not be subject to transfer
outside of a Remarketing.
(b) Subject to paragraph 4(c) of this Part I of these Articles
Supplementary, if fewer than all the outstanding shares of RP are to be
redeemed pursuant to this paragraph 4 of these Articles Supplementary, the
number of shares of RP to be so redeemed shall be determined (and, if the
Applicable Dividend Rate for any outstanding shares of RP shall be the Penalty
Rate, the shares to be redeemed shall be selected pro rata among types of
Dividend Periods (except as hereinafter described) and by lot among shares of
the same type of Dividend Period) by the Corporation, and the Corporation
shall give a Notice of Redemption; provided that no share of RP shall be
redeemed on any Dividend Payment Date from any Optional Dividend Period
containing at least as many Dividend Period Days as the then Minimum Holding
Period at the time such Optional Dividend Period was selected if a redemption
at such time would have the effect that a Holder who purchased such share in
the preceding Remarketing therefor would not satisfy the Minimum Holding
Period with respect thereto solely by reason of such redemption. So long as
the Applicable Dividend Rate for all outstanding shares of RP shall not be the
Penalty Rate, the Paying Agent will first determine the number of shares to be
redeemed pro rata from each current Dividend Period, but with such adjustments
as the Paying Agent shall make in its sole discretion to allow for redemption
of whole shares of RP only. The Paying Agent shall give to the Securities
Depository and the Remarketing Agent a redemption notice, which notice shall
include the aggregate number of shares of RP to be redeemed and the number of
shares of RP to be redeemed for each Dividend Period. The Securities
Depository will then determine by lot on a Dividend Period basis the number of
shares of RP to be redeemed from the account of each Agent Member (which may
include an Agent Member holding shares for its own account, including the
Remarketing Agent) and will notify the Paying Agent and the Remarketing Agent
of such determination by 10:00 a.m., New York City time, on the second
Business Day following the date on which the Securities Depository receives
the notice referred to in the immediately preceding sentence. Upon receipt of
such notice from the Securities Depository, the Paying Agent will in turn
determine by lot the number of shares of RP from each Dividend Period to be
redeemed from the accounts of the Beneficial Owners whose Agent Members have
been selected. The Paying Agent may determine that shares of RP will be
redeemed from the accounts of some
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Beneficial Owners without shares of RP being redeemed from the accounts of
other Beneficial Owners and shall give prompt notice of such determination to
the Remarketing Agent.
(c) Notwithstanding Paragraph 4(b) of this Part I of these Articles
Supplementary, if fewer than all the outstanding shares of RP are to be
redeemed pursuant to this paragraph 4 of these Articles Supplementary and the
Applicable Dividend Rate applicable to any outstanding share of RP shall be
the Penalty Rate, the number of shares of RP to be redeemed shall be
determined by the Corporation and the shares to be redeemed shall be selected
pro rata from among types of Dividend Period (provided that no share of RP
shall be redeemed on any Dividend Payment Date from any Optional Dividend
Period containing at least as many Dividend Period Days as the then Minimum
Holding Period at the time such Optional Dividend Period was selected if a
redemption at such time would have the effect that a Beneficial Owner who
purchased such share in the preceding Remarketing therefor would not satisfy
the Minimum Holding Period with respect thereto solely by reason of such
redemption) and by lot from among shares of the same type of Dividend Period
by the Corporation. The Corporation shall give a Notice of Redemption which
shall include the aggregate number of shares to be redeemed and the specific
shares selected to be redeemed.
(d) Any Notice of Redemption with respect to a redemption in whole
or in part, pursuant to this paragraph 4 shall be given by the Corporation to
the Paying Agent, the Securities Depository (and any other registered holder
of shares of RP) and the Remarketing Agent. In the case of a partial
redemption, the Remarketing Agent will, at the Corporation's expense, use
reasonable efforts to provide telephonic notice to each Beneficial Owner of
shares of RP called for redemption not later than the close of business on the
Business Day on which the Remarketing Agent receives notice from the Paying
Agent of its determination of the shares to be redeemed (as described above)
(or if the Applicable Dividend Rate for all shares of RP shall be the Penalty
Rate, the Paying Agent shall give such telephonic notice not later than the
close of business on the Business Day immediately following the day on which
the Paying Agent receives Notice of Redemption from the Corporation). In the
case of a redemption in whole, the Remarketing Agent (or the Paying Agent, if
the Applicable Dividend Rate with respect to any outstanding share of RP shall
be the Penalty Rate) will, at the Corporation's expense, use its reasonable
efforts to provide telephonic notice to each Beneficial Owner, the Paying
Agent and the Securities Depository not later than the close of business on
the Business Day immediately following the day on which the Remarketing Agent
receives a Notice of Redemption from the Corporation. In any such case, such
telephonic notice shall be confirmed promptly in writing not later than the
close of business on the third Business Day preceding the redemption date by
notice sent by the Remarketing Agent (or the Paying Agent, if the Applicable
Dividend Rate with respect to any outstanding share of RP shall be the Penalty
Rate) to each Beneficial Owner, the Paying Agent and the Securities Depository
of shares of RP called for redemption.
Every Notice of Redemption or other redemption notice shall state:
(i) the redemption date; (ii) the number of shares of RP to be redeemed;
(iii) the redemption price; and (iv) that dividends on the shares of RP to
be redeemed will cease to accrue on such redemption date. In addition, notice
of redemption given to Beneficial Owners shall state the CUSIP number of the
shares of RP to be redeemed and the manner in which owners of such shares may
obtain payment of the redemption price. No defect in the Notice of Redemption
or other redemption notice or in the transmittal or the mailing thereof shall
affect the validity of the redemption proceedings, except as required by
applicable law. The Remarketing Agent (or the Paying Agent, if the Applicable
Dividend Rate with respect to any outstanding share of RP shall be the Penalty
Rate), within two Business Days of the date of the Notice of Redemption, will
use its reasonable efforts to cause the publication of a redemption notice in
an Authorized Newspaper. The Corporation shall pay the expenses incurred in
providing the notices required by this paragraph 4(d).
(e) On any redemption date, the Corporation shall deposit,
irrevocably in trust, in same-day funds, with the Paying Agent, by 12:00 noon
New York City time, the price to be paid on such redemption date of any share
of RP plus an amount equal to dividends thereon (whether or not earned or
declared) accrued to and unpaid through such redemption date.
(f) In connection with any redemption, upon the date of deposit of
the funds necessary for such redemption with the Paying Agent and the giving
of notice of redemption to the Beneficial Owners of shares of RP so called for
redemption, unless the Corporation shall default in making payment of such
redemption price, all rights of the Holders of shares of RP so called for
redemption by requisite notice shall cease and terminate, except the right of
the Holders thereof to receive the redemption price thereof, inclusive of an
amount equal to dividends (whether or not earned or declared) accrued to and
unpaid through the redemption date but without any interest, and such shares
shall no longer be deemed outstanding for any purposes. The Corporation shall
be entitled to receive, promptly after the date fixed for redemption, any cash
held by the Paying Agent in excess of the aggregate redemption price of the
shares of RP called for redemption on such date. Any funds so deposited with
the Paying Agent which are unclaimed at the end of ninety days from such
redemption date shall, to the extent permitted by law, be repaid to the
Corporation, after which time the Holders of shares of RP so called for
redemption shall look only to the Corporation for payment thereof. The
Corporation shall be entitled to receive, from time to time after the date
fixed for redemption, any interest on the funds so deposited.
(g) To the extent that any redemption for which Notice of
Redemption has been given is not made by reason of the absence of legally
available funds, such redemption shall be made as soon as practicable to the
extent such funds become available. Failure to redeem shares of RP shall be
deemed to exist at any time after the date specified for redemption in a
Notice of Redemption when the Corporation shall have failed, for any reason
whatsoever, to deposit funds with the Paying Agent pursuant to paragraph 4(e)
with respect to any shares for which such Notice of Redemption has been given.
Notwithstanding the fact that the Corporation may not have redeemed shares of
RP for which Notice of Redemption has been given, dividends may be declared
and paid on shares of RP and shall include those shares of RP for which Notice
of Redemption has been given.
(h) Notwithstanding the foregoing, (i) no share of RP may be
redeemed unless the full amount of cumulative dividends to the date fixed for
redemption for each such share of RP called for redemption shall have been
declared, and (ii) no share of RP may be redeemed unless all outstanding
shares of RP are simultaneously redeemed, nor may any shares of RP be
purchased or otherwise acquired by the Corporation except in accordance with a
purchase offer made by the Corporation for all outstanding shares of RP,
unless in each such instance dividends on all outstanding shares of RP to the
end of the Dividend Period immediately preceding such transaction (and, if
such transaction is on a Dividend Payment Date, for the Dividend Period ending
on such Dividend Payment Date) shall have been paid or declared and sufficient
funds for the payment thereof shall have been deposited with the Paying Agent.
(i) Except as set forth in this paragraph 4 with respect to
redemptions and subject to paragraph 4(h), nothing contained herein shall
limit any legal right of the Corporation or any affiliate to purchase or
otherwise acquire any shares of RP at any price. Any shares of RP which have
been redeemed, purchased or otherwise acquired by the Corporation or any
affiliate shall not be reissued and the Corporation shall effect a retirement
of such shares; in no event shall such shares have any voting rights.
(j) Notwithstanding any of the foregoing provisions of this
paragraph 4, the Remarketing Agent may, in its sole discretion, after
consultation with the Corporation, modify the procedures set forth above with
respect to notification of redemption provided any such modification does not
adversely affect the Holders of the shares of RP.
5. Liquidation. (a) Upon a liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the Holders
shall be entitled, whether from capital or surplus, before any assets of the
Corporation shall be distributed among or paid over to holders of Common Stock
or any other class or series of stock of the Corporation junior to the RP as
to liquidation payments, to be paid in the amount of $100,000 per share of RP,
plus an amount equal to all accrued and unpaid dividends thereon (whether or
not earned or declared) to and including the date of final distribution.
After any such payment, the Holders shall not be entitled to any further
participation in any distribution of assets of the Corporation.
(b) If upon any such liquidation, dissolution or winding up of the
Corporation the assets of the Corporation shall be insufficient to make such
full payments to the Holders and the holders of any preferred stock ranking as
to liquidation, dissolution or winding up, on a parity with the RP, then such
assets shall be distributed among the Holders ratably in accordance with the
respective amounts which would be payable on such shares of RP or
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any other such preferred stock if all amounts thereon were paid in full.
(c) Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
and assets of the Corporation nor the merger or consolidation of any other
corporation into or with the Corporation nor a reorganization of the
Corporation, shall be deemed to be a dissolution, liquidation or winding up of
the Corporation.
6. Voting Rights. (a) Holders of shares of RP shall have no voting
rights, either general or special except as expressly required by applicable
law, the Charter and as specified in this paragraph 6.
(b) Whenever dividends on any shares of RP shall be in arrears for
such number of Dividend Periods which shall in the aggregate contain not less
than 540 days, then at the next annual meeting of stockholders and at any
annual meeting thereafter and at any meeting called for the election of
Directors, until all dividends accumulated on the shares of RP have been paid
or declared and a sum sufficient for payment has been set aside, the Holders
of the shares of RP either alone or together with the holders of one or more
other cumulative series of the Preferred Stock at the time outstanding which
are granted such voting rights, voting as a class, shall be entitled, to the
exclusion of the holders of one or more other series or classes of stock
having general voting rights, to vote for and elect two members of the Board
of Directors of the Corporation, and the holders of Common Stock together with
the holders of any series or class or classes of stock of the Corporation
having general voting rights and not then entitled to elect two members of the
Board of Directors pursuant to this paragraph 6 to the exclusion of the
holders of all series then so entitled, shall be entitled to vote and elect
the balance of the Board of Directors. In such case the Board of Directors of
the Corporation shall, as of the date of the annual meeting of stockholders
aforesaid, be increased by two Directors. The rights of Holders of shares of
RP of any series to participate (either alone or together with the holders of
one or more other cumulative series of Preferred Stock at the time outstanding
which are granted such voting rights) in the exclusive election of two members
of the Board of Directors of the Corporation pursuant to this paragraph 6
shall continue in effect until cumulative dividends have been paid in full or
declared and set apart for payment on the shares of RP. At elections for such
Directors, each Holder of shares of RP shall be entitled to 2,000 votes for
each share held. The Holders of shares of RP shall have no right to cumulate
such shares in voting for the election of Directors. At the annual meeting of
stockholders next following the termination (by reason of the payment of all
accumulated and defaulted dividends on such stock or provision for the payment
thereof by declaration and setting apart thereof) of the exclusive voting
power pursuant to this paragraph 6 of the Holders of shares of RP and the
holders of all other cumulative series which shall have been entitled to vote
for and elect such two members of the Board of Directors of the Corporation,
the terms of office of all persons who may have been elected Directors of the
Corporation by vote of such holders shall terminate and the two vacancies
created pursuant to this Paragraph 6 to accommodate the exclusive right of
election conferred hereunder shall thereupon be eliminated, and the Board of
Directors shall be decreased by two Directors.
(c) So long as any shares of RP remain outstanding, the affirmative
vote of the Holders of at least two-thirds of the votes of the shares of RP
outstanding at the time given in person or by proxy, at any special or annual
meeting called for the purpose, shall be necessary to permit, effect or
validate any one or more of the following:
(i) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as
that term is defined below in this paragraph 6) to such shares of
RP, or
(ii) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks on a
parity with the shares of RP unless the Articles Supplementary or
other provisions of the charter creating or authorizing such class or
series shall provide that if in any case the stated dividends or
amounts payable on liquidation are not paid in full on such shares of
RP and all outstanding shares of stock ranking on a parity (as that
term is defined below in this paragraph 6) with such shares of RP
(such shares of RP and all such other stock being herein called
"Parity Stock"), the shares of all Parity Stock shall share ratably
in the payment of dividends, including accumulations (if any) in
accordance with the sums which would be payable on all Parity Stock
if all dividends in respect of all shares of Parity Stock were paid
in full, and on any distribution of assets upon liquidation ratably
in accordance with the sums which would be payable in respect of all
shares of Parity Stock if all sums payable were discharged in full,
or
(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the charter
of the Corporation including these Articles Supplementary which would
materially and adversely affect any right, preference, privilege or
voting power of such shares of RP or of the Holders thereof;
provided, however, that any increase in the amount of authorized
Preferred Stock or Cumulative Preferred Stock, Floating Rate Series B
Stock, the Series A and Series B Dutch Auction Rate Transferable
SecuritiesTM Preferred Stock, the MMP or the RP or the creation and
issuance of other series of Preferred Stock including RP, in each
case ranking on a parity with or junior to the shares of RP with
respect to the payment of dividends and the distribution of assets
upon liquidation, shall not be deemed to affect materially and
adversely such rights, preferences, privileges or voting powers.
The foregoing voting provisions shall not apply as to any shares of RP
if, at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of RP shall
have been redeemed or sufficient funds shall have been deposited in trust in
accordance with Part I, paragraph 4 to effect such redemption.
Any class or classes of stock of the Corporation shall be deemed to rank
(i) prior to the shares of RP as to dividends or as to distribution
of assets if the holders of such class shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or
priority to the Holders of the shares of RP; and
(ii) on a parity with the shares of RP as to dividends or as to
distribution of assets, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation prices per share thereof
be different from the shares of RP, if the holders of such class of
stock and the shares of RP shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority
one over the other.
In connection with the exercise of the voting rights contained in this
paragraph 6(c), each Holder of the shares of RP shall have 2,000 votes for
each share of stock held.
(d) So long as any shares of RP remain outstanding, the Corporation
shall not, without the affirmative vote of the holders of at least a majority
of the votes of all Parity Stock entitled to vote outstanding at the time,
given in person or by proxy, by resolution adopted at a meeting at which the
Holders of shares of RP (alone or together with the holders of one or more
other series of Parity Stock at the time outstanding and entitled to vote)
vote separately as a class, (a) directly or indirectly, sell, transfer or
otherwise dispose of, or permit Republic National Bank of New York (the
"Bank") or any other subsidiary of the Corporation, to issue, sell, transfer
or otherwise dispose of any shares of voting stock of the Bank, or securities
convertible into or options, warrants or rights to acquire voting stock of the
Bank, unless after giving effect to any such transaction the Bank remains a
Controlled Subsidiary (as hereinafter defined) of the Corporation or of a
Qualified Successor Company (hereinafter defined); (b) merge or consolidate
with, or convey substantially all of its assets to any person or corporation
unless the entity surviving such merger or consolidation or the transferee of
such assets is the Corporation or a Qualified Successor Company; or (c)
permit the Bank to merge, consolidate with, or convey substantially all of its
assets to any person or corporation unless the entity surviving such merger or
consolidation or the transferee of such assets is a Controlled Subsidiary of
the Corporation or of a Qualified Successor Company, except in any of the
foregoing cases as required to comply with applicable law, including, without
limitation, any court or regulatory order. The term "Qualified Successor
Company" shall mean a corporation (or other similar organization or
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entity whether organized under or pursuant to the laws of the United States or
any state thereof or of another jurisdiction) which (i) is or is required to
be a registered bank holding company under the United States Bank Holding
Company Act of 1956, as amended, or any successor legislation, (ii) issues
to the holders of RP in exchange for the RP shares of preferred stock having
at least the same relative rights and preferences as the RP (the "Exchanged
Stock"), (iii) immediately after such transaction has not outstanding or
authorized any class of stock or equity securities ranking prior to the
Exchanged Stock with respect to the payment of dividends or the distribution
of assets upon liquidation, and (iv) holds, as a Controlled Subsidiary or
Subsidiaries, either the Bank or one or more other banking corporations which,
collectively, immediately after such transaction hold substantially all of the
assets and liabilities which the Bank held immediately prior to such
transaction (which may be in addition to other assets and liabilities acquired
in such transaction). "Controlled Subsidiary" shall mean any corporation at
least 80% of the outstanding shares of voting stock of which shall at the time
be owned directly or indirectly by the Corporation or a Qualified Successor
Company. In connection with the exercise of the voting rights contained in
this paragraph 6(d), holders of all series of Parity Stock which are granted
such voting rights shall vote as a class, and each Holder of RP shall have
2,000 votes for each share of stock held, and each other series shall have
such number of votes, if any, for each share of stock held as may be granted
them.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of the RP shall have been redeemed
or sufficient funds shall have been deposited in trust in accordance with Part
I, paragraph 4 to effect such redemption.
7. Exclusion of Other Rights. Unless otherwise required by law, shares
of RP shall not have any rights, including preemptive rights, or references
other than those specifically set forth herein or as provided by applicable
law.
8. Notice. All notices or communications unless otherwise specified in
the Bylaws of the Corporation or these Articles Supplementary shall be
sufficiently given if in writing and delivered in person or mailed by first-
class mail, postage prepaid. Notice shall be deemed given on the earlier of
the date received or the date such notice is mailed.
PART II
REMARKETING PROCEDURES
1. Remarketing Schedule. A Remarketing with respect to shares of RP
subject to Tender and Dividend Reset for each Dividend Period after the
Initial Dividend Period shall be held over a three-day (in each case a "normal
remarketing day") period consisting of the Tender Date (normally a Tuesday),
the Dividend Reset Date (normally a Wednesday) and the Settlement Date
(normally a Thursday) except that (i) if Tuesday is not a Business Day,
Monday shall be the Tender Date, Wednesday shall be the Dividend Reset Date
and Thursday shall be the Settlement Date; (ii) if Wednesday is not a
Business Day, Monday shall be the Tender Date, Tuesday shall be the Dividend
Reset Date and Thursday shall be the Settlement Date; (iii) if Thursday is
not a Business Day, the preceding Friday shall be the Tender Date, the next
following Monday shall be the Dividend Reset Date and the Tuesday following
such Monday shall be the Settlement Date; and (iv) if Friday is not a
Business Day, Monday shall be the Tender Date, Tuesday shall be the Dividend
Reset Date and Wednesday shall be the Settlement Date. If there are fewer
than four Business Days in any seven-day period which commences on a Tender
Date such that none of the foregoing clauses can be given effect such that
Beneficial Owners of RP whose shares have been sold in a Remarketing will
receive same-day funds for the purchase price thereof the day following the
Settlement Date (because the Tender Date, the Dividend Reset Date or the
Settlement Date would fall on a day which is not a Business Day), the
Remarketing Agent shall in its sole discretion adjust the remarketing schedule
as appropriate to complete such Remarketing. Although any particular Tender
Date, Dividend Reset Date and Settlement Date may not occur on the originally
scheduled normal remarketing day because of the exceptions stated above, the
next succeeding Tender Date, Dividend Reset Date and Settlement Date shall be,
subject to the above listed exceptions, the originally designated normal
remarketing day.
2. Procedure for Tendering. (a) A share of RP is subject to Tender and
Dividend Reset only at the end of the current Dividend Period applicable to
such share and may be tendered in a Remarketing only on the Tender Date
immediately prior to the end of such Dividend Period. By 12:00 noon, New York
City time, on the Tender Date, the Remarketing Agent shall, after canvassing
the market and considering prevailing market conditions at the time for shares
of RP and similar securities, provide Beneficial Owners, by telephone, telex,
or otherwise, non-binding indications of Applicable Dividend Rates for the
next succeeding 7-day Dividend Period, 49-day Dividend Period and any Optional
Dividend Period or Periods. The actual Applicable Dividend Rates for such
Dividend Periods may be greater or less than the rates indicated in such non-
binding indications (but not greater than the applicable Maximum Dividend
Rate). By 1:00 p.m., New York City time, on such Tender Date, each Beneficial
Owner of shares of RP subject to Tender and Dividend Reset must notify the
Remarketing Agent of its desire, on a share-by-share basis, to either tender
such share of RP at a price of $100,000 per share or to continue to hold such
share of RP and elect a 7-day Dividend Period, a 49-day Dividend Period or an
Optional Dividend Period, if any, at the new Applicable Dividend Rate for the
selected Dividend Period. Any such notice shall be irrevocable, which
irrevocability may not be waived by the Remarketing Agent except that prior to
4:00 p.m., New York City time, on the Dividend Reset Date, the Remarketing
Agent may, in its sole discretion (i) at the request of a Tendering
Beneficial Owner waive any such Beneficial Owner's tender and thereby enable
such Beneficial Owner to continue to hold the share or shares in question for
a 7-day, 49-day or available Optional Dividend Period as agreed to by the
Beneficial Owner and the Remarketing Agent so long as such tendering
Beneficial Owner has indicated that it would accept the new Applicable
Dividend Rate determined in the current Remarketing for such Dividend Period
and (ii) at the request of a Beneficial Owner that has elected to hold its
shares of RP, waive such Beneficial Owner's election, but only with respect to
the type of the Dividend Period selected.
(b) The right of each Beneficial Owner to tender shares of RP is
limited to the extent that (i) the Remarketing Agent conducts a Remarketing
pursuant to the terms of the Remarketing Agreement, (ii) shares tendered
have not been called for redemption, and (iii) the Remarketing Agent is able
to find a purchaser or purchasers on a share-by-share basis for tendered
shares of RP at an Applicable Dividend Rate for the applicable Dividend Period
or Periods that is not in excess of the applicable Maximum Dividend Rate or
Rates.
(c) Any share of RP which is not tendered by the Beneficial Owner
thereof for any reason (other than because there is no Remarketing Agent or
because the Remarketing Agent is not required to conduct a Remarketing
pursuant to the terms of the Remarketing Agreement) according to the
Remarketing provisions provided for in this Part II and with respect to which
no notice to hold pursuant to paragraph 2(a) of this Part II has been given
will automatically accrue dividends at the new Applicable Dividend Rate for a
Dividend Period of the same type as the prior Dividend Period for such share,
except a 49-Day Dividend Period shall apply if the prior Dividend Period was
the Initial Dividend Period and will be subject to Tender and Dividend Reset
at the end of such new Dividend Period. However, in the event that such prior
Dividend Period was an Optional Dividend Period of more than 98 days and if
the Remarketing Agent is unable to remarket on the applicable Dividend Reset
Date all shares of RP tendered to it in the relevant Remarketing at a price of
$100,000 per share, then such new Dividend Period for such holder's shares
shall be a 7-day Dividend Period and such new Applicable Dividend Rate will be
the applicable Maximum Dividend Rate for a 7-day Dividend Period.
3. Determination of Applicable Dividend Rate. (a) Between 1:00 p.m.,
New York City time, on the Tender Date and 4:00 p.m., New York City time, on
the Dividend Reset Date, the Remarketing Agent will determine (i) the
allocation of tendered shares of RP among a 7-day Dividend Period, a 49-day
Dividend Period and any available Optional Dividend Period (except as provided
in paragraph 4(a) of this Part II), and (ii) the Applicable Dividend Rates
to the nearest one-thousandth (0.001) of one percent per annum for the next 7-
day Dividend Period, 49-day Dividend Period and available Optional Dividend
Period, if any, respectively. The Applicable Dividend Rate for each such
Dividend Period will be the dividend rate which the Remarketing Agent
determines, in its sole judgment, to be the lowest rate, giving effect to such
allocation, that would enable it to remarket on behalf of the Beneficial
Owners thereof all shares of RP tendered to it at a price of $100,000 per
share.
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(b) If no Applicable Dividend Rate shall have been set in any
Remarketing for a 7-day Dividend Period or 49-day Dividend Period, or any
Optional Dividend Period or for any or all such periods, for any reason (other
than because there is no Remarketing Agent or because the Remarketing Agent is
not required to conduct a Remarketing pursuant to the terms of the Remarketing
Agreement) the Remarketing Agent, in its sole discretion, will, after taking
into account market conditions as reflected in the prevailing yields on fixed
and variable rate taxable and tax exempt debt securities and the prevailing
dividend yields of fixed and variable rate preferred stock, determine the
Applicable Dividend Rate or Rates for such Dividend Period or Periods which
would be an initial dividend rate fixed in an offering on such Dividend Reset
Date, assuming a comparable dividend period, issuer and security. If there is
no Remarketing Agent or if the Remarketing Agent is not required to conduct a
Remarketing pursuant to the Remarketing Agreement, the Applicable Dividend
Rate for each subsequent Dividend Period for which no Remarketing takes place
because of the foregoing will be the applicable Maximum Dividend Rate for a 7-
day Dividend Period and the next succeeding Dividend Period will be a 7-day
Dividend Period.
(c) In determining such Applicable Dividend Rate or Rates, and
making such allocation, the Remarketing Agent will, after taking into account
market conditions as reflected in the prevailing yields on fixed and variable
rate taxable and tax-exempt debt securities and the prevailing dividend yields
on fixed and variable rate preferred stocks in providing non-binding
indications of the Applicable Dividend Rates to Beneficial Owners and
potential purchasers of shares of RP (i) consider the number of shares of RP
tendered and the number of shares of RP potential purchasers are willing to
purchase and (ii) contact directly by telephone or otherwise and ascertain
from current and potential Beneficial Owners of shares of RP the dividend
rates at which they would be willing to hold shares of RP.
(d) The Applicable Dividend Rates, as well as the allocation of
tendered shares of RP, shall be determined by the Remarketing Agent in its
sole discretion (except as otherwise provided in these Articles Supplementary
with respect to Applicable Dividend Rates that shall be the Penalty Rate and
Maximum Dividend Rates) and shall be conclusive and binding on Beneficial
Owners.
(e) As a condition precedent to purchasing shares of RP, in any
Remarketing or outside of any Remarketing, each purchaser of shares of RP
shall sign and deliver, as provided therein, a copy of a Purchaser's Letter;
the sufficiency of such Purchaser's Letter shall be determined by the
Remarketing Agent, in its sole discretion.
(f) The Applicable Dividend Rate for any Dividend Period shall not
be more than the applicable Maximum Dividend Rate.
4. Allocation of Shares; Failure to Remarket at $100,000 Per Share. (a)
If the Remarketing Agent is unable to remarket by 4:00 p.m., New York City
time, on a Dividend Reset Date all shares of RP tendered to it in a
Remarketing at a price of $100,000 per share, (i) each Beneficial Owner that
tendered shares of RP for sale shall sell a number of shares of RP on a pro
rata basis, to the extent practicable, or by lot, as determined by the
Remarketing Agent in its sole discretion based on the number of orders to
purchase shares of RP in such Remarketing; (ii) the next Dividend Period for
all tendered but unsold shares and for all other shares the Beneficial Owners
of which shall have elected or been deemed to have elected to hold such shares
for a Dividend Period of more than 98 days shall be a 7-day Dividend Period;
and (iii) the Applicable Dividend Rates for the next 7-day Dividend Period
(including the 7-day Dividend Period referred to in the preceding clause
(ii)), next 49-day Dividend Period and, if applicable, next Optional Dividend
Period or Periods of 98 days or fewer will be the applicable Maximum Dividend
Rate for such Dividend Period.
(b) If the allocation procedures described above would result in
the sale of a faction of a share of RP, the Remarketing Agent shall, in its
sole discretion, round up or down the number of shares of RP on such Dividend
Reset Date so that each share sold by a Beneficial Owner shall be a whole
share of RP and the total number of shares sold equals the total number of
shares bought on such Dividend Reset Date.
5. Notification of Results; Settlement. (a) By approximately 4:30
p.m., New York City time, on each Dividend Reset Date, by telephone, telex or
otherwise, the Remarketing Agent will advise (i) each Beneficial Owner (or
the Agent Member thereof who in turn will advise such Beneficial Owner) of
shares of RP that submitted a notice of intent to tender shares of RP in the
related Remarketing whether such tender was accepted in whole or in part and
to give instructions to its Agent Member to deliver those shares of RP for
which the tender was accepted, by book entry against payment therefor to the
Paying Agent through the Securities Depository, by 8:30 a.m., New York City
time on the related Settlement Date and (ii) each purchaser (or the Agent
Member thereof who in turn will advise such purchaser) purchasing shares of RP
as a result of the related Remarketing, to give instructions to its Agent
Member to pay the purchase price to the Remarketing Agent, against delivery of
such shares, by book entry through the Securities Depository, by 8:30 a.m.,
New York City time on the related Settlement Date. The Paying Agent may
return any shares of RP delivered to the Paying Agent after 8:30 a.m. New York
City time on the Settlement Date for redelivery to the extent practicable on
the same or on the following day. The Paying Agent shall deliver to the
Remarketing Agent against receipt of payment, through the Securities
Depository, all shares of RP received by the Paying Agent as provided herein.
(b) The Remarketing Agent also will (i) advise each purchaser (or
its Agent Member) that is to purchase shares of RP as a result of the
Remarketing of the amount that it will be required, by 8:30 a.m., New York
City time, on the Settlement Date, to pay against delivery by book entry of
the shares of RP to be purchased, (ii) advise each Beneficial Owner (or its
Agent Member) that is to sell shares of RP as a result of the Remarketing of
the number of shares of RP that it will be required to deliver by 8:30 a.m.,
New York City time, on the Settlement Date by book entry against payment
therefor, (iii) advise, upon request to the Remarketing Agent, each existing
Beneficial Owner of shares of RP who will continue to hold shares of RP and
each purchaser of shares of RP of the Applicable Dividend Rates for the next
Dividend Periods, (iv) advise each existing Beneficial Owner (or its Agent
Member) who has elected to hold shares and has elected to change the type of
the Dividend Period with respect to such shares, to deliver by 8:30 a.m., New
York City time, on the Settlement Date by book entry such shares "free" to the
Paying Agent through the Securities Depository to effectuate such change, (v)
if the Remarketing Agent is unable to remarket by 4:00 p.m., New York City
time, on a Dividend Reset Date all shares of RP tendered to it in a
Remarketing at a price of $100,000 per share, advise the Beneficial Owners of
all tendered but unsold shares and the Beneficial Owners which shall have
elected, or been deemed to have elected, to hold shares for an Optional
Dividend Period of more than 98 days, to deliver such shares by 8:30 a.m., New
York City time, on the Settlement Date, by book entry "free" to the Paying
Agent through the Securities Depository to effectuate a conversion to a 7-day
Dividend Period, and (vi) advise the Paying Agent, by 4:30 p.m., New York
City time, on each Dividend Reset Date, of the Applicable Dividend Rate or
Rates determined in the related Remarketing, of the number of shares of RP to
which such Applicable Dividend Rate or Rates apply, of the shares of RP sold
and purchased in such Remarketing and of the selling and purchasing Beneficial
Owners and the Beneficial Owners who have elected to change the length of the
Dividend Period with respect to their shares of RP and of the number of shares
affected thereby.
(c) In accordance with the Securities Depository's normal
procedures, on the Settlement Date, the transactions described above will be
executed through the Securities Depository, as authorized in accordance with
paragraph 5(b) of this Part II, and the accounts of the respective Agent
Members at the Securities Depository will be debited and credited and shares
delivered by book entry as necessary to effect the purchases and sales of
shares of RP or the change in length of Dividend Period as determined in the
Remarketing. Purchasers of shares of RP will make payment through their Agent
Members in New York Clearing House funds to the Securities Depository against
delivery through their Agent Members. The Securities Depository will make
payment in accordance with its normal procedures, which now provide for
payment in New York Clearing House funds, provided that if the procedures of
the Securities Depository shall be changed to provide for payment in same-day
funds, then purchasers will make payment in same-day funds.
(d) If any Beneficial Owner selling shares of RP in a Remarketing
fails to deliver such shares, the Agent Member of such selling Beneficial
Owner and of any other person that was to have purchased shares of RP in such
Remarketing may deliver to any such other person a number of whole shares of
RP that is less than the number of shares that otherwise was to be purchased
by such person. In such event, the number of shares of RP to be so delivered
shall be determined by such Agent Member who shall give the Remarketing Agent
and the Paying Agent notice of such number. Delivery
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of such lesser number of shares of RP shall constitute good delivery.
(e) The Remarketing Agent, Paying Agent and Securities Depository
will each use their reasonable commercial efforts to meet the timing
requirements set forth in paragraphs (a) and (b) above; provided however, that
in the event that there is a delay in the occurrence of any delivery or other
event connected with a Remarketing, the Remarketing Agent, Paying Agent and
Securities Depository will each use their reasonable commercial efforts to
accommodate such delay in furtherance of the Remarketing.
(f) Notwithstanding any of the foregoing provisions of this
paragraph 5, the Remarketing Agent may, in its sole discretion, after
consultation with the Corporation, modify the procedures set forth above with
respect to settlement, provided any such modification does not adversely
affect the Holders of RP or the Corporation; provided further that any such
modification shall not increase the obligations of the Paying Agent without
the prior consent of the Paying Agent.
6. Purchase of Shares of RP by Remarketing Agent. The Remarketing Agent
may purchase for its own account shares of RP in a Remarketing, provided that
it purchases all shares of RP not sold in a Remarketing to other purchasers
and that the Applicable Dividend Rate or Rates set with respect to such shares
in the Remarketing are no higher than the Applicable Dividend Rate or Rates
that would have been set if the Remarketing Agent had not purchased such
shares. Notwithstanding the foregoing, the Remarketing Agent is not obligated
to purchase any shares of RP that would otherwise remain unsold in a
Remarketing. If the Remarketing Agent owns any shares of RP immediately prior
to a Remarketing and if all other shares tendered for sale by other Beneficial
Owners of shares of RP have been sold in such Remarketing, then the
Remarketing Agent may sell such number of its shares in such Remarketing as
there are outstanding orders to purchase. Neither the Corporation nor the
Remarketing Agent is obligated in any case to provide funds to make payment to
a Beneficial Owner upon such Beneficial Owner's tender of its shares of RP for
Remarketing.
7. Applicable Dividend Rate as the Penalty Rate. If the Applicable
Dividend Rate with respect to any share of RP shall be the Penalty Rate,
paragraphs 1, 2, 3, 4, 5 and 6 of this Part II shall no longer be applicable
to any of the shares of RP and the shares of RP shall not be subject to Tender
and Dividend Reset.
8. Transfers. So long as the Applicable Dividend Rate applicable to any
share of RP is not the Penalty Rate, shares of RP may be sold, transferred or
otherwise disposed of, either in a Remarketing or otherwise, only to a person
that has delivered a signed copy of a Purchaser's Letter addressed to the
Corporation, the Remarketing Agent, the Paying Agent and the Agent Member and
to be delivered as provided in such Purchaser's Letter, provided that, in the
case of all transfers other than pursuant to Remarketings, as a condition to
such transfer, the Agent Member of the transferee and of the transferor advise
the Paying Agent and the Remarketing Agent of such transfer.
9. Miscellaneous. The Board of Directors of the Corporation may
interpret or adjust the provisions of these Articles Supplementary to resolve
any inconsistency or ambiguity, remedy any formal defect or make any other
change or modification which does not adversely affect the rights of
Beneficial Owners of shares of RP and if such inconsistency or ambiguity
reflects an incorrect provision hereof the Board of Directors may authorize
the filing of a Certificate of Correction.
10. Securities Depository; Stock Certificates. (a) The Depository
Trust Company will initially act as Securities Depository for the Agent
Members with respect to shares of RP. In accordance with applicable law, on
the Date of Original Issue an appropriate number of certificates for all of
the shares of RP will be registered in the name of Cede, as nominee of the
Securities Depository. Such certificates will bear a legend to the effect
that such certificates are issued subject to the provisions contained in these
Articles Supplementary and each Purchaser's Letter. The Corporation will also
issue stop-transfer instructions to the Paying Agent for the shares of RP.
Except as provided in paragraphs (b) and (c) below, Cede will be the Holder,
and no Beneficial Owner shall receive certificates representing its ownership
interest in such shares.
(b) If DTC shall cease acting as Securities Depository, the Paying
Agent and the Corporation shall, at the Corporation's option, either (i)
arrange for another securities depository to maintain custody of the
certificates evidencing the shares of RP or (ii) cause the Corporation to
issue one or more new certificates registered in the names of the Beneficial
Owners or their nominees.
(c) If the Applicable Dividend Rate applicable to all shares of RP
shall be the Penalty Rate, the Corporation shall issue one or more new
certificates with respect to such shares (without the legend referred to in
paragraph 10(a) of this Part II) registered in the names of the Beneficial
Owners or their nominees and shall rescind the stop-transfer instruction
referred to in paragraph 10(a) of this Part II with respect to such shares.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its President and its corporate
seal to be hereunto affixed and attested by its Secretary, and the said
officers of the Corporation further acknowledged said instrument to be the
corporate act of the Corporation and stated under the penalties of perjury
that to the best of their knowledge, information and belief the matters and
facts therein set forth with respect to approval are true in all material
respects, all on July 28, 1987.
REPUBLIC NEW YORK CORPORATION
By: /s/ Jeffrey C. Keil
Attest: (President)
/s/ William F. Rosenblum, Jr.
(Secretary)
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Exhibit A
TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN DELIVER COPIES ON
YOUR BEHALF TO THE RESPECTIVE TRUST COMPANY
MASTER PURCHASER'S LETTER
Relating to Securities Involving Rate Settings
Through Auctions or Remarketings
THE COMPANY
THE REMARKETING AGENT
THE TRUST COMPANY
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered
debt or equity securities ("Securities") of any issuer ("Company") which are
described in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions") or remarketing
procedures ("Remarketings"). This letter shall be for the benefit of any
Company and of any trust company, auction agent, paying agent, (collectively,
"trust company"), remarketing agent, broker-dealer, agent member, securities
depository or other interested person in connection with any Securities and
related Auctions or Remarketings (it being understood that such persons may be
required to execute specified agreements and nothing herein shall alter such
requirements). The terminology used herein is intended to be general in its
application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales
and offers and to Securities owned by us. We understand that the
dividend/interest rate on Securities may be based from time to time on the
results of Auctions or Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise
described in the Prospectus) by us to purchase or sell the Securities subject
to such bid or sell order, or such lesser amount of Securities as we shall be
required to sell or purchase as a result of such Auction or Remarketing, at
the applicable price, all as set forth in the Prospectus, and that if we fail
to place a bid or sell order with respect to Securities owned by us with a
broker-dealer on any Auction or Remarketing date, or a broker-dealer to which
we communicate a bid or sell order fails to submit such bid or sell order to
the trust company or remarketing agent concerned, we shall be deemed to have
placed a hold order with respect to such Securities as described in the
Prospectus. We authorize any broker-dealer that submits a bid or sell order
as our agent in Auctions or Remarketings to execute contracts for the sale of
Securities covered by such bid or sell order. We recognize that the payment
by such broker-dealer for Securities purchased on our behalf shall not relieve
us of any liability to such broker-dealer for payment for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate or
rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agents, and we
agree to be conclusively bound by such determinations. We further agree to
the payment of different dividend or interest rates to different holders of
Securities depending on the length of the dividend or interest period elected
by such holders. We agree that any notice given by us to a remarketing agent
(or to a broker-dealer for transmission to a remarketing agent) of our desire
to tender Securities in a Remarketing shall constitute an irrevocable (except
to the limited extend set forth in the Prospectus) offer by us to sell the
Securities specified in such notice, or such lesser number of Securities as we
shall be required to sell as a result of such Remarketing, in accordance with
the terms set forth in the Prospectus, and we authorize the remarketing agent
to sell, transfer or otherwise dispose of such Securities as set forth in the
Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations
set forth in the Prospectus and we will sell, transfer or otherwise dispose of
any Securities held by us from time to time only pursuant to a bid or sell
order placed in an Auction, in a Remarketing, to or through a broker-dealer
or, when permitted in the Prospectus, to a person that has signed and
delivered to the applicable trust company or a remarketing agent a letter
substantially in the form of this letter (or other applicable purchaser's
letter), provided that in the case of all transfers other than pursuant to
Auctions or Remarketings we or our broker-dealer or our agent member shall
advise such trust company or a remarketing agent of such transfer. We
understand that a restrictive legend will be placed on certificates
representing the Securities and stop-transfer instructions will be issued to
the transfer agent and/or registrar, all as set forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable trust company or remarketing agent such information concerning our
beneficial ownership of Securities as such trust company or remarketing agent
shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall
constitute good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior- or post-dated purchaser's
letter specific to particular Securities, and this letter may only be revoked
by a signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing procedures set forth in
each applicable Prospectus are incorporated by reference herein and in case of
any conflict between this letter, any purchaser's letter specific to
particular Securities and any such description, such description shall
control.
11. Any xerographic or other copy of this letter shall be deemed of
equal effect as a signed original.
12. Our agent member of the Depository Trust Company currently is
13. Our personnel authorized to place orders with broker-dealers for the
purpose set forth in the Prospectus in Auctions or Remarketings currently
is/are, telephone number ( ) .
14. Our taxpayer identification number is .
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15. In the case of each offer to purchase, purchase, offer to sell or
sale by us of Securities not registered under the Securities Act of 1933, as
amended (the "Act"), we represent and agree as follows:
A. We understand and expressly acknowledge that the Securities have
not been and will not be registered under the Act and, accordingly, that
the Securities may not be reoffered, resold or otherwise pledged,
hypothecated or transferred unless an applicable exemption from the
registration requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us
will be for our own account, or for the account of one or more parties
for which we are acting as trustee or agent with complete investment
discretion and with authority to bind such parties, and not with a view
to any public resale or distribution thereof. We and each other party
for which we are acting which will acquire Securities will be "accredited
investors" within the meaning of Regulation D under the Act with respect
to the Securities to be purchased by us or such party, as the case may
be, will have previously invested in similar types of instruments and
will be able and prepared to bear the economic risk of investing in and
holding such Securities.
C. We acknowledge that prior to purchasing any Securities we shall
have received a Prospectus (or private placement memorandum) with respect
thereto and acknowledge that we will have had access to such financial
and other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto,
as we deem necessary in connection with our decision to purchase
Securities.
D. We recognize that the Company and broker-dealers will rely upon
the truth and accuracy of the foregoing investment representations and
agreements, and we agree that each of our purchases of Securities now or
in the future shall be deemed to constitute our concurrence in all of the
foregoing which shall be binding on us and each party for which we are
acting as set forth in Subparagraph B above.
Dated:__________________________ ___________________________________
(Name of Purchaser)
Mailing Address of Purchaser
________________________________ By:_____________________
________________________________ Printed Name:______________________
________________________________ Title:__________________
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CONFORMED COPY 5.14.91
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has authorized the classification of up to 4,000,000 of the
15,000,000 shares of Preferred Stock (the "Preferred Stock") which the
Corporation now has authority to issue into a series designated $3.375
Cumulative Convertible Preferred Stock and has provided for the issuance of
such series.
SECOND: The number of shares and terms of the $3.375 Cumulative Convertible
Preferred Stock as set by the Finance Committee of the Board of Directors
pursuant to authority duly delegated by the Board of Directors are as follows:
1. $3.375 Cumulative Convertible Preferred Stock. 4,000,000 shares of
Preferred Stock of the Corporation, without par value, are hereby constituted
as the original number of shares of a series of Preferred Stock designated as
$3.375 Cumulative Convertible Preferred Stock (hereinafter sometimes called
the "Convertible Preferred Stock"). The Convertible Preferred Stock is
issuable in whole shares only. The Convertible Preferred Stock shall be of a
stated value of $50 per share (the "Stated Value"). The term "Charter" when
used herein shall include all articles or certificates filed pursuant to law
with respect to any series of the Preferred Stock.
2. Dividends. The holders of the Convertible Preferred Stock shall be
entitled to receive, but only when and as declared by the Board of Directors
out of funds legally available for the purpose, cash dividends at the rate of
$3.375 per share per annum, and no more, payable quarterly on the first day of
January, April, July and October of each year, with the first such dividend
being payable July 1, 1991 (each a "dividend payment date"). Such dividends
shall be payable from, and shall be cumulative from, the date of original
issue of each share. Dividends will be payable, in arrears, to holders of
record as they appear on the stock transfer records of the Corporation on such
record dates, not more than 60 days nor less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors. The
amount of dividends payable per share for each full dividend period shall be
computed by dividing by four the $3.375 annual rate. The amount of dividends
payable for the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day year of twelve
30-day months. If in any quarterly dividend period (being the period between
such dividend payment dates or, in the case of the first such period, from the
date of original issue to July 1, 1991) dividends at the rate of $3.375 per
share per annum shall not have been paid or declared and set apart for payment
on all outstanding shares of Convertible Preferred Stock for such quarterly
dividend period and all preceding quarterly dividend periods from and after
the first day from which dividends are cumulative, then the aggregate
deficiency shall be declared and fully paid or set apart for payment, but
without interest, before (i) any dividends or other distributions (excluding
dividends paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock of the Corporation or shares of any other
capital stock of the Corporation ranking junior to the Convertible Preferred
Stock with respect to the payment of dividends and distribution of assets upon
liquidation, dissolution or winding up of the Corporation) shall be declared
and paid or set apart for payment on the Common Stock or on any other capital
stock of the Corporation ranking junior to the Convertible Preferred Stock
with respect to the payment of dividends, or (ii) the Corporation shall
purchase, redeem or otherwise acquire any shares of Preferred Stock or any
shares of capital stock of the Corporation ranking on a parity with or junior
to the Convertible Preferred Stock with respect to the payment of dividends,
except by conversion into or exchange for capital stock of the Corporation
ranking junior to the Convertible Preferred Stock with respect to the payment
of dividends and distribution of assets upon liquidation, dissolution or
winding up of the Corporation; provided, however, that any moneys set aside in
trust as a sinking fund payment for any series of Preferred Stock pursuant to
the resolutions providing for the issue of shares of such series may
thereafter be applied to the purchase or redemption of Preferred Stock of such
series whether or not at the time of such application full cumulative
dividends upon the outstanding Convertible Preferred Stock shall have been
paid or declared and set apart for payment.
3. Conversion. (i) Subject to and upon compliance with the provisions
of this paragraph 3, each holder of Convertible Preferred Stock shall have the
right, at his option, at any time, to convert any or all of the shares of
Convertible Preferred Stock held by such holder into the number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion,
for the purpose of determining the amount of any cash payments provided for
under subparagraph (iii) of this paragraph 3, to the nearest 1/100 of a share
of Common Stock, with 1/200 of a share of Common Stock being rounded upward)
obtained by dividing the Stated Value of a share of Convertible Preferred
Stock by the Conversion Price (as defined below) and multiplying such
resulting number by the number of shares of Convertible Preferred Stock to be
converted, and by surrendering such shares of Convertible Preferred Stock so
to be converted, such surrender to be made in the manner provided in
subparagraph (ii) of this paragraph 3; provided, however, that the right to
convert shares called for redemption pursuant to paragraph 6 shall terminate
at the close of business on the date fixed for such redemption unless the
Corporation shall default in making payment of the amount payable upon such
redemption. The term "Common Stock" shall mean the Common Stock, par value
$5.00, of the Corporation as the same exists at the date of these Articles
Supplementary or as such stock may be constituted from time to time, except
that for the purpose of subparagraph (v) of this paragraph 3, the term "Common
Stock" shall also mean and include stock of the Corporation of any class,
whether now or hereafter authorized, which shall have the right to participate
in the distribution of either earnings or assets of the Corporation without
limit as to amount or percentage.
The term "Conversion Price" shall mean $72.50, as adjusted in accordance
with the provisions of this paragraph 3.
(ii) In order to exercise the conversion privilege, the holder of
each share of Convertible Preferred Stock to be converted shall surrender the
certificate representing such share at the office of the conversion agent for
the Convertible Preferred Stock in the Borough of Manhattan, The City of New
York, appointed for such purpose by the Corporation, which shall initially be
the transfer agent for the Common Stock, with the Notice of Election to
Convert on the back of said certificate completed and signed. Unless the
shares issuable on conversion are to be issued in the same name as the name in
which such share of Convertible Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or his duly
authorized attorney, and by an amount sufficient to pay any transfer or
similar tax.
The holders of shares of Convertible Preferred Stock at the close of
business on a dividend payment record date shall be entitled to receive the
dividend payable on such shares (except that holders of shares called for
redemption on a redemption date between such record date and the dividend
payment date shall not be entitled to receive such dividend on such dividend
payment date) on the corresponding dividend payment date notwithstanding the
conversion thereof or the Corporation's default in payment of the dividend due
on such dividend payment date. However, shares of Convertible Preferred Stock
surrendered for conversion during the period between the close of business on
any dividend payment record date and the opening of business on the
corresponding dividend payment date (except shares called for redemption on a
redemption date during such period) must be accompanied by payment of an
amount equal to the dividend payable on such shares on such dividend payment
date. A holder of shares of Convertible Preferred Stock on a dividend payment
record date who (or whose transferee) tenders any of such shares for
conversion into shares of Common Stock on a dividend payment date will receive
the dividend payable by the Corporation on such shares of Convertible
Preferred Stock on such date, and the converting holder need not include
payment in the amount of such dividend upon surrender of shares of Convertible
Preferred Stock for conversion. Except as provided above, the Corporation
shall make no payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares or for dividends on the shares of Common Stock
issued upon such conversion.
As promptly as practicable after the surrender of the certificates for
shares of Convertible Preferred Stock as aforesaid, the Corporation shall
issue and shall deliver at the office of the conversion agent to such holder,
or on his written order, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this paragraph 3, and
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CONFORMED COPY 5.14.91
any fractional interest in respect of a share of Common Stock arising upon
such conversion shall be settled as provided in subparagraph (iii) of this
paragraph 3.
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of
Convertible Preferred Stock shall have been surrendered, with the Notice of
Election to Convert on the back of said certificates completed and signed
(and, if applicable, payment of an amount equal to the dividend payable on
such shares shall have been made), to the Corporation as aforesaid, and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed
to have become the holder or holders of record of the shares represented
thereby at such time on such date and such conversion shall be at the
Conversion Price in effect at such time on such date, unless the stock
transfer books of the Corporation shall be closed on such date, in which event
such person or persons shall be deemed to have become such holder or holders
of record at the close of business on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such shares shall have been surrendered
and such notice (and, if applicable, payment) received by the Corporation.
All shares of Common Stock delivered upon conversion of the Convertible
Preferred Stock will upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
(iii) In connection with the conversion of any shares of
Convertible Preferred Stock, no fractional shares or scrip representing
fractions of shares of Common Stock shall be issued upon conversion of the
Convertible Preferred Stock. Instead of any fractional interest in a share of
Common Stock which would otherwise be deliverable upon the conversion of a
share of Convertible Preferred Stock or a fraction thereof, the Corporation
shall pay to the holder of such share of Convertible Preferred Stock or
fraction thereof an amount in cash (computed to the nearest cent, with
one-half cent being rounded upward) equal to the reported last sales price (as
defined in subparagraph (iv)(e) of this paragraph 3) of the Common Stock on
the Trading Day (as defined in subparagraph (iv)(e) of this paragraph 3) next
preceding the day of conversion multiplied by the fraction of a share of
Common Stock represented by such fractional interest. If more than one share
of Convertible Preferred Stock shall be surrendered for conversion at one time
by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate Stated
Value of the shares of Convertible Preferred Stock so surrendered.
(iv) The Conversion Price shall be adjusted from time to time as
follows:
(a) In case the Corporation shall (x) pay a dividend or make a
distribution on the Common Stock in shares of Common Stock, (y)
subdivide the outstanding Common Stock into a greater number of
shares or (z) combine the outstanding Common Stock into a smaller
number of shares, the Conversion Price shall be adjusted so that the
holder of any share of Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number
of shares of Common Stock of the Corporation which he would have
owned or have been entitled to receive after the happening of any of
the events described above had such share of Convertible Preferred
Stock been converted immediately prior to the record date in the
case of a dividend or the effective date in the case of subdivision
or combination. An adjustment made pursuant to this subparagraph
(a) shall become effective immediately after the record date in the
case of a dividend, except as provided in subparagraph (h) below,
and shall become effective immediately after the effective date in
the case of a subdivision or combination.
(b) In case the Corporation shall issue rights or warrants to all
holders of the Common Stock entitling them (for a period expiring
within 45 days after the record date mentioned below) to subscribe
for or purchase shares of Common Stock at a price per share less
than the current market price per share of Common Stock (as defined
for purposes of this subparagraph (b) in subparagraph (e) below), at
the record date for the determination of stockholders entitled to
receive such rights or warrants, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of such rights or
warrants by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at such current market
price, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock
receivable upon exercise of such rights or warrants. Such
adjustment shall be made successively whenever any such rights or
warrants are issued, and shall become effective immediately, except
as provided in subparagraph (h) below, after such record date. In
determining whether any rights or warrants entitle the holders of
the Convertible Preferred Stock to subscribe for or purchase shares
of Common Stock at less than such current market price, and in
determining the aggregate offering price of such shares of Common
Stock, there shall be taken into account any consideration received
by the Corporation for such rights or warrants plus the exercise
price thereof, the value of such consideration or exercise price,
as the case may be, if other than cash, to be determined by the
Board.
(c) In case the Corporation shall distribute to all holders of
Common Stock any shares of capital stock of the Corporation (other
than Common Stock) or evidences of its indebtedness or assets
(excluding cash dividends or distributions paid from retained
earnings of the Corporation) or rights or warrants to subscribe for
or purchase any of its securities (excluding those rights or
warrants referred to in subparagraph (b) above) (any of the
foregoing being hereinafter in this subparagraph (c) called the
"Securities"), then, in each such case, unless the Corporation
elects to reserve such Securities for distribution to the holders of
the Convertible Preferred Stock upon the conversion of the shares of
Convertible Preferred Stock so that any such holder converting
shares of Convertible Preferred Stock will receive upon such
conversion, in addition to the shares of the Common Stock to which
such holder is entitled, the amount and kind of such Securities
which such holder would have received if such holder had,
immediately prior to the record date for the distribution of the
Securities, converted its shares of Convertible Preferred Stock into
Common Stock, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of such distribution
by a fraction the numerator of which shall be the current market
price per share (as defined for purposes of this subparagraph (c) in
subparagraph (e) below) of the Common Stock on the record date
mentioned above less the then fair market value (as determined by
the Board, whose determination shall, if made in good faith, be
conclusive) of the portion of the Securities so distributed
applicable to one share of Common Stock, and the denominator of
which shall be the current market price per share (as defined in
subparagraph (e) below) of the Common Stock; provided, however, that
in the event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share of
Common Stock is equal to or greater than the current market price
per share (as defined in subparagraph (e) below) of the Common Stock
on the record date mentioned above, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of
shares of Convertible Preferred Stock shall have the right to
receive the amount and kind of Securities such holder would have
received had he converted each such share of Convertible Preferred
Stock immediately prior to the record date for the distribution of
the Securities. Such adjustment shall become effective immediately,
except as provided in subparagraph (h) below, after the record date
for the determination of stockholders entitled to receive such
distribution.
(d) If, pursuant to subparagraph (b) or (c) above, the number of
shares of Common Stock into which a share of Convertible Preferred
Stock is convertible shall have been adjusted because the
Corporation has declared a dividend, or made a distribution, on the
outstanding shares of Common Stock in the form of any right or
warrant to purchase securities of the Corporation, or the
Corporation has issued any such right or warrant, then, upon the
expiration of any such unexercised right or unexercised warrant, the
Conversion Price shall forthwith be adjusted to equal the Conversion
Price that would have applied had such right or warrant never been
declared, distributed or issued.
(e) For the purpose of any computation under subparagraph (b)
above, the current market price per share of Common Stock on any
date shall be deemed to be the average of the reported last sales
prices for the thirty consecutive Trading Days (as defined below)
commencing forty-five Trading Days before the date in question. For
the purpose of any computation under subparagraph (c) above, the
current market price per share of Common Stock on any date shall be
deemed to be the average of the reported last sales prices for the
ten consecutive
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Trading Days before the date in question. The
reported last sales price for each day (whether for purposes of
subparagraph (b) or subparagraph (c)) shall be the reported last
sales price, regular way, or, in case no sale takes place on such
day, the average of the reported closing bid and asked prices,
regular way, in either case as reported on the New York Stock
Exchange Composite Tape or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the National Market System of the
National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or, if the Common Stock is not quoted
on such National Market System, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported
by NASDAQ or, if bid and asked prices for the Common Stock on each
such day shall not have been reported through NASDAQ, the average of
the bid and asked prices for such day as furnished by any New York
Stock Exchange member firm regularly making a market in the Common
Stock selected for such purpose by the Board or a committee thereof
or, if no such quotations are available, the fair market value of
the Common Stock as determined by a New York Stock Exchange member
firm regularly making a market in the Common Stock selected for such
purpose by the Board or a committee thereof. As used herein, the
term "Trading Day" with respect to Common Stock means (x) if the
Common Stock is listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which the
New York Stock Exchange or such other national securities exchange
is open for business or (y) if the Common Stock is quoted on the
National Market System of the NASDAQ, a day on which trades may be
made on such National Market System or (z) otherwise, any day other
than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law or
executive order to close.
(f) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1%
in such price; provided, however, that any adjustments which by
reason of this subsection (f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment;
and provided further that adjustment shall be required and made in
accordance with the provisions of this paragraph 3 (other than this
subparagraph (f)) not later than such time as may be required in
order to preserve the tax free nature of a distribution to the
holders of Common Stock. All calculations under this paragraph 3
shall be made to the nearest cent or to the nearest 1/100 of a
share, as the case may be, with one-half cent and 1/200 of a share,
respectively, being rounded upward. Anything in this subparagraph
(iv) to the contrary notwithstanding, the Corporation shall be
entitled to make such reductions in the Conversion Price, in
addition to those required by this subparagraph (iv), as it in its
discretion shall determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights or warrants
to purchase stock or securities, or distribution of other assets
(other than cash dividends) hereafter made by the Corporation to its
stockholders shall not be taxable.
(g) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with any conversion agent an
officers' certificate, signed by the Chairman, the President, any
Vice-Chairman or any Executive Vice President, and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Corporation, setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment, which certificate shall be conclusive
evidence of the correctness of such adjustment. Promptly after
delivery of such certificate, the Corporation shall prepare a notice
of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which such adjustment
becomes effective and shall mail such notice of such adjustment of
the Conversion Price to the holder of each share of Convertible
Preferred Stock at his last address as shown on the stock books of
the Corporation.
(h) In any case in which this subparagraph (iv) provides that an
adjustment shall become effective immediately after a record date
for an event, the Corporation may defer until the occurrence of such
event (y) issuing to the holder of any share of Convertible
Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (z) paying to
such holder any amount in cash in lieu of any fractional share of
Common Stock pursuant to subparagraph (iii) of this paragraph 3.
(v) If:
(a) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than in cash out of
retained earnings); or
(b) the Corporation shall authorize the granting to the holders of
Common Stock of rights or warrants to subscribe for or purchase any
shares of any class of capital stock of the Corporation or any other
rights or warrants; or
(c) there shall be any reclassification or change of the Common
Stock (other than a subdivision or combination of the outstanding
Common Stock and other than a change in the par value, or from par
value to no par value, or from no par value to par value), or any
consolidation, merger, or statutory share exchange to which the
Corporation is a party and for which approval of any stockholders of
the Corporation is required or any sale or transfer of all or
substantially all the assets of the Corporation as an entirety; or
(d) there shall be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with the conversion agent, and
shall cause to be mailed to the holders of shares of the Convertible Preferred
Stock at their addresses as shown on the stock transfer records of the
Corporation, at least 15 days prior to the applicable date hereinafter
specified, a notice stating (y) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights or
warrants are to be determined or (z) the date on which such reclassification,
change, consolidation, merger, statutory share exchange, sale, transfer,
liquidation, dissolution or winding up is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation, dissolution or winding
up. Failure to give such notice or any defect therein shall not affect the
legality or validity of the proceedings described in subparagraph (viii) of
this paragraph 3 or in subparagraph (v)(a), (v)(b), (v)(c) or (v)(d) of this
paragraph 3.
(vi) The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, for the purpose of effecting
conversions of the Convertible Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of all outstanding shares of
Convertible Preferred Stock not theretofore converted. For purposes of this
subparagraph (vi), the number of shares of Common Stock which shall be
deliverable upon the conversion of all outstanding shares of Convertible
Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.
Before taking any action which would cause any adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common
Stock deliverable upon conversion of the Convertible Preferred Stock, the
Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted
Conversion Price.
The Corporation will endeavor to list the shares of Common Stock required
to be delivered upon conversion of the Convertible Preferred Stock prior to
such delivery upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the Convertible Preferred Stock, the
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Corporation will endeavor to comply with all Federal and State laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(vii) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversions of the Convertible Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock in a name other than that of the
holder of the Convertible Preferred Stock to be converted and no such issue or
delivery shall be made unless and until
the person requesting such issue or delivery has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(viii) Notwithstanding any other provision herein to the contrary,
if any of the following events occur, namely (x) any reclassification or
change of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision of combination of the Common Stock), (y) any
consolidation, merger or combination of the Corporation with or into another
corporation as a result of which holders of Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock or (z) any sale or conveyance
of the properties and assets of the Corporation as, or substantially as, an
entirety to any other entity as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then
appropriate provision shall be made so that the holder of each share of
Convertible Preferred Stock then outstanding shall have the right to convert
such share into the kind and amount of the shares of stock and other
securities or property or assets (including cash) that would have been
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of the number of shares of Common
Stock issuable upon conversion of such share of Convertible Preferred Stock
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance. The adjustments described in this
subparagraph (viii) shall be subject to further adjustments as appropriate
that shall be as nearly equivalent as may be practicable to the relevant
adjustments provided for in this paragraph 3. If, in the case of any such
consolidation, merger, combination, sale or conveyance, the stock or other
securities and property receivable thereupon by a holder of shares of Common
Stock includes shares of stock, securities or other property or assets
(including cash) of an entity other than the successor or acquiring entity, as
the case may be, in such consolidation, merger, combination, sale or
conveyance, then the Corporation shall enter into an agreement with such other
entity for the benefit of the holders of Convertible Preferred Stock that
shall contain such provisions to protect the interests of such holders as the
Board shall reasonably consider necessary by reason of the foregoing.
(ix) Upon any conversion or redemption of shares of Convertible
Preferred Stock, the shares of Convertible Preferred Stock so converted or
redeemed shall have the status of authorized and unissued shares of Preferred
Stock, and the number of shares of Preferred Stock which the Corporation shall
have authority to issue shall not be decreased by the conversion or redemption
of shares of Convertible Preferred Stock.
4. Voting Rights. (i) Holders of the Convertible Preferred Stock shall
have no voting rights, either general or special, except as expressly required
by applicable law, the Charter and as specified in this paragraph 4.
(ii) Whenever, at any time or times, dividends payable on the
shares of Convertible Preferred Stock shall be in arrears for six consecutive
calendar quarters, then at the next annual meeting of stockholders and at any
annual meeting thereafter and at any meeting called for the election of
Directors, until all dividends accumulated on the Convertible Preferred Stock
have been paid or declared and a sum sufficient for payment has been set
aside, the holders of the Convertible Preferred Stock, either alone or
together with the holders of one or more other cumulative series of the
Preferred Stock at the time outstanding which are granted such voting rights,
voting as a class, shall be entitled, to the exclusion of the holders of one
or more other series or classes of stock having general voting rights, to vote
for and elect two additional members of the Board of Directors of the
Corporation, and the holders of Common Stock together with the holders of any
series or class or classes of stock of the Corporation having general voting
rights and not then entitled to elect two members of the Board of Directors
pursuant to this paragraph 4 to the exclusion of the holders of all series
then so entitled, shall be entitled to vote and elect the balance of the Board
of Directors. In such case the Board of Directors of the Corporation shall,
as of the date of the annual meeting of stockholders or at any meeting called
for the election of Directors aforesaid, be increased by two Directors. The
rights of the holders of the Convertible Preferred Stock to participate
(either alone or together with the holders of one or more other cumulative
series of Preferred Stock at the time outstanding which are granted such
voting rights) in the exclusive election of two members of the Board of
Directors of the Corporation pursuant to this paragraph 4 shall continue in
effect until cumulative dividends have been paid in full or declared and a
sum sufficient has been set apart for payment on the Convertible Preferred
Stock. At elections for such Directors, each holder of Convertible Preferred
Stock shall be entitled to one vote for each share of Convertible Preferred
Stock held of record on the record date established for the meeting. The
holders of Convertible Preferred Stock shall have no right to cumulate such
shares in voting for the election of Directors. At the annual meeting of
stockholders next following the termination (by reason of the payment of all
accumulated and defaulted dividends on such stock or provision for the payment
thereof by declaration and setting apart thereof) of the exclusive voting
power pursuant to this paragraph 4 of the holders of Convertible Preferred
Stock and the holders of all other cumulative series which shall have been
entitled to vote for and elect such two members of the Board of Directors of
the Corporation, the terms of office of all persons who may have been elected
Directors of the Corporation by vote of such holders shall terminate and the
two vacancies created pursuant to this paragraph 4 to accommodate the
exclusive right of election conferred hereunder shall thereupon be eliminated
and the Board of Directors shall be decreased by two Directors.
(iii) So long as any shares of Convertible Preferred Stock remain
outstanding, the affirmative vote of the holders of at least two-thirds of the
shares of Convertible Preferred Stock outstanding at the time given in person
or by proxy, at any special or annual meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the following:
(a) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class of series of stock
(including any class or series of Preferred Stock) ranking prior (as
that term is defined in paragraph 5) to the Convertible Preferred
Stock, or
(b) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks on a
parity with the Convertible Preferred Stock unless the Articles
Supplementary or other provisions of the Charter creating or
authorizing such class or series shall provide that if in any case
the stated dividends or amounts payable on liquidation, dissolution
or winding up of the Corporation are not paid in full on the
Convertible Preferred Stock and all outstanding shares of stock
ranking on a parity (as that term is defined in paragraph 5) with
the Convertible Preferred Stock (the Convertible Preferred Stock and
all such other stock being herein called "Parity Stock"), the shares
of all Parity Stock shall share ratably (x) in the payment of
dividends, including accumulations (if any) in accordance with the
sums which would be payable on all Parity Stock if all dividends in
respect of all shares of Parity Stock were paid in full and (y) on
any distribution of assets upon liquidation, dissolution or winding
up of the Corporation in accordance with the sums which would be
payable in respect of all shares of Parity Stock if all sums payable
were discharged in full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Charter
of the Corporation, including these Articles Supplementary, which
would materially and adversely affect any right, preference,
privilege or voting power of the Convertible Preferred Stock or of
the holders thereof; provided, however, that any increase in the
amount of authorized Preferred Stock or the Corporation's Cumulative
Floating Rate Series B Preferred Stock, the Series A and Series B
Dutch Auction Rate Transferable Securities Preferred Stock, the
Money Market Cumulative Preferred Stock, the Remarketed Preferred
Stock or the Convertible Preferred Stock or any other capital stock
of the Corporation, or the creation and issuance of other series of
Preferred Stock including convertible Preferred Stock or any other
capital stock of the Corporation, in each case ranking on a parity
with or junior to the Convertible Preferred Stock with respect to
the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, shall not
be deemed to affect materially and adversely such rights,
preferences, privileges or voting powers.
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(iv) So long as any shares of Convertible Preferred Stock remain
outstanding and notwithstanding any provision of the Charter of the
Corporation requiring a greater percentage, the Corporation shall not, without
the affirmative vote of the holders of at least a majority of the votes of all
Parity Stock entitled to vote outstanding at the time, given in person or by
proxy, by resolution duly adopted at a meeting at which a quorum was present
and acting and at which the holders of Convertible Preferred Stock (alone or
together with the holders of one or more other series of Parity Stock at the
time outstanding and entitled to vote) vote separately as a class, (a)
directly or indirectly, sell, transfer or otherwise dispose of, or permit
Republic National Bank of New York (the "Bank") or any other subsidiary of the
Corporation, to issue, sell, transfer or otherwise dispose of any shares of
voting stock of the Bank, or securities convertible into or options, warrants
or rights to acquire voting stock of the Bank, unless after giving effect to
any such transaction the Bank remains a Controlled Subsidiary (as hereinafter
defined) of the Corporation or of a Qualified Successor Company (as
hereinafter defined); (b) merge or consolidate with, or convey substantially
all of its assets to any person or corporation unless the entity surviving
such merger or consolidation or the transferee of such assets is the
Corporation or a Qualified Successor Company; or (c) permit the Bank to merge,
consolidate with, or convey substantially all of its assets to any person or
corporation unless the entity surviving such merger or consolidation or the
transferee of such assets is a Controlled Subsidiary of the Corporation or of
a Qualified Successor Company, except in any of the foregoing cases as
required to comply with applicable law, including, without limitation, any
court or regulatory order. The term "Qualified Successor Company" shall mean
a corporation (or other similar organization or entity whether organized under
or pursuant to the laws of the United States or any state thereof or of
another jurisdiction) which (a) is or is required to be a registered bank
holding company under the United States Bank Holding Company Act of 1956, as
amended, or any successor legislation, (b) issues to the holders of the
Convertible Preferred Stock in exchange for the Convertible Preferred Stock
shares of preferred stock having at least the same relative rights and
preferences as the Convertible Preferred Stock (the "Exchanged Stock"), (c)
immediately after such transaction has not outstanding or authorized any class
of stock or equity securities ranking prior to the Exchanged Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, and (d) holds, as a
Controlled Subsidiary or Subsidiaries, either the Bank or one or more other
banking corporations which, collectively, immediately after such transaction
hold substantially all of the assets and liabilities which the Bank held
immediately prior to such transaction (which may be in addition to other
assets and liabilities acquired in such transaction). "Controlled Subsidiary"
shall mean any corporation at least 80% of the outstanding shares of voting
stock of which shall at the time be owned directly or indirectly by the
Corporation or a Qualified Successor Company. In connection with the exercise
of the voting rights contained in this paragraph 4(iv), holders of all series
of Parity Stock which are granted such voting rights shall vote as a class,
and each holder of Convertible Preferred Stock shall have one vote for each
share of stock held, and each other series shall have such number of votes, if
any, for each share of stock held as may be granted them.
The foregoing voting provisions shall not apply as to any shares of
Convertible Preferred Stock if, at or prior to the time when the act with
respect to which such vote would otherwise be required shall be effected, all
outstanding shares of Convertible Preferred Stock shall have been redeemed or
sufficient funds shall have been deposited in trust in accordance with
paragraph 6 to effect such redemption.
5. Rank. For the purposes of these Articles Supplementary, any class or
classes of stock of the Corporation shall be deemed to rank:
(a) prior to the Convertible Preferred Stock as to dividends or as
to distribution of assets upon liquidation, dissolution or winding
up of the Corporation if the holders of such class shall be entitled
to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of the Convertible Preferred
Stock;
(b) on a parity with the Convertible Preferred Stock as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation
preference per share thereof be different from those of the
Convertible Preferred Stock, if the holders of such class of stock
and the Convertible Preferred Stock shall be entitled to the receipt
of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to
their respective dividend rates or liquidation preference, without
preference or priority one over the other; and
(c) junior to shares of the Convertible Preferred Stock, either as
to dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, or both, if such class
shall be Common Stock or if the holders of the Convertible Preferred
Stock shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of stock of such class or classes.
The Convertible Preferred Stock shall rank prior, as to dividends and
upon liquidation, dissolution or winding up, to the Common Stock and on a
parity with the Corporation's Cumulative Floating Rate Series B Preferred
Stock, the Series A and Series B Dutch Auction Rate Transferable Securities
Preferred Stock, the Money Market Cumulative Preferred Stock and the
Remarketed Preferred Stock.
6. Optional Redemption. The shares of the Convertible Preferred Stock
may be redeemed at the option of the Corporation, as a whole, or from time to
time in part, at any time, upon not less than 30 nor more than 60 days' prior
notice mailed to the holders of the shares to be redeemed at their addresses
as shown on the stock books of the Corporation; provided, however, that shares
of the Convertible Preferred Stock shall not be redeemable prior to May 15,
1995. Subject to the foregoing, shares of the Convertible Preferred Stock are
redeemable at the following redemption prices per share if redeemed during the
12-month period beginning May 15, in the year indicated:
<TABLE>
<CAPTION>
Year Price Year Price
<C> <C> <C> <C>
1995 $52.0250 1998 $51.0125
1996 51.6875 1999 50.6750
1997 51.3500 2000 50.3375
</TABLE>
and $50 if redeemed on or after May 15, 2001, in each case together with an
amount equal to all dividends (whether or not earned or declared) accrued and
accumulated and unpaid to, but excluding, the date fixed for redemption.
If full cumulative dividends on the Convertible Preferred Stock have not
been paid, the Convertible Preferred Stock may not be redeemed in part and the
Corporation may not purchase or acquire any shares of the Convertible
Preferred Stock otherwise than pursuant to a purchase or exchange offer made
on the same terms to all holders of the Convertible Preferred Stock. If fewer
than all the outstanding shares of Convertible Preferred Stock are to be
redeemed, the Corporation will select those to be redeemed by lot or a
substantially equivalent method.
If a notice of redemption has been given pursuant to this paragraph 6 and
if, on or before the date fixed for redemption, the funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart
from its other funds, in trust for the pro rata benefit of the holders of the
shares of Convertible Preferred Stock so called for redemption, then,
notwithstanding that any certificates for such shares have not been
surrendered for cancellation, on the redemption date dividends shall cease to
accrue on the shares to be redeemed, and at the close of business on the
redemption date the holders of such shares shall cease to be stockholders with
respect to such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be outstanding.
Notwithstanding the foregoing, if notice of redemption has been given pursuant
to this paragraph 6 and any holder of shares of Convertible Preferred Stock
shall, prior to the close of business on the redemption date, give written
notice to the Corporation pursuant to paragraph 3 of the conversion of any or
all of the shares to be redeemed held by such holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Corporation), then the conversion of such shares to be redeemed shall become
effective as provided in paragraph 3. Subject to applicable escheat laws, any
moneys so set aside by the Corporation and unclaimed at the end of ninety days
from the redemption date shall revert to the general funds of the Corporation,
after which reversion the holders of such shares so called for redemption
shall look only to the general funds of the Corporation for the payment of the
amounts payable upon such redemption. Any interest accrued on funds so
deposited shall be paid to the Corporation from time to time. Any funds which
have been deposited by the Corporation, or on its behalf, with a paying agent
or segregated and held in trust by the Corporation
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for the redemption of shares converted into Common Stock on or prior to the
date fixed for such redemption shall (subject to any right of the holder of
such shares to receive the dividend payable thereon as provided in paragraph
3) immediately upon such conversion be returned to the Corporation or, if then
held in trust by the Corporation, shall be discharged from such trust.
7. Liquidation. (i) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the
Convertible Preferred Stock shall be entitled, whether from capital or
surplus, before any assets of the Corporation shall be distributed among or
paid over to holders of Common Stock or any other class or series of stock of
the Corporation junior to the Convertible Preferred Stock as to liquidation
preference, to be paid the amount of $50 per share (the "liquidation
preference") of the Convertible Preferred Stock, plus an amount equal to all
accrued and unpaid dividends thereon (whether or not earned or declared) to
and including the date of final distribution. The holders of the Convertible
Preferred Stock will not be entitled to receive the liquidation preference
until the liquidation preference of any other class of stock of the
Corporation ranking senior to the Convertible Preferred Stock as to rights
upon liquidation, dissolution or winding up shall have been paid (or a sum set
aside therefor sufficient to provide for payment) in full. After any such
liquidation preference payment, the holders of the Convertible Preferred Stock
shall not be entitled to any further participation in any distribution of
assets of the Corporation.
(ii) If upon any such liquidation, dissolution or winding up of the
Corporation the assets of the Corporation shall be insufficient to make such
full payments to the holders of the Convertible Preferred Stock and the
holders of any Preferred Stock ranking as to liquidation, dissolution or
winding up on a parity with the Convertible Preferred Stock, then such assets
shall be distributed among the holders of the Convertible Preferred Stock
ratably in accordance with the respective amounts which would be payable on
such shares of Convertible Preferred Stock or any other such Preferred Stock
if all amounts thereon were paid in full.
(iii) Neither the sale, lease or exchange (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property and assets of the Corporation nor the merger or consolidation of any
other corporation into or with the Corporation nor a reorganization of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation.
8. Parity Stock. So long as any shares of Convertible Preferred Stock
shall remain outstanding, in case the stated dividends or amounts payable on
liquidation, dissolution or winding up of the Corporation are not paid in full
with respect to all outstanding shares of Parity Stock, all such shares shall
share ratably (x) in the payment of dividends, including accumulations (if
any) in accordance with the sums which would be payable in respect of all
outstanding shares of Parity Stock if all dividends were paid in full and (y)
in any distribution of assets upon liquidation, dissolution or winding up of
the Corporation, in accordance with the sums which would be payable in respect
of all outstanding Parity Stock if all sums payable were discharged in full.
9. Certain Definitions. (i) The term "outstanding", when used in
reference to shares of stock, shall mean issued shares, excluding shares
reacquired by the Corporation.
(ii) The amount of dividends "accrued" on any share of
Convertible Preferred Stock as at any quarterly dividend payment date shall be
deemed to be the amount of any unpaid dividends accumulated thereon to and
including the end of the day preceding such quarterly dividend payment date,
whether or not earned or declared; and the amount of dividends "accrued" on
any share of Convertible Preferred Stock as at any date other than a quarterly
dividend payment date shall be calculated as the amount of any unpaid
dividends accumulated thereon to and including the end of the day preceding
the last preceding quarterly dividend payment date, whether or not earned or
declared, plus an amount equivalent to dividends on the liquidation preference
of such share at the annual dividend rate fixed for such share for the period
after the end of the day preceding such last preceding quarterly dividend
payment date to and including the date as of which the calculation is made,
calculated in accordance with the provisions of paragraph 2.
10. Exclusion of Other Rights. Unless otherwise required by law, shares
of the Convertible Preferred Stock shall not have any rights, including
preemptive rights, or preferences other than those specifically set forth
herein, in the Charter or as provided by applicable law.
11. Notice. All notices or communications unless otherwise specified in
the Bylaws of the Corporation or these Articles Supplementary shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the
earlier of the date received or the date such notice is mailed.
12. Interpretation or Adjustment By Board of Directors. The Board of
Directors of the Corporation may, consistent with Maryland law, interpret or
adjust the provisions of these Articles Supplementary to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change
or modification which does not adversely affect the rights of beneficial
owners of the Convertible Preferred Stock and if such inconsistency or
ambiguity reflects any typographical error, error in transcription or other
error the Board of Directors may authorize the filing of a Certificate of
Correction.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its President and its corporate
seal to be hereunto affixed and attested by its Secretary, and the said
officers of the Corporation further acknowledge said instrument to be the
corporate act of the Corporation and state under the penalties of perjury that
to the best of their knowledge, information and belief the matters and facts
therein set forth with respect to approval are true in all material respects,
all on May 14, 1991.
REPUBLIC NEW YORK CORPORATION
By: /s/ Dov C. Schlein
(Vice Chairman)
Attest:
/s/ William F. Rosenblum, Jr.
(Secretary)
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REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out the
first paragraph of Article FIFTH of the Articles of Incorporation and
inserting in lieu thereof the following:
"FIFTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is ONE HUNDRED SIXTY
FIVE million (165,000,000) shares, of which FIFTEEN million (15,000,000)
shares shall be shares of Preferred Stock without par value (hereinafter
called "Preferred Stock"), and ONE HUNDRED FIFTY million (150,000,000)
shares shall be shares of Common Stock of the par value of FIVE DOLLARS
($5.00) per share (hereinafter called "Common Stock") having an aggregate
par value of SEVEN HUNDRED FIFTY million dollars ($750,000,000)."
SECOND: The Board of Directors of the Corporation, at a meeting held on
July 17, 1991, duly adopted a resolution in which was set forth the foregoing
amendment to the charter, declaring that said amendment of the charter as
proposed was advisable and directing that it be submitted for action thereon
by the Stockholders of the Corporation at a Special Meeting thereof to be held
on September 4, 1991.
THIRD: Notice, setting forth the said amendment of the charter and stating
that the purpose of the Special Meeting of the Stockholders, called thereby,
would be to take action thereon, was duly given pursuant to Section 2-504 of
the Corporation and Associations Article of the Annotated Code of Maryland to
all Stockholders entitled to vote thereon. The amendment of the charter of
the Corporation as hereinabove set forth was approved by the Stockholders of
the Corporation at a Special Meeting held on September 4, 1991, by affirmative
vote of a majority of all the votes entitled to be cast thereon as permitted
by the charter of the Corporation.
FOURTH: (a) As of immediately before this amendment, the total shares of
all classes of stock which the Corporation was authorized to issue is
Sixty-Five Million (65,000,000) shares, divided into Fifteen Million
(15,000,000) shares of Preferred Stock without par value and Fifty Million
(50,000,000) shares of Common Stock with the par value of Five Dollars ($5.00)
per share having an aggregate par value of Two Hundred Fifty Million Dollars
($250,000,000).
(b) As amended, the total number of shares of all classes of stock
which the Corporation has authority to issue is One Hundred Sixty-Five Million
(165,000,000) shares, divided into Fifteen Million (15,000,000) shares of
Preferred Stock without par value and One Hundred Fifty Million (150,000,000)
shares of Common Stock of the par value of Five Dollars ($5.00) per share
having an aggregate par value of Seven Hundred Fifty Million Dollars
($750,000,000).
(c) A description of each class of stock of the Corporation with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualification and terms and conditions of
redemption, of each class of the authorized capital stock as increased, is set
forth in the charter of the Corporation, and such description has not been
changed by the amendment of the charter of the Corporation herein set forth.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these present to
be signed in its name and on its behalf by a Senior Vice President and
witnessed by an Assistant Secretary on September 4, 1991.
REPUBLIC NEW YORK CORPORATION
By: /s/ William F. Rosenblum, Jr.
(Senior Vice President)
Witnessed:
/s/ Steven J. Wright
(Assistant Secretary)
THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who
executed on behalf of said Corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate
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act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ William F. Rosenblum, Jr.
(Senior Vice President)
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CONFORMED COPY 2.26.92
REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has authorized the classification of 4,000,000 of the 15,000,000
shares of Preferred Stock (the "Preferred Stock") which the Corporation now
has authority to issue into a series designated $1.9375 Cumulative Preferred
Stock and has provided for the issuance of such series.
SECOND: The number of shares and terms of the $1.9375 Cumulative Preferred
Stock as set by the Finance Committee of the Board of Directors pursuant to
authority duly delegated by the Board of Directors are as follows:
1. $1.9375 Cumulative Preferred Stock. 4,000,000 shares of Preferred
Stock of the Corporation, without par value, are hereby constituted as the
original number of shares of a series of Preferred Stock designated as $1.9375
Cumulative Preferred Stock (hereinafter sometimes called the "Cumulative
Preferred Stock"). The Cumulative Preferred Stock is issuable in whole shares
only. The Cumulative Preferred Stock shall be of a stated value of $25 per
share (the "Stated Value"). The term "Charter" when used herein shall include
all articles or certificates filed pursuant to law with respect to any series
of the Preferred Stock.
2. Dividends. The holders of the Cumulative Preferred Stock shall be
entitled to receive, but only when and as declared by the Board of Directors
out of funds legally available for the purpose, cash dividends at the rate of
$1.9375 per share per annum, and no more, payable quarterly on the first day
of January, April, July and October of each year, with the first such dividend
being payable July 1, 1992 (each a "dividend payment date"). Such dividends
shall be payable from, and shall be cumulative from, the date of original
issue of each share. Dividends will be payable, in arrears, to holders of
record as they appear on the stock transfer records of the Corporation on
such record dates, not more than 60 days nor less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors. The
amount of dividends payable per share for each full dividend period shall be
computed by dividing by four the $1.9375 annual rate. The amount of dividends
payable for the initial dividend period or any period shorter than a full
dividend period shall be calculated on the basis of a 360-day year of twelve
30-day months. If in any quarterly dividend period (being the period between
such dividend payment dates or, in the case of the first such period, from the
date of original issue to July 1, 1992) dividends at the rate of $1.9375 per
share per annum shall not have been paid or declared and set apart for payment
on all outstanding shares of Cumulative Preferred Stock for such quarterly
dividend period and all preceding quarterly dividend periods from and after
the first day from which dividends are cumulative, then the aggregate
deficiency shall be declared and fully paid or set apart for payment, but
without interest, before (i) any dividends or other distributions (excluding
dividends paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock of the Corporation or shares of any other
capital stock of the Corporation ranking junior to the Cumulative Preferred
Stock with respect to the payment of dividends and distribution of assets upon
liquidation, dissolution or winding up of the Corporation) shall be declared
and paid or set apart for payment on the Common Stock or on any other capital
stock of the Corporation ranking junior to the Cumulative Preferred Stock with
respect to the payment of dividends, or (ii) the Corporation shall purchase,
redeem or otherwise acquire any shares of Preferred Stock or any shares of
capital stock of the Corporation ranking on a parity with or junior to the
Cumulative Preferred Stock with respect to the payment of dividends, except by
conversion into or exchange for capital stock of the Corporation ranking
junior to the Cumulative Preferred Stock with respect to the payment of
dividends and distribution of assets upon liquidation, dissolution or winding
up of the Corporation; provided, however, that any moneys set aside in trust
as a sinking fund payment for any series of Preferred Stock pursuant to the
resolutions providing for the issue of shares of such series may thereafter be
applied to the purchase or redemption of Preferred Stock of such series
whether or not at the time of such application full cumulative dividends upon
the outstanding Cumulative Preferred Stock shall have been paid or declared
and set apart for payment.
3. Voting Rights. (i) Holders of the Cumulative Preferred Stock shall
have no voting rights, either general or special, except as expressly required
by applicable law, the Charter and as specified in this paragraph 3.
(ii) Whenever, at any time or times, dividends payable on the
shares of Cumulative Preferred Stock shall be in arrears for six consecutive
calendar quarters, then at the next annual meeting of stockholders and at any
annual meeting thereafter and at any meeting called for the election of
Directors, until all dividends accumulated on the Cumulative Preferred Stock
have been paid or declared and a sum sufficient for payment has been set
aside, the holders of the Cumulative Preferred Stock, either alone or together
with the holders of one or more other cumulative series of Preferred Stock at
the time outstanding which are granted such voting rights, voting as a class,
shall be entitled, to the exclusion of the holders of one or more other series
or classes of stock having general voting rights, to vote for and elect two
additional members of the Board of Directors of the Corporation, and the
holders of Common Stock together with the holders of any series or class or
classes of stock of the Corporation having general voting rights and not then
entitled to elect two members of the Board of Directors pursuant to this
paragraph 3 to the exclusion of the holders of all series then so entitled,
shall be entitled to vote and elect the balance of the Board of Directors. In
such case the Board of Directors of the Corporation shall, as of the date of
the annual meeting of stockholders or at any meeting called for the election
of Directors aforesaid, be increased by two Directors. The rights of the
holders of the Cumulative Preferred Stock to participate (either alone or
together with the holders of one or more other cumulative series of Preferred
Stock at the time outstanding which are granted such voting rights) in the
exclusive election of two members of the Board of Directors of the Corporation
pursuant to this paragraph 3 shall continue in effect until cumulative
dividends have been paid in full or declared and a sum sufficient has been set
apart for payment on the Cumulative Preferred Stock. At elections for such
Directors, each holder of Cumulative Preferred Stock shall be entitled to
one-half vote for each share of Cumulative Preferred Stock held of record on
the record date established for the meeting. The holders of Cumulative
Preferred Stock shall have no right to cumulate such shares in voting for the
election of Directors. At the annual meeting of stockholders next following
the termination (by reason of the payment of all accumulated and defaulted
dividends on such stock or provision for the payment thereof by declaration
and setting apart thereof) of the exclusive voting power pursuant to this
paragraph 3 of the holders of Cumulative Preferred Stock and the holders of
all other cumulative series which shall have been entitled to vote for and
elect such two members of the Board of Directors of the Corporation, the terms
of office of all persons who may have been elected Directors of the
Corporation by vote of such holders shall terminate and the two vacancies
created pursuant to this paragraph 3 to accommodate the exclusive right of
election conferred hereunder shall thereupon be eliminated and the Board of
Directors shall be decreased by two Directors.
(iii) So long as any shares of Cumulative Preferred Stock remain
outstanding, the affirmative vote of the holders of at least two-thirds of the
shares of Cumulative Preferred Stock outstanding at the time given in person
or by proxy, at any special or annual meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the following:
(a) The authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as
set forth in paragraph 4(a)) to the Cumulative Preferred Stock, or
(b) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks on a
parity (as set forth in paragraph 4(b)) with the Cumulative
Preferred Stock unless the Articles Supplementary or other
provisions of the Charter creating or authorizing such class or
series shall provide that if in any case the stated dividends or
amounts payable on liquidation, dissolution or winding up of the
Corporation are not paid in full on the Cumulative Preferred Stock
and all outstanding shares of stock ranking on a parity with the
Cumulative Preferred Stock (the Cumulative Preferred Stock and all
such other stock being herein called "Parity Stock"), the shares of
all Parity Stock shall share ratably (x) in the payment of dividends,
including accumulations (if any)in accordance with the sums which
would be payable on all Parity Stock if all dividends in respect
of all shares of Parity Stock were paid in full and (y) on any
distribution
of assets upon liquidation, dissolution or winding up of the
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CONFORMED COPY 2.26.92
Corporation in accordance with the sums which would be payable in
respect of all shares of Parity Stock if all sums payable were
discharged in full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Charter of
the Corporation, including these Articles Supplementary, which would
materially and adversely affect any right, preference, privilege or
voting power of the Cumulative Preferred Stock or of the holders
thereof; provided, however, that any increase in the amount of
authorized Preferred Stock or the Corporation's Cumulative Floating
Rate Series B Preferred Stock, the Series A and Series B Dutch Auction
Rate Transferable Securities Preferred Stock, the Money Market
Cumulative Preferred Stock, the Remarketed Preferred Stock, the $3.375
Cumulative Convertible Preferred Stock or the Cumulative Preferred
Stock or any other capital stock of the Corporation, or the creation
and issuance of other series of Preferred Stock including convertible
Preferred Stock or any other capital stock of the Corporation, in
each case ranking on a parity with or junior to the Cumulative
Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up of
the Corporation, shall not be deemed to affect materially and
adversely such rights, preferences, privileges or voting powers.
(iv) So long as any shares of Cumulative Preferred Stock remain
outstanding and not withstanding any provision of the Charter of the
Corporation requiring a greater percentage, the Corporation shall not, without
the affirmative vote of the holders of at least a majority of the votes of all
Parity Stock entitled to vote outstanding at the time, given in person or by
proxy, by resolution duly adopted at a meeting at which a quorum was present
and acting and at which the holders of Cumulative Preferred Stock (alone or
together with the holders of one or more other series of Parity Stock at the
time outstanding and entitled to vote) vote separately as a class, (a)
directly or indirectly, sell, transfer or otherwise dispose of, or permit
Republic National Bank of New York (the "Bank") or any other subsidiary of the
Corporation, to issue, sell, transfer or otherwise dispose of any shares of
voting stock of the Bank, or securities convertible into or options, warrants
or rights to acquire voting stock of the Bank, unless after giving effect to
any such transaction the Bank remains a Controlled Subsidiary (as hereinafter
defined) of the Corporation or of a Qualified Successor Company (as
hereinafter defined); (b) merge or consolidate with, or convey substantially
all of its assets to any person or corporation unless the entity surviving
such merger or consolidation or the transferee of such assets is the
Corporation or a Qualified Successor Company; or (c) permit the Bank to
merge, consolidate with, or convey substantially all of its assets to any
person or corporation unless the entity surviving such merger or consolidation
or the transferee of such assets is a Controlled Subsidiary of the Corporation
or of a Qualified Successor Company, except in any of the foregoing cases as
required to comply with applicable law, including, without limitation, any
court or regulatory order. The term "Qualified Successor Company" shall mean
a corporation (or other similar organization or entity whether organized under
or pursuant to the laws of the United States or any state thereof or of
another jurisdiction) which (a) is or is required to be a registered bank
holding company under the United States Bank Holding Company Act of 1956, as
amended, or any successor legislation, (b) issues to the holders of the
Cumulative Preferred Stock in exchange for the Cumulative Preferred Stock
shares of preferred stock having at least the same relative rights and
preferences as the Cumulative Preferred Stock (the "Exchanged Stock"), (c)
immediately after such transaction has not outstanding or authorized any class
of stock or equity securities ranking prior to the Exchanged Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, and (d) holds, as a
Controlled Subsidiary or Subsidiaries, either the Bank or one or more other
banking corporations which, collectively, immediately after such transaction
hold substantially all of the assets and liabilities which the Bank held
immediately prior to such transaction (which may be in addition to other
assets and liabilities acquired in such transaction). "Controlled Subsidiary"
shall mean any corporation at least 80% of the outstanding shares of voting
stock of which shall at the time be owned directly or indirectly by the
Corporation or a Qualified Successor Company. In connection with the exercise
of the voting rights contained in this paragraph 4(iv), holders of all series
of Parity Stock which are granted such voting rights shall vote as a class,
and each holder of Cumulative Preferred Stock shall have one-half vote for
each share of stock held, and each other series shall have such number of
votes, if any, for each share of stock held as may be granted them.
The foregoing voting provisions shall not apply as to any shares of
Cumulative Preferred Stock if, at or prior to the time when the act with
respect to which such vote would otherwise be required shall be effected, all
outstanding shares of Cumulative Preferred Stock shall have been redeemed or
sufficient funds shall have been deposited in trust in accordance with
paragraph 5 to effect such redemption.
4. Rank. For the purposes of these Articles Supplementary, any class or
classes of stock of the Corporation shall be deemed to rank:
(a) prior to the Cumulative Preferred Stock as to dividends or as
to distribution of assets upon liquidation, dissolution or winding
up of the Corporation if the holders of such class shall be entitled
to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of the Cumulative Preferred
Stock;
(b) on a parity with the Cumulative Preferred Stock as to dividends
or as to distribution of assets upon liquidation, dissolution or
winding up of the Corporation, whether or not the dividend rates,
dividend payment dates, or redemption or liquidation preference per
share thereof be different from those of the Cumulative Preferred
Stock, if the holders of such class of stock and the Cumulative
Preferred Stock shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up,
as the case may be, in proportion to their respective dividend rates
or liquidation preference, without preference or priority one over
the other; and
(c) junior to shares of the Cumulative Preferred Stock, either as
to dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, or both, if such
class shall be Common Stock or if the holders of the Cumulative
Preferred Stock shall be entitled to the receipt of dividends or
of amounts distributable upon liquidation, dissolution or winding
up of the Corporation, as the case may be, in preference or priority
to the holders of stock of such class or classes.
The Cumulative Preferred Stock shall rank prior, as to dividends and upon
liquidation, dissolution or winding up, to the Common Stock and on a parity
with the Corporation's Cumulative Floating Rate Series B Preferred Stock, the
Series A and Series B Dutch Auction Rate Transferable Securities Preferred
Stock, the Money Market Cumulative Preferred Stock, the Remarketed Preferred
Stock and the $3.375 Cumulative Convertible Preferred Stock.
5. Optional Redemption. The shares of the Cumulative Preferred Stock
may be redeemed at the option of the Corporation, as a whole, or from time to
time in part, at any time, upon not less than 30 nor more than 60 days' prior
notice mailed to the holders of the shares to be redeemed at their addresses
as shown on the stock books of the Corporation; provided, however, that shares
of the Cumulative Preferred Stock shall not be redeemable prior to February
27, 1997. Subject to the foregoing, shares of the Cumulative Preferred Stock
are redeemable at the following redemption price of $25 if redeemed on or
after February 27, 1997, together with an amount equal to all dividends
(whether or not earned or declared) accrued and accumulated and unpaid to, but
excluding, the date fixed for redemption.
If full cumulative dividends on the Cumulative Preferred Stock have not
been paid, the Cumulative Preferred Stock may not be redeemed in part and the
Corporation may not purchase or acquire any shares of the Cumulative Preferred
Stock otherwise than pursuant to a purchase or exchange offer made on the same
terms to all holders of the Cumulative Preferred Stock. If fewer than all the
outstanding shares of Cumulative Preferred Stock are to be redeemed, the
Corporation will select those to be redeemed by lot or a substantially
equivalent method.
If a notice of redemption has been given pursuant to this paragraph 5 and
if, on or before the date fixed for redemption, the funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart
from its other funds, in trust for the pro-rata benefit of the holders of the
shares of Cumulative Preferred Stock so called for redemption, then,
notwithstanding that any certificates for such shares have not been
surrendered for cancellation, on the redemption date dividends shall cease to
accrue on the shares to be redeemed, and at the close of business on the
redemption date the holders of such shares shall cease to be stockholders with
respect to such shares and shall have no interest in or claims against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive the moneys payable upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be outstanding.
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CONFORMED COPY 2.26.92
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of ninety days from the redemption date shall revert
to the general funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the general funds of
the Corporation for the payment of the amounts payable upon such redemption.
Any interest accrued on funds so deposited shall be paid to the Corporation
from time to time.
6. Liquidation. (i) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the
Cumulative Preferred Stock shall be entitled, whether from capital or surplus,
before any assets of the Corporation shall be distributed among or paid over
to holders of Common Stock or any other class or series of stock of the
Corporation junior to the Cumulative Preferred Stock as to liquidation
preference, to be paid the amount of $25 per share (the "liquidation
preference") of the Cumulative Preferred Stock, plus an amount equal to all
accrued and unpaid dividends thereon (whether or not earned or declared) to
and including the date of final distribution. The holders of the Cumulative
Preferred Stock will not be entitled to receive the liquidation preference
until the liquidation preference of any other class of stock of the
Corporation ranking senior to the Cumulative Preferred Stock as to rights upon
liquidation, dissolution or winding up shall have been paid (or a sum set
aside therefor sufficient to provide for payment) in full. After any such
liquidation preference payment, the holders of the Cumulative Preferred Stock
shall not be entitled to any further participation in any distribution of
assets of the Corporation.
(ii) If upon any such liquidation, dissolution or winding up of the
Corporation the assets of the Corporation shall be insufficient to make such
full payments to the holders of the Cumulative Preferred Stock and the holders
of any Preferred Stock ranking as to liquidation, dissolution or winding up on
a parity with the Cumulative Preferred Stock, then such assets shall be
distributed among the holders of the Cumulative Preferred Stock ratably in
accordance with the respective amounts which would be payable on such shares
of Cumulative Preferred Stock or any other such Preferred Stock if all amounts
thereon were paid in full.
(iii) Neither the sale, lease or exchange (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property and assets of the Corporation nor the merger or consolidation of any
other corporation into or with theCorporation nor a reorganization of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation.
7. Parity Stock. So long as any shares of Cumulative Preferred Stock
shall remain outstanding, in case the stated dividends or amounts payable on
liquidation, dissolution or winding up of the Corporation are not paid in
full with respect to all outstanding shares of Parity Stock, all such shares
shall share ratably (x) in the payment of dividends, including accumulations
(if any) in accordance with the sums which would be payable in respect of all
outstanding shares of Parity Stock if all dividends were paid in full and (y)
in any distribution of assets upon liquidation, dissolution or winding up of
the Corporation, in accordance with the sums which would be payable in respect
of all outstanding Parity Stock if all sums payable were discharged in full.
8. Certain Definitions. (i) The term "outstanding", when used in
reference to shares of stock, shall mean issued shares, excluding shares
reacquired by the Corporation.
(ii) The amount of dividends "accrued" on any share of Cumulative
Preferred Stock as at any quarterly dividend payment date shall be deemed to
be the amount of any unpaid dividends accumulated thereon to and including the
end of the day preceding such quarterly dividend payment date, whether or not
earned or declared; and the amount of dividends "accrued" on any share of
Cumulative Preferred Stock as at any date other than a quarterly dividend
payment date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the end of the day preceding the last
preceding quarterly dividend payment date, whether or not earned or declared,
plus an amount equivalent to dividends on the liquidation preference of such
share at the annual dividend rate fixed for such share for the period after
the end of the day preceding such last preceding quarterly dividend payment
date to and including the date as of which the calculation is made, calculated
in accordance with the provisions of paragraph 2.
9. Exclusion of Other Rights. Unless otherwise required by law, shares
of the Cumulative Preferred Stock shall not have any rights, including
preemptive rights, or preferences other than those specifically set forth
herein, in the Charter or as provided by applicable law.
10. Notice. All notices or communications unless otherwise specified in
the Bylaws of the Corporation or these Articles Supplementary shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the
earlier of the date received or the date such notice is mailed.
11. Interpretation or Adjustment By Board of Directors. The Board of
Directors of the Corporation may, consistent with Maryland law, interpret or
adjust the provisions of these Articles Supplementary to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change
or modification which does not adversely affect the rights of beneficial
owners of the Cumulative Preferred Stock and if such inconsistency or
ambiguity reflects any typographical error, error in transcription or other
error the Board of Directors may authorize the filing of a Certificate of
Correction.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its President and its corporate
seal to be hereunto affixed and attested by its Secretary, and the said
officers of the Corporation further acknowledge said instrument to be the
corporate act of the Corporation and state under the penalties of perjury that
to the best of their knowledge, information and belief the matters and facts
therein set forth with respect to approval are true in all material respects,
all on February 24, 1992.
REPUBLIC NEW YORK CORPORATION
By: /s/ Jeffrey C. Keil
(President)
Attest:
/s/ William F. Rosenblum, Jr
( Secretary)
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REPUBLIC NEW YORK CORPORATION
ARTICLES OF AMENDMENT
Republic New York Corporation, a Maryland corporation, having its principal
office in the City of Baltimore, State of Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by striking out the
first paragraph of Article FIFTH of the Articles of Incorporation and
inserting in lieu thereof the following:
"FIFTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is ONE HUNDRED SEVENTY
million (170,000,000) shares, of which TWENTY million (20,000,000) shares
shall be shares of Preferred Stock without par value (hereinafter called
"Preferred Stock"), and ONE HUNDRED FIFTY million (150,000,000) shares
shall be shares of Common Stock of the par value of FIVE DOLLARS ($5.00)
per share (hereinafter called "Common Stock") having an aggregate par
value of SEVEN HUNDRED FIFTY million dollars ($750,000,000)."
SECOND: The Board of Directors of the Corporation, at a meeting held on
January 20, 1993, duly adopted a resolution in which was set forth the
foregoing amendment to the charter, declaring that said amendment of the
charter as proposed was advisable and directing that it be submitted for
action thereon by the Stockholders of the Corporation at the Annual Meeting
thereof to be held on April 21, 1993.
THIRD: Notice, setting forth the said amendment of the charter and stating
that one of the purposes of the Annual Meeting of the Stockholders, called
thereby, would be to take action thereon, was duly given pursuant to Section
2-504 of the Corporations and Associations Article of the Annotated Code of
Maryland to all Stockholders entitled to vote thereon. The amendment of the
charter of the Corporation as hereinabove set forth was approved by the
Stockholders of the Corporation at the Annual Meeting held on April 21, 1993,
by the affirmative vote of a majority of all the votes entitled to be cast
thereon as permitted by the charter of the Corporation.
FOURTH: (a) As of immediately before this amendment, the total shares
of all classes of stock which the Corporation was authorized to issue is One
Hundred Sixty-Five Million (165,000,000) shares, divided into Fifteen Million
(15,000,000) shares of Preferred Stock without par value and One Hundred Fifty
Million (150,000,000) shares of Common Stock with the par value of Five
Dollars ($5.00) per share having an aggregate par value of Seven Hundred Fifty
Million Dollars ($750,000,000).
(b) As amended, the total number of shares of all classes of stock
which the Corporation has authority to issue is One Hundred Seventy Million
(170,000,000) shares, divided into Twenty Million (20,000,000) shares of
Preferred Stock without par value and One Hundred Fifty Million (150,000,000)
shares of Common Stock of the par value of Five Dollars ($5.00) per share
having an aggregate par value of Seven Hundred Fifty Million Dollars
($750,000,000).
(c) A description of each class of stock of the Corporation with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualification and terms and conditions of
redemption, of each class of the authorized capital stock as increased, is set
forth in the charter of the Corporation, and such description has not been
changed by the amendment of the charter of the Corporation herein set forth.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by a Senior Vice President and
witnessed by a Deputy Corporate Secretary on April 21, 1993.
REPUBLIC NEW YORK CORPORATION
By: /s/ William F. Rosenblum, Jr.
(Senior Vice President)
Witnessed:
/s/ Patricia J. Howard
(Deputy Corporate Secretary)
THE UNDERSIGNED, a Senior Vice President of REPUBLIC NEW YORK CORPORATION, who
executed on behalf of said Corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate
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act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ William F. Rosenblum, Jr.
(Senior Vice President)
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has authorized the classification of 1,500,000 of the 11,869,000
shares of Preferred Stock (the "Preferred Stock") which the Corporation now
has authority to issue into a series designated the Adjustable Rate Cumulative
Preferred Stock, Series D, and has provided for the issuance of such series.
SECOND: The number of shares and terms of the Adjustable Rate Cumulative
Preferred Stock, Series D, as set by the Finance Committee of the Board of
Directors pursuant to authority duly delegated by the Board of Directors are
as follows:
1. Adjustable Rate Cumulative Preferred Stock, Series D. 1,500,000
shares of Preferred Stock of the Corporation, without par value, are hereby
constituted as the original number of shares of a series of Preferred Stock
designated as Adjustable Rate Cumulative Preferred Stock, Series D (the
"Adjustable Rate Cumulative Preferred Stock, Series D"). The Adjustable Rate
Cumulative Preferred Stock, Series D, is issuable in whole or fractional
shares. The Adjustable Rate Cumulative Preferred Stock, Series D, shall be of
a stated value of $100 per share (the "Stated Value"). The term "Charter"
when used herein shall include all Articles of Incorporation and all
amendments and supplements thereto.
2. Dividends. The holders of the Adjustable Rate Cumulative Preferred
Stock, Series D, will be entitled to receive, but only when and as declared by
the Board of Directors out of funds legally available for the purpose,
cumulative cash dividends. The initial dividend for the dividend period
commencing May 23, 1994, to June 30, 1994 (the "Initial Period"), will be
payable at the Initial Period Rate (as defined below), and will be payable on
July 1, 1994. Thereafter, dividends on the Adjustable Rate Cumulative
Preferred Stock, Series D, will be payable quarterly, as, if and when declared
by the Board of Directors of the Corporation on January 1, April 1, July 1 and
October 1 of each year at the Applicable Rate (as defined herein) from time to
time in effect. The Applicable Rate for any dividend period will be equal to
81% of the highest of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate (each as defined herein), as
determined in advance of such dividend period. The Applicable Rate for any
dividend period will not be less than 4.5% per annum nor greater than 10.5%
per annum.
The amount of dividends payable for the Initial Period or any period
shorter than a full dividend period shall be calculated on the basis of a
360-day year consisting of twelve 30-day months and the actual number of days
elapsed in the dividend period for which dividends are payable, and by
multiplying the Applicable Rate by $100. If in any quarterly dividend period
(being the period between such dividend payment dates or, in the case of the
Initial Period, from the date of original issuance to and including June 30,
1994) dividends at the Applicable Rate per share per annum shall not have been
paid or declared and set apart for payment on all outstanding shares of
Adjustable Rate Cumulative Preferred Stock, Series D, for such quarterly
dividend period and all preceding quarterly dividend periods from and after
the first day from which dividends are cumulative, then the aggregate
deficiency shall be declared and fully paid or set apart for payment, but
without interest, before (i) any dividends or other distributions (excluding
dividends paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock of the Corporation or shares of any other
capital stock of the Corporation ranking junior to the Adjustable Rate
Cumulative Preferred Stock, Series D, with respect to the payment of dividends
and distribution of assets upon liquidation, dissolution or winding up of the
Corporation) shall be declared and paid or set apart for payment on the Common
Stock or on any other capital stock of the Corporation ranking junior to the
Adjustable Rate Cumulative Preferred Stock, Series D, with respect to the
payment of dividends, or (ii) the Corporation shall purchase, redeem or
otherwise acquire any shares of Preferred Stock or any shares of capital stock
of the Corporation ranking on a parity with or junior to the Adjustable Rate
Cumulative Preferred Stock, Series D, with respect to the payment of
dividends, except by conversion into or exchange for capital stock of the
Corporation ranking junior to the Adjustable Rate Cumulative Preferred Stock,
Series D, with respect to the payment of dividends and distribution of assets
upon liquidation, dissolution or winding up of the Corporation; provided,
however, that any moneys set aside in trust as a sinking fund payment for any
series of Preferred Stock pursuant to the resolutions providing for the issue
of shares of such series may thereafter be applied to the purchase or
redemption of Preferred Stock of such series whether or not at the time of
such application full cumulative dividends upon the outstanding Adjustable
Rate Cumulative Preferred Stock, Series D, shall have been paid or declared
and set apart for payment. If a dividend payment date is not a business day,
dividends (if declared) on the Adjustable Rate Cumulative Preferred Stock,
Series D, will be paid on the immediately succeeding business day, without
interest. Each such dividend will be payable to holders of record as they
appear on the stock books of the Corporation on such record dates, not more
than 30 nor less than 15 days preceding the payment dates thereof, as shall be
fixed by the Board of Directors thereof.
3. Adjustable Rate Dividends. The Initial Period Rate will be equal to
6.05% per annum, equivalent to $0.64 per share of Adjustable Rate Cumulative
Preferred Stock, Series D. Except as provided below in this paragraph, the
"Applicable Rate" for any dividend period (other than the Initial Period) will
be equal to 81% of the Effective Rate (as defined below), but not less than
4.5% per annum, nor more than 10.5% per annum. The "Effective Rate" for any
dividend period will be equal to the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate
(each as defined below), as determined in advance of such dividend period. In
the event that the Corporation determines in good faith that for any reason:
(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate cannot be determined for any
dividend period, then the Effective Rate for such dividend period shall be
equal to the higher of whichever two such rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate can be determined for any
dividend period, then the Effective Rate for such dividend period shall be
equal to whichever such rate can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate can be determined for any
dividend period, then the Effective Rate for the preceding dividend period
shall be continued for such dividend period.
Except as described below in this paragraph, the "Treasury Bill Rate"
for each dividend period will be the arithmetic average of the two most recent
weekly per annum market discount rates (or the one weekly per annum market
discount rate, if only one such rate is published during the relevant Calendar
Period (as defined below)) for three-month U.S. Treasury bills, as published
weekly by the Federal Reserve Board (as defined below) during the Calendar
Period immediately preceding the last ten calendar days preceding the dividend
period for which the dividend rate on the Adjustable Rate Cumulative Preferred
Stock, Series D, is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum market discount rate during any
such Calendar Period, then the Treasury Bill Rate for such dividend period
will be the arithmetic average of the two most recent weekly per annum market
discount rates (or the one weekly per annum market discount rate, if only one
such rate is published during the relevant Calendar Period) for three-month
U.S. Treasury bills, as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the Corporation. In the event that a per annum market discount rate for
three-month U.S. Treasury bills is not published by the Federal Reserve Board
or by any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period, then the Treasury Bill Rate for such dividend
period will be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if
only one such rate is published during the relevant Calendar Period) for all
of the U.S. Treasury bills then having remaining maturities of not less than
80 nor more than 100 days, as published during such Calendar Period by the
Federal Reserve Board
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or, if the Federal Reserve Board does not publish such
rates, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason no such U.S. Treasury bill rates
are published as provided above during such Calendar Period, then the Treasury
Bill Rate for such dividend period will be the arithmetic average of the per
annum market discount rates based upon the closing bids during such Calendar
Period for each of the issues of marketable non-interest-bearing U.S. Treasury
securities with a remaining maturity of not less than 80 nor more than 100
days from the date of each such quotation, as chosen and quoted daily for each
business day in New York City (or less frequently if daily quotations are not
generally available) to the Corporation by at least three recognized dealers
in U.S. Government securities selected by the Corporation. In the event that
the Corporation determines in good faith that for any reason the Corporation
cannot determine the Treasury Bill Rate for any dividend period as provided
above in this paragraph, the Treasury Bill Rate for such dividend period will
be the arithmetic average of the per annum market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable interest-bearing U.S. Treasury securities with a remaining maturity
of not less than 80 nor more than 100 days, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations are
not generally available) to the Corporation by at least three recognized
dealers in U.S. Government securities selected by the Corporation.
Except as described below in this paragraph, the "Ten Year Constant
Maturity Rate" for each dividend period will be the arithmetic average of the
two most recent weekly per annum Ten Year Average Yields (as defined below)
(or the one weekly per annum Ten Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the
last ten calendar days preceding the dividend period for which the dividend
rate on the Adjustable Rate Cumulative Preferred Stock, Series D, is being
determined. In the event that the Federal Reserve Board does not publish such
a weekly per annum Ten Year Average Yield during such Calendar Period, then
the Ten Year Constant Maturity Rate for such dividend period will be the
arithmetic average of the two most recent weekly per annum Ten Year Average
Yields (or the one weekly per annum Ten Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event
that a per annum Ten Year Average Yield is not published by the Federal
Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Ten Year Constant
Maturity Rate for such dividend period will be the arithmetic average of the
two most recent weekly per annum average yields to maturity (or the one weekly
per annum average yield to maturity, if only one such yield is published
during the relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities (as defined below)) then having remaining maturities of not less
than eight nor more than 12 years, as published during such Calendar Period by
the Federal Reserve Board or, if the Federal Reserve Board does not publish
such yields, by any Federal Reserve Bank or by any U.S. Government department
or agency selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot determine
the Ten Year Constant Maturity Rate for any dividend period as provided above
in this paragraph, then the Ten Year Constant Maturity Rate for such dividend
period will be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than eight nor more than 12 years from the date of each such quotation, as
chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the Corporation
by at least three recognized dealers in U.S. Government securities selected by
the Corporation.
Except as described below in this paragraph, the "Thirty Year Constant
Maturity Rate" for each dividend period will be the arithmetic average of the
two most recent weekly per annum Thirty Year Average Yields (as defined below)
(or the one weekly per annum Thirty Year Average Yield, if only one such yield
is published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the
last ten calendar days preceding the dividend period for which the dividend
rate on the Adjustable Rate Cumulative Preferred Stock, Series D, is being
determined. In the event that the Federal Reserve Board does not publish such
a weekly per annum Thirty Year Average Yield during such Calendar Period, then
the Thirty Year Constant Maturity Rate for such dividend period will be the
arithmetic average of the two most recent weekly per annum Thirty Year Average
Yields (or the one weekly per annum Thirty Year Average Yield, if only one
such yield is published during the relevant Calendar Period), as published
weekly during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event
that a per annum Thirty Year Average Yield is not published by the Federal
Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Thirty Year
Constant Maturity Rate for such dividend period will be the arithmetic average
of the two most recent weekly per annum average yields to maturity (or the one
weekly per annum average yield to maturity, if only one such yield is
published during the relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having remaining maturities of not less than 28 nor more than
30 years, as published during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board does not publish such yields, by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the Corporation. In the event that the Corporation determines in good
faith that for any reason the Corporation cannot determine the Thirty Year
Constant Maturity Rate for any dividend period as provided above in this
paragraph, then the Thirty Year Constant Maturity Rate for such dividend
period will be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than 28 nor more than 30 years from the date of each such quotation, as chosen
and quoted daily for each business day in New York City (or less frequently if
daily quotations are not generally available) to the Corporation by at least
three recognized dealers in U.S. Government securities selected by the
Corporation.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate will each be rounded to the nearest five
one-hundredths of one percent.
The Applicable Rate with respect to each dividend period (other than the
Initial Period) will be calculated as promptly as practicable by the
Corporation according to the appropriate method described above. The
Corporation will cause notice of each Applicable Rate to be enclosed with the
dividend payment checks next mailed to the holders of the Adjustable Rate
Cumulative Preferred Stock, Series D.
As used above, the term "Calendar Period" means a period of 14 calendar
days; the term "Federal Reserve Board" means the Board of Governors of the
Federal Reserve System; the term "Special Securities" means securities which
can, at the option of the holder, be surrendered at face value in payment of
any Federal estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally issued at a deep
or substantial discount; the term "Ten Year Average Yield" means the average
yield to maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of ten years); and the term
"Thirty Year Average Yield" means the average yield to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of 30 years).
4. Voting Rights. (i) Holders of the Adjustable Rate Cumulative
Preferred Stock, Series D, shall have no voting rights, either general or
special, except as expressly required by applicable law, the Charter and as
specified in this paragraph 4.
(ii) Whenever, at any time or times, dividends payable on the shares of
Adjustable Rate Cumulative Preferred Stock, Series D, shall be in arrears for
six consecutive calendar quarters, then at the next annual meeting of
stockholders and at any annual meeting thereafter and at any meeting called
for the election of directors, until all dividends accumulated on the
Adjustable Rate Cumulative Preferred Stock, Series D, have been paid or
declared and a sum sufficient for payment has been set aside, the holders of
the Adjustable Rate Cumulative Preferred Stock, Series D, either alone or
together with the holders of one or more other cumulative series of Preferred
Stock at the time outstanding which are granted such voting rights, voting as
a class, shall be entitled, to the exclusion of the holders of one or more
other series or classes of stock having general voting rights, to vote for and
elect two additional members of the Board of Directors of the Corporation, and
the holders of Common Stock together with the holders of any series or class
or classes of stock of the Corporation having general voting rights and not
then entitled to elect two members of the Board of Directors pursuant to this
paragraph 4 to the exclusion of the holders of all series then so entitled,
shall be entitled to vote and elect the balance of the Board of Directors. In
such case the Board of Directors of the Corporation shall, as of the date of
the annual meeting of stockholders or at any meeting called for the election
of directors aforesaid, be increased by two directors. The rights of the
holders of the Adjustable Rate Cumulative Preferred Stock, Series D, to
participate (either alone or together with the holders of one or more other
cumulative series of Preferred Stock at the time outstanding which are
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granted such voting rights) in the exclusive election of two members of the
Board of Directors of the Corporation pursuant to this paragraph 4 shall
continue in effect until cumulative dividends have been paid in full or declared
and a sum sufficient has been set apart for payment on the Adjustable Rate
Cumulative Preferred Stock, Series D. At elections for such directors, each
holder of Adjustable Rate Cumulative Preferred Stock, Series D, shall be
entitled to two votes for each share of Adjustable Rate Cumulative Preferred
Stock, Series D, held of record on the record date established for the meeting.
The holders of Adjustable Rate Cumulative Preferred Stock, Series D, shall have
no right to cumulate such shares in voting for the election of directors. At
the annual meeting of stockholders next following the termination (by reason
of the payment of all accumulated and defaulted dividends on such stock or
provision for the payment thereof by declaration and setting apart thereof)
of the exclusive voting power pursuant to this paragraph 4 of the holders of
Adjustable Rate Cumulative Preferred Stock, Series D, and the holders of all
other cumulative series which shall have been entitled to vote for and elect
such two members of the Board of Directors of the Corporation, the terms of
office of all persons who may have been elected directors of the Corporation
by vote of such holders shall terminate and the two vacancies created pursuant
to this paragraph 4 to accommodate the exclusive right of election conferred
hereunder shall thereupon be eliminated and the Board of Directors shall be
decreased by two directors.
(iii) So long as any shares of Adjustable Rate Cumulative Preferred
Stock, Series D, remain outstanding, the affirmative vote of the holders of at
least two-thirds of the shares of Adjustable Rate Cumulative Preferred Stock,
Series D, outstanding at the time given in person or by proxy, at any special
or annual meeting called for the purpose, shall be necessary to permit, effect
or validate any one or more of the following:
(a) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) ranking prior (as set forth in
paragraph 5(a)) to the Adjustable Rate Cumulative Preferred Stock,
Series D, or
(b) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock (including
any class or series of Preferred Stock) which ranks on a parity (as set
forth in paragraph 5(b)) with the Adjustable Rate Cumulative Preferred
Stock, Series D, unless the Articles Supplementary or other provisions
of the Charter creating or authorizing such class or series shall provide
that if in any case the stated dividends or amounts payable on
liquidation, dissolution or winding up of the Corporation are not paid
in full on the Adjustable Rate Cumulative Preferred Stock, Series D, and
all outstanding shares of stock ranking on a parity with the Adjustable
Rate Cumulative Preferred Stock, Series D, (the Adjustable Rate
Cumulative Preferred Stock, Series D, and all such other stock being
herein called "Parity Stock"), the shares of all Parity Stock shall share
ratably (x) in the payment of dividends, including accumulations (if any)
in accordance with the sums which would be payable on all Parity Stock if
all dividends in respect of all shares of Parity Stock were paid in full
and (y) on any distribution of assets upon liquidation, dissolution or
winding up of the Corporation in accordance with the sums which would be
payable in respect of all shares of Parity Stock if all sums payable were
discharged in full, or
(c) The amendment, alteration or repeal, whether by merger, consolidation
or otherwise, of any of the provisions of the Charter of the Corporation,
including these Articles Supplementary, which would materially and
adversely affect any right, preference, privilege or voting power of the
Adjustable Rate Cumulative Preferred Stock, Series D, or of the holders
thereof; provided, however, that any increase in the amount of authorized
Preferred Stock or the Corporation's Cumulative Floating Rate Series B
Preferred Stock, the Series A and Series B Dutch Auction Rate Transferable
Securities Preferred Stock, the Money Market Cumulative Preferred Stock,
the Remarketed Preferred Stock, the $3.375 Cumulative Convertible
Preferred Stock, the $1.9375 Cumulative Preferred Stock or the Adjustable
Rate Cumulative Preferred Stock, Series D, or any other capital stock of
the Corporation, or the creation and issuance of other series of Preferred
Stock including convertible Preferred Stock or any other capital stock of
the Corporation, in each case ranking on a parity with or junior to the
Adjustable Rate Cumulative Preferred Stock, Series D, with respect to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, shall not be deemed to affect
materially and adversely such rights, preferences, privileges or voting
powers.
(iv) So long as any shares of Adjustable Rate Cumulative Preferred
Stock, Series D, remain outstanding and notwithstanding any provision of the
Charter of the Corporation requiring a greater percentage, the Corporation
shall not, without the affirmative vote of the holders of at least a majority
of the votes of all Parity Stock entitled to vote outstanding at the time,
given in person or by proxy, by resolution duly adopted at a meeting at which
a quorum was present and acting and at which the holders of Adjustable Rate
Cumulative Preferred Stock, Series D, (alone or together with the holders of
one or more other series of Parity Stock at the time outstanding and entitled
to vote) vote separately as a class, (a) directly or indirectly, sell,
transfer or otherwise dispose of, or permit Republic National Bank of New York
(the "Bank") or any other subsidiary of the Corporation, to issue, sell,
transfer or otherwise dispose of any shares of voting stock of the Bank, or
securities convertible into or options, warrants or rights to acquire voting
stock of the Bank, unless after giving effect to any such transaction the Bank
remains a Controlled Subsidiary (as hereinafter defined) of the Corporation or
of a Qualified Successor Company (as hereinafter defined); (b) merge or
consolidate with, or convey substantially all of its assets to any person or
corporation unless the entity surviving such merger or consolidation or the
transferee of such assets is the Corporation or a Qualified Successor Company;
or (c) permit the Bank to merge, consolidate with, or convey substantially all
of its assets to any person or corporation unless the entity surviving such
merger or consolidation or the transferee of such assets is a Controlled
Subsidiary of the Corporation or of a Qualified Successor Company, except in
any of the foregoing cases as required to comply with applicable law,
including, without limitation, any court or regulatory order. The term
"Qualified Successor Company" shall mean a corporation (or other similar
organization or entity whether organized under or pursuant to the laws of the
United States or any state thereof or of another jurisdiction) which (a) is or
is required to be a registered bank holding company under the United States
Bank Holding Company Act of 1956, as amended, or any successor legislation,
(b) issues to the holders of the Adjustable Rate Cumulative Preferred Stock,
Series D, in exchange for the Adjustable Rate Cumulative Preferred Stock,
Series D, shares of preferred stock having at least the same relative rights
and preferences as the Adjustable Rate Cumulative Preferred Stock, Series D,
(the "Exchanged Stock"), (c) immediately after such transaction has not
outstanding or authorized any class of stock or equity securities ranking
prior to the Exchanged Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, and (d) holds, as a Controlled Subsidiary or Subsidiaries, either
the Bank or one or more other banking corporations which, collectively,
immediately after such transaction hold substantially all of the assets and
liabilities which the Bank held immediately prior to such transaction (which
may be in addition to other assets and liabilities acquired in such
transaction). "Controlled Subsidiary" shall mean any corporation at least 80%
of the outstanding shares of voting stock of which shall at the time be owned
directly or indirectly by the Corporation or a Qualified Successor Company.
In connection with the exercise of the voting rights contained in this
paragraph 4(iv), holders of all series of Parity Stock which are granted such
voting rights shall vote as a class, and each holder of Adjustable Rate
Cumulative Preferred Stock, Series D, shall have two votes for each share of
stock held, and each other series shall have such number of votes, if any, for
each share of stock held as may be granted them.
The foregoing voting provisions shall not apply as to any shares of
Adjustable Rate Cumulative Preferred Stock, Series D, if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Adjustable Rate Cumulative
Preferred Stock, Series D, shall have been redeemed or sufficient funds shall
have been deposited in trust in accordance with paragraph 6 to effect such
redemption.
5. Rank. For the purposes of these Articles Supplementary, any class or
classes of stock of the Corporation shall be deemed to rank:
(a) prior to the Adjustable Rate Cumulative Preferred Stock, Series
D, as to dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation if the holders of such
class shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of the
Adjustable Rate Cumulative Preferred Stock, Series D;
(b) on a parity with the Adjustable Rate Cumulative Preferred Stock,
Series D, as to dividends or as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether or
not the dividend rates, dividend payment dates, or redemption or
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liquidation preference per share thereof be different from those of
the Adjustable Rate Cumulative Preferred Stock, Series D, if the
holders of such class of stock and the Adjustable Rate Cumulative
Preferred Stock, Series D, shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective
dividend rates or liquidation preference, without preference or
priority one over the other; and
(c) junior to the Adjustable Rate Cumulative Preferred Stock,
Series D, either as to dividends or as to distribution of assets
upon liquidation, dissolution or winding up of the Corporation, or
both, if such class shall be Common Stock or if the holders of the
Adjustable Rate Cumulative Preferred Stock, Series D, shall be
entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up of the Corporation, as
the case may be, in preference or priority to the holders of stock
of such class or classes.
The Adjustable Rate Cumulative Preferred Stock, Series D, shall rank
prior, as to dividends and upon liquidation, dissolution or winding up, to the
Common Stock and on a parity with the Corporation's Cumulative Floating Rate
Series B Preferred Stock, the Series A and Series B Dutch Auction Rate
Transferable Securities Preferred Stock, the Money Market Cumulative Preferred
Stock, the Remarketed Preferred Stock, the $3.375 Cumulative Convertible
Preferred Stock and the $1.9375 Cumulative Preferred Stock.
6. Optional Redemption. The shares of the Adjustable Rate Cumulative
Preferred Stock, Series D, may be redeemed on or after July 1, 1999, at the
option of the Corporation, for cash, on at least 30 but not more than 60 days'
notice at any time or from time to time, as a whole or in part, at $100 per
share, plus, in each case, dividends accrued and accumulated but unpaid to the
redemption date. The Adjustable Rate Cumulative Preferred Stock, Series D,
will not be subject to any sinking fund or other obligation of the Corporation
to purchase or redeem the Adjustable Rate Cumulative Preferred Stock, Series
D.
Any such redemption may be effected only with the prior approval of the
Federal Reserve Board (unless at such time it is determined that such approval
is not required).
If fewer than all outstanding shares of the Adjustable Rate Cumulative
Preferred Stock, Series D, are to be redeemed, the number of shares to be
redeemed will be determined by the Board of Directors of the Corporation and
such shares will be redeemed pro rata from the holders of record of such
shares in proportion to the number of such shares held by such holders (with
adjustments to avoid the redemption of fractional shares) or by lot in a
manner determined by the Board of Directors of the Corporation.
Notwithstanding the foregoing, if any dividends, including any
accumulation on the Adjustable Rate Cumulative Preferred Stock, Series D, are
in arrears, no Adjustable Rate Cumulative Preferred Stock, Series D, shall be
redeemed unless all outstanding Adjustable Rate Cumulative Preferred Stock,
Series D, is simultaneously redeemed, and the Corporation shall not purchase
or otherwise acquire any Adjustable Rate Cumulative Preferred Stock, Series D;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Adjustable Rate Cumulative Preferred Stock, Series D, pursuant
to a purchase or exchange offer provided that such offer is made on the same
terms to all holders of the Adjustable Rate Cumulative Preferred Stock, Series
D.
Notice of redemption shall be given by mailing the same to each record
holder of the Adjustable Rate Cumulative Preferred Stock, Series D, not less
than 30 nor more than 60 days prior to the date fixed for redemption thereof,
at the address of such holder as the same shall appear on the stock books of
the Corporation. Each notice shall state: (i) the redemption date; (ii) the
number of shares of Adjustable Rate Cumulative Preferred Stock, Series D, to
be redeemed; (iii) the redemption price; (iv) the place or places where
certificates for such shares of Adjustable Rate Cumulative Preferred Stock,
Series D, are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holders' exchange rights, if any, as to
such shares, shall terminate. If fewer than all the shares of the Adjustable
Rate Cumulative Preferred Stock, Series D, are to be redeemed, the notice
mailed to each such holder thereof shall also specify the number of shares of
Adjustable Rate Cumulative Preferred Stock, Series D, to be redeemed from each
such holder.
If notice of redemption of any shares of the Adjustable Rate Cumulative
Preferred Stock, Series D, has been given and if the funds necessary for such
redemption have been set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the holders of any shares of
Adjustable Rate Cumulative Preferred Stock, Series D, so called for
redemption, from and after the redemption date for such shares, dividends on
such shares shall cease to accrue and such shares shall no longer be deemed to
be outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive the redemption price) shall cease.
Upon surrender, in accordance with such notice, of the certificates
representing any such shares (properly endorsed or assigned for transfer, if
the Board of Directors of the Corporation shall so require and the notice
shall so state), the redemption price set forth above shall be paid out of the
funds provided by the Corporation. If fewer than all shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
Subject to applicable escheat laws, any moneys so set aside by the Corporation
and unclaimed at the end of 90 days from the redemption date shall revert to
the general funds of the Corporation, after which reversion the holders of
such shares so called for redemption shall look only to the general funds of
the Corporation for the payment of the amounts payable upon such redemption.
Any interest accrued on funds so deposited shall be paid to the Corporation
from time to time.
7. Liquidation. (i) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the
Adjustable Rate Cumulative Preferred Stock, Series D, shall be entitled,
whether from capital or surplus, before any assets of the Corporation shall be
distributed among or paid over to holders of Common Stock or any other class
or series of stock of the Corporation junior to the Adjustable Rate Cumulative
Preferred Stock, Series D, as to liquidation preference, to be paid the amount
of $100 per share (the "liquidation preference") of the Adjustable Rate
Cumulative Preferred Stock, Series D, plus an amount equal to all accrued and
unpaid dividends thereon (whether or not earned or declared) to and including
the date of final distribution. The holders of the Adjustable Rate Cumulative
Preferred Stock, Series D, will not be entitled to receive the liquidation
preference until the liquidation preference of any other class of stock of the
Corporation ranking senior to the Adjustable Rate Cumulative Preferred Stock,
Series D, as to rights upon liquidation, dissolution or winding up shall have
been paid (or a sum set aside therefor sufficient to provide for payment) in
full. After any such liquidation preference payment, the holders of the
Adjustable Rate Cumulative Preferred Stock, Series D, shall not be entitled to
any further participation in any distribution of assets of the Corporation.
(ii) If upon any such liquidation, dissolution or winding up of the
Corporation the assets of the Corporation shall be insufficient to make such
full payments to the holders of the Adjustable Rate Cumulative Preferred
Stock, Series D, and the holders of any Preferred Stock ranking as to
liquidation, dissolution or winding up on a parity with the Adjustable Rate
Cumulative Preferred Stock, Series D, then such assets shall be distributed
among the holders of the Adjustable Rate Cumulative Preferred Stock, Series D,
ratably in accordance with the respective amounts which would be payable on
such shares of Adjustable Rate Cumulative Preferred Stock, Series D, or any
other such Preferred Stock if all amounts thereon were paid in full.
(iii) Neither the sale, lease or exchange (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property and assets of the Corporation nor the merger or consolidation of any
other corporation into or with the Corporation nor a reorganization of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation.
8. Parity Stock. So long as any shares of Adjustable Rate Cumulative
Preferred Stock, Series D, shall remain outstanding, in case the stated
dividends or amounts payable on liquidation, dissolution or winding up of the
Corporation are not paid in full with respect to all outstanding shares of
Parity Stock, all such shares shall share ratably (x) in the payment of
dividends, including accumulations (if any) in accordance with the sums which
would be payable in respect of all outstanding shares of Parity Stock if all
dividends were paid in full and (y) in any distribution of assets upon
liquidation, dissolution or winding up of the Corporation, in accordance with
the sums which would be payable in respect of all outstanding Parity Stock if
all sums payable were discharged in full.
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9. Certain Definitions. (i) The term "outstanding", when used in
reference to shares of stock, shall mean issued shares, excluding shares
reacquired by the Corporation.
(ii) The amount of dividends "accrued" on any share of Adjustable
Rate Cumulative Preferred Stock, Series D, as at any quarterly dividend
payment date shall be deemed to be the amount of any unpaid dividends
accumulated thereon to and including the end of the day preceding such
quarterly dividend payment date, whether or not earned or declared; and the
amount of dividends "accrued" on any share of Adjustable Rate Cumulative
Preferred Stock, Series D, as at any date other than a quarterly dividend
payment date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the end of the day preceding the last
preceding quarterly dividend payment date, whether or not earned or declared,
plus an amount equivalent to dividends on the liquidation preference of such
share at the annual dividend rate fixed for such share for the period after
the end of the day preceding such last preceding quarterly dividend payment
date to and including the date as of which the calculation is made, calculated
in accordance with the provisions of paragraph 2.
10. Exclusion of Other Rights. Unless otherwise required by law, shares
of the Adjustable Rate Cumulative Preferred Stock, Series D, shall not have
any rights, including preemptive rights, or preferences other than those
specifically set forth herein, in the Charter or as provided by applicable
law.
11. Notice. All notices or communications unless otherwise specified in
the Bylaws of the Corporation or these Articles Supplementary shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the
earlier of the date received or the date such notice is mailed.
12. Interpretation or Adjustment By Board of Directors. The Board of
Directors of the Corporation may, consistent with Maryland law, interpret or
adjust the provisions of these Articles Supplementary to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change
or modification which does not adversely affect the rights of beneficial
owners of the Adjustable Rate Cumulative Preferred Stock, Series D, and if
such inconsistency or ambiguity reflects any typographical error, error in
transcription or other error the Board of Directors may authorize the filing
of a Certificate of Correction.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its Chairman and its corporate seal
to be hereunto affixed and attested by its Secretary, and the said officers of
the Corporation further acknowledge said instrument to be the corporate act of
the Corporation and state under the penalties of perjury that to the best of
their knowledge, information and belief the matters and facts therein set
forth with respect to approval are true in all material respects, all on
May 3, 1994.
REPUBLIC NEW YORK CORPORATION
By: /s/ Walter H. Weiner
(Chairman)
Attest:
/s/ William F. Rosenblum, Jr.
(Secretary)
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has authorized the classification of 3,000,000 of the 8,047,500
shares of Preferred Stock (the "Preferred Stock") which the Corporation now
has authority to issue into a series designated the $1.8125 Cumulative
Preferred Stock, and has provided for the issuance of such series.
SECOND: The number of shares and terms of the $1.8125 Cumulative Preferred
Stock, as set by the Finance Committee of the Board of Directors pursuant to
authority duly delegated by the Board of Directors are as follows:
1. $1.8125 Cumulative Preferred Stock. 3,000,000 shares of Preferred
Stock of the Corporation, without par value, are hereby constituted as the
original number of shares of a series of Preferred Stock designated as $1.8125
Cumulative Preferred Stock (the "$1.8125 Cumulative Preferred Stock"). The
$1.8125 Cumulative Preferred Stock, is issuable in whole shares only. The
$1.8125 Cumulative Preferred Stock, shall be of a stated value of $25 per
share (the "Stated Value"). The term "Charter" when used herein shall include
all Articles of Incorporation and all amendments and supplements thereto.
2. Dividends. The holders of the $1.8125 Cumulative Preferred Stock
shall be entitled to receive, but only when and as declared by the Board of
Directors out of funds legally available for the purpose, cash dividends at
the rate of $1.8125 per share per annum, and no more, payable quarterly on the
first day of January, April, July and October of each year, with the first
such dividend being payable October 1, 1995 (each a "dividend payment date").
Such dividends shall be payable from, and shall be cumulative from, the date
of original issue of each share. Dividends will be payable, in arrears, to
holders of record as they appear on the stock transfer records of the
Corporation on such record dates, not more than 60 days nor less than 10 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors. The amount of dividends payable per share for each full dividend
period shall be computed by dividing by four the $1.8125 annual rate. The
amount of dividends payable for any dividend period or any period, either
shorter or longer than a full dividend period shall be calculated on the basis
of a 360-day year of twelve 30-day months and the actual number of days
elapsed in the dividend period for which dividends are payable. If in any
quarterly dividend period (being the period between such dividend payment
dates or, in the case of the first such period, from the date of original
issue to October 1, 1995) dividends at the rate of $1.8125 per share per annum
shall not have been paid or declared and set apart for payment on all
outstanding shares of $1.8125 Cumulative Preferred Stock for such quarterly
dividend period and all preceding quarterly dividend periods from and after
the first day from which dividends are cumulative, then the aggregate
deficiency shall be declared and fully paid or set apart for payment, but
without interest, before (i) any dividends or other distributions (excluding
dividends paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Common Stock of the Corporation or shares of any other
capital stock of the Corporation ranking junior to the $1.8125 Cumulative
Preferred Stock with respect to the payment of dividends and distribution of
assets upon liquidation, dissolution or winding up of the Corporation) shall
be declared and paid or set apart for payment on the Common Stock or on any
other capital stock of the Corporation ranking junior to the Cumulative
Preferred Stock with respect to the payment of dividends, or (ii) the
Corporation shall purchase, redeem or otherwise acquire any shares of
Preferred Stock or any shares of capital stock of the Corporation ranking on a
parity with or junior to the $1.8125 Cumulative Preferred Stock with respect
to the payment of dividends, except by conversion into or exchange for capital
stock of the Corporation ranking junior to the $1.8125 Cumulative Preferred
Stock with respect to the payment of dividends and distribution of assets
upon liquidation, dissolution or winding up of the Corporation; provided,
however, that any moneys set aside in trust as a sinking fund payment for any
series of Preferred Stock pursuant to the resolutions providing for the issue
of shares of such series may thereafter be applied to the purchase or
redemption of Preferred Stock of such series whether or not at the time of
such application full cumulative dividends upon the outstanding Cumulative
Preferred Stock shall have been paid or declared and set apart for payment.
3. Voting Rights. (i) Holders of the $1.8125 Cumulative Preferred
Stock, shall have no voting rights, either general or special, except as
expressly required by applicable law, the Charter and as specified in this
paragraph 3.
(ii) Whenever, at any time or times, dividends payable on the
shares of $1.8125 Cumulative Preferred Stock, shall be in arrears for six
consecutive calendar quarters, then at the next annual meeting of stockholders
and at any annual meeting thereafter and at any meeting called for the
election of directors, until all dividends accumulated on the $1.8125
Cumulative Preferred Stock, have been paid or declared and a sum sufficient
for payment has been set aside, the holders of the $1.8125 Cumulative
Preferred Stock, either alone or together with the holders of one or more
other series of cumulative Preferred Stock at the time outstanding which are
granted such voting rights, voting as a class, shall be entitled, to the
exclusion of the holders of one or more other series or classes of stock
having general voting rights, to vote for and elect two additional members of
the Board of Directors of the Corporation, and the holders of Common Stock
together with the holders of any series or class or classes of stock of the
Corporation having general voting rights and not then entitled to elect two
members of the Board of Directors pursuant to this paragraph 3 to the
exclusion of the holders of all series then so entitled, shall be entitled to
vote and elect the balance of the Board of Directors. In such case, the Board
of Directors of the Corporation shall, as of the date of the annual meeting of
stockholders or at any meeting called for the election of directors aforesaid,
be increased by two directors. The rights of the holders of the $1.8125
Cumulative Preferred Stock, to participate (either alone or together with the
holders of one or more other cumulative series of Preferred Stock at the time
outstanding which are granted such voting rights) in the exclusive election of
two members of the Board of Directors of the Corporation pursuant to this
paragraph 3 shall continue in effect until cumulative dividends have been paid
in full or declared and a sum sufficient has been set apart for payment on the
$1.8125 Cumulative Preferred Stock. At elections for such directors, each
holder of $1.8125 Cumulative Preferred Stock shall be entitled to one-half
vote for each share of $1.8125 Cumulative Preferred Stock held of record on
the record date established for the meeting. The holders of $1.8125
Cumulative Preferred Stock shall have no right to cumulate such shares in
voting for the election of directors. At the annual meeting of stockholders
next following the termination (by reason of the payment of all accumulated
and defaulted dividends on such stock or provision for the payment thereof by
declaration and setting apart thereof) of the exclusive voting power of the
holders of $1.8125 Cumulative Preferred Stock pursuant to this paragraph 3,
and the holders of all other cumulative series which shall have been entitled
to vote for and elect such two members of the Board of Directors of the
Corporation, the terms of office of all persons who may have been elected
directors of the Corporation by vote of such holders shall terminate and the
two vacancies created pursuant to this paragraph 3 to accommodate the
exclusive right of election conferred hereunder shall thereupon be eliminated
and the Board of Directors shall be decreased by two directors.
(iii) So long as any shares of $1.8125 Cumulative Preferred Stock,
remain outstanding, the affirmative vote of the holders of at least two-thirds
of the shares of $1.8125 Cumulative Preferred Stock, outstanding at the time
given in person or by proxy, at any special or annual meeting called for the
purpose, shall be necessary to permit, effect or validate any one or more of
the following:
(a) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as
set forth in paragraph 4(a)) to the $1.8125 Cumulative Preferred
Stock, or
(b) The authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks
on a parity (as set forth in paragraph 4(b)) with the $1.8125
Cumulative Preferred Stock, unless the Articles Supplementary or
other provisions of the Charter creating or authorizing such
class or series shall provide that if in any case the stated
dividends or amounts payable on liquidation, dissolution or
winding up of the Corporation are not paid in full on the
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$1.8125 Cumulative Preferred Stock, and all outstanding shares
of stock ranking on a parity with the $1.8125 Cumulative Preferred
Stock, (the $1.8125 Cumulative Preferred Stock, and all such other
stock being herein called "Parity Stock"), the shares of all Parity
Stock shall share ratably (x) in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be
payable on all Parity Stock if all dividends in respect of all
shares of Parity Stock were paid in full and (y) on any distribution
of assets upon liquidation, dissolution or winding up of the
Corporation in accordance with the sums which would be payable in
respect of all shares of Parity Stock if all sums payable were
discharged in full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Charter
of the Corporation, including these Articles Supplementary, which
would materially and adversely affect any right, preference,
privilege or voting power of the $1.8125 Cumulative Preferred Stock,
or of the holders thereof; provided, however, that any increase in
the amount of authorized Preferred Stock or the Corporation's Series
A and Series B Dutch Auction Rate Transferable Securities Preferred
Stock, the Money Market Cumulative Preferred Stock, the Remarketed
Preferred Stock, the $3.375 Cumulative Convertible Preferred Stock,
the $1.9375 Cumulative Preferred Stock, the Adjustable Rate
Cumulative Preferred Stock, Series D, or the $1.8125 Cumulative
Preferred Stock, or any other capital stock of the Corporation, or
the creation and issuance of other series of Preferred Stock,
including convertible Preferred Stock, or any other capital stock of
the Corporation, in each case ranking on a parity with or junior to
the $1.8125 Cumulative Preferred Stock with respect to the payment of
dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, shall not be deemed to
affect materially and adversely such rights, preferences, privileges
or voting powers.
(iv) So long as any shares of $1.8125 Cumulative Preferred Stock
remain outstanding and notwithstanding any provision of the Charter of the
Corporation requiring a greater percentage, the Corporation shall not, without
the affirmative vote of the holders of at least a majority of the votes of all
Parity Stock entitled to vote outstanding at the time, given in person or by
proxy, by resolution duly adopted at a meeting at which a quorum was present
and acting and at which the holders of $1.8125 Cumulative Preferred Stock
(alone or together with the holders of one or more other series of Parity
Stock at the time outstanding and entitled to vote) vote separately as a
class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or
permit Republic National Bank of New York (the "Bank") or any other subsidiary
of the Corporation, to issue, sell, transfer or otherwise dispose of any
shares of voting stock of the Bank, or securities convertible into or options,
warrants or rights to acquire voting stock of the Bank, unless after giving
effect to any such transaction the Bank remains a Controlled Subsidiary (as
hereinafter defined) of the Corporation or of a Qualified Successor Company
(as hereinafter defined); (b) merge or consolidate with, or convey
substantially all of its assets, to any person or corporation unless the
entity surviving such merger or consolidation or the transferee of such assets
is the Corporation or a Qualified Successor Company; or (c) permit the Bank to
merge, consolidate with, or convey substantially all of its assets to, any
person or corporation unless the entity surviving such merger or consolidation
or the transferee of such assets is a Controlled Subsidiary of the Corporation
or of a Qualified Successor Company, except in any of the foregoing cases as
required to comply with applicable law, including, without limitation, any
court or regulatory order. The term "Qualified Successor Company" shall mean
a corporation (or other similar organization or entity whether organized under
or pursuant to the laws of the United States or any state thereof or of
another jurisdiction) which (a) is or is required to be a registered bank
holding company under the United States Bank Holding Company Act of 1956, as
amended, or any successor legislation, (b) issues to the holders of the
$1.8125 Cumulative Preferred Stock, in exchange for the $1.8125 Cumulative
Preferred Stock, shares of preferred stock having at least the same relative
rights and preferences as the $1.8125 Cumulative Preferred Stock, (the
"Exchanged Stock"), (c) immediately after such transaction has not outstanding
or authorized any class of stock or equity securities ranking prior to the
Exchanged Stock with respect to the payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up of the Corporation, and
(d) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one
or more other banking corporations which, collectively, immediately after such
transaction hold substantially all of the assets and liabilities which the
Bank held immediately prior to such transaction (which may be in addition to
other assets and liabilities acquired in such transaction). "Controlled
Subsidiary" shall mean any corporation at least 80% of the outstanding shares
of voting stock of which shall at the time be owned directly or indirectly by
the Corporation or a Qualified Successor Company. In connection with the
exercise of the voting rights contained in this paragraph 3(iv), holders of
all series of Parity Stock which are granted such voting rights shall vote as
a class, and each holder of $1.8125 Cumulative Preferred Stock, shall have
one-half vote for each share of stock held, and each other series shall have
such number of votes, if any, for each share of stock held as may be granted
them.
The foregoing voting provisions shall not apply as to any shares of
$1.8125 Cumulative Preferred Stock if, at or prior to the time when the act
with respect to which such vote would otherwise be required shall be effected,
all outstanding shares of $1.8125 Cumulative Preferred Stock shall have been
redeemed or sufficient funds shall have been deposited in trust in accordance
with paragraph 5 to effect such redemption.
4. Rank. For the purposes of these Articles Supplementary, any class or
classes of stock of the Corporation shall be deemed to rank:
(a) prior to the $1.8125 Cumulative Preferred Stock, as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, if the holders of
such class shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up,
as the case may be, in preference or priority to the holders of the
$1.8125 Cumulative Preferred Stock;
(b) on a parity with the $1.8125 Cumulative Preferred Stock, as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether or not the
dividend rates, dividend payment dates, or redemption or
liquidation preference per share thereof be different from those of
the $1.8125 Cumulative Preferred Stock, if the holders of such
class of stock and the $1.8125 Cumulative Preferred Stock shall be
entitled to the receipt of dividends or of amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or liquidation
preference, without preference or priority one over the other; and
(c) junior to the $1.8125 Cumulative Preferred Stock, either as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, or both, if such
class shall be Common Stock or if the holders of the $1.8125
Cumulative Preferred Stock shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution
or winding up of the Corporation, as the case may be, in preference
or priority to the holders of stock of such class or classes.
The $1.8125 Cumulative Preferred Stock shall rank prior, as to dividends
and upon liquidation, dissolution or winding up, to the Common Stock and on a
parity with the Corporation's Series A and Series B Dutch Auction Rate
Transferable Securities Preferred Stock, the Money Market Cumulative Preferred
Stock, the Remarketed Preferred Stock, the $3.375 Cumulative Convertible
Preferred Stock, the $1.9375 Cumulative Preferred Stock and the Adjustable
Rate Cumulative Preferred Stock, Series D.
5. Optional Redemption. The shares of the $1.8125 Cumulative Preferred
Stock, may be redeemed on or after July 1, 2000, at the option of the
Corporation, for cash, on at least 30 but not more than 60 days' notice at any
time or from time to time, as a whole or in part, at $25 per share, plus, in
each case, dividends accrued and accumulated but unpaid to the redemption
date. The $1.8125 Cumulative Preferred Stock, will not be subject to any
sinking fund or other obligation of the Corporation to purchase or redeem the
$1.8125 Cumulative Preferred Stock.
Any such redemption may be effected only with the prior approval of the
Federal Reserve Board (unless at such time it is determined that such approval
is not required).
If fewer than all outstanding shares of the $1.8125 Cumulative Preferred
Stock, are to be redeemed, the number of shares to be redeemed will be
determined by the Board of Directors of the Corporation and such shares will
be redeemed pro rata from the holders of record of such shares in proportion
to the number of such shares held by such holders (with adjustments to avoid
the redemption of fractional shares) or by lot in a manner determined by the
Board of Directors of the Corporation.
Notwithstanding the foregoing, if any dividends, including any
accumulation on the $1.8125 Cumulative Preferred Stock, are in arrears, no
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$1.8125 Cumulative Preferred Stock shall be redeemed unless all outstanding
$1.8125 Cumulative Preferred Stock is simultaneously redeemed, and the
Corporation shall not purchase or otherwise acquire any $1.8125 Cumulative
Preferred Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of $1.8125 Cumulative Preferred Stock pursuant to a
purchase or exchange offer so long as such offer is made on the same terms to
all holders of the $1.8125 Cumulative Preferred Stock.
Notice of redemption shall be given by mailing the same to each record
holder of the $1.8125 Cumulative Preferred Stock not less than 30 nor more
than 60 days prior to the date fixed for redemption thereof, at the address of
such holder as the same shall appear on the stock books of the Corporation.
Each notice shall state: (i) the redemption date; (ii) the number of shares
of $1.8125 Cumulative Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such shares of $1.8125
Cumulative Preferred Stock are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease to accrue on
such redemption date; and (vi) the date upon which the holders' exchange
rights, if any, as to such shares, shall terminate. If fewer than all the
shares of the $1.8125 Cumulative Preferred Stock are to be redeemed, the
notice mailed to each such holder thereof shall also specify the number of
shares of $1.8125 Cumulative Preferred Stock to be redeemed from each such
holder.
If notice of redemption of any shares of the $1.8125 Cumulative Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by the Corporation separate and apart from its other funds, in trust
for the pro rata benefit of the holders of any shares of $1.8125 Cumulative
Preferred Stock so called for redemption, from and after the redemption date
for such shares, dividends on such shares shall cease to accrue and such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the right to
receive the redemption price) shall cease. Upon surrender, in accordance with
such notice, of the certificates representing any such shares (properly
endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), the redemption
price set forth above shall be paid out of the funds provided by the
Corporation. If fewer than all shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof. Subject to applicable escheat laws, any
moneys so set aside by the Corporation and unclaimed at the end of 90 days
from the redemption date shall revert to the general funds of the Corporation,
after which reversion the holders of such shares so called for redemption
shall look only to the general funds of the Corporation for the payment of the
amounts payable upon such redemption. Any interest accrued on funds so
deposited shall be paid to the Corporation from time to time.
6. Liquidation. (i) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the $1.8125
Cumulative Preferred Stock shall be entitled, whether from capital or surplus,
before any assets of the Corporation shall be distributed among or paid over
to holders of Common Stock or any other class or series of stock of the
Corporation junior to the $1.8125 Cumulative Preferred Stock, as to preference
in respect to liquidation, dissolution or winding up, to be paid the amount of
$25 per share (the "liquidation preference") of the $1.8125 Cumulative
Preferred Stock, plus an amount equal to all accrued and unpaid dividends
thereon (whether or not earned or declared) to and including the date of final
distribution. The holders of the $1.8125 Cumulative Preferred Stock will not
be entitled to receive the liquidation preference until the liquidation
preference of any other class of stock of the Corporation ranking senior to
the $1.8125 Cumulative Preferred Stock, as to rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set aside therefor
sufficient to provide for payment) in full. After any such liquidation
preference payment, the holders of the $1.8125 Cumulative Preferred Stock
shall not be entitled to any further participation in any distribution of
assets of the Corporation.
(ii) If, upon any such liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation shall be insufficient to make
such full payments to the holders of the $1.8125 Cumulative Preferred Stock,
and the holders of any Preferred Stock ranking as to liquidation, dissolution
or winding up on a parity with the $1.8125 Cumulative Preferred Stock, then
such assets shall be distributed among the holders of the $1.8125 Cumulative
Preferred Stock, ratably in accordance with the respective amounts which would
be payable on such shares of $1.8125 Cumulative Preferred Stock and any other
such Preferred Stock if all amounts thereon were paid in full.
(iii) Neither the sale, lease or exchange (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property and assets of the Corporation, nor the merger or consolidation of any
other corporation into or with the Corporation nor a reorganization of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation.
7. Parity Stock. So long as any shares of $1.8125 Cumulative Preferred
Stock shall remain outstanding, in case the stated dividends or amounts
payable on liquidation, dissolution or winding up of the Corporation are not
paid in full with respect to all outstanding shares of Parity Stock, all such
shares shall share ratably (x) in the payment of dividends, including
accumulations (if any) in accordance with the sums which would be payable in
respect of all outstanding shares of Parity Stock if all dividends were paid
in full and (y) in any distribution of assets upon liquidation, dissolution or
winding up of the Corporation, in accordance with the sums which would be
payable in respect of all outstanding Parity Stock if all sums payable were
discharged in full.
8. Certain Definitions. (i) The term "outstanding", when used in
reference to shares of stock, shall mean issued shares, excluding shares
reacquired by the Corporation.
(ii) The amount of dividends "accrued" on any share of $1.8125
Cumulative Preferred Stock, as at any quarterly dividend payment date, shall
be deemed to be the amount of any unpaid dividends accumulated thereon to and
including the end of the day preceding such quarterly dividend payment date,
whether or not earned or declared; and the amount of dividends "accrued" on
any share of $1.8125 Cumulative Preferred Stock, as at any date other than a
quarterly dividend payment date, shall be calculated as the amount of any
unpaid dividends accumulated thereon to and including the end of the day
preceding the last preceding quarterly dividend payment date, whether or not
earned or declared, plus an amount equivalent to dividends on the liquidation
preference of such share at the annual dividend rate fixed for such share for
the period after the end of the day preceding such last preceding quarterly
dividend payment date to and including the date as of which the calculation is
made, calculated in accordance with the provisions of paragraph 2.
9. Exclusion of Other Rights. Unless otherwise required by law, shares
of the $1.8125 Cumulative Preferred Stock shall not have any rights, including
preemptive rights, or preferences other than those specifically set forth
herein, in the Charter or as provided by applicable law.
10. Notice. All notices or communications unless otherwise specified in
the Bylaws of the Corporation or these Articles Supplementary shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the
earlier of the date received or the date such notice is mailed.
11. Interpretation or Adjustment By Board of Directors. The Board of
Directors of the Corporation may, consistent with Maryland law, interpret or
adjust the provisions of these Articles Supplementary to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change
or modification which does not adversely affect the rights of beneficial
owners of the $1.8125 Cumulative Preferred Stock, and if such inconsistency or
ambiguity reflects any typographical error, error in transcription or other
error, the Board of Directors may authorize the filing of a Certificate of
Correction.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
presents to be signed in its name and on its behalf by its Chairman and
its corporate seal to be hereunto affixed and attested by its Secretary,
and the said officers of the Corporation further acknowledge
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said instrument to be the corporate act of the Corporation and state under the
penalties of perjury that to the best of their knowledge, information and
belief the matters and facts therein set forth with respect to approval are
true in all material respects, all on June 26, 1995.
REPUBLIC NEW YORK CORPORATION
By: /s/ Walter H. Weiner
(Chairman)
Attest:
/s/ William F. Rosenblum, Jr.
(Secretary)
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DOMESTIC CORPORATION
NOTICE OF CHANGE OF PRINCIPAL OFFICE AND RESIDENT AGENT
State Department of Assessments
and Taxation
Baltimore, Maryland
Pursuant to the provisions of Section 2-108 of the Maryland General
Corporation Law, the undersigned Maryland corporation hereby notifies the
State Department of Assessments and Taxation of Maryland:
(1) That under resolution adopted by the Board of Directors of the
corporation on May 28, 1997, a certified copy of which is filed herewith, the
resident agent of the corporation in the State of Maryland has been changed to
CSC-Lawyers Incorporating Service Company whose post office address is 11 East
Chase Street, Baltimore, Maryland 21202. The resident agent so designated is
a corporation of the State of Maryland.
(2) That under resolution adopted by the Board of Directors of the
corporation on May 28, 1997, a certified copy of which is filed herewith, the
principal office of the corporation in the State of Maryland has been changed
from 32 SOUTH STREET, BALTIMORE, Maryland to 11 East Chase Street, c/o CSC-
Lawyers Incorporating Service Company, Baltimore, Maryland 21202.
REPUBLIC NEW YORK CORPORATION
By /s/ Patricia J. Howard
(Vice) President
Dated: June 25, 1997
The undersigned, being the duly elected and acting Secretary of REPUBLIC
NEW YORK CORPORATION, hereby certifies that at a meeting of the Board of
Directors duly called and held on May 28, 1997, the following resolutions were
duly adopted and are now in full force and effect:
"RESOLVED, that CSC-Lawyers Incorporating Service Company, 11 East Chase
Street, Baltimore, Maryland 21202 be and it hereby is designated as
Resident Agent of the corporation in lieu of THE CORPORATION TRUST
INCORPORATED and that the proper officer of the corporation is authorized
to file a Notice to that effect.
FURTHER RESOLVED, that the principal office of the corporation in the
State of Maryland be and it is hereby changed to 11 East Chase Street,
c/o CSC-Lawyers Incorporating Service Company, Baltimore, Maryland 21202
and that the proper office of the corporation is authorized to file a
Notice to that effect."
Signed under the penalties of perjury this 25th day of June, 1997.
/s/ William F. Rosenblum, Jr.
Secretary
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its principal
Maryland office in the City of Baltimore, State of Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board
of Directors has authorized the classification of 3,000,000 of the 15,497,250
shares of Preferred Stock (the "Preferred Stock") which the Corporation now
has authority to issue into a series designated the $2.8575 Cumulative
Preferred Stock, and has provided for the issuance of such series.
SECOND: The number of shares and terms of the $2.8575 Cumulative Preferred
Stock, as set by the Finance Committee of the Board of Directors pursuant to
authority duly delegated by the Board of Directors are as follows:
1. $2.8575 Cumulative Preferred Stock. 3,000,000 shares of Preferred
Stock of the Corporation, without par value, are hereby constituted as the
original number of shares of a series of Preferred Stock designated as $2.8575
Cumulative Preferred Stock (the "$2.8575 Cumulative Preferred Stock"). The
$2.8575 Cumulative Preferred Stock is issuable in whole shares only. The
$2.8575 Cumulative Preferred Stock shall be of a stated value of $50 per share
(the "Stated Value"). The term "Charter" when used herein shall include the
Articles of Incorporation, as amended, restated and supplemented.
2. Dividends. The holders of the $2.8575 Cumulative Preferred Stock
shall be entitled to receive, but only when and as declared by the Board of
Directors out of funds legally available for the purpose, cash dividends at
the rate of $2.8575 per share per annum, and no more, payable quarterly on the
first day of January, April, July and October of each year, with the first
such dividend being payable January 1, 1998 (each a "dividend payment date").
Such dividends shall be payable from, and shall be cumulative from, the date
of original issue of each share. Dividends will be payable, in arrears, to
holders of record as they appear on the stock transfer records of the
Corporation on March 15, June 15, September 15 and December 15 immediately
preceding the relevant dividend payment date or if such day is not a business
day, the next preceding business day. The amount of dividends payable per
share for each full dividend period shall be computed by dividing by four the
$2.8575 annual rate. The amount of dividends payable for any dividend period
or any period, either shorter or longer than a full dividend period shall be
calculated on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in the dividend period for which dividends are
payable.
The Corporation shall not declare or pay or set apart for payment and
dividends on any series of its Preferred Stock ranking, as to dividends, on a
parity with or junior to the$2.8575 Cumulative Preferred Stock unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such
payment on the $2.8575 Cumulative Preferred Stock for all dividend periods
terminating on or prior to the date of payment of any such dividends on such
other series of Preferred Stock of the Corporation. When dividends are not
paid in full upon the $2.8575 Cumulative Preferred Stock and any other shares
of Preferred Stock of the Corporation ranking on parity as to dividends with
the $2.8575 Cumulative Preferred Stock, all dividends declared upon the
$2.8575 Cumulative Preferred Stock and any other Preferred Stock of the
Corporation ranking on parity as to dividends with the $2.8575 Cumulative
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share on the $2.8575 Cumulative Preferred Stock and such other
shares shall in all cases bear to each other the same ratio that the accrued
dividends per share on the $2.8575 Cumulative Preferred Stock and such other
Preferred Stock bear to each other. Except as set forth in the preceding
sentence, unless full dividends on the cumulative Preferred Stock of any
series have been declared and paid or set apart for payment for all past
dividend periods and full dividends for the then-current dividend period on
any outstanding noncumulative Preferred Stock of any series have been declared
and paid or declared and a sum sufficient for the payment thereof set apart
for such payment, no dividends (other than in Common Stock of the Corporation
or other shares of the Corporation ranking junior to the $2.8575 Cumulative
Preferred Stock as to dividends and upon liquidation) shall be declared or
paid or set aside for payment, nor shall any other distribution be made, on
the Common Stock of the Corporation or any other shares of the Corporation
ranking on a parity with or junior to the $2.8575 Cumulative Preferred Stock
as to dividends or upon liquidation. Unless full dividends on the cumulative
Preferred Stock of any series have been declared and paid or set apart for
payment for all past dividend periods and full dividends for the then-current
dividend period on the noncumulative Preferred Stock of any series have been
declared and a sum sufficient for the payment thereof set apart for such
payment, no Common Stock or any other shares of the Corporation ranking on a
parity with or junior to the $2.8575 Cumulative Preferred Stock as to
dividends or upon liquidation, shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid or made available for a
sinking fund for the redemption of any such shares) by the Corporation or any
subsidiary of the Corporation except by conversion into or exchange for
shares of the Corporation ranking junior to the $2.8575 Cumulative Preferred
Stock as to dividends and upon liquidation ; provided, however, that any
moneys set aside in trust as a sinking fund payment for any series of
Preferred Stock pursuant to the resolutions providing for the issue of shares
of such series may thereafter be applied to the purchase or redemption of
Preferred Stock of such series whether or not at the time of such application
full cumulative dividends upon the outstanding $2.8575 Cumulative Preferred
Stock shall have been paid or declared and set apart for payment.
If, prior to 18 months after the date of the original issuance of
the $2.8575 Cumulative Preferred Stock, one or more amendments to the
Internal Revenue Code of 1986, as amended (the Code ), are enacted that
reduce the percentage of the dividends-received deduction (currently 70%)
as specified in section 243(a)(1) of the Code or any
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successor provision (the Dividends-Received Percentage ) with respect to
dividends payable on the $2.8575 Cumulative Preferred Stock, certain
adjustments may be made in respect of the dividends payable by the
Corporation, and Post Declaration Date Dividends and Retroactive Dividends (as
such terms are defined below) may become payable, as described below.
The amount of each dividend payable (if declared) per share of $2.8575
Cumulative Preferred Stock for dividend payments made on or after the
effective date of such change in the Code will be adjusted by multiplying the
amount of the dividend payable described above (before adjustment) by the
following fraction (the DRD Formula ), and rounding the result to the nearest
cent (with one-half cent rounded up):
1 - .35 (1 - .70)
1 - .35 (1 - DRP)
For the purposes of the DRD Formula, DRP means the Dividends-Received
Percentage (expressed as a decimal) applicable to the dividend in question;
provided, however, that if the Dividends-Received Percentage applicable to the
dividend in question shall be less than 50%, then the DRP shall equal .50. No
amendment to the Code, other than a change in the percentage of the dividends-
received deduction set forth in section 243(a)(1) of the Code or any successor
provision thereto, will give rise to an adjustment. Notwithstanding the
foregoing provisions, if, with respect to any such amendment, the Corporation
receives either an unqualified opinion of nationally recognized independent
tax counsel selected by the Corporation or a private letter ruling or similar
form of authorization from the Internal Revenue Service ( IRS ) to the effect
that such amendment does not apply to a dividend payable on the $2.8575
Cumulative Preferred Stock, then such amendment will not result in the
adjustment provided for pursuant to the DRD Formula with respect to such
dividend. The opinion referenced in the previous sentence shall be based upon
the legislation amending or establishing the DRP or upon a published
pronouncement of the IRS addressing such legislation. Unless the context
otherwise requires, references to dividends in these Articles Supplementary
mean dividends as adjusted by the DRD Formula. The Corporation's calculation
of the dividends payable, as so adjusted and as certified accurate as to
calculation and reasonable as to method by the independent certified public
accountants then regularly engaged by the Corporation, shall be final and not
subject to review absent manifest error.
Notwithstanding the foregoing, if any such amendment to the Code is
enacted after the dividend payable on a dividend payment date has been
declared and such amendment is applicable to such dividend, the amount of the
dividend payable on such dividend payment date will not be increased; instead,
additional dividends (the Post Declaration Date Dividends ) equal to the
amount, if any, by which (x) the product of the dividend paid by the
Corporation on such dividend payment date and the DRD Formula (where the DRP
used in the DRD Formula would be equal to the greater of the Dividend-Received
Percentage applicable to the dividend in question and .50) is greater than (y)
the dividend paid by the Corporation on such dividend payment date, will be
payable (if declared) to holders of $2.8575 Cumulative Preferred Stock on the
record date applicable to the next succeeding dividend payment date or, if the
$2.8575 Cumulative Preferred Stock is called for redemption prior to such
dividend payment date, to the holders of $2.28575 Cumulative Preferred Stock
on the applicable redemption date, as the case may be, and will be paid on
such dividend payment date or such redemption date, as the case may be, in
addition to any other amounts payable on such date.
If any such amendment to the Code is enacted and the reduction in the
Dividends-Received Percentage retroactively applies to a dividend payment date
as to which the Corporation previously paid dividends on the $2.8575
Cumulative Preferred Stock (each, an Affected Dividend Payment Date ), the
Corporation will pay (if declared) additional dividends (the Retroactive
Dividends ) to holders of $2.8575 Cumulative Preferred Stock on the record
date applicable to the next succeeding dividend payment date (or, if such
amendment is enacted after the dividend payable on such dividend payment date
has been declared, to holders of $2.8575 Cumulative Preferred Stock on the
record date following the date of enactment) or, if the $2.8575 Cumulative
Preferred Stock is called for redemption prior to such record date, to holders
of $2.8575 Cumulative Preferred Stock on the applicable redemption date, as
the case may be, and will be paid on such dividend payment date or such
redemption date, as the case may be, in an amount equal to the amount, if any
by which (x) the product of the sum of the dividends paid by the Corporation
on each Affected Dividend Payment Date and the DRD Formula (where the DRP used
in the DRD Formula would be equal to the greater of the Dividends-Received
Percentage and .50 applied to each Affected Dividend Payment Date) is greater
than (y) the sum of the dividends paid by the Corporation on each Affected
Dividend Payment Date. The Corporation will only make one payment of
Retroactive Dividends for any such amendment. Notwithstanding the foregoing
provisions, if, with respect to any such amendment, the Corporation receives
either an unqualified opinion of nationally recognized independent tax counsel
selected by the Corporation or a private letter ruling or similar form of
authorization from the IRS to the effect that such amendment does not apply to
a dividend payable on an Affected Dividend Payment Date for the $2.8575
Cumulative Preferred Stock, then such amendment will not result in the payment
of Retroactive Dividends with respect to such Affected Dividend Payment Date.
The opinion referenced in the previous sentence shall be based upon the
legislation amending or establishing the DRP or upon a published pronouncement
of the IRS addressing such legislation.
Notwithstanding the foregoing, no adjustment in the dividends payable by
the Corporation shall be made, and no Post Declaration Date Dividends or
Retroactive Dividends shall be payable by the Corporation, in respect of the
enactment of any amendment to the Code 18 months or more after the date of
original issuance of the $2.8575 Cumulative Preferred Stock that reduces the
Dividends-Received Percentage.
In the event that the amount of dividends payable per share of the
$2.8575 Cumulative Preferred Stock is adjusted
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pursuant to the DRD Formula and/or Post Declaration Date Dividends or
Retroactive Dividends are to be paid, the Corporation will give notice of each
such adjustment and, if applicable, any Post Declaration Date Dividends and
Retroactive Dividends to the affected holders of $2.8575 Cumulative Preferred
Stock.
3. Voting Rights. (i) Holders of the $2.8575 Cumulative Preferred
Stock, shall have no voting rights, either general or special, except as
expressly required by applicable law, the Charter and as specified in this
paragraph 3.
(ii) Whenever, at any time or times, dividends payable on the
shares of $2.8575 Cumulative Preferred Stock shall be in arrears for six
consecutive calendar quarters, then at the next annual meeting of stockholders
and at any annual meeting thereafter and at any meeting called for the
election of directors, until all dividends accumulated on the $2.8575
Cumulative Preferred Stock have been paid or declared and a sum sufficient for
payment has been set aside, the holders of the $2.8575 Cumulative Preferred
Stock, either alone or together with the holders of one or more other series
of cumulative Preferred Stock at the time outstanding which are granted such
voting rights, voting as a class, shall be entitled, to the exclusion of the
holders of one or more other series or classes of stock having general voting
rights, to vote for and elect two additional members of the Board of Directors
of the Corporation, and the holders of Common Stock together with the holders
of any series or class or classes of stock of the Corporation having general
voting rights and not then entitled to elect two members of the Board of
Directors pursuant to this paragraph 3 to the exclusion of the holders of all
series then so entitled, shall be entitled to vote and elect the balance of
the Board of Directors. In such case, the Board of Directors of the
Corporation shall, as of the date of the annual meeting of stockholders or at
any meeting called for the election of directors aforesaid, be increased by
two directors. The rights of the holders of the $2.8575 Cumulative Preferred
Stock to participate (either alone or together with the holders of one or more
other series of cumulative Preferred Stock at the time outstanding which are
granted such voting rights) in the exclusive election of two members of the
Board of Directors of the Corporation pursuant to this paragraph 3 shall
continue in effect until cumulative dividends have been paid in full or
declared and a sum sufficient has been set apart for payment on the $2.8575
Cumulative Preferred Stock. At elections for such directors, each holder of
$2.8575 Cumulative Preferred Stock shall be entitled to one vote for each
share of $2.8575 Cumulative Preferred Stock held of record on the record date
established for the meeting. The holders of $2.8575 Cumulative Preferred
Stock shall have no right to cumulate such shares in voting for the election
of directors. At the annual meeting of stockholders next following the
termination (by reason of the payment of all accumulated and defaulted
dividends on such stock or provision for the payment thereof by declaration
and setting apart thereof) of the exclusive voting power of the holders of
$2.8575 Cumulative Preferred Stock pursuant to this paragraph 3, and the
holders of all other cumulative series which shall have been entitled to vote
for and elect such two members of the Board of Directors of the Corporation,
the terms of office of all persons who may have been elected directors of the
Corporation by vote of such holders shall terminate and the two vacancies
created pursuant to this paragraph 3 to accommodate the exclusive right of
election conferred hereunder shall thereupon be eliminated and the Board of
Directors shall be decreased by two directors.
(iii) So long as any shares of $2.8575 Cumulative Preferred Stock
remain outstanding, the affirmative vote of the holders of at least two-thirds
of the shares of all the series of cumulative Preferred Stock, outstanding at
the time (voting separately as one class) given in person or by proxy, at any
special or annual meeting called for the purpose, shall be necessary to
permit, effect or validate any one or more of the following:
(a) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking prior (as
set forth in paragraph 4(a)) to the $2.8575 Cumulative Preferred
Stock, or
(b) The authorization, creation or issuance, or any increase in the
authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) which ranks on a
parity (as set forth in paragraph 4(b)) with the $2.8575 Cumulative
Preferred Stock, unless the Articles Supplementary or other
provisions of the Charter creating or authorizing such class or
series shall provide that if in any case the stated dividends or
amounts payable on liquidation, dissolution or winding up of the
Corporation are not paid in full on the $2.8575 Cumulative Preferred
Stock and all outstanding shares of stock ranking on a parity with
the $2.8575 Cumulative Preferred Stock, (the $2.8575 Cumulative
Preferred Stock, and all such other stock being herein called
"Parity Stock"), the shares of all Parity Stock shall share ratably
(x) in the payment of dividends, including accumulations (if any) in
accordance with the sums which would be payable on all Parity Stock
if all dividends in respect of all shares of Parity Stock were paid
in full and (y) on any distribution of assets upon liquidation,
dissolution or winding up of the Corporation in accordance with the
sums which would be payable in respect of all shares of Parity Stock
if all sums payable were discharged in full, or
(c) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Charter
of the Corporation, including these Articles Supplementary, which
would materially and adversely affect any right, preference,
privilege or voting power of the $2.8575 Cumulative Preferred Stock,
or of the holders thereof; provided, however, that any increase in
the amount of authorized Preferred Stock or the Corporation's Series
A and Series B Dutch Auction Rate Transferable Securities Preferred
Stock, the Money Market Cumulative Preferred Stock, the Adjustable
Rate Cumulative Preferred Stock, Series D, the $1.8125 Cumulative
Preferred Stock, the $2.8575 Cumulative Preferred Stock, or any
other capital stock of the Corporation, or the creation and issuance
of other series of Preferred Stock, including convertible Preferred
Stock, or any other capital stock of the Corporation, in each case
ranking on a parity with or junior to the $2.8575 Cumulative
Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up
of the Corporation, shall not be deemed to affect materially and
adversely such rights, preferences, privileges or voting powers.
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(iv) So long as any shares of $2.8575 Cumulative Preferred Stock
remain outstanding and notwithstanding any provision of the Charter of the
Corporation requiring a greater percentage, the Corporation shall not, without
the affirmative vote of the holders of at least a majority of the votes of all
Parity Stock entitled to vote outstanding at the time, given in person or by
proxy, by resolution duly adopted at a meeting at which a quorum was present
and acting and at which the holders of $2.8575 Cumulative Preferred Stock
(alone or together with the holders of one or more other series of Parity
Stock at the time outstanding and entitled to vote) vote separately as a
class, (a) directly or indirectly, sell, transfer or otherwise dispose of, or
permit Republic National Bank of New York (the "Bank") or any other subsidiary
of the Corporation, to issue, sell, transfer or otherwise dispose of any
shares of voting stock of the Bank, or securities convertible into or options,
warrants or rights to acquire voting stock of the Bank, unless after giving
effect to any such transaction the Bank remains a Controlled Subsidiary (as
hereinafter defined) of the Corporation or of a Qualified Successor Company
(as hereinafter defined); (b) merge or consolidate with, or convey
substantially all of its assets, to any person or corporation unless the
entity surviving such merger or consolidation or the transferee of such assets
is the Corporation or a Qualified Successor Company; or (c) permit the Bank to
merge, consolidate with, or convey substantially all of its assets to, any
person or corporation unless the entity surviving such merger or consolidation
or the transferee of such assets is a Controlled Subsidiary of the Corporation
or of a Qualified Successor Company, except in any of the foregoing cases as
required to comply with applicable law, including, without limitation, any
court or regulatory order. The term "Qualified Successor Company" shall mean
a corporation (or other similar organization or entity whether organized under
or pursuant to the laws of the United States or any state thereof or of
another jurisdiction) which (a) is or is required to be a registered bank
holding company under the United States Bank Holding Company Act of 1956, as
amended, or any successor legislation, (b) issues to the holders of the
$2.8575 Cumulative Preferred Stock, in exchange for the $2.8575 Cumulative
Preferred Stock, shares of preferred stock having at least the same relative
rights and preferences as the $2.8575 Cumulative Preferred Stock, (the
"Exchanged Stock"), (c) immediately after such transaction has not outstanding
or authorized any class of stock or equity securities ranking prior to the
Exchanged Stock with respect to the payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up of the Corporation, and
(d) holds, as a Controlled Subsidiary or Subsidiaries, either the Bank or one
or more other banking corporations which, collectively, immediately after such
transaction hold substantially all of the assets and liabilities which the
Bank held immediately prior to such transaction (which may be in addition to
other assets and liabilities acquired in such transaction). "Controlled
Subsidiary" shall mean any corporation at least 80% of the outstanding shares
of voting stock of which shall at the time be owned directly or indirectly by
the Corporation or a Qualified Successor Company. In connection with the
exercise of the voting rights contained in this paragraph 3(iv), holders of
all series of Parity Stock which are granted such voting rights shall vote as
a class, and each holder of $2.8575 Cumulative Preferred Stock shall have one
vote for each share of stock held, and each other series shall have such
number of votes, if any, for each share of stock held as may be granted them.
The foregoing voting provisions shall not apply as to any shares of
$2.8575 Cumulative Preferred Stock if, at or prior to the time when the act
with respect to which such vote would otherwise be required shall be effected,
all outstanding shares of $2.8575 Cumulative Preferred Stock shall have been
redeemed or sufficient funds shall have been deposited in trust in accordance
with paragraph 5 to effect such redemption.
4. Rank. For the purposes of these Articles Supplementary, any class or
classes of stock of the Corporation shall be deemed to rank:
(a) prior to the $2.8575 Cumulative Preferred Stock, as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, if the holders of such
class shall be entitled to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of the $2.8575
Cumulative Preferred Stock;
(b) on a parity with the $2.8575 Cumulative Preferred Stock, as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether or not the
dividend rates, dividend payment dates, or redemption or liquidation
preference per share thereof be different from those of the $2.8575
Cumulative Preferred Stock, if the holders of such class of stock
and the $2.8575 Cumulative Preferred Stock shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to
their respective dividend rates
or liquidation preference, without preference or priority one over
the other; and
(c) junior to the $2.8575 Cumulative Preferred Stock, either as to
dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, or both, if such class
shall be Common Stock or if the holders of the $2.8575 Cumulative
Preferred Stock shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up of
the Corporation, as the case may be, in preference or priority to
the holders of stock of such class or classes.
The $2.8575 Cumulative Preferred Stock shall rank prior, as to dividends
and upon liquidation, dissolution or winding up, to the Common Stock and on a
parity with the Corporation's Series A and Series B Dutch Auction Rate
Transferable Securities Preferred Stock, the Money Market Cumulative Preferred
Stock, the Adjustable Rate Cumulative Preferred Stock, Series D and the
$1.8125 Cumulative Preferred Stock.
5. Optional Redemption. The shares of the $2.8575 Cumulative Preferred
Stock, may be redeemed on or after October 1, 2007, at the option of the
Corporation, for cash, on at least 30 but not more than 60 days' notice at any
time or from time to time, as a whole or in part, at $50 per share, plus, in
each case, dividends accrued and accumulated but unpaid to the redemption
date. The $2.8575 Cumulative Preferred Stock, will not be subject to any
sinking fund or other obligation of the Corporation to purchase or redeem the
$2.8575 Cumulative Preferred Stock.
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Any such redemption may be effected only with the prior approval of the
Board of Governors of the Federal Reserve System (unless at such time it is
determined that such approval is not required).
If fewer than all outstanding shares of the $2.8575 Cumulative Preferred
Stock, are to be redeemed, the number of shares to be redeemed will be
determined by the Board of Directors of the Corporation and such shares will
be redeemed pro rata from the holders of record of such shares in proportion
to the number of such shares held by such holders (with adjustments to avoid
the redemption of fractional shares) or by lot in a manner determined by the
Board of Directors of the Corporation.
Notwithstanding the foregoing, if any dividends, including any
accumulation on the $2.8575 Cumulative Preferred Stock, are in arrears, no
$2.8575 Cumulative Preferred Stock shall be redeemed unless all outstanding
$2.8575 Cumulative Preferred Stock is simultaneously redeemed, and the
Corporation shall not purchase or otherwise acquire any $2.8575 Cumulative
Preferred Stock; provided, however, that the foregoing shall not prevent the
purchase or acquisition of $2.8575 Cumulative Preferred Stock pursuant to a
purchase or exchange offer so long as such offer is made on the same terms to
all holders of the $2.8575 Cumulative Preferred Stock.
Notice of redemption shall be given by mailing the same to each record
holder of the $2.8575 Cumulative Preferred Stock not less than 30 nor more
than 60 days prior to the date fixed for redemption thereof, at the address of
such holder as the same shall appear on the stock books of the Corporation.
Each notice shall state: (i) the redemption date; (ii) the number of shares
of $2.8575 Cumulative Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such shares of $2.8575
Cumulative Preferred Stock are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease to accrue on
such redemption date; and (vi) the date upon which the holders' exchange
rights, if any, as to such shares, shall terminate. If fewer than all the
shares of the $2.8575 Cumulative Preferred Stock are to be redeemed, the
notice mailed to each such holder thereof shall also specify the number of
shares of $2.8575 Cumulative Preferred Stock to be redeemed from each such
holder.
If notice of redemption of any shares of the $2.8575 Cumulative Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by the Corporation separate and apart from its other funds, in trust
for the pro rata benefit of the holders of any shares of $2.8575 Cumulative
Preferred Stock so called for redemption, from and after the redemption date
for such shares, dividends on such shares shall cease to accrue and such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the right to
receive the redemption price) shall cease. Upon surrender, in accordance with
such notice, of the certificates representing any such shares (properly
endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), the redemption
price set forth above shall be paid out of the funds provided by the
Corporation. If fewer than all shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof. Subject to applicable escheat laws, any
moneys so set aside by the Corporation and unclaimed at the end of 90 days
from the redemption date shall revert to the general funds of the Corporation,
after which reversion the holders of such shares so called for redemption
shall look only to the general funds of the Corporation for the payment of the
amounts payable upon such redemption. Any interest accrued on funds so
deposited shall be paid to the Corporation from time to time.
6. Liquidation. (i) Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the $2.8575
Cumulative Preferred Stock shall be entitled, whether from capital or surplus,
before any assets of the Corporation shall be distributed among or paid over
to holders of Common Stock or any other class or series of stock of the
Corporation junior to the $2.8575 Cumulative Preferred Stock, as to preference
in respect to liquidation, dissolution or winding up, to be paid the amount of
$50 per share (the "liquidation preference") of the $2.8575 Cumulative
Preferred Stock, plus an amount equal to all accrued and
unpaid dividends thereon (whether or not earned or declared) to and including
the date of final distribution. The holders of the $2.8575 Cumulative
Preferred Stock will not be entitled to receive the liquidation preference
until the liquidation preference of any other class of stock of the
Corporation ranking senior to the $2.8575 Cumulative Preferred Stock, as to
rights upon liquidation, dissolution or winding up shall have been paid (or a
sum set aside therefor sufficient to provide for payment) in full. After any
such liquidation preference payment, the holders of the $2.8575 Cumulative
Preferred Stock shall not be entitled to any further participation in any
distribution of assets of the Corporation.
(ii) If, upon any such liquidation, dissolution or winding up of
the Corporation, the assets of the Corporation shall be insufficient to make
such full payments to the holders of the $2.8575 Cumulative Preferred Stock
and the holders of any Preferred Stock ranking as to liquidation, dissolution
or winding up on a parity with the $2.8575 Cumulative Preferred Stock, then
such assets shall be distributed among the holders of the $2.8575 Cumulative
Preferred Stock and holders of such other Preferred Stock, ratably in
accordance with the respective amounts which would be payable on such shares
of $2.8575 Cumulative Preferred Stock and any other such Preferred Stock if
all amounts thereon were paid in full.
(iii) Neither the sale, lease or exchange (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property and assets of the Corporation, nor the merger or consolidation of any
other corporation into or with the Corporation nor a reorganization of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation.
7. Parity Stock. So long as any shares of $2.8575 Cumulative
Preferred Stock shall remain outstanding, in case
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the stated dividends or amounts payable on liquidation, dissolution or winding
up of the Corporation are not paid in full with respect to all outstanding
shares of Parity Stock, all such shares shall share ratably (x) in the payment
of dividends, including accumulations (if any) in accordance with the sums
which would be payable in respect of all outstanding shares of Parity Stock if
all dividends were paid in full and (y) in any distribution of assets upon
liquidation, dissolution or winding up of the Corporation, in accordance with
the sums which would be payable in respect of all outstanding Parity Stock if
all sums payable were discharged in full.
8. Certain Definitions. (i) The term "outstanding", when used in
reference to shares of stock, shall mean issued shares, excluding shares
reacquired by the Corporation.
(ii) The amount of dividends "accrued" on any share of $2.8575
Cumulative Preferred Stock, as at any quarterly dividend payment date, shall
be deemed to be the amount of any unpaid dividends accumulated thereon to and
including the end of the day preceding such quarterly dividend payment date,
whether or not earned or declared; and the amount of dividends "accrued" on
any share of $2.8575 Cumulative Preferred Stock, as at any date other than a
quarterly dividend payment date, shall be calculated as the amount of any
unpaid dividends accumulated thereon to and including the end of the day
preceding the last preceding quarterly dividend payment date, whether or not
earned or declared, plus an amount equivalent to dividends on the liquidation
preference of such share at the annual dividend rate fixed for such share for
the period after the end of the day preceding such last preceding quarterly
dividend payment date to and including the date as of which the calculation is
made, calculated in accordance with the provisions of paragraph 2.
9. Exclusion of Other Rights. Unless otherwise required by law, shares
of the $2.8575 Cumulative Preferred Stock shall not have any rights, including
preemptive rights, or preferences other than those specifically set forth
herein, in the Charter or as provided by applicable law.
10. Notice. All notices or communications unless otherwise specified in
the Bylaws of the Corporation or these Articles Supplementary shall be
sufficiently given if in writing and delivered in person or mailed by
first-class mail, postage prepaid. Notice shall be deemed given on the
earlier of the date received or the date such notice is mailed.
11. Interpretation or Adjustment By Board of Directors. The Board of
Directors of the Corporation may, consistent with Maryland law, interpret or
adjust the provisions of these Articles Supplementary to resolve any
inconsistency or ambiguity, remedy any formal defect or make any other change
or modification which does not adversely affect the rights of beneficial
owners of the $2.8575 Cumulative Preferred Stock, and if such inconsistency or
ambiguity reflects any typographical error, error in transcription or other
error, the Board of Directors may authorize the filing of a Certificate of
Correction.
IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these presents to
be signed in its name and on its behalf by its Senior Vice President and its
corporate seal to be hereunto affixed and attested by its Assistant Secretary,
and the said officers of the Corporation further acknowledge said instrument
to be the corporate act of the Corporation and state under the penalties of
perjury that to the best of their knowledge, information and belief the
matters and facts therein set forth with respect to approval are true in all
material respects, all on September 23, 1997.
REPUBLIC NEW YORK CORPORATION
By: /s/ Stephen J. Saali
(Senior Vice President)
Attest:
/s/ Kathleen Johnson
(Assistant Secretary)
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation having its
principal Maryland office in the City of Baltimore, State of Maryland
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland (the "Department") that:
FIRST: The Board of Directors of the Corporation has redeemed 1,000
shares of the Republic New York Corporation Remarketed Preferred Stock, no par
value, of the Corporation ("Remarketed Preferred"), which by the terms of the
Company's Charter may not be reissued. Currently, there are no outstanding
shares of Remarketed Preferred.
SECOND: The terms of the 2,000,000 shares $2.125 Cumulative Preferred
Stock, no par value, of the Company contained in Article SECOND, paragraph 5
of the Articles Supplementary dated October 6, 1977 and filed with the
Department on October 11, 1977, in part, are as follows:
"At he option of the Corporation, shares of [$2.125
Cumulative Preferred Stock] redeemed or otherwise acquired
(including sinking fund acquisitions) may be restored to the
status of authorized but unissued shares of Preferred Stock."
All of the issued shares of the $2.125 Cumulative Preferred Stock having
been since redeemed, purchased or otherwise acquired by the Corporation, the
Board of Directors has reclassified, and has approved the filing of these
Articles Supplementary to confirm reclassification of, such shares (together
with any unissued shares of the $2.125 Cumulative Preferred Stock) back into
2,000,000 shares Preferred Stock, no par value.
THIRD: The terms of the 1,000,000 shares $3.125 Cumulative Preferred
Stock, no par value, of the Company contained in Article SECOND, paragraph 5
of the Articles Supplementary dated September 5, 1980 and filed with the
Department on September 9, 1980, in part, are as follows:
"At he option of the Corporation, shares of [$3.125
Cumulative Preferred Stock] redeemed or otherwise acquired may
be restored to the status of authorized but unissued shares of
Preferred Stock."
All of the issued shares of the $3.125 Cumulative Preferred Stock having been
since redeemed, purchased or otherwise acquired by the Corporation, the Board
of Directors has reclassified, and has approved the filing of these Articles
Supplementary to confirm reclassification of, such shares (together with any
unissued shares of the $3.125 Cumulative Preferred Stock) back into 1,000,000
shares Preferred Stock, no par value.
FOURTH: The terms of the 1,500,000 shares Cumulative Preferred Stock
Floating Rate Series A, no par value, of the Company contained in Article
SECOND, paragraph 6 of the Articles Supplementary dated May 14, 1982 and filed
with the Department on May 14, 1982, in part, are as follows:
"At he option of the Corporation, shares of Floating Rate
Series A Stock redeemed or otherwise acquired, may be restored
to the status of authorized but unissued shares of Preferred
Stock."
All of the issued shares of the Cumulative Preferred Stock, Floating Rate
Series A having been since redeemed, purchased or otherwise acquired by the
Corporation, the Board of Directors has reclassified, and has approved the
filing of these Articles Supplementary to confirm reclassification of, such
shares (together with any unissued shares of the Cumulative Preferred Stock
Floating Rate Series A) back into 1,500,000 shares Preferred Stock, no par
value.
FIFTH: The terms of the 1,000,000 shares Cumulative Preferred Stock,
Floating Rate Series B, no par value, of the Company contained in Article
SECOND, paragraph 6 of the Articles Supplementary dated March 7, 1984 and
filed with the Department on March 9, 1984, in part, are as follows:
"At he option of the Corporation, shares of Floating Rate
Series B Stock redeemed or otherwise acquired, may be restored
to the status of authorized but unissued shares of Preferred
Stock."
All of the issued shares of the Cumulative Preferred Stock, Floating Rate
Series B having been since redeemed, purchased or otherwise acquired by the
Corporation, the Board of Directors has reclassified, and has approved the
filing of these Articles Supplementary to confirm reclassification of, such
shares (together with any unissued shares of the Cumulative Preferred Stock,
Floating Rate Series B) back into 1,000,000 shares Preferred Stock, no par
value.
SIXTH: The terms of the 4,000,000 shares $1.9375 Cumulative Preferred
Stock, no par value, of the Company were established in the Articles
Supplementary dated February 24, 1992 and filed with the Department on
February 24, 1992.
All of the issued shares of the $1.9375 Cumulative Preferred Stock, no par
value, of the Company having been since
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converted, redeemed, purchased or otherwise acquired by the Corporation, the
Board of Directors has reclassified, and has approved the filing of these
Articles Supplementary to confirm reclassification of, such shares (together
with any unissued shares of the $1.9375 Cumulative Preferred Stock) back into
4,000,000 shares Preferred Stock, no par value.
SEVENTH: The terms of the 4,000,000 shares $3.375 Cumulative Convertible
Preferred Stock, no par value, of the Company contained in Article SECOND,
paragraph 3(ix) of the Articles Supplementary dated May 14, 1991 and filed
with the Department on May 14, 1991, in part as follows:
"Upon any conversion or redemption of shares of [$3.375
Cumulative].Convertible Preferred Stock, the shares of [$3.375
Cumulative] Convertible Preferred Stock so converted or
redeemed shall have the status of authorized and unissued
shares of Preferred Stock, and the number of shares of
Preferred Stock which the Corporation shall have authority to
issue shall not be decreased by the conversion or redemption of
[$3.375 Cumulative] Convertible Preferred Stock."
All of the issued shares of the $3.375 Cumulative Convertible Preferred Stock,
no par value, of the Company having been since converted, redeemed, purchased
or otherwise acquired by the Corporation, the Board of Directors has
reclassified, and has approved the filing of these Articles Supplementary to
confirm reclassification of, such shares (together with any unissued shares of
the $3.375 Cumulative Preferred Stock) back into 4,000,000 shares Preferred
Stock, no par value.
EIGHTH: The terms of the 500 shares of Money Market Cumulative Preferred
Stock, no par value ("MMP"), of the Company contained in Article SECOND, Part
I, paragraph 1(b) of the Articles Supplementary dated July 17, 1987 and filed
with the Department on July 22, 1987, in part as follows:
"All shares of MMP redeemed or purchased by the
Corporation shall be retired and cancelled and shall be
restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series, and may
thereafter by issued, but not as shares of MMP."
All of the issued shares of the Money Market Cumulative Preferred Stock, no
par value, of the Company having been since redeemed, purchased or otherwise
acquired by the Corporation, the Board of Directors has reclassified, and has
approved the filing of these Articles Supplementary to confirm
reclassification of, such shares (together with any unissued shares of the
Money Market Cumulative Preferred Stock) back into 500 shares Preferred Stock,
no par value.
NINTH: As a result of the redemption of the Remarketed Preferred and the
reclassifications described herein, the Corporation s authorized capital stock
currently consists of the following:
150,000,000 shares of Common Stock, par value $5.00 per share
12,497,750 shares of Preferred Stock, no par value (which
shares of Preferred Stock are not classified as to series)
625 shares of Dutch Auction Rate Transferable Securities
Preferred Stock, Series A, no pare value
625 shares of Dutch Auction Rate Transferable Securities
Preferred Stock, Series B, no pare value
1,500,00 shares of Adjustable Rate Cumulative Preferred Stock,
Series D, nor par value
3,000,000 shares of $1.8125 Cumulative Preferred Stock, no par
value
3,000,000 shares of $2.8575 Cumulative Preferred Stock, no par
value
TENTH: No amendment to the Charter of the Corporation is effected by
these Articles Supplementary, the purposes hereof being to record the
reduction of authorized shares of the Preferred Stock resulting from the
redemption by the Corporation of it Remarketed Preferred, which by the terms
of the Company's Charter may not be reissued, and to reclassify or to confirm
for the record the reclassification of the share of certain series of capital
stock of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Executive Vice President and
witnessed by its Secretary on January 21, 1998.
WITNESS: REPUBLIC NEW YORK CORPORATION
/s/ William F. Rosenblum. Jr. By: /s/ Thomas F. Robards
William F. Rosenblum, Jr., Thomas F. Robards,
Secretary Executive Vice President
THE UNDERSIGNED, Executive Vice President of Republic New York
Corporation, who executed on behalf of the Corporation Articles Supplementary
of which this Certificate is made a part, hereby acknowledges in the name and
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on behalf of said Corporation the foregoing Articles Supplementary to be the
corporate act of said Corporation and hereby certifies that the matters and
facts set forth herein with respect to the authorization and approval thereof
are true in all material respects under the penalties of perjury.
/s/ Thomas F. Robards
Thomas F. Robards, Executive Vice President
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REPUBLIC NEW YORK CORPORATION
ARTICLES SUPPLEMENTARY
REPUBLIC NEW YORK CORPORATION, a Maryland corporation (hereinafter
called the Corporation ) hereby certifies to the State Department of
Assessments and Taxation of the State of Maryland (the Department ) that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors in Article Fifth of the charter of the Corporation, as amended
through the date hereof, the Board of Directors has classified one hundred
(100) shares of Preferred Stock of the 12,497,750 shares of Preferred Stock
without par value which the Corporation now has authority to issue into a
series designated the Series X Preferred Stock, and has provided for the
issuance of such series.
SECOND: A description of the Series X Preferred Stock, including
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption thereof, is as follows:
1. Number of Shares and Designation. One hundred (100) shares of
Preferred Stock are hereby designated as "Series X Preferred Stock."
2. Definitions. For purposes of the Series X Preferred Stock, the
following terms shall have the meanings indicated:
"Applicable Taxes" shall mean in respect of any Cash Proceeds, any
Transferable Proceeds or any Non-Transferable Value arising as a result of the
receipt of FIRREA Proceeds, an amount thereof agreed to in good faith between
the Corporation and the holders of the Required Percentage of the Series X
Preferred Stock as representing the Taxes payable by the FIRREA Plaintiff (or
the consolidated return group of which it is a member) in respect of the
receipt thereof or on the proceeds realized from the liquidation thereof;
provided, that if no such agreement is reached by the fifth (5th) Business Day
prior to the Dividend/Redemption Distribution Date on which the dividend or
redemption distribution relating to such Cash Proceeds, Transferable Proceeds
or Non-Transferable Value is required to be paid to the holders, Applicable
Taxes shall in such case be an amount equal to the product of (i) the amount
of the Cash Proceeds, Transferable Proceeds or Non-Transferable Value, as the
case may be, determined by the Corporation in good faith; and (ii) the maximum
applicable marginal statutory tax rate in effect at the time of receipt of
such FIRREA Proceeds.
"Board of Directors" shall mean the board of directors of the
Corporation or any committee authorized by such Board of Directors to perform
any of its responsibilities with respect to the Series X Preferred Stock.
"Business Day" shall mean a day on which banks are not required or
authorized to be closed in New York or Toronto.
"Cash Amount" shall have the meaning set forth in Section 3(c)(i).
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"Cash Distribution" shall have the meaning set forth in Section 5(b).
"Cash Dividend" shall have the meaning given in Section 4(a)(i).
"Cash Proceeds" shall have the meaning given in Section 3(a)(ii).
"Closing Date" shall mean the day of the closing of the transactions
contemplated by the Stock Purchase Agreement.
"Common Stock" shall mean the common stock of the Corporation, par
value $5.00 per share, whether now or hereinafter authorized, issued and
outstanding.
"Corporation" shall mean Republic New York Corporation, a Maryland
corporation, or any successor-in-interest thereto.
"CTFS" shall mean CT Financial Services Inc., a federal corporation
organized under the laws of Canada.
"Distributable Cash and Non-Cash Proceeds" shall have the meaning
given in Section 3(d).
"Distributable Non-Cash Proceeds" shall have the meaning given in
Section 3(c)(ii).
"Dividend/Redemption Distribution Date" shall mean in respect of any
FIRREA Proceeds, (i) the date specified in the Proceeds Notice given by the
Corporation in respect of such FIRREA Proceeds pursuant to Section 3(a) but in
no event later than the first Business Day following the later of (x) thirty
(30) days after the Receipt Date in respect of any FIRREA Proceeds and (y)
ninety one (91) days after the last day of the taxation year of the FIRREA
Plaintiff in which such FIRREA Proceeds are received or (ii) such later date,
if any, as shall be specified in the Election Notice given by the holders of
the Series X Preferred Stock in respect of such FIRREA Proceeds pursuant to
Section 3(d).
"Election Notice" shall have the meaning given in Section 3(d).
"Fair Value" shall have the meaning given in Section 3(b)(ii).
"FIRREA Claim" shall mean the litigation filed by First Federal in
the United States Court of Federal Claims styled First Federal Savings and
Loan Association of Rochester v. United States, No.95-517C (Ct. Fed. CL filed
August 7, 1995), and any claim, right or administrative or judicial
proceedings comprising, arising out of, or resulting from, such litigation.
"FIRREA Plaintiff" shall mean First Federal or any successor-in-
interest thereto at the time holding the FIRREA Claim.
"FIRREA Proceeds" shall have the meaning given in Section 3(a).
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"FIRREA Recovery" shall mean the aggregate amount received by the
FIRREA Plaintiff in the form of cash or non-cash property in respect of the
FIRREA Claim whether by way of settlement before judgment or payment after
judgment.
"First Federal" shall mean First Federal Savings and Loan Association
of Rochester, a federally chartered savings and loan association.
"Holder or holder" shall mean at any time each person included on the
Register of Holders and such holder shall (except in the case of manifest
error) for all purposes be deemed to hold the number of shares of Series X
Preferred Stock shown in the Register of Holder as held by such holder at such
time.
"In-Kind Distribution" shall have the meaning given in Section 5(b).
"In-Kind Dividend" shall have the meaning given in Section 4(a)(ii).
"Non-Cash Proceeds" shall have the meaning given in Section 3(a)(ii).
"Non-Transferable Amount" shall have the meaning given in Section
3(c)(iii).
"Non-Transferable Proceeds" shall have the meaning given in Section
3(a)(iv).
"Non-Transferable Proceeds Distribution" shall have the meaning given
in Section 5(b).
"Non-Transferable Proceeds Dividend" shall have the meaning given in
Section 4(a)(iii).
"Non-Transferable Value" shall have the meaning given in Section
3(b).
"Proceeds Notice" shall have the meaning given in Section 3(a).
"Receipt Date" shall have the meaning given in Section 3(a).
"Register of Holders" shall mean a register of holders of the Series
X Preferred Stock maintained by the Corporation showing for each holder, its
name, mailing address, voice and facsimile telephone numbers and the number of
shares of Series X Preferred Stock held by such holder.
"Required Percentage of the Series X Preferred Stock" shall mean
shares constituting seventy-five percent (75%) or more of the outstanding
shares of Series X Preferred Stock.
"Retained Proceeds" shall have the meaning given in Section 3(c)(ii).
"Stock Purchase Agreement" shall mean the Amended and Restated Stock
Purchase Agreement, dated as of August 21, 1996, by and between HSBC Americas,
Inc., as purchaser, and CTFS, as seller.
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"Tax" or "Taxes" shall mean all taxes, however denominated, including
any interest or penalties that may become payable in respect thereof, imposed
by any federal, state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all net income, alternative or add-
on minimum, gross income, gross receipts, sales, use, goods and services, ad
valorem, earnings, franchise, profits, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, excess or windfall
profit or value added tax.
"Tax Portion" shall have the meaning given in Section 3(c)(ii).
"Transferable Proceeds" shall have the meaning given in Section
3(b)(i).
3. FIRREA Proceeds. (a) In the event that at any time the FIRREA
Plaintiff shall receive the whole or any part of the FIRREA Recovery ("FIRREA
Proceeds"), the Corporation shall give written notice of such receipt to the
holders of the Series X Preferred Stock (each such notice, a "Proceeds
Notice") as soon as practical but in no event more than five (5) Business Days
following the day such FIRREA Proceeds are received (the "Receipt Date").
Each Proceeds Notice shall (i) state the Receipt Date, (ii) specify the
aggregate amount of any cash included in the FIRREA Proceeds ("Cash
Proceeds"), (iii) describe in reasonable detail any non-cash property included
in the FIRREA Proceeds ("Non-Cash Proceeds") and (iv) specify the
Dividend/Redemption Distribution Date for any dividend pursuant to Section 4
or any redemption pursuant to Section 5 expected to result from receipt of
such FIRREA Proceeds. In addition, if in the reasonable belief of the
Corporation any part of the Non-Cash Proceeds (x) cannot legally or
practically be transferred to the holders of the Series X Preferred Stock or
(y) if such Non-Cash Proceeds are legally and practically transferable, but
such transfer cannot be effected without impairment of the value of such Non-
Cash Proceeds, the Proceeds Notice shall so state and shall also describe such
Non-Cash Proceeds in reasonable detail ("Non-Transferable Proceeds").
(b) To the extent such FIRREA Proceeds include:
(i) Non-Cash Proceeds other than Non-Transferable Proceeds
(the "Transferable Proceeds"), the Corporation shall cause the FIRREA
Plaintiff to transfer such Transferable Proceeds to the Corporation, or
(ii) Non-Transferable Proceeds, the Corporation shall cause
the FIRREA Plaintiff, at the option of the FIRREA Plaintiff, either
(x) to liquidate the Non-Transferable Proceeds in a commercially
reasonable manner or (y) to retain the Non-Transferable Proceeds and
determine in good faith the Fair Value of the Non-Transferable
Proceeds. The actual proceeds received by the FIRREA Plaintiff from
liquidation of such Non-Transferable Proceeds pursuant to clause (x)
of the preceding sentence (net of all costs reasonably incurred in
such liquidation) or the Fair Value of such Non-Transferable Proceeds
determined pursuant to clause (y) of the preceding sentence is
hereinafter referred to as the "Non-Transferable Value." As used
in this clause (b)(ii), "Fair Value" of Non-Transferable Proceeds
shall mean: (A) the fair market value of such Non-Transferable
Proceeds if such Non-Transferable Proceeds have a market value or
(B) if in the reasonable judgment of the FIRREA Plaintiff there is no
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readily ascertainable market value for such Non-Transferable Proceeds,
the fair value of such Non-Transferable Proceeds to the FIRREA Plaintiff.
(c) Upon the actual receipt of any FIRREA Proceeds by the
FIRREA Plaintiff, the holders of the Series X Preferred Stock shall be
entitled to receive the following either as a dividend pursuant to Section 4
or as a distribution in redemption pursuant to Section 5:
(i) To the extent that such FIRREA Proceeds include Cash
Proceeds, an amount in cash (the "Cash Amount") equal to the aggregate
amount of such Cash Proceeds less Applicable Taxes thereon;
(ii) To the extent that such FIRREA Proceeds include
Transferable Proceeds, an in-kind distribution of a portion of the
Transferable Proceeds (the "Distributable Non-Cash Proceeds") equal
to the Transferable Proceeds less a portion thereof (the "Retained
Proceeds") sufficient to pay (x) Applicable Taxes on the Transferable
Proceeds (the "Tax Portion") plus (y) if liquidation of the Tax Portion
is necessary for the Corporation to recognize the economic benefit of the
Tax Portion, the after-tax costs reasonably incurred by the Corporation
in the liquidation of the Retained Proceeds in a commercially reasonable
manner; and
(iii) To the extent that such FIRREA Proceeds include
Non-Transferable Proceeds, an amount in cash (the "Non-Transferable
Amount") equal to the Non-Transferable Value less Applicable Taxes.
(d) Following the giving of each Proceeds Notice, the holders
of the Series X Preferred Stock may elect to receive the Cash Amount, if any,
Distributable Non-Cash Proceeds, if any, and Non-Transferable Amount, if any
(collectively, the "Distributable Cash and Non-Cash Proceeds") as (i) a
dividend payable as provided in Section 4 or (ii) a distribution in redemption
of all or a part of the outstanding Series X Preferred Stock payable as
provided in Section 5. Such election shall be made by written notice to the
Corporation (an "Election Notice") signed on behalf of holders of the Required
Percentage of the Series X Preferred Stock and given within the period of
fifteen (15) Business Days following the date of the Proceeds Notice;
provided, however, that if an Election Notice is not received by the
Corporation within fifteen (15) Business Days of the date of the Proceeds
Notice in respect of any FIRREA Proceeds, the holders of the Series X
Preferred Stock shall be deemed to have elected that payment of the
Distributable Cash and Non-Cash Proceeds shall be made by way of a dividend
payable as provided in Section 4. Any such election or deemed election shall
be binding on each holder of Series X Preferred Stock whether or not such
holder executed an Election Notice. In any Election Notice given pursuant to
this Section 3(d) the holders of the Series X Preferred Stock may specify a
Business Day following the Dividend/Redemption Distribution Date specified in
the related Proceeds Notice, but not later than 31 days after the end of the
taxation year of the FIRREA Plaintiff in which such FIRREA Proceeds are
received, to which such Dividend/Redemption Distribution Date is to be
deferred whereupon such later date shall become the Dividend/Redemption
Distribution Date in respect of the FIRREA Proceeds to which it relates. In
the event a later date is specified in any Election Notice, the dividend or
redemption may be paid on such later date and no interest shall accrue on the
amount of such dividend or
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redemption payment in respect of the period from the Dividend/Redemption
Distribution Date originally specified in such Proceeds Notice to such later
date.
(e) The holders of the Series X Preferred Stock shall be
entitled to receive, either in cash or in kind, in one or more dividends
pursuant to Section 4 or one or more distributions in redemption pursuant to
Section 5, an aggregate amount equal to the whole of the FIRREA Recovery less
Applicable Taxes. The Series X Preferred Stock shall remain and continue to
be outstanding (to the extent not previously redeemed) until the Corporation
shall have paid such amount to the holders of the Series X Preferred Stock at
which time any shares of Series X Preferred Stock remaining outstanding shall
be cancelled, null and void and no further rights shall appertain thereto
without any action by the Corporation or the holders thereof; provided,
however, that if the holders elect pursuant to paragraph (d) above to receive
the final or only installment of Distributable Cash and Non-Cash Proceeds as a
dividend, then the Series X Preferred Stock shall remain and continue to be
outstanding until the tenth (10th) Business Day after the last day of the
taxation year of the Corporation in which such Dividend is paid to the
holders, on which date the Series X Preferred Stock remaining outstanding
shall be redeemed upon payment to the holders by the Corporation of the sum of
$1.00 per share, and on such date the Series X Preferred Stock shall be
cancelled, null and void and no further rights shall appertain thereto without
any further action by the Corporation or the holders thereof. The Corporation
shall be entitled to withhold any final dividend or redemption payment
otherwise payable to any holder of Series X Preferred Stock, without any
obligation to pay interest thereon pursuant to paragraph (g), until such
holder delivers to the Corporation any outstanding certificate formerly
representing shares of Series X Preferred Stock held by such holder.
(f) If the amount of any FIRREA Proceeds received by the
FIRREA Plaintiff has been reduced as a result of any set-off, counterclaim, or
other reduction successfully asserted by the U.S. Government against the
FIRREA Plaintiff arising out of a claim against the FIRREA Plaintiff or any of
its affiliates unrelated to the FIRREA Claim (other than a set-off,
counterclaim, or other reduction asserted against First Federal relating to a
period or events prior to the Closing Date), the Distributable Cash and Non-
Cash Proceeds in respect of such FIRREA Proceeds shall be determined and
calculated as if no such reduction had been made.
(g) If any amount of Distributable Cash and Non-Cash Proceeds
payable to the holders of the Series X Preferred Stock is not paid in full, in
cash or in kind, as provided herein, within three (3) Business Days of the
date on which such cash or in-kind payment is due as provided herein, the
amount of such payment that is not so paid in cash or in kind shall bear
interest at the Citibank Prime Rate in effect from time to time during the
period from the date such cash or in-kind payment is due until paid in full.
As used in this Section 3(g), "Citibank Prime Rate" means for any date, the
rate of interest publicly announced by Citibank N.A. as its prime rate or base
lending rate as of 11:00 A.M., New York City time, on such date.
4. Dividends. (a) If the holders of the Series X Preferred
Stock shall have elected (or be deemed to have elected) pursuant to paragraph
(d) of Section 3 that payment of the Distributable Cash and Non-Cash Proceeds
relating to any FIRREA Proceeds received by the FIRREA Plaintiff be made by
way of a dividend:
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(i) to the extent that such Distributable Cash and Non-Cash
Proceeds includes a Cash Amount, the Corporation shall pay an aggregate
cash dividend (a "Cash Dividend") on the outstanding shares of Series X
Preferred Stock in an amount equal to the Cash Amount;
(ii) to the extent that the Distributable Cash and Non-Cash
Proceeds includes Distributable Non-Cash Proceeds, the Corporation shall
make an in-kind distribution (an "In-Kind Dividend") on the outstanding
shares of Series X Preferred Stock of the Distributable Non-Cash
Proceeds; and
(iii) to the extent that the Distributable Cash and Non-Cash
Proceeds includes a Non-Transferable Amount, the Corporation shall pay an
aggregate cash dividend (a "Non-Transferable Proceeds Dividend") on the
outstanding shares of Series X Preferred Stock in an amount equal to the
Non-Transferable Amount.
(b) Each holder of Series X Preferred Stock shall be entitled to
participate in such Cash Dividend, In-Kind Dividend and Non-Transferable
Proceeds Dividend required to be paid or made by the Corporation as provided
in paragraph (a) above pro rata in proportion to the number of shares of
Series X Preferred Stock held by such holder.
(c) The amount of each Cash Dividend and each Non-Transferable
Proceeds Dividend payable to a holder shall be paid on the Dividend/Redemption
Distribution Date with respect to such FIRREA Proceeds by wire transfer to an
account in the name of such holder specified in writing by such holder to the
Corporation not less than two (2) Business Days prior to the
Dividend/Redemption Distribution Date on which such Cash Dividend or Non-
Transferable Proceeds Dividend, as the case may be, is required to be paid as
provided herein; provided, however, that if any holder shall fail to specify
such an account, such amount shall be paid by check payable to such holder and
mailed to such holder at its address as set out in the Register of Holders.
(d) The portion of each In-Kind Dividend to be distributed to a
holder of Series X Preferred Stock shall be distributed in a commercially
reasonable manner by the Corporation on the Dividend/Redemption Distribution
Date or if on such Dividend/Redemption Distribution Date distribution of such
In-Kind Distribution is not possible or practical for reasons beyond the
control of the Corporation, such In-Kind Dividend shall be distributed as
promptly as possible thereafter.
(e) The payment to any holder of the portion of each Cash Dividend,
each In-Kind Dividend and each Non-Transferable Proceeds Dividend to which
such holder is entitled pursuant to the terms hereof shall be subject to all
applicable withholding Taxes imposed by the United States of America or any
political subdivision thereof and the Corporation shall be entitled to
withhold the same from the cash or non-cash property otherwise payable to such
holder and pay the same to the appropriate taxing authority.
5. Redemption. (a) If the holders of the Series X Preferred Stock
shall have elected pursuant to paragraph (d) of Section 3 that payment of the
Distributable Cash and Non-Cash
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Proceeds relating to any FIRREA Proceeds received by the FIRREA Plaintiff
shall be made by way of a distribution in redemption of the Series X Preferred
Stock:
(i) if such FIRREA Proceeds constitute the entire FIRREA
Recovery, then the Corporation shall redeem all of the outstanding
shares of Series X Preferred Stock for redemption consideration equal to
the Distributable Cash and Non-Cash Proceeds resulting from such FIRREA
Proceeds; and
(ii) if such FIRREA Proceeds constitute less than the entire
FIRREA Recovery, then the Corporation shall redeem for redemption
consideration equal to the Distributable Cash and Non-Cash Proceeds
resulting from such FIRREA Proceeds a number of the outstanding shares of
Series X Preferred Stock (rounded down to the nearest whole number of
shares) determined by multiplying (x) the number of shares of Series X
Preferred Stock issued and outstanding before any redemption pursuant to
this Section 5 by (y) a fraction the numerator of which is the
Distributable Cash and Non-Cash Proceeds resulting from such FIRREA
Proceeds and the denominator of which is the Distributable Cash and Non-
Cash Proceeds that would be payable to the holders of the Series X
Preferred Stock in respect of the whole of the FIRREA Recovery as
determined by the Corporation in good faith, based to the extent
necessary on estimates of the amount of the entire FIRREA Recovery made
in good faith by the Corporation.
(b) The redemption consideration payable pursuant to paragraph (a)
shall consist of (x) a cash payment (the "Cash Distribution") in an amount
equal to the Cash Amount, if any, included in the Distributable Cash and Non-
Cash Proceeds, (y) an in-kind distribution (the "In-Kind Distribution") of the
Distributable Non-Cash Proceeds, if any, included in the Distributable Cash
and Non-Cash Proceeds and (z) a cash payment (the "Non-Transferable Proceeds
Distribution") in an amount equal to the Non-Transferable Amount, if any,
included in the Distributable Cash and Non-Cash Proceeds.
(c) In the event of any redemption required by paragraph (a), the
shares of Series X Preferred Stock held by each holder shall be redeemed pro
rata in proportion to the number of shares of Series X Preferred Stock held by
such holders.
(d) The portion of the Cash Distribution, if any, and the Non-
Transferable Proceeds Distribution, if any, which is payable to a holder of
Series X Preferred Stock as part of the redemption consideration for the
shares of Series X Preferred Stock held by such holder to be redeemed in
accordance with paragraph (b) shall be paid to such holder in the manner
specified in Section 4(c).
(e) The In-Kind Distribution, if any, which is distributable to a
holder of Series X Preferred Stock as part of the redemption consideration for
the shares of Series X Preferred Stock held by such holder to be redeemed in
accordance with paragraph (b) shall be distributed to such holder in the
manner specified in Section 4(d).
(f) The payment to any holder of the portion of the Cash
Distribution, if any, the Non-Transferable Proceeds Distribution, if any, and
the In-Kind Distribution to which a holder of Series X Preferred Stock is
entitled as part of the redemption consideration for the shares of
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Series X Preferred Stock of such holder to be redeemed in accordance with
paragraph (a) shall be subject to all applicable withholding Taxes imposed by
the United States of America or any political subdivision thereof and the
Corporation shall be entitled to withhold the same from the cash or non-cash
proceeds and pay the same to the appropriate taxing authority.
6. Right of the Holders to Receive the FIRREA Proceeds. (a) The rights
of the holders of the Series X Preferred Stock to receive the Distributable
Cash and Non-Cash Proceeds resulting from the receipt of FIRREA Proceeds by
the FIRREA Plaintiff, either as a dividend pursuant to Section 4 or as a
distribution in redemption pursuant to Section 5, shall accrue immediately and
only upon, and not prior to, actual receipt of such FIRREA Proceeds by the
FIRREA Plaintiff, and shall not be conditioned upon any other occurrence
including, but not limited to, the receipt of the FIRREA Proceeds by the
Corporation.
(b) In the event that the Corporation enters into, or intends to
enter into, any transaction or series of transactions a result of which is
that the FIRREA Plaintiff will cease to be controlled by the Corporation, then
the Corporation shall consult with the holders and advise them of the
arrangements between the Corporation and the successor FIRREA Plaintiff to
permit the Corporation to determine the Distributable Cash and Non-Cash
Proceeds resulting from receipt of FIRREA Proceeds by the successor FIRREA
Plaintiff following completion of such transactions, and, in the case of
Distributable Non-Cash Proceeds, the arrangements made for the Corporation to
receive such Distributable Non-Cash Proceeds from the successor FIRREA
Plaintiff.
7. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, each holder of Series X Preferred Stock then outstanding shall
be entitled to receive out of the assets of the Corporation available for
distribution to its stockholders, whether such assets are capital, surplus or
earnings, a liquidation payment of $120.00 per share plus accrued but unpaid
dividends thereon which shall include a dividend per share, determined and
payable as provided in Section 4, in an amount equal to the value of the total
FIRREA Recovery less Applicable Taxes (as determined by the Corporation in
good faith, based to the extent necessary on estimates of the value of the
total FIRREA Recovery made in good faith by the Corporation), less the sum of
(i) $120.00 and (ii) any amounts previously paid to the holders of the Series
X Preferred Stock by the Corporation as provided herein in respect of the
FIRREA Recovery.
(b) Neither the sale, conveyance, lease, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Corporation.
8. Ranking. (a) Except (i) as provided in paragraph (b) of this Section
8 and (ii) for any class or series of Preferred Stock ranking prior to the
Series X Preferred Stock which was created with the prior affirmative vote or
consent of the Required Percentage of the Series X Preferred Stock pursuant to
paragraph (b) of Section 9, the Series X Preferred Stock shall rank on a
parity with each other series of Preferred Stock of the Corporation whether
now or hereafter issued. The Series X Preferred Stock shall rank prior, both
as to payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether
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voluntary or involuntary, to all of the Corporation s now or hereafter issued
Common Stock with respect exclusively to an amount equal to the Distributable
Cash and Non-Cash Proceeds resulting from receipt by the FIRREA Plaintiff of
FIRREA Proceeds prior to the time of any such distribution of assets upon
liquidation, dissolution or winding up of the Corporation, but only to the
extent such Distributable Cash and Non-Cash Proceeds have not previously been
distributed to the holders of the Series X Preferred Stock as a dividend
pursuant to Section 4 or as a distribution in redemption pursuant to Section 5
of any cash or in-kind proceeds of the FIRREA Claim; and the Corporation shall
not pay any dividend on its Common Stock at any time at which interest is
accruing pursuant to paragraph (g) of Section 3.
(b) The Corporation shall not issue any series of Preferred Stock
to be held exclusively by any one or more of (i) the holders of the
Corporation s Common Stock and (ii) any company controlling, controlled by or
under common control with the Corporation ("Parent Preferred Stock") unless
the terms of such Parent Preferred Stock shall provide that the Series X
Preferred Stock shall rank prior to the Parent Preferred Stock to the same
extent as the Series X Preferred Stock ranks prior to the Corporation's Common
Stock.
(c) For the purposes of the Series X Preferred Stock, any series,
class or classes of stock of the Corporation shall be deemed to rank:
(i) prior to the Series X Preferred Stock, as to dividends or
as to distribution of assets upon liquidation, dissolution or winding up of
the Corporation, if the holders of such series, class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up of the Corporation, as the case may be,
in preference or priority to the holders of the Series X Preferred Stock;
(ii) on a parity with the Series X Preferred Stock, as to
dividends or as to distribution of assets upon liquidation, dissolution or
winding up of the Corporation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation preference amounts per share
thereof be different from those of the Series X Preferred Stock, if the
holders of such series, class or classes of stock and the Series X Preferred
Stock shall be entitled to the receipt of dividends or amounts distributed
upon liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or liquidation preference, without
preference or priority one over the other; and
(iii) junior to the Series X Preferred Stock, either
as to dividends or as to distribution of assets upon liquidation, dissolution
or winding up of the Corporation, or both, if such class shall be Common Stock
or if the holders of the Series X Preferred Stock shall be entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation, as the case may be, in preference or priority
to the holders of stock of such series, class or classes.
9. Voting. (a) The holders of the Series X Preferred Stock will have
no voting rights with respect to any matter coming before the shareholders of
the Corporation except as provided by the terms of the Series X Preferred
Stock or by law. In connection with any right to vote, the holders of the
Series X Preferred Stock shall have one vote for each share held of record.
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(b) So long as any shares of the Series X Preferred Stock
shall be outstanding, the Corporation will not, and will not allow the FIRREA
Plaintiff to, without the affirmative vote or consent, given in writing or by
resolution adopted at a meeting duly called for that purpose, of the Required
Percentage of the Series X Preferred Stock then outstanding, (i) amend, alter,
repeal or waive compliance with (by merger, consolidation or otherwise) any
provision of these Articles Supplementary, the charter or the by-laws of the
Corporation as in effect as of the date hereof, so as to materially affect
adversely the specified rights, preferences, privileges or voting rights of
the Series X Preferred Stock, (ii) effect any reclassification of the Series X
Preferred Stock, (iii) authorize the issuance of any additional shares of
Series X Preferred Stock, or (iv) authorize, create or issue, or increase the
authorized or issued amount of any class or series of stock (including any
class of Preferred Stock) ranking prior (as set forth in Section 8(c) above)
to the Series X Preferred Stock).
10. Transferability. No holders of shares of Series X Preferred Stock
may transfer or assign shares of Series X Preferred Stock held by such holder,
in whole or in part, except to Imasco Limited or any direct or indirect
subsidiary of Imasco Limited or CTFS.
11. The Obligations of the Corporation. The obligations of the
Corporation set forth herein shall be strictly construed in accordance with
the terms set forth herein.
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IN WITNESS WHEREOF, REPUBLIC NEW YORK CORPORATION has caused these
Articles Supplementary to be signed in its name and on its behalf by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary, and the said officers of the Corporation further acknowledge said
instrument to be the corporate act of the Corporation and state under the
penalties of perjury that to the best of their knowledge, information and
belief the matters and facts therein set forth with respect to approval are
true in all material respects, all on December 16, 1999.
REPUBLIC NEW YORK CORPORATION
By: /s/ Stephen J. Saali
President
Attest:
/s/ William F. Rosenblum, Jr.
Secretary
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ARTICLES OF MERGER
merging
RNYC Merger Corporation
(a Corporation of the State of Maryland)
INTO
Republic New York Corporation
(a Corporation of the State of Maryland)
Republic New York Corporation, a corporation duly organized and existing
under the laws of the State of Maryland (the "Successor Corporation"), and
RNYC Merger Corporation, a corporation duly organized and existing under the
laws of the State of Maryland (the "Merged Corporation"), do hereby certify to
the State Department of Assessments and Taxation of Maryland (the
"Department") as follows:
FIRST: The parties to these Articles of Merger agree that, pursuant to
the terms and conditions set forth in the Transaction Agreement and Plan of
Merger, dated as of May 10, 1999, among HSBC Holdings plc, the Successor
Corporation and Safra Republic Holdings S.A., as amended by that certain
Joinder Agreement, dated as of May 20, 1999, among HSBC Holdings plc, the
Merged Corporation, the Successor Corporation and Safra Republic Holdings
S.A., and as further amended by Amendment No. 1 to the Transaction Agreement
and Plan of Merger, dated as of November 8, 1999, among HSBC Holdings plc, the
Merged Corporation, the Successor Corporation and Safra Republic Holdings
S.A., the Merged Corporation shall be merged with and into the Successor
Corporation (the "Merger").
SECOND: The Merger shall become effective at 12:00 noon New York City
time on December 31, 1999 (the "Effective Time").
THIRD: The Successor Corporation, a corporation organized and existing
under the laws of the State of Maryland, shall survive the Merger as successor
corporation and shall continue its corporate existence pursuant to the
provisions of the Maryland General Corporation Law and under its charter and
bylaws under the name "Republic New York Corporation".
FOURTH: No amendments to the charter of the Successor Corporation are to
be effected as part of the Merger.
FIFTH: From and after the Effective Time, until successors are duly
elected or appointed and qualified in accordance with applicable law, (a) the
directors of the Merged Corporation immediately prior to the Effective Time
shall be the directors of the Successor Corporation and (b) the officers of
the Merged Corporation immediately prior to the Effective Time shall be the
officers of the Successor Corporation, such directors and officers to hold
office in accordance with the Successor Corporation's bylaws and applicable
law.
SIXTH: The total number of shares of all classes of capital stock which
the Successor Corporation has authority to issue is 169,999,000 shares
consisting of 150,000,000 shares of
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Common Stock, par value $5.00 per share ("Republic Common Stock") and
19,999,000 shares of Preferred Stock, no par value ("Republic Preferred
Stock"), consisting of (i) 12,497,650 shares of Preferred Stock which are not
classified as to series, (ii) 625 shares of Dutch Auction Rate Transferable
Securities Preferred Stock, Series A (the "Republic Series A DART Preferred
Stock"), (iii) 625 shares of Dutch Auction Rate Transferable Securities
Preferred Stock, Series B (the "Republic Series B DART Preferred Stock"), (iv)
1,500,000 shares of Adjustable Rate Cumulative Preferred Stock, Series D (the
"Republic Series D Preferred Stock"), (v) 3,000,000 shares of $1.8125
Cumulative Preferred Stock (the "Republic $1.8125 Preferred Stock"), (vi)
3,000,000 shares of $2.8575 Cumulative Preferred Stock (the "Republic $2.8575
Preferred Stock") and (vii) 100 shares of Series X Preferred Stock ("Republic
Series X Preferred Stock"). The aggregate par value of all classes of stock
of the Successor Corporation having par value is $750,000,000.
SEVENTH: The total number of shares of stock of all classes which the
Merged Corporation has authority to issue is 1,000 shares, all of which are
shares of common stock, par value $0.01 per share, with an aggregate par value
of $10.00.
EIGHTH: The manner and basis of converting or exchanging issued stock of
the Merged Corporation and the Successor Corporation into different stock or
other consideration and the treatment of any issued stock of the Merged
Corporation and the Successor Corporation not to be converted or exchanged
shall be as follows:
As of the Effective Time, by virtue of the Merger and without any action
on the part of any holder of any stock of either of the merging entities:
(A) Republic Common Stock
Each share of Republic Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of
Republic Common Stock held (i) in the Successor Corporation s
treasury or (ii) directly or indirectly by HSBC Holdings plc or the
Successor Corporation or any of their respective wholly owned
subsidiaries (except for shares held, directly or indirectly in
trust accounts, managed accounts and the
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like or otherwise held in a fiduciary or custodial capacity that are
beneficially owned by third parties and other than any shares of
Republic Common Stock held by HSBC Holdings plc or the Successor
Corporation or any of their respective subsidiaries in respect of a
debt previously contracted)) shall become and be converted into the
right to receive $72.00 in cash, without interest thereon; provided,
that in no event shall any check be required to be mailed before
January 7, 2000.
Shares of Republic Common Stock held (i) in the Successor
Corporation's treasury or (ii) directly or indirectly by HSBC
Holdings plc or the Successor Corporation or any of their respective
wholly owned subsidiaries (except for shares held, directly or
indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary or custodial capacity that are
beneficially owned by third parties and other than any shares of
Republic Common Stock held by HSBC Holdings plc or the Successor
Corporation or any of their respective subsidiaries in respect of a
debt previously contracted) shall be canceled and shall cease to
exist without any consideration therefor.
(B) Republic Preferred Stock
Each share of Republic Series A DART Preferred Stock, Republic
Series B DART Preferred Stock, Republic Series D Preferred Stock,
Republic $1.8125 Preferred Stock and Republic $2.8575 Preferred
Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Republic Preferred Stock held in the Successor
Corporation s treasury) shall remain unchanged as an issued and
outstanding share of Preferred Stock of the same respective series
of the Successor Corporation following the Effective Time.
Shares of Republic Preferred Stock held in the Successor
Corporation s treasury shall be canceled and shall cease to exist
without any consideration therefor.
No shares of Republic Series X Preferred Stock are outstanding.
(C) Merged Corporation Stock
Each share of common stock of the Merged Corporation issued and
outstanding prior to the Effective Time shall become a share of
common stock of the Successor Corporation.
NINTH: The principal office of the Successor Corporation in Maryland is
located in Baltimore City.
TENTH: The principal office of the Merged Corporation in Maryland is
located in Baltimore City.
ELEVENTH: The Merged Corporation owns no interest in land in the State
of Maryland.
TWELFTH: The terms and conditions of the transaction set forth in these
articles were advised, authorized, and approved by the Successor Corporation
in the manner and by the vote required by the laws of the State of Maryland
and the charter and bylaws of the Successor Corporation as follows:
(a) At meetings held on May 9, 1999 and November 5, 1999, the Board of
Directors of the Successor Corporation adopted resolutions approving the
Merger and declaring the Merger advisable.
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(b) At a meeting of the stockholders of the Successor Corporation
convened on September 9, 1999 and adjourned to October 12, 1999, to October
29, 1999 and then to November 30, 1999, the Merger was approved by the
affirmative vote of the stockholders entitled to vote thereon.
THIRTEENTH: The terms and conditions of the transaction set forth in
these articles were advised, authorized, and approved by the Merged
Corporation in the manner and by the vote required by the laws of the State of
Maryland and the charter and bylaws of the Merged Corporation as follows:
(a) On May 20, 1999 and November 6, 1999, the Board of Directors of the
Merged Corporation adopted resolutions approving the Merger and declaring the
Merger advisable.
(b) On November 8, 1999, the sole stockholder of the Merged Corporation,
by written consent, adopted a resolution approving the Merger.
FOURTEENTH: Each undersigned officer acknowledges these Articles of
Merger to be the corporate act of the respective corporate party on whose
behalf he has signed, and further, as to all matters and facts required to be
verified under oath, each undersigned officer acknowledges that to the best of
his knowledge, information and belief, these matters and facts relating to the
corporation on whose behalf he has signed are true in all material respects
and that this statement is made under the penalties of perjury.
FIFTEENTH: These Articles of Merger may be executed in multiple
counterparts, with multiple signature pages each bearing one or more
signatures, but all such counterparts and multiple signature pages shall
constitute one and the same instrument.
* * *
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IN WITNESS WHEREOF, Republic New York Corporation and RNYC Merger
Corporation, the corporations parties to the Merger, have caused these
articles of Merger to be signed in their respective corporate names and on
their behalf by their respective presidents and witnessed or attested by their
respective secretaries all as of the 30th day of December, 1999.
REPUBLIC NEW YORK CORPORATION
By: /s/ Stephen J. Saali
Stephen J. Saali, President
Attest: (Witness)
/s/ William F. Rosenblum, Jr.
William F. Rosenblum, Jr., Secretary
RNYC MERGER CORPORATION
By: /s/ Gerald A. Ronning
Gerald A. Ronning, President
Attest: (Witness)
/s/ Philip S. Toohey
Philip S. Toohey, Secretary
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ARTICLES OF MERGER
BETWEEN
HSBC USA INC.
AND
REPUBLIC NEW YORK CORPORATION
Republic New York Corporation, a corporation duly
organized and existing under the laws of the State of Maryland (the "Successor
Corporation"), and HSBC USA Inc., a corporation duly organized and existing
under the laws of the State of Delaware (the "Merged Corporation"), do hereby
certify to the State Department of Assessments and Taxation of the State of
Maryland (the "Department") as follows:
FIRST: The parties to these Articles of Merger agree that, pursuant to
the terms and conditions set forth in the Plan and Agreement of Merger, dated
as of December 29, 1999, between the Merged Corporation and the Successor
Corporation, the Merged Corporation shall be merged with and into the
Successor Corporation (the "Merger"). When the Merger becomes effective, the
separate existence of the Merged Corporation shall cease and the Successor
Corporation shall continue its corporate existence pursuant to the provisions
of the Maryland General Corporation Law and under its charter and bylaws.
SECOND: The Merged Corporation is a corporation incorporated in the
State of Delaware, which was incorporated under the General Corporation Law of
Delaware on September 23, 1929 under the name Marine Midland Corporation and
the separate corporate existence of which will cease upon the effective date
of the Merger in accordance with the provisions of the general laws of the
State of Delaware.
The Merged Corporation has no principal office in the State of Maryland.
The Merged Corporation owns no interest in land in the State of Maryland.
The Merged Corporation is not registered or qualified to do business in
the State of Maryland.
THIRD: The principal office of the Successor Corporation in Maryland is
located in Baltimore City.
FOURTH: The merger shall become effective at the later of (a) 12:15
p.m. New York City time on December 31, 1999 and (b) immediately following the
effective time of the merger of RNYC Merger Corporation, a Maryland
corporation ("RNYC") with and into the Successor Corporation as set forth in
Articles of Merger between RNYC and the Successor Corporation filed with the
Department on or about December 30, 1999 (the later of (a) and (b), the
"Effective
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Time"), which Effective Time shall in no event be later than thirty days after
the date these Articles of Merger are accepted for record by the Department.
FIFTH: The total number of shares of all classes of stock which each
corporation party to these Articles of Merger has the authority to issue, and
the number of shares of each class are as follows:
(A) The Merged Corporation
The total number of shares of stock of all classes which the Merged
Corporation has authority to issue is 10,050,258 shares consisting of 49,158
shares of cumulative preferred stock without par value; 10,000,000 shares of
preferred stock of the par value of $1.00 each, of which 100 shares have been
designated as Series X Preferred Stock ("HSBC USA Series X Preferred Stock");
and 1,100 shares of common stock of the par value of $5.00 each ("HSBC USA
Common Stock"). The aggregate par value of all classes of stock of the Merged
Corporation having par value is $10,005,500.
(B) The Successor Corporation
The total number of shares of all classes of stock which the
Successor Corporation has authority to issue is 169,999,000 shares consisting
of 150,000,000 shares of Common Stock, par value $5.00 per share ("Republic
Common Stock") and 19,999,000 shares of Preferred Stock, no par value
("Republic Preferred Stock"), consisting of (i) 12,497,650 shares of Preferred
Stock which are not classified as to series, (ii) 625 shares of Dutch Auction
Rate Transferable Securities Preferred Stock, Series A (the "Republic Series A
DART Preferred Stock"), (iii) 625 shares of Dutch Auction Rate Transferable
Securities Preferred Stock, Series B (the "Republic Series B DART Preferred
Stock"), (iv) 1,500,000 shares of Adjustable Rate Cumulative Preferred Stock,
Series D (the "Republic Series D Preferred Stock"), (v) 3,000,000 shares of
$1.8125 Cumulative Preferred Stock (the "Republic $1.8125 Preferred Stock"),
(vi) 3,000,000 shares of $2.8575 Cumulative Preferred Stock (the "Republic
$2.8575 Preferred Stock") and (vii) 100 shares of Series X Preferred Stock
("Republic Series X Preferred Stock"). The aggregate par value of all classes
of stock of the Successor Corporation having par value is $750,000,000.
SIXTH: The Merger does not change the authorized stock of the Successor
Corporation.
SEVENTH: The manner and basis of converting or exchanging issued stock
of the Merged Corporation and the Successor Corporation into different stock
or other consideration and the treatment of any issued stock of the Merged
Corporation and the Successor Corporation not to be converted or exchanged
shall be as follows:
As of the Effective Time, by virtue of the Merger and without any action
on the part of any holder of any stock of either of the merging entities:
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(A) Republic Common Stock
Each share of Republic Common Stock issued and outstanding
immediately prior to the Effective Time shall remain unchanged as an issued
and outstanding share of Common Stock of the Successor Corporation following
the Effective Time.
(B) Republic Preferred Stock
Each share of Republic Series A DART Preferred Stock, Republic
Series B DART Preferred Stock, Republic Series D Preferred Stock, Republic
$1.8125 Preferred Stock and Republic $2.8575 Preferred Stock issued and
outstanding immediately prior to the Effective Time shall remain unchanged as
an issued and outstanding share of Preferred Stock of the same respective
series of the Successor Corporation following the Effective Time.
(C) HSBC USA Common Stock
All of the shares of HSBC USA Common Stock issued and outstanding
immediately prior to the Effective Time, all of which are owned of record by a
sole stockholder, shall be converted into an aggregate of one share of Common
Stock of the Successor Corporation (the "Common Consideration") as of the
Effective Time. After the Effective Time, there shall be no transfers on the
stock transfer books of HSBC USA or the Successor Corporation of shares of
HSBC USA Common Stock. At any time following the Effective Time, the holder of
the HSBC USA Common Stock may deliver such stockholder's certificates
representing shares of HSBC USA Common Stock to the Successor Corporation in
exchange for a certificate representing the Common Consideration.
(D) HSBC USA Preferred Stock
Each share of HSBC USA Series X Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be converted into
one share of Republic Series X Preferred Stock as of the Effective Time.
Until surrendered for cancellation or exchange, each certificate evidencing
shares of HSBC USA Series X Preferred Stock outstanding following the
Effective Time will represent an equal number of shares of Series X Preferred
Stock of the Successor Corporation.
EIGHTH: The terms and conditions of the Merger were duly advised,
authorized and approved by the Successor Corporation in the manner and by the
vote required by the laws of the State of Maryland and the charter and bylaws
of the Successor Corporation, as follows:
(a) On November 30, 1999, the Board of Directors of the Successor
Corporation adopted a resolution approving the Merger and declaring the Merger
advisable.
(b) Pursuant to Section 3-105(a)(5)(i) of the Maryland General
Corporation Law and the charter of the Successor Corporation, no vote or
consent of the stockholders of the Corporation is required in connection with
the Merger.
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NINTH: The terms and conditions of the Merger were duly advised,
authorized and approved, in respect of the Merged Corporation, in the manner
and by the vote required by the Certificate of Incorporation of said
corporation and by the laws of the State of Delaware, as follows:
(a) On July 22, 1999, the Board of Directors of the Merged
Corporation adopted resolutions approving the terms and conditions of the
Merger, declaring the Merger advisable and directing that the proposed Merger
be submitted for consideration by the sole holder of HSBC USA Common Stock.
(b) The sole holder of the HSBC USA Common Stock, by written
consent, adopted a resolution approving the Merger, in all respects in the
manner prescribed under the certificate of incorporation and bylaws of the
Merged Corporation and the General Corporation Law of Delaware.
TENTH: Each undersigned officer acknowledges these Articles of Merger to
be the corporate act of the respective corporate party on whose behalf he has
signed, and further, as to all matters and facts required to be verified under
oath, each undersigned officer acknowledges that to the best of his knowledge,
information and belief, these matters and facts relating to the corporation on
whose behalf he has signed are true in all material respects and that this
statement is made under the penalties of perjury.
ELEVENTH: These Articles of Merger may be executed in multiple
counterparts, with multiple signature pages each bearing one or more
signatures, but all such counterparts and multiple signature pages shall
constitute one and the same instrument.
* * *
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IN WITNESS WHEREOF, Republic New York Corporation and HSBC USA Inc., the
parties to the Merger, have caused these Articles of Merger to be signed in
their respective corporate names and on their behalf by their respective
presidents or vice-presidents and witnessed by their respective secretaries
all as of the 30th day of December, 1999.
REPUBLIC NEW YORK CORPORATION
By: /s/ Stephen J. Saali
Stephen J. Saali, President
Witness:
/s/ William F. Rosenblum, Jr.
William F. Rosenblum, Jr., Secretary
HSBC USA INC.
By: /s/ L. Malcolm Burnett
I. Malcolm Burnett, President
Witness:
/s/ Philip S. Toohey
Philip S. Toohey, Secretary
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CERTIFICATE OF MERGER
OF
HSBC USA INC.
(A Delaware Corporation)
INTO
REPUBLIC NEW YORK CORPORATION
(A Maryland Corporation)
Pursuant to Section 252 of the General Corporation Law of the State of
Delaware
It is hereby certified that:
1. The constituent business corporations participating in the Merger
herein certified are:
(i) HSBC USA INC. ("Old HSBC USA"), which is incorporated and existing
under the laws of the state of Delaware; and
(ii) REPUBLIC NEW YORK CORPORATION ("Republic"), which is incorporated
and existing under the laws of the State of Maryland.
2. A Plan and Agreement of Merger, including the Articles of Merger
attached thereto (the "Plan of Merger") has been approved, adopted, certified,
executed and acknowledged by each of the aforesaid constituent corporations in
accordance with the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware, to wit, by Old HSBC USA in the same
manner as is provided in Section 251 of the General Corporation Law of the
State of Delaware and by Republic in accordance with the laws of the State of
Maryland.
3. Republic, as the surviving corporation in the Merger herein certified
(the "Surviving Corporation"), will continue its existence upon the effective
date of said Merger pursuant to the provisions of the laws of the State of
Maryland.
4. The charter of the Surviving Corporation, as amended and
supplemented, and as now in force and effect, shall continue to be the charter
of the said Surviving Corporation.
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5. The executed Plan of Merger between the aforesaid constituent
corporations is on file at the principal place of business of the Surviving
Corporation, the address of which is as follows:
452 Fifth Avenue
New York, NY 10018
6. A copy of the aforesaid Plan of Merger will be furnished by the
Surviving Corporation, on request, and without cost, to any stockholder of
each of the aforesaid constituent corporations.
7. The Surviving Corporation does hereby agree that it may be served
with process in the State of Delaware in any proceeding for enforcement of any
obligation of Old HSBC USA, as well as for enforcement of any obligation of
the Surviving Corporation arising from the Merger herein certified, including
any suit or other proceeding to enforce the right, if any, of any stockholder
of Old HSBC USA as determined in appraisal proceedings pursuant to the
provisions of Section 262 of the General Corporation Law of the State of
Delaware; does hereby irrevocably appoint the Secretary of State of the State
of Delaware as its agent to accept service of process in any such suit or
other proceedings; and does hereby specify the following as the address to
which a copy of such process shall be mailed by the Secretary of the State of
Delaware:
1 HSBC Center
Buffalo, NY 14203
8. The merger herein certified shall become effective at 12:15 p.m. New
York City time on December 31, 1999.
IN WITNESS WHEREOF, the undersigned has duly caused this Certificate of
Merger to be executed by its duly authorized officer as of this 30th day of
December, 1999.
REPUBLIC NEW YORK CORPORATION
By: /s/ Gerald A. Ronning
Gerald A. Ronning, President
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ARTICLES OF AMENDMENT
OF
REPUBLIC NEW YORK CORPORATION
Republic New York Corporation, a Maryland corporation (the
"Corporation"), certifies to the State Department of Assessments and Taxation
of the State of Maryland as follows:
FIRST: The Charter of the Corporation is hereby amended by deleting
Article SECOND in its entirety and inserting in its place the following:
"SECOND: The name of the Corporation (the
"Corporation") is HSBC USA Inc."
SECOND: The amendment effected by these Articles was approved and
advised by the Board of Directors by unanimous written action on December 31,
1999, in accordance with the Maryland General Corporation Law (the "MGCL") and
the Charter of the Corporation. Pursuant to Section 2-605 of the MGCL, the
amendment effected by these Articles does not require action by the
stockholders of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed in its name and on its behalf this 3rd day of January, 2000 by its
President who acknowledges that these Articles are the act of the Corporation
and that, to the best of his knowledge, information and belief and under
penalties for perjury, all matters and facts contained in these Articles are
true in all material respects.
ATTEST: REPUBLIC NEW YORK CORPORATION
/s/ Philip S. Toohey By: /s/ Youssef A. Nasr (SEAL)
Philip S. Toohey Youssef A. Nasr
Secretary President
200
HSBC USA INC.
BY-LAWS
(As Amended and Restated effective January 18, 2000)
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BY-LAWS
OF
HSBC USA INC.
ARTICLE I
OFFICES
Section 1.1 The principal office of HSBC USA Inc. (the "Corporation") in the
State of Maryland shall be in the City of Baltimore, State of Maryland.
Section 1.2 The Corporation may also have offices at such other place or
places, both within and without the State of Maryland, as the Board of
Directors, or the President of the Corporation acting under delegated
authority, may from time to time determine.
ARTICLE II
STOCKHOLDERS
Section 2.1 Place of Stockholders' Meetings. Meetings of the Corporation's
stockholders shall be held at such place in the United States as is set from
time to time by the Corporation's Board of Directors.
Section 2.2 Annual Meetings of Stockholders. An annual meeting of the
Corporation's stockholders shall be held in April each year. At each annual
meeting, the Corporation's stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before the meeting in
accordance with these By-Laws. Except as the Charter or statute provides
otherwise, any business may be considered at an annual meeting without the
purpose of the meeting having been specified in the notice. Failure to hold
an annual meeting does not invalidate the Corporation's corporate existence or
affect any otherwise valid corporate acts of the Corporation.
Section 2.3 Special Meetings of Stockholders. At any time in the interval
between annual meetings, a special meeting of the Corporation's stockholders
may be called by the Chairman of the Board or the President or by a majority
of the Corporation's Board of Directors by vote at a meeting or in writing
(addressed to the Corporate Secretary of the Corporation) with or without a
meeting. Special meetings of the Corporation's stockholders shall be called by
the Corporate Secretary on the written request of stockholders of the
Corporation entitled to cast at least 25 percent of all the votes entitled to
be cast at the meeting. A stockholders request for a special meeting shall
state the purpose of the meeting and the matters proposed to be acted on at
it. The Corporate Secretary shall inform the stockholders who make the
request of the reasonably estimated costs of preparing and mailing a notice of
meeting and, on payment of these costs to the Corporation, notify each
stockholder entitled to notice of the meeting. Unless requested by
stockholders entitled to cast a majority of all the votes entitled to be cast
at the meeting, a special meeting need not be called to consider any matter
which is substantially the same as a matter voted on at any special meeting of
stockholders of the Corporation held in the preceding 12 months. Business
transacted at any special meeting of stockholders shall be limited to the
purpose stated in the notice thereof.
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Section 2.4 Notice of Stockholders' Meetings; Waiver of Notice. Not less
than 10 days nor more than 90 days before the date of every stockholders
meeting, the Corporate Secretary shall give to each stockholder entitled to
vote at such meeting written notice stating the time and place of the meeting
and, in the case of a special meeting or if notice of the purpose is required
by statute, the purpose or purposes for which the meeting is called, either by
mail or by presenting it to him personally or by leaving it at his residence
or usual place of business. If mailed, such notice shall be deemed to be
given when deposited in the United States mail addressed to the stockholder at
his address as it appears on the records of the Corporation, with postage
thereon prepaid. Notwithstanding the foregoing provisions, a waiver of notice
in writing, signed by the person or persons entitled to such notice and filed
with the records of the meeting, whether before or after the holding thereof,
or actual attendance at the meeting in person or by proxy, shall be deemed
equivalent to the giving of such notice to such persons.
Section 2.5 Quorum at Stockholders' Meetings; Voting; Adjournments. Unless
any statute or the Charter provides otherwise, at each meeting of the
Corporation's stockholders, the presence in person or by proxy of stockholders
entitled to cast a majority of all the votes entitled to be cast at the
meeting constitutes a quorum, and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting, except that a plurality of all votes cast
at a meeting at which a quorum is present is sufficient to elect a director.
Whether or not a quorum is present, a meeting of stockholders convened on the
date for which it was called may be adjourned from time to time without
further notice by a majority vote of the stockholders present in person or by
proxy to a date not more than 120 days after the original record date. Any
business which might have been transacted at the meeting as originally
notified may be deferred and transacted at any such adjourned meeting at which
a quorum is present.
Section 2.6 General Right to Vote; Proxies. Unless the Charter provides for
a greater or lesser number of votes per share or limits or denies voting
rights, each outstanding share of stock, regardless of class, is entitled to
one vote on each matter submitted to a vote at a meeting of stockholders;
however, a share is not entitled to be voted if any installment payable on it
is overdue and unpaid. In all elections of directors, each share of stock may
be voted for as many persons as there are directors to be elected and for
whose election the share is entitled to be voted. A stockholder may vote the
stock the stockholder owns of record either in person or by proxy. A
stockholder may sign a writing authorizing another person to act as proxy.
Signing may be accomplished by the stockholder or the stockholder's authorized
agent signing the writing or causing the stockholder's signature to be affixed
to the writing by any reasonable means, including facsimile signature. A
stockholder may authorize another person to act as proxy by transmitting, or
authorizing the transmission of, a telegram, cablegram, datagram, or other
means of electronic transmission to the person authorized to act as proxy or
to a proxy solicitation firm, proxy support service organization, or other
person authorized by the person who will act as proxy to receive the
transmission. Unless a proxy provides for a longer period, it is not valid
more than eleven months after its date. A proxy is revocable by a stockholder
at any time without condition or qualification unless the proxy states that it
is irrevocable and the proxy is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted
under the proxy or another general interest in the Corporation or its assets
or liabilities.
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Section 2.7 List of Stockholders. At each meeting of stockholders, a full,
true and complete list of all stockholders entitled to vote at such meeting,
showing the number and class of shares held by each and certified by the
transfer agent for such class or by the Corporate Secretary, shall be
furnished by the Corporate Secretary.
Section 2.8 Conduct of Voting. At all meetings of stockholders, unless the
voting is conducted by inspectors, the proxies and ballots shall be received,
and all questions touching the qualification of voters and the validity of
proxies, the acceptance or rejection of votes and procedures for the conduct
of business not otherwise specified by these By-Laws, the Charter or law,
shall be decided or determined by the chairman of the meeting. If demanded by
stockholders, present in person or by proxy, entitled to cast 10% in number of
votes entitled to be cast, or if ordered by the chairman of the meeting, the
vote upon any election or question shall be taken by ballot. Before any
meeting of the stockholders, the Board of Directors may appoint persons to act
as inspectors of election at the meeting and any adjournment thereof. If no
inspectors of election are so appointed, the chairman of the meeting may, and
on the request of stockholders, present in person or by proxy, entitled to
cast 10% in number of votes entitled to be cast, shall, appoint inspectors of
election at the meeting. The number of inspectors shall be either one or
more. If inspectors are appointed at a meeting on the request of
stockholders, the holders of a majority of shares present in person or by
proxy shall determine whether one or more inspectors are to be appointed. No
candidate for election as a director at a meeting shall serve as an inspector
thereat. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of a
stockholder shall, appoint a person to fill that vacancy. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity and effect of proxies; receive votes, ballots or
consents; hear and determine all challenges and questions in any way arising
in connection with the right to vote; count and tabulate all votes or
consents; determine when polls shall close; determine the result; and do any
other acts that may be proper to conduct the election or vote with fairness to
all stockholders. Unless so demanded or ordered, no vote need be by ballot and
voting need not be conducted by inspectors.
Section 2.9. Advance Notice Provisions for Election of Directors.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors of the Corporation. Nominations
of persons for election to the Board of Directors may be made at any annual
meeting of stockholders, or at any special meeting of stockholders called for
the purpose of electing directors, (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (b) by any stockholder
of the Corporation (i) who is a stockholder of record on the date of the
giving of the notice provided for in this Section 2.9 and on the record date
for the determination of stockholders entitled to vote at such meeting and
(ii) who complies with the notice procedures set forth in this Section 2.9.
To be timely, a stockholder's notice must be delivered to or mailed and
received by the Corporate Secretary at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than 120 days nor
more than 150 days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice by the stockholder to be timely must
be so delivered not earlier than the 150th day prior to such annual meeting
and not later than the close of business on the later of the 120th day prior
to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made; and (b) in the
case of a special meeting of stockholders called for the purpose
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of electing directors, not later than the close of business on the 10th day
following the day on which notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Corporate
Secretary must set forth (a) as to each person whom the stockholder proposes
to nominate for election as a director, all information relating to such
person that is required to be disclosed in connection with solicitations of
proxies for election of directors pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder; and (b) as to the stockholder giving the
notice, (i) the name and address of such stockholder as they appear on the
Corporation s books and of the beneficial owner, if any, on whose behalf the
nomination is made, (ii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of record by such
stockholder and such beneficial owner, (iii) a description of all arrangements
or understandings between such stockholder and each proposed nominee and any
other person or persons (including their names) pursuant to which the
nomination(s) are to be made by such stockholder, (iv) a representation that
such stockholder intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice and (v) any other information
relating to such stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Regulation 14A
of the Exchange Act and the rules and regulations promulgated thereunder.
Such notice must be accompanied by a written consent of each proposed nominee
to be named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section
2.9. If the chairman of the meeting determines that nomination was not made
in accordance with the foregoing procedures, the chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall
be disregarded. No adjournment or postponement of a meeting of stockholders
shall commence a new period for the giving of notice of a stockholder proposal
hereunder.
Section 2.10. Advance Notice Provisions for Business to be Transacted at
Annual Meeting. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the
Board of Directors (or any duly authorized committee thereof), (b) otherwise
properly brought before the annual meeting by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (c) otherwise
properly brought before the annual meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of
the notice provided for in this Section 2.10 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 2.10.
To be timely, a stockholder's notice must be delivered to or mailed and
received by the Corporate Secretary at the principal executive offices of the
Corporation not less than 120 days nor more than 150 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 150th day
prior to such annual meeting and not later than the close of business on the
later of the 120th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first
made.
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To be in proper written form, a stockholder's notice to the Corporate
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address of such stockholder
as they appear on the Corporation s books and of the beneficial owner, if any,
on whose behalf the proposal is made, (iii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder and such beneficial owner, (iv) a description of
all arrangements or understandings between such stockholder and any other
person or persons (including their names) in connection with the proposal of
such business by such stockholder and any material interest of such
stockholder in such business, and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures
set forth in Section 2.09 or in this Section 2.10, provided, however, that
once business has been properly brought before the annual meeting in
accordance with such procedures, nothing in Section 2.09 nor in this Section
2.10 shall be deemed to preclude discussion by any stockholder of any such
business. If the chairman of an annual meeting determines that business was
not properly brought before the annual meeting in accordance with the
foregoing procedures, the chairman shall declare to the meeting that the
business was not properly brought before the meeting and such business shall
not be transacted. No adjournment or postponement of a meeting of
stockholders shall commence a new period for the giving of notice of a
stockholder proposal hereunder.
ARTICLE III
DIRECTORS
Section 3.1 The number of directors of the Corporation which shall
constitute the whole of the Corporation's Board of Directors (the "Board")
shall not be less than three nor more than thirty. Within the limits above
specified, the number of directors constituting the Board shall be determined
by resolution of the Board or by the Corporation's stockholders at the Annual
Meeting, but the tenure of office of a director shall not be affected by any
decrease in the number of directors so made by the Board. The directors shall
be elected at the Annual Meeting of stockholders, except as provided in
Section 3.2 of this Article, and each director elected shall hold office until
the succeeding Annual Meeting of stockholders or until his successor is
elected and qualified. Directors need not be stockholders.
Section 3.2 Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the
next Annual Meeting and until their successors are duly elected and shall
qualify, unless sooner displaced.
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Section 3.3 The business of the Corporation shall be managed by its Board,
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Articles of Incorporation or
by these By-Laws directed or required to be exercised or done by the
stockholders. The directors shall choose from among their number a Chairman
of the Board and a Vice Chairman of the Board.
Section 3.4 At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast on the election or
removal of such director, remove any director or directors from office and may
elect a successor or successors to fill any resulting vacancies for the
unexpired terms of removed directors. In case such a removal occurs but the
stockholders entitled to vote thereon fail to fill any resulting vacancies,
such vacancies may be filled by the Board of Directors pursuant to Section
3.2.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.5 The Board may hold meetings, both regular and special, either
within or without the State of Maryland.
Section 3.6 After each meeting of stockholders at which a Board of Directors
shall have been elected, the Board of Directors so elected shall meet, as soon
as practicable, for the purpose of organization and the transaction of other
business; and, in the event that no other time is designated by the
stockholders, the Board of Directors shall meet one hour after the time for
such stockholders' meeting or immediately following the close of such meeting,
whichever is later, on the day of such meeting. No notice of such meeting
shall be necessary if held as hereinabove provided.
Section 3.7 Regular meetings of the Board shall be held at such time and
place as designated by the Board. No notice of a Regular Meeting shall be
required if the meeting is held according to a Schedule of Regular Meetings
approved by the Board.
Section 3.8 Special Meetings of the Board may be called by the Chairman or
the President upon notice to each director, either personally, by mail, by
telex or by telegram. Special Meetings shall be called by the President or
Secretary in like manner and on like notice upon the written request of two or
more directors. Notice of the place, day and hour of every Special Meeting
shall be given to each director at least twenty-four (24) hours before the
time of the meeting, by delivering the same to him personally, by telephone,
by telex, by telegraph, or by delivering the same at his residence or usual
place of business, or, in the alternative, by mailing such notice at least
seventy-two (72) hours before the time of the meeting, postage paid, and
addressed to him at his last known post office address, according to the
records of the Corporation. Unless required by the By-Laws or by resolution
of the Board of Directors, no notice of any meeting of the Board of Directors
need state the business to be transacted thereat. No notice of any meeting of
the Board of Directors need be given to any director who attends, or to any
director who, in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Any meeting
of the Board of Directors, Annual or Special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.
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Section 3.9 One third of the entire Board shall constitute a quorum at any
meeting except as may be otherwise specifically provided by statute or by the
Articles of Incorporation. If a quorum shall not be present at any meeting of
the Board, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present. Members of the Board or any committee designated thereby
may participate in a meeting of the Board or any such committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at such
meeting.
Section 3.10 Unless otherwise restricted by the Articles of Incorporation or
these By-Laws, any action required or permitted to be taken at any meeting of
the Board or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto, in
writing or writings and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
Section 3.11 On any question on which the Board of Directors shall vote, the
names of those voting and their votes shall be entered in the minutes of the
meeting when any member of the Board so requests.
COMMITTEES OF DIRECTORS
Section 3.12 Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than five directors and
one of which shall be appointed Chairman of the Executive Committee. When the
Board of Directors is not in session, the Executive Committee shall have and
may exercise, in the absence of or subject to any restrictions which the Board
of Directors may from time to time impose, all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
except the power to authorize dividends on stock, elect directors, issue stock
other than as provided in the next sentence, recommend to the stockholders any
action which requires stockholder approval, amend these By-Laws, or approve
any merger or share exchange which does not require stockholder approval. If
the Board of Directors has given general authorization for the issuance of
stock providing for or establishing a method or procedure for determining the
number of shares to be issued, a committee of the Board, in accordance with
that general authorization or any stock option or other plan or program
adopted by the Board of Directors, may authorize or fix the terms of stock
subject to classification or reclassification and the terms on which any stock
may be issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
Section 3.13 Audit & Examining Committee. The Board shall designate an Audit
& Examining Committee, which shall hold office until the next annual meeting
of the Board following the annual meeting of stockholders, consisting of not
less than three of its members, other than officers of the Corporation, and
whose duty it shall be to make an examination at least once during each
calendar year and within 15 months of the last such examination into the
affairs of the Corporation including the administration of fiduciary powers,
or cause suitable examinations to be made by auditors responsible only to the
Board and to report the result of such examination in writing to the Board.
Such report shall state whether the Corporation is in a sound condition,
whether adequate internal controls and procedures are being maintained and
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shall recommend to the Board such changes in the manner of conducting the
affairs of the Corporation as shall be deemed advisable.
Section 3.14 Other Committees. The Board of Directors may appoint any other
committees, each of which shall be composed of one or more directors, as
determined by the Board from time to time. Such other committees shall have
such powers, subject to the same limitations as are applicable to the
Executive Committee under Section 3.12, as shall be designated by the Board
from time to time.
Section 3.15 Committee Procedure. Each committee shall keep minutes of its
proceedings when exercising powers of the Board of Directors and may fix rules
of procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority
of those present at a meeting at which a quorum is present shall be the act of
the committee. The members of a committee present at any meeting, whether or
not they constitute a quorum, may appoint an eligible director to act in the
place of an absent member. Any action required or permitted to be taken at a
meeting of a committee may be taken without a meeting, if an unanimous written
consent which sets forth the action is signed by each member of the committee
and filed with the minutes of the committee. The members of a committee may
conduct any meeting thereof by conference telephone in accordance with the
provisions of Section 3.9.
COMPENSATION OF DIRECTORS
Section 3.16 The Board shall fix the amounts to be paid directors for their
services as directors and for their attendance at the meetings of the Board or
of committees or otherwise. No director who receives a salary from the
Corporation shall receive any fee for attending meetings of the Board or of
any of its committees.
RESIGNATION OF DIRECTORS
Section 3.17 Any director may resign at any time either by oral tender of
such resignation at any meeting of the Board or to the Chairman or President
or by giving written notice thereof to the Corporation. Any resignation shall
be effective immediately, unless a date certain is specified for it to take
effect.
ARTICLE IV
OFFICERS
Section 4.1 Executive and Other Officers. The Corporation shall have a
President, a Corporate Secretary and a Treasurer who shall be the Chief
Financial Officer, and who need not be directors. The Corporation shall also
have a Chairman of the Board and a Chairman of the Executive Committee, and
may have one or more Vice Chairmen, all of whom shall be directors. The Board
shall designate who shall serve as chief executive officer, who shall have
general supervision of the business and affairs of the Corporation. In the
absence of any designation, the Chairman of the Board, if there be one, shall
serve as chief executive officer. In the absence of the Chairman of the
Board, or if there be none, the Chairman of the Executive Committee shall
serve as the chief executive officer. The Corporation may also have one or
more Vice-Presidents, assistant and subordinate officers, other officers not
designated by these By-Laws, and agents as it shall deem necessary, none of
whom need be a director. A person may hold more than one office in the
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Corporation except that no person may serve concurrently as both President and
Vice-President of the Corporation.
Section 4.2 Chairman of the Board. The Chairman of the Board shall be a
director and shall preside at all meetings of the Board and of the
Stockholders at which he shall be present. Unless otherwise specified by the
Board, he shall serve as the chief executive officer of the Corporation. In
general, he shall perform such duties as are customarily performed by the
chief executive officer of a corporation, and may also perform any duties of
the President, and shall perform such other duties and may have such other
powers as are, from time to time, assigned to him by the Board.
Section 4.3 Chairman of the Executive Committee. The Chairman of the
Executive Committee shall be a director and shall chair meetings of the
Executive Committee, supervise and carry out policies adopted or approved by
the Board and exercise such further powers and duties as are, from time to
time, conferred upon or assigned to him by the Board. Additionally, in the
absence of the Chairman of the Board, the Chairman of the Executive Committee
(a) shall serve as the Chief Executive Officer of the Corporation and (b)
shall preside at all meetings of the Board and the Stockholders at which he
shall be present.
Section 4.4 Vice Chairman. Each Vice Chairman, if one or more be elected,
shall be a director and shall perform such duties and may have such other
powers as are, from time to time, assigned to him by the Board.
Section 4.5 President. The President shall be a director. The President
may execute, in the name of the Corporation, all authorized deeds, mortgages,
bonds, contracts or other instruments, except in cases in which the execution
thereof shall have been expressly delegated to some other officer or agent of
the Corporation. In general, he shall perform such duties usually performed
by a president of a corporation and shall perform such other duties and may
have such other powers as are from time to time assigned to him by the Board.
Section 4.6 Vice-Presidents. The Vice-President or Vice-Presidents, at the
request of the chief executive officer or the President, or in the absence of
the President or during his inability or refusal to act, shall, in order of
seniority of appointment, unless otherwise designated by the Board, the chief
executive officer, or the President, perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice-President shall perform such other
duties and have such other powers, and have such additional descriptive
designations in their titles (if any), as are from time to time assigned to
them by the Board, the chief executive officer, or the President.
Section 4.7 Corporate Secretary. The Corporate Secretary shall attend all
meetings of the stockholders and all meetings of the Board and record, or
cause to be recorded, all the procedures of the meetings of the stockholders
and the Board in books to be kept for that purpose. The Corporate Secretary
may perform like duties for the standing committees when required. He shall,
as required, give, or cause to be given, notice of all meetings of the
stockholders and meetings of the Board. He shall have custody of the
corporate seal of the Corporation and he, or a Deputy or Associate or
Assistant Corporate Secretary, shall affix the same to any instrument which is
required or desired to be under its seal and when so affixed, it may be
attested by his signature or by the signature of such Deputy or Associate or
Assistant Corporate Secretary. The Board may give general authority to any
other officer to affix the seal of the Corporation and to attest the affixing
by his signature. In general, the Corporate Secretary shall perform all
duties incident to the office of a
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secretary of a corporation, and shall perform such other duties and may have
such other powers as are from time to time assigned to him by the Board, the
chief executive officer or the President.
Section 4.8 Deputy Corporate Secretary, Associate Corporate Secretary and
Assistant Corporate Secretary. The Deputy Corporate Secretary or the
Associate Corporate Secretary or the Assistant Corporate Secretary, or if
there be more than one, each of them, may, in the absence of the Corporate
Secretary or during his inability or refusal to act, perform the duties and
exercise the powers of the Corporate Secretary and shall perform such other
duties and have such other powers as are from time to time assigned to each of
them by the Board, the chief executive officer, the President or the Corporate
Secretary.
Section 4.9 Treasurer. The Treasurer shall have charge of and be
responsible for all corporate funds and securities and shall keep, or cause to
be kept, full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit, or cause to be deposited, all
moneys and other valuable effects, in the name and to the credit of the
Corporation, in such depositories as may from time to time be designated. He
shall render to the Board, the chief executive officer or the President, when
so required, an account of the financial condition of the Corporation. In
general, the Treasurer shall perform all the duties incident to the office of
a treasurer of a corporation, and shall perform such other duties and may have
such other powers as are from time to time assigned to him by the Board, the
chief executive officer or the President.
Section 4.10 Assistant Treasurers. The Assistant Treasurer, or if there
shall be more than one, each of them, may, in the absence of the Treasurer or
during his inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such
other powers as are from time to time assigned to each of them by the Board,
the chief executive officer, the President or the Treasurer.
Section 4.11 Assistant and Subordinate Officers, Other Officers and Agents.
The assistant and subordinate officers of the Corporation are all officers
below the office of Vice-President, Corporate Secretary or Treasurer.
Assistant officers, subordinate officers, other officers not designated by
these By-Laws, and agents shall perform such duties and have such powers as
are from time to time assigned to them by the Board, the chief executive
officer, the President, or any management committee or officer authorized by
the Board or these By-Laws.
Section 4.12 Election, Tenure and Removal of Officers. The Board shall elect
all officers but may authorize any management committee or officer to appoint
any assistant or subordinate officer, other officer not designated by these
By-Laws, or agent. Election or appointment of any officer, employee or agent
shall not of itself create contract rights. All officers shall be appointed
to hold their respective offices during the pleasure of the Board. The Board
may remove any officer at any time but may authorize any management committee
or officer to remove any assistant or subordinate officer, other officer not
designated by these By-Laws, or agent. The removal of an officer does not
prejudice any of his contract rights. Any officer may resign at any time,
either by oral tender of such resignation to the Chairman of the Board or the
President or by giving written notice thereof to the Corporation. Any
resignation shall be effective immediately, unless a date certain is specified
for it to take effect. The Board may fill a vacancy which occurs in any
office but may authorize any management committee or officer to fill any
vacancy caused by the removal or resignation of any assistant or subordinate
officer, other officer not designated by these By-Laws, or agent.
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Section 4.13 Compensation. The Board shall have power to fix the salaries
and other compensation and remuneration, of whatever kind, of all officers of
the Corporation. No officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the Corporation. The Board
may authorize any management committee or officer to fix the salaries,
compensation and remuneration of any officers, employees and agents other than
those who are members of the Management Executive Committee of the
Corporation.
ARTICLE V
CERTIFICATES OF STOCK
Section 5.1 Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by the
Chairman of the Board or President or a Vice President and the Treasurer or an
Assistant Treasurer, or the Secretary or a Deputy or Associate or Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation.
Section 5.2 Where a certificate is manually countersigned (1) by a transfer
agent, other than the Corporation or its employee, or, (2) by a registrar,
other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is signed, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at the
date of issue.
LOST CERTIFICATES
Section 5.3The Board may authorize a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 5.4 Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5.5 The Board may, at its discretion, appoint one or more banks or
trust companies in New York City, and in such other city or cities as the
Board may deem advisable, including any banking subsidiary of the Corporation,
from time to time, to act as transfer agent(s) and registrar(s) of the stock
of the Corporation.
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FIXING RECORD DATE
Section 5.6 The Board is hereby empowered to fix, in advance, a date as the
record date for the purpose of determining stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any rights, or
in order to make determination of stockholders for any other proper purpose.
Such date in any case shall be not more than ninety (90) days, and in case of
a meeting of stockholders, not less than ten (10) days, prior to the date of
which the particular action, requiring such determination of stockholders is
to be taken. In lieu of fixing a record date, the Board may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, twenty (20) days. If the stock transfer books are closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
STOCK LEDGER
Section 5.7 Original or duplicate stock ledgers, containing the name and
addresses of the stockholders of the Corporation and the number of shares of
each class held by them respectively, shall be kept at the offices of a
transfer agent for the particular class of stock, within or without the State
of Maryland, or, if none, at a principal office or the principal executive
offices of the Corporation.
REGISTERED STOCKHOLDERS
Section 5.8 The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Maryland.
ARTICLE VI
GENERAL PROVISIONS
DIVIDENDS
Section 6.1 Subject to the provisions of the Articles of Incorporation,
dividends, if any, may be declared by the Board at any meeting, pursuant to
the law.
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EXECUTION OF INSTRUMENTS
Section 6.2 All agreements, indentures, mortgages, deeds, conveyances,
transfers, certificates, declarations, receipts, discharges, releases,
satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds,
undertakings, proxies and other instruments or documents may be signed,
executed, acknowledged, verified, delivered or accepted on behalf of the
Corporation by the Chairman of the Board, or the President, or the Chief
Executive Officer, or the Secretary, or any Vice President, or any other
officer or employee designated by the Board or the Chief Executive Officer or
his designee. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted in behalf of the Corporation in such other
manner and by such other officers as the Board may from time to time direct.
The provisions of this Section 6.2 are supplementary to any other provisions
of these By-Laws. Each of the foregoing authorizations shall be at the
pleasure of the Board, and each such authorization by the Chief Executive
Officer or his designee also shall be at the pleasure of the Chief Executive
Officer.
FISCAL YEAR
Section 6.3 The fiscal year of the Corporation shall be the calendar year.
SEAL
Section 6.4 The Corporation's seal shall have inscribed thereon the name of
the Corporation and the words "Corporate Seal, Maryland". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SHARES OF OTHER CORPORATIONS
Section 6.5 The Chairman of the Board, the President, any Vice President,
and the Secretary is each authorized to vote, represent and exercise on behalf
of the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted to said officer to vote or represent on behalf of the
Corporation any and all shares held by the Corporation in any other
corporation or corporations may be exercised either by said officer in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officers. Notwithstanding the above, however, the Board, in
its discretion, may designate by resolution the person to vote or represent
said shares of other corporations.
RECORDS
Section 6.6 The By-Laws and the proceedings of all meeting of the
shareholders, the Board, and standing committees of the Board, shall be
recorded in appropriate minute books provided for the purpose. The minutes of
each meeting shall be signed by the Secretary or other officer appointed to
act as Secretary of the meeting.
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EMERGENCY OPERATIONS
Section 6.7 In the event of war or warlike damage or disaster of sufficient
severity to prevent the conduct and management of the affairs, business, and
property of the Corporation by its directors and officers as contemplated by
these By-Laws, any two or more available members of the then incumbent Board
shall constitute a quorum for the full conduct and management of the affairs,
business, and property of the Corporation. This By-Law shall be subject to
implementation by resolutions of the Board passed from time to time for that
purpose, and any provisions of these By-Laws (other than this Section) and any
resolutions which are contrary to the provisions of this Section or to the
provisions of any such implementary resolutions shall be suspended until it
shall be determined by any interim Board acting under this Section that it
shall be to the advantage of the Corporation to resume the conduct and
management of its affairs, business, and property under all of the other
provisions of these By-Laws.
RIGHT TO INDEMNIFICATION
Section 6.8 (a) . Each person who was or is made a party or is threatened to
be made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he is or was a director or officer of the Corporation or, while a
director or officer of the Corporation is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (an "Indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
a director or officer, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Annotated Code of
Maryland, as the same exists or may hereafter be amended, against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such Indemnitee in connection therewith and such indemnification
shall continue as to an Indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the Indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 6.8(b)
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such Indemnitee in connection with a
proceeding (or party thereof) initiated by such Indemnitee only if such
proceeding (or part thereof) was authorized by the Board. The right to
indemnification conferred in this Section 6.8 shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Annotated Code of Maryland so requires, an advancement
of expenses incurred by an Indemnitee shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such Indemnitee
is not entitled to be indemnified for such expenses under this Section or
otherwise.
(b) Right of Indemnitee to Bring Suit. If a claim under paragraph
(a) of this Section 6.8 is not paid in full by the Corporation within sixty
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty days, the Indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
such Indemnitee's undertaking the Indemnitee shall be entitled to be paid the
expense of prosecuting or defending such suit. In any suit brought by the
Indemnitee to enforce a right to indemnification hereunder it shall be a
-15-
215
defense that, and in any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the
Indemnitee has not met the applicable standard of conduct set forth in the
Annotated Code of Maryland. Neither the failure of the Corporation to have
made a determination prior to the commencement of such suit that
indemnification of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in the
Annotated Code of Maryland, nor an actual determination by the Corporation
that the Indemnitee has not met such applicable standard of conduct, shall
create a presumption that the Indemnitee has not met the applicable standard
of conduct or, in the case of such a suit brought by the Indemnitee, be a
defense to such suit. In any suit brought by the Indemnitee to enforce a
right to indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking by the Indemnitee, the Corporation shall have the burden of
proving that the Indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section 6.8 or otherwise.
(c) Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Section 6.8 shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Corporation's Certificate of Incorporation, By-Law, agreement,
vote of shareholders or disinterested directors or otherwise.
(d) Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board,
grant rights to indemnification, and to the advancement of expenses to any
employee or agent of the Corporation to the fullest extent of the provisions
of this Section 6.8 with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
(e) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law, as the
same exists or may hereafter be amended.
ARTICLE VII
AMENDMENTS
Section 7.1 The By-Laws may be added to, amended, altered or repealed at any
regular meeting of the Board, by a vote of a majority of the total number of
the directors, or at any meeting of shareholders, duly called and held, by a
majority of the stock represented at such meeting.
ARTICLE VIII
Section 8.1 Notwithstanding any other provision of the charter of the
Corporation or these By-Laws, Title 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to the acquisition of all of the common stock, $5.00
par value per share, of the Corporation by HSBC Holdings plc, an English
public limited company, pursuant to that certain Transaction Agreement and
Plan of Merger, dated May 10, 1999, as amended by Amendment No. 1, dated
November 8, 1999, and as may be further amended from time to time, by and
among HSBC Holdings Plc, the Corporation, Safra Republic Holdings S.A., a
societe anonyme
-16-
216
organized and existing under the laws of Luxembourg, and RNYC Merger
Corporation, a Maryland corporation, and to the other transactions
contemplated thereby.
Section 8.2 Notwithstanding any other provision of the charter of the
Corporation or these By-Laws, Title 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to the grant by the Corporation of the option to HSBC
Holdings Plc, an English public limited company, pursuant to that certain
Stock Option Agreement, dated May 10, 1999, between the Corporation and HSBC
of shares of the Corporation s common stock pursuant thereto.
Section 8.3 Notwithstanding any other provision of the charter of the
Corporation or these By-Laws, Title 3, Subtitle 7 of the Corporations and
Associations Article of the Annotated Code of Maryland (or any successor
statute) shall not apply to the Stockholders Agreement, dated May 10, 1999,
as amended by Amendment No. 1 to the Stockholders Agreement, dated November 8,
1999, and as may be further amended from time to time, among HSBC, an
English public limited company, RNYC Holdings Limited, a Gibraltar
corporation, Congregation Beit Yaakov, Saban S.A., a Panamanian corporation,
Mr. Edmond J. Safra, HSBC North America Inc., a Delaware corporation, and in
part, the Corporation, or the exercise by HSBC of its rights thereunder.
-17-
217
<TABLE>
<CAPTION>
Exhibit 12.01
HSBC USA Inc.
Computation of Ratio of Earnings to Fixed Charges
(in millions, except ratios)
- -----------------------------------------------------------------------------------
Year Ended December 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits
Net income $ 464 $ 527 $ 471 $ 380 $ 284
Applicable income tax expense 308 238 193 171 52
Less undistributed equity earnings 4 2 2 2 -
Fixed charges:
Interest on:
Borrowed funds 130 204 197 121 81
Long-term debt 112 96 112 48 50
One third of rents, net of
income from subleases 15 14 14 12 12
- -----------------------------------------------------------------------------------
Total fixed charges 257 314 323 181 143
Earnings before taxes based
on income and fixed charges $1,025 $1,077 $ 985 $ 730 $ 479
- -----------------------------------------------------------------------------------
Ratio of earnings to fixed charges 3.99 3.43 3.05 4.03 3.35
- -----------------------------------------------------------------------------------
Including interest on deposits
Total fixed charges (as above) $ 257 $ 314 $ 323 $ 181 $ 143
Add: Interest on deposits 853 867 679 481 465
- -----------------------------------------------------------------------------------
Total fixed charges and interest
on deposits $1,110 $1,181 $1,002 $ 662 $ 608
- -----------------------------------------------------------------------------------
Earnings before taxes based on
income and fixed charges (as above) $1,025 $1,077 $ 985 $ 730 $ 479
Add: Interest on deposits 853 867 679 481 465
- -----------------------------------------------------------------------------------
Total $1,878 $1,944 $1,664 $1,211 $ 944
- -----------------------------------------------------------------------------------
Ratio of earnings to fixed charges 1.69 1.65 1.66 1.83 1.55
- -----------------------------------------------------------------------------------
</TABLE>
218
<TABLE>
<CAPTION>
Exhibit 12.02
HSBC USA Inc.
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Dividends
(in millions, except ratios)
- -----------------------------------------------------------------------------------
Year Ended December 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits
Net income $ 464 $ 527 $ 471 $ 380 $ 284
Applicable income tax expense 308 238 193 171 52
Less undistributed equity earnings 4 2 2 2 -
Fixed charges:
Interest on:
Borrowed funds 130 204 197 121 81
Long-term debt 112 96 112 48 50
One third of rents, net of
income from subleases 15 14 14 12 12
- -----------------------------------------------------------------------------------
Total fixed charges 257 314 323 181 143
Earnings before taxes based
on income and fixed charges $1,025 $1,077 $ 985 $ 730 $ 479
- -----------------------------------------------------------------------------------
Total fixed charges $ 257 $ 314 $ 323 $ 181 $ 143
Preferred dividends - - 1 6 6
Ratio of pretax income to
income after applicable income
tax expense 1.66 1.45 1.41 1.45 1.18
- -----------------------------------------------------------------------------------
Total preferred stock dividend
factor - - 2 9 7
Fixed charges, including preferred
stock dividend factor $ 257 $ 314 $ 325 $ 190 $ 150
- -----------------------------------------------------------------------------------
Ratio of earnings to combined
fixed charges and preferred
dividends 3.99 3.43 3.03 3.84 3.19
- -----------------------------------------------------------------------------------
Including interest on deposits
Total fixed charges, including
preferred stock dividend factor
(as above) $ 257 $ 314 $ 325 $ 190 $ 150
Add: Interest on deposits 853 867 679 481 465
- -----------------------------------------------------------------------------------
Fixed charges, including
preferred stock dividend factor
and interest on deposits $1,110 $1,181 $1,004 $ 671 $ 615
- -----------------------------------------------------------------------------------
Earnings before taxes based on
income and fixed charges
(as above) $1,025 $1,077 $ 985 $ 730 $ 479
Add: Interest on deposits 853 867 679 481 465
- -----------------------------------------------------------------------------------
Total $1,878 $1,944 $1,664 $1,211 $ 944
- -----------------------------------------------------------------------------------
Ratio of earnings to combined
fixed charges and preferred
dividends 1.69 1.65 1.66 1.80 1.53
- -----------------------------------------------------------------------------------
</TABLE>
219
Exhibit 23
Consent of Independent Accountants
The Board of Directors
HSBC USA Inc.:
We consent to incorporation by reference in Registration Statements (No.
333-42421, 333-53647, 333-42421-01, 333-42421-02) on Form S-3 of HSBC USA Inc.
of our report dated February 9, 2000, except as to Note 27 which is as of
February 28, 2000, relating to the consolidated balance sheets of HSBC USA
Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1999,
and the consolidated balance sheets of HSBC Bank USA and subsidiaries as of
December 31, 1999 and 1998, which report appears in the 1999 HSBC USA Inc.
Annual Report on Form 10-K.
/s/ KPMG LLP
Buffalo, New York
March 28, 2000
220
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,978
<INT-BEARING-DEPOSITS> 4,235
<FED-FUNDS-SOLD> 2,318
<TRADING-ASSETS> 4,527
<INVESTMENTS-HELD-FOR-SALE> 25,974
<INVESTMENTS-CARRYING> 4,812
<INVESTMENTS-MARKET> 4,812
<LOANS> 37,909
<ALLOWANCE> 660
<TOTAL-ASSETS> 90,240
<DEPOSITS> 56,450
<SHORT-TERM> 5,272
<LIABILITIES-OTHER> 12,592
<LONG-TERM> 5,175
710
500
<COMMON> 0
<OTHER-SE> 9,541
<TOTAL-LIABILITIES-AND-EQUITY> 90,240
<INTEREST-LOAN> 1,841
<INTEREST-INVEST> 215
<INTEREST-OTHER> 264
<INTEREST-TOTAL> 2,320
<INTEREST-DEPOSIT> 853
<INTEREST-EXPENSE> 1,094
<INTEREST-INCOME-NET> 1,226
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 828
<INCOME-PRETAX> 772
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 464
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.84
<LOANS-NON> 344
<LOANS-PAST> 40
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 380
<CHARGE-OFFS> 134
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 660
<ALLOWANCE-DOMESTIC> 318
<ALLOWANCE-FOREIGN> 128
<ALLOWANCE-UNALLOCATED> 214
</TABLE>
